The United States Securities and Exchange Commission (SEC) has issued a Wells Notice to Robinhood regarding its cryptocurrency activities. Here's what exactly happened.
Securities and Exchange Commission could target Robinhood for prosecution
Robinhood, a financial services company, received... Warning Notice (Wells Notice) of the United States Securities and Exchange Commission (SEC). The regulator warned the company that its activity related to the digital currency sector could face prosecution.
Robinhood now has the opportunity to respond to the SEC's charges, which were filed on May 4, in an effort to reach a compromise before formal action is taken. On the other hand, the Securities and Exchange Commission has the power to take legal action against a company.
Read more: Coinbase Exchange VS Robinhood Exchange. Which platform is the latest in trading?
So Robinhood has yet to survive the SEC's arrows, this time facing IPO fees. These charges are part of an ongoing campaign by SEC Chairman Gary Gensler to hold digital currency trading platforms accountable for their practices.
In the initial reaction from platform officials, Dan Gallagher, Robinhood's head of legal affairs, downplayed the SEC's actions against the platform, describing them as achieving no results and going nowhere:
“We strongly believe that the assets listed on our platform are not securities, and we look forward to engaging with the SEC to clarify the futility of any lawsuit against the Robinhood cryptocurrency platform.”
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If the SEC decides to take legal action against Robinhood, the charges will likely relate to the sale of securities. This is similar to the accusations against Coinbase, the largest digital currency trading platform in America. In both cases, the SEC relies on the “Howey” test issued in 1946 to determine whether the digital assets that appeared in 2008 are securities!
Robinhood Has Taken Cautious Steps From the Start...But Its Stock Price Takes a Hit
Dan Gallagher emphasized his confidence in the platform's ability to overcome these challenges and achieve long-term success. He also noted in his statement that Robinhood has taken deliberate steps to prevent the listing of any digital tokens considered securities, and that the company prevents the provision of mortgage services for reasons related to the same policy:
“Cryptocurrency platform Robinhood has made the difficult choice not to list certain tokens or offer products, such as loans. And betwhich, according to the SEC, were securities in public actions against other platforms.
In general, the cryptocurrency market did not react to this news, as the price of Bitcoin is still experiencing fluctuations similar to previous days. And also alternative currencies. But Robinhood's stock price fell (HOOD) from $18.44 the day before to $17.72 at the time of writing this article.
It is worth noting that the United States Securities and Exchange Commission last month issued notices to both... Uniswap (Uniswap), a decentralized exchange (DEX), and Consensys, the parent company of the MetaMask wallet, for similar reasons with Robinhood's opinion. These measures are part of a broader campaign by the Wall Street watchdog aimed at imposing itself on the cryptocurrency sector. While I resisted Consensys These legal actions by taking countermeasures.
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