Retail trading platform Robinhood pushes to dismiss class-action lawsuit

Updated: 17 May 2023

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Robinhood, one of the most used retail trading platforms in the stock and exchange markets, is pushing to dismiss a class-action lawsuit against the company. The lawsuit claims that the exchange failed to disclose information ahead of its initial public offering (IPO) in 2021. The information in question relates to the exchange offering crypto trading activities.

Robinhood wants to dismiss class-action lawsuit

The lawyers representing the Robinhood exchange have filed a motion to dismiss the class-action lawsuit. The motion filed by the US publicly traded company follows a court ruling in February that said there was no proof showing that Robinhood shared false or misleading IPO information with its customers in 2021.

The plaintiffs in the case were provided with an opportunity to file an amended complaint. The case was filed in a federal court in San Francisco, and it was submitted before the US District Judge Edward Chen.

The latest motion filed by Robinhood seems to be calling for a total dismissal of the case. If this case is closed, it could be a significant milestone for the company after facing a rocky period. On Tuesday, Robinhood stock closed with a 21.5% decline over the last 12 months at the New York Stock Exchange. However, the stock’s price appears to have stabilized.

The plaintiffs in this case had said that Robinhood failed to provide disclosure on the popularity of meme stocks like GameStop and meme coins such as Dogecoin. In the recent motion, the lawyers from the exchange said that the new theory that was evident for the first time in the plaintiff’s third try in the case failed to succeed.

“As an initial matter, Plaintiffs ignore the fact that the so-called “meme stock” trading frenzy of early 2021, along with its impact on Robinhood’s business, was one of the most widely reported news events of the year,” the lawyers said.

Robinhood defends cryptocurrency trading activities

The Robinhood trading platform filed for its IPO in mid-2021. The IPO coincided with a meme stock trading frenzy on the platform earlier in the year. The class-action lawsuit against the company claimed that the increase in crypto trading activities and the resulting plunge in the values of these assets were not properly disclosed by the exchange.

The lawyers representing Robinhood have said that the notable increase in crypto trading volumes in early 2021 and the decline that followed shortly after was extensively covered by news platforms and on social media. The exchange said that such information was available to all reasonable investors that participated in the IPO.

In April, Robinhood reached a settlement with several stages, such as California. The settlement included $10 million worth of penalties, with the exchange being accused of technical and operational failures that affected retail investors after the platform suddenly stopped GameStop stock trading.

However, Robinhood is not the only party that seeks to dismiss a lawsuit around meme coins. In April this year, Tesla’s CEO, Elon Musk, pushed for the dismissal of a lawsuit that claimed he inflated the price of Dogecoin. Musk has been a major supporter of the DOGE meme coin and has previously triggered the coin’s gains through tweets.

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