- Robinhood is the latest victim of the regulatory “war on crypto.”
- Coinbase CEO Brian Armstrong pushed political activism as the long-term solution to regulatory overreach.
- Robinhood CEO Vlad Tenov remained defiant in the face of pending enforcement action.
The crypto industry faces an intensifying campaign of enforcement actions from regulators, who claim large swaths of the sector are operating in violation of the law. Such claims include allegations of improper disclosures and the pushing of unregistered securities products.
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The latest company caught in the Securities Exchange Commission’s (SEC) crosshairs is the retail trading app Robinhood, which received a Wells Notice recently. Chiming into the situation, Coinbase CEO Brian Armstrong welcomed Robinhood to the “club” of crypto firms battling the regulator. However, Armstrong believes the long-term solution to regulator hostility is supporting pro-crypto politicians.
Coinbase CEO Looks to Politics
In response to Robinhood’s run-in with the SEC, Armstrong expressed confidence that the court system will ultimately side with crypto firms. However, he argued that the long-term solution requires crypto stakeholders to actively support pro-industry political candidates to decisively end regulatory overreach stifling innovation.
Pushing the political solution, Armstrong urged individuals to back groups like FairShake, a political action committee supporting pro-crypto politicians, and Stand With Crypto, an advocacy nonprofit mobilizing grassroots support with over 400,000 members who have raised over $86 million to advance the cause.
A key initiative of Stand With Crypto is encouraging individuals to directly lobby their representatives to support legislation such as Fit21, a bill to establish a legal framework for digital assets, including transferring the crypto industry’s regulatory authority to the Commodity Futures Trading Commission (CFTC).
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Beyond calling and emailing Congress members, the group also recommended that citizens donate funds and raise public awareness about the industry’s plight at the hands of overzealous, hostile regulators.
Robinhood Under the Cosh
Reacting to the perceived hostility of a Wells Notice, Robinhood CEO Vlad Tenev struck a defiant tone, calling it “yet another improper attempt by the administrative state to stifle innovation.” Tenev signaled a willingness to take on the SEC in court to establish regulatory clarity.
Robinhood’s crypto division received the Wells Notice on May 4, which detailed allegations of violating Sections 15(a) and 17A of the Securities Exchange Act of 1934. Section 15(a) refers to appropriate registration with the SEC, while 17A relates to rules governing the clearance, settlement, and record-keeping of securities transactions to safeguard customer assets and funds during the trading process.
On the Flipside
- The CFTC should not be regarded as a soft touch compared to the SEC.
- KuCoin and Binance have been charged by the CFTC for operating illegal derivatives exchanges.
- Lawmakers have struggled to find bipartisan agreement on comprehensive crypto regulations.
Why This Matters
Unclear rules and regulations by enforcement lead many to believe the US crypto industry is the victim of underhand practices. With the future of US innovation at risk, the stakes have never been higher.
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