The settlement mandates ongoing crypto withdrawals and updated disclosures.
Key Takeaways
- Robinhood's settlement with California requires ongoing crypto withdrawals.
- The $3.9M settlement addresses past custody and disclosure issues.
California Attorney General Rob Bonta announced a $3.9 million settlement with Robinhood Crypto LLC for violating state commodities law by prohibiting customers from withdrawing crypto from their accounts between 2018 and 2022.
The settlement resolves an investigation into Robinhood’s past practices and includes conduct requirements in addition to the monetary penalty. Under the agreement, Robinhood must allow customers to withdraw crypto to their own wallets and update disclosures regarding its trading and custody practices.
California’s Department of Justice concluded that Robinhood sold commodities contracts in violation of state law by allowing customers to purchase crypto without actually delivering the assets. During the period in question, customers were unable to withdraw their crypto and had to sell them back to Robinhood to exit the platform.
Attorney General Bonta emphasized the importance of consumer protection in the space, stating:
“Whether you’re a brick-and-mortar store or a cryptocurrency company, you must adhere to California’s consumer and investor protection laws.”
The investigation also found that Robinhood misled customers about its trading practices, including claims that it would connect to multiple trading venues to ensure competitive prices. Additionally, the company failed to disclose instances where it arranged for trading venues to hold customer assets for extended periods.
Robinhood’s chief lawyer, Lucas Moskowitz, referred to the settled issues as “historical practices” and expressed satisfaction in resolving the matter. The company had previously disclosed receiving subpoenas from the California Attorney General regarding its trading platform, operations, and coin listings.
This settlement comes as Robinhood faces separate scrutiny from the SEC, which indicated in May that it is preparing to file suit over alleged violations of federal securities laws.