Proactive Investors - Robinhood Markets Inc (NASDAQ:HOOD) said it has received a warning from the Securities and Exchange Commission (SEC) that it could face an enforcement action related to the cryptocurrency tokens traded on its platform.
The stock trading platform said it had received a Wells Notice, a notification that the SEC is planning to bring an enforcement action against Robinhood.
Robinhood will have the opportunity to respond to the SEC’s allegations before the regulator pursues any action.
“After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our US crypto business,” Dan Gallagher, Robinhood’s legal, compliance, and corporate affairs officer said in a statement.
“We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law.”
The SEC declined to comment on the enforcement action notice.
It has previously argued that most crypto tokens are securities and therefore subject to SEC rules and that the platforms they trade on should be registered with the regulator.
Crypto advocates, however, argue that many digital assets do not meet the standard set for assets covered by the SEC’s rules and that updated rules are needed to account for the unique attributes of cryptocurrencies.
Shares of Robinhood traded 0.6% higher at about $18 following the company’s disclosure.