Robinhood’s cryptocurrency division has agreed to pay a $3.9 million penalty to settle an investigation by California’s Department of Justice.
The probe found that from 2018 to 2022, Robinhood did not allow customers to withdraw their cryptocurrency, forcing them to sell it back to the platform to exit. The settlement also revealed that Robinhood misled customers about securing the most competitive prices across multiple trading venues.
Under the agreement, Robinhood must enable customers to withdraw their crypto assets and clearly inform users about potential delays in settlement if network security concerns arise.
“The settlement fully resolves the Attorney General’s concerns related to historical practices, and we look forward to continuing to make crypto more accessible and affordable to everyone,” said Robinhood’s general counsel, Lucas Moskowitz.
The settlement comes at a time when Robinhood continues to expand its crypto trading business, including a planned acquisition of crypto exchange Bitstamp, expected to complete by mid-2025. In the second quarter of 2023, Robinhood’s crypto transaction revenues surged 161% year-on-year to $81 million.
The commission-free brokerage firm Robinhood reported solid second-quarter earnings, driven by a surge in interest in meme stocks and cryptocurrencies.
The trading app, known for its appeal to retail investors, said its trading volumes were spurred by meme-stock influencer Keith Gill’s return to social media and renewed interest in highly shorted shares like GameStop (GME.N).
The company’s number of monthly active users reached 11.8 million, a 9% increase compared to the period ending in June 2023.
The brokerage’s transaction-based revenue surged 69% to $327 million in the quarter. Crypto revenues surged to $81 million, marking a 161% increase from the same period last year.
This figure is double the transaction revenues earned from equities this quarter. Options remained the company’s largest revenue stream.
Robinhood CEO Vlad Tenev revealed that the platform’s digital asset “notional” trading volume rose to $21.5 billion, up 137% from 2023 when leading cryptocurrencies like Bitcoin and Ether were trading at lower values.
The popular trading app will leverage the licenses of Bitstamp to offer cryptocurrency futures to its customers in the U.S. and Europe later this year.
Despite the growing demand, Robinhood’s crypto business faces several challenges. On May 6, the company received a Wells notice from the U.S. Securities and Exchange Commission (SEC), indicating potential enforcement action against its crypto arm.
