Key Takeaways
- Robinhood’s crypto arm was fined $3.9 million in a settlement with the California Department of Justice.
- Robinhood blocked users from making crypto withdrawals between 2018 and 2022.
- The trading firm did not admit or deny any wrongdoing in its settlement.
The crypto-trading subsidiary of Robinhood Markets reached a $3.9 million settlement with the California Department of Justice (DOJ) over claims that it blocked users from making crypto withdrawals between 2018 and 2022.
The “historical practices,” as described by Robinhood’s chief lawyer, earned the stock and investment platform the first public action against a crypto company by California’s DOJ.
Robinhood Violated California Law
The settlement came after Attorney General Rob Bonta alleged that Robinhood Crypto violated the California Commodities Law (CCL) by allowing users to purchase crypto they could not access.
Bonta also alleged that users were forced to sell their crypto on the Robinhood platform to free their funds.
The attorney general said that the platform also misled users by allowing other trading venues to hold users’ assets in some cases after stating that all customer crypto assets were held on the platform.
California DOJ Settlement Should ‘Send a Strong Message’
In addition to the $3.9 million penalty, Robinhood also agreed to allow customers to withdraw crypto into their own wallets. The trading platform must also be transparent with its trading and order handling.
“Our investigation and settlement with Robinhood should send a strong message: Whether you’re a brick-and-mortar store or a cryptocurrency company, you must adhere to California’s consumer and investor protection laws,” Bonta said in a statement.
Robinhood did not admit or deny any wrongdoing in its settlement.
Robinhood’s Tumultuous Relationship With the SEC
In May, Robinhood warned of an impending lawsuit from the Securities and Exchange Commission (SEC) over its cryptocurrency business, marking the latest chapter in the regulator’s crackdown on digital assets.
The firm confirmed that its crypto arm had received a Wells notice, something crypto companies seem to be receiving increasingly regularly.
A Wells notice is a communication informing a company that an agency, such as the SEC, plans to bring an enforcement action against them. The notice outlines the charges the agency intends to file and allows the recipient to respond before any formal legal action is taken.
“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,” said Dan Gallagher, Robinhood’s chief legal, compliance and corporate affairs officer.
Kurt Robson is a London-based reporter at CCN, specialising in the fast-moving worlds of crypto and emerging technology. He began his career covering local news in Cornwall after graduating from Falmouth University with First Class Honours in Journalism. There, he cut his teeth on everything from council meetings to missing swans.
He quickly rose through the ranks to become a frontline journalist at several of the UK’s leading national newspapers. Over the years, he has interviewed musicians and celebrities, reported from courtrooms and crime scenes, and secured multiple front-page exclusives.
Following the upheaval of the COVID-19 pandemic, Kurt shifted his focus to technology journalism—just ahead of the AI boom. With a natural curiosity and a trained eye for emerging trends, he has found a new rhythm in reporting on innovation.
At CCN, Kurt's work focuses on the cutting edge of crypto, blockchain, AI, and the evolving digital world. Drawing on his background in people-first reporting and his deep interest in disruptive tech, Kurt delivers stories that are insightful, entertaining, and human-centric.
