KEY POINTS
- Robinhood said it "cooperated" with the SEC's probe into its crypto listings, but still got a Wells Notice
- One user suggested the timing of the Wells Notice's issuance may be related to a rise in BTC prices
- Rep. John Rose said the SEC "exceeded its mandate" in issuing the notice
Robinhood recently revealed that its digital assets unit received a Wells notice from staff of the U.S. Securities and Exchange Commission (SEC), and the announcement isn't sitting well with cryptocurrency users and some lawmakers.
The Menlo Park-based financial services giant made the announcement in an SEC filing over the weekend, saying Robinhood Crypto (RHC), its digital assets arm, "received investigative subpoenas" from the SEC regarding its crypto listings among other business-related activities.
RHC "cooperated with this investigation," Robinhood said, but it received a Wells Notice from SEC staff stating that the Wall Street regulator has been advised to "file an enforcement against RHC alleging violations" of securities laws.
The financial services provider went on to note in the filing that action from the SEC may result in various implications such as "limitations on [Robinhood Crypto's] activities," and a civil injunction among others.
A Wells Notice is a letter that SEC delivers to companies that warn them of potential enforcement actions.
"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," Robinhood's chief legal officer Dan Gallagher said in a statement.
The crypto community on X (formerly Twitter) took the news with outrage, with many pointing out that the SEC was weaponizing regulation to block a looming mass adoption of digital assets.
The official X handle of liquidity platform RichQuack said it hopes things get cleared up soon "for the sake of all the users" counting on Robinhood Crypto's services. One user said he "can't wait for the day" when SEC chair Gary Gensler either resigns "or is fired."
Oh snap, Let's hope they clear things up fast for the sake of all the users counting on them.
— RichQuack (@RichQuack) May 6, 2024
The SEC is reachin here
— DibbleDunk ✝️🇺🇸₿ (@DibbleDunk) May 6, 2024
Can’t wait for the day when Gary steps down or is fired
One user had an interesting theory that the regulator appears to be issuing Wells Notices at "any significant rise" in Bitcoin prices so they can "control" the price movements of the world's top digital asset.
This is how big brother controls the price of BTC. Any significant rise in price they lob a wells grenade into the audience. 🤷♂️.
— Douglas Czumble (@dczumble) May 6, 2024
The said user's comments may refer to the Wells Notice received by Uniswap on April 10. On that day, Bitcoin hit $70,000 to a community still reeling from the news regarding the warning on the rising decentralized crypto exchange. Robinhood, on the other hand, received its Wells Notice Saturday, when Bitcoin rebounded to $64,000 after plunging to $58,000 a few days earlier.
Regular digital assets enthusiasts weren't the only people displeased with the news about Robinhood. Rep. John Rose, R-Tenn., said the SEC "exceeded its mandate to protect investors and maintain fair, orderly markets" when it issued the Wells Notice to Robinhood. He also called Gensler a "rogue" regulator.
The @SECgov exceeded its mandate to protect investors and maintain fair, orderly markets by issuing a Wells Notice to @RobinhoodApp, a precursor to enforcement action.
— Congressman John Rose (@RepJohnRose) May 6, 2024
I'm proud to help lead the effort to provide clarity by passing the FIT for the 21st Century Act so that rogue…
The SEC just sent a Wells notice to Robinhood.
— Jake Chervinsky (@jchervinsky) May 6, 2024
The number they've sent about crypto in recent months is astonishing. It's hard to imagine that they would (or could) bring so many enforcement actions at once.
It seems like they're abusing the Wells process as a scare tactic now.
Prominent lawyer Jake Chervinsky said the Robinhood Wells Notice is just one of an "astonishing" number of notices sent to crypto-related companies in recent months. "It seems like they're abusing the Wells process as a scare tactic now," he wrote.
