Robinhood might Delist Cryptocurrencies Referenced in the SEC Lawsuit

Updated: 07 June 2023

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A popular fintech trading app, Robinhood, revealed recently that it is considering what to do with a number of cryptocurrencies listed on its platform.

The dilemma comes after the US Securities and Exchange Commission (SEC) filed lawsuits against Binance and Coinbase.

In its documents, the regulator named certain coins, including Solana (SOL), Cardano (ADA), and Polygon (MATIC).

BREAKING:

Robinhood to delist tokens named in the SEC lawsuit against Binance and Coinbase. This includes Solana, Polygon and Cardano.

— WhaleFUD (@WhaleFUD) June 7, 2023

Not wanting to get into trouble with the regulator as well, Robinhood’s Chief Legal Compliance Officer, Dan Gallagher, stated

We are actively reviewing the SEC analysis to determine what, if any, actions to take in that regard.

Robinhood’s dilemma

No cryptocurrencies have been delisted as of yet, but if the company decides that the SEC could file a legal action against Robinhood for offering these coins, they will likely be removed.

The company does possess a broker-dealer license that allows it to trade securities.

However, Gallagher, who used to be an SEC commissioner, does not think that the firm could use this license to safely trade cryptocurrencies named in the SEC filings.

On the other hand, the lack of disclosures standard for other security investments from these projects would prevent re-listing them.

He continued by saying that there is a lack of compulsory disclosure in the digital asset space, pointing out a problem: retail investors might not be aware of what they are buying when investing in digital currencies.

Gallagher, alongside the former CFTC Chair Christopher Giancarlo and Coinbase’s Chief Legal Officer Paul Grewal, wanted to define what should be disclosed to potential investors.

He explained that some investors want to look at quantitative measures, while others want qualitative ones.

Disclosures in crypto

However, some, like Rep. John Duarte, R-Calif., were skeptical regarding the way disclosures work with crypto.

Duarte, for example, compared digital currencies to special purpose acquisition companies.

This is a rather unorthodox vehicle to offer stocks publicly, and it also received its fair share of criticism in recent years due to the lack of disclosures, which led to unwanted outcomes for retail investors.

He concluded,

So we don’t know what we’re disclosing, but we’re going to be disclosing something. It’s not earnings, it’s not business strategy, it’s just something. What is your competitive advantage, what is your unique value proposition, what is your business strategy, what are you going to do better than what other companies aren’t already doing, what resources do you have, what’s your talent pool?

None of this fits into describing how crypto assets are valued, according to Duarte.

On the other hand, Giancarlo said that analysis companies, like Chainalysis, might be better at providing analysis and details for investors instead of financial disclosures that are issued when new tokens are offered.

Once again, the biggest problem in the crypto industry is the lack of regulations, which means that neither the projects, investors, nor even exchanges know what they can or must do.

As for the regulators, they continue to ignore the matter while trying to claim jurisdiction over the crypto industry.

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