Key Insights
- Robinhood Crypto settles California investigation for $3.9 million over past withdrawal restrictions.
- Settlement requires Robinhood to allow crypto withdrawals and improve transparency.
- Robinhood’s crypto revenue grew 161% year-on-year, surpassing equities in Q2 2024.
SAN FRANCISCO (MarketsXplora) – Robinhood Markets Inc’s cryptocurrency arm has agreed to pay $3.9 million to settle an investigation by California authorities into its past practices that prevented customers from withdrawing digital assets, the state’s Department of Justice said on Wednesday.
The settlement, secured by California Attorney General Rob Bonta, addresses Robinhood Crypto’s failure to allow customers to withdraw cryptocurrency from 2018 to 2022, forcing them to sell their holdings back to the platform if they wished to exit.
“Robinhood misled customers by advertising it would connect to multiple trading venues to ensure customers receive the most competitive prices between the venues, which was not always true,” the California DOJ said in a statement.
Attorney General Bonta emphasized the significance of the settlement, stating,
“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.”
As part of the agreement, Robinhood must ensure that customers can withdraw their crypto assets from the platform and transfer them to their personal wallets. The company is also required to clearly communicate to users that it will custody crypto assets and may delay settlement with trading venues in the event of security concerns related to a cryptocurrency’s network.
Lucas Moskowitz, Robinhood’s general counsel, expressed satisfaction in resolving the matter, stating,
“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.”
The settlement comes as Robinhood appears to be doubling down on its cryptocurrency offerings. In June, the company announced plans to acquire crypto exchange Bitstamp, with the deal expected to close in the first half of 2025.
Robinhood’s crypto business has shown significant growth, with transaction-based revenues in the sector expanding to $81 million in the second quarter of 2024, a 161% year-on-year increase. This figure surpassed the company’s transaction revenues from equities during the same period.
Despite the settlement news, Robinhood’s stock on Nasdaq closed down 1.34% at $19.11 on Wednesday.