Robinhood Crypto is underneath investigation in Florida for allegedly falsely promoting its platform because the least costly manner to purchase crypto.
In a Thursday press statement, Florida Legal professional Normal James Uthmeier stated his workplace has proof to recommend that crypto merchants truly pay extra, on common, when utilizing Robinhood than when utilizing competing platforms.
“Crypto is an important element of Florida’s monetary future, and President [Donald] Trump’s efforts to advance the crypto market will make America stronger and wealthier. When shoppers purchase and promote crypto property, they deserve transparency of their transactions,” Uthmeier stated. “Robinhood has lengthy claimed to be the most effective cut price, however we imagine these representations have been misleading.”
On the coronary heart of Uthmeier’s allegation is Robinhood’s cost for order circulation (PFOF) enterprise mannequin. PFOF permits Robinhood to supply commission-free buying and selling by as an alternative producing income from routing its buyer trades via market makers in trade for a reduce of the income. Critics of the apply — which Robinhood additionally makes use of for inventory buying and selling — have complained that PFOF presents an inherent battle of curiosity, probably incentivizing the corporate to route prospects’ trades via the market maker providing essentially the most fee, not the one with the most effective worth for patrons.
In 2020, Robinhood paid $65 million to settle a U.S. Securities and Alternate Fee (SEC) enforcement motion alleging that the corporate misrepresented the standard of its executions of buyer trades. Robinhood didn’t admit or deny the SEC’s findings. Below former Chair Gary Gensler, the SEC thought-about banning PFOF however finally didn’t. PFOF is banned in the UK and shall be banned within the European Union starting subsequent 12 months.
Robinhood CEO Vlad Tenev has lengthy defended the apply, telling CNBC in 2023 that PFOF was “inherently right here to remain.”
“Our disclosures are best-in-class — We disclose pricing info to prospects throughout the lifecycle of a commerce that clearly outlines the unfold or the charges related to the transaction and the income Robinhood receives. We’re proud to be a spot the place prospects can commerce crypto on the lowest value on common,” stated Robinhood Markets Normal Counsel Lucas Moskowitz in an emailed assertion.
Uthmeier’s subpoena is looking for a slew of knowledge from Robinhood, together with documentation of how the platform determines pricing for transaction rebates or PFOF practices with market makers, paperwork containing comparative worth analyses of different crypto exchanges, and paperwork regarding the sale or entry of customers’ crypto buying and selling information.
Robinhood has till the top of the month to reply to the Uthmeier’s subpoena.