SEC enforcement continues, following Uniswap and ConsenSys, Robinhood also receives Wells notice

The cryptocurrency division of the U.S. online brokerage Robinhood, Robinhood Crypto, received a Wells Notice from the U.S. Securities and Exchange Commission (SEC) on May 4. This marks the third cryptocurrency-related company to receive such a notice following Uniswap and Consensys in April, indicating that SEC staff have preliminarily decided to recommend enforcement action against the company for alleged violations of securities regulations.

SEC Accuses Robinhood of Violating Securities Regulations

Robinhood stated in a press release that the SEC staff has preliminarily decided to recommend enforcement action against its crypto division, accusing it of violating securities regulations.

Dan Gallagher, General Counsel, Chief Compliance Officer, and Head of Legal at Robinhood Markets, stated:

For years, we have made sincere efforts to collaborate with the SEC to enhance regulatory transparency, but we are disappointed by the agency's decision to issue a Wells notice related to our U.S. crypto business.

Shortly after the bankruptcy filing of the cryptocurrency exchange FTX in November 2022, Robinhood received a subpoena from the SEC. The subpoena aimed to provide information on topics such as "cryptocurrency listings, cryptocurrency custody, and platform operations."

Following this, Robinhood Crypto made several concessions, including not listing certain tokens or offering products like lending and staking, as the SEC has categorized these tokens as securities in its public actions against other platforms. Additionally, Robinhood also attempted to register a special purpose broker-dealer with the SEC.

Uniswap and Consensys Recently Received Wells Notices as Well

Last month, the decentralized cryptocurrency exchange Uniswap received a Wells notice from the SEC. Uniswap's founder, Hayden Adams, expressed disappointment, stating: "The SEC has not been committed to making clear, informed rules, but has decided to focus on attacking long-standing, well-meaning participants like Uniswap and Coinbase, while letting bad actors like FTX slip through."

Uniswap received a Wells notice, and the founder stated that they will fight against the SEC to the end.

Consensys, a developer of Ethereum infrastructure, also received a Wells notice from the SEC in April and decided to proactively sue the SEC. The lawsuit found that the SEC had been investigating Consensys' product MetaMask for years. Consensys stated that regulating Ethereum as a security would jeopardize the ability of the United States to use Ethereum and other blockchains. If the value and belief in Ethereum as a decentralized platform are undermined, it could potentially lead to massive layoffs in the U.S. crypto industry.

Consensys sues the SEC to support Ethereum, highlighting "four reasons" why ETH is not a security.