Robinhood Would Likely Win Crypto Court Case With the SEC: KBW

The platform being issued a Wells Notice by the SEC is surprising given the company’s conservative approach to digital assets listings, the report said.

AccessTimeIconMay 7, 2024 at 9:42 a.m. UTC
Updated May 7, 2024 at 6:49 p.m. UTC
  • The SEC issuing Robinhood a Wells Notice is surprising, KBW said.
  • The broker expects no change to the platform’s current U.S. crypto operations or asset listings.
  • Robinhood has a higher likelihood of winning a case with the SEC than most of its U.S. competitors, the report said.

Robinhood (HOOD) being issued a Wells Notice by the Securities and Exchange Commission (SEC) is surprising given the company’s very conservative approach to digital asset listings, KBW said in a research report on Monday.

KBW notes that Robinhood only offers fifteen cryptocurrencies on its U.S. platform, while some of its peers offer more than two hundred digital assets.

“We expect no change to HOOD’s current U.S. crypto operations or asset listings - and expect the SEC to bring forward a suit within the coming months,” analysts led by Kyle Voigt wrote.

“Our preliminary view is that HOOD would likely fight the SEC in court and has a higher likelihood to prevail than most U.S. competitors (if put in similar situations) given HOOD’s stricter listings standards,” the authors wrote.

Crypto trading makes up 12% of Robinhood’s revenue, the report said, and KBW assumes that the SEC will likely go after a subset of digital assets on the platform.

“The worst case scenario from a revenue-at-risk perspective is if the SEC chooses to move forward with categorizing ether (ETH) as a security - as this likely makes up ~25% of HOOD’s crypto assets/trading,” the report added.

The broker has a market perform on the stock with a $20 price target. The shares were trading 1.3% higher in early trading on Tuesday at around $18.

KBW said that Robinhood shareholders won’t have full clarity on the outcome of a potential legal case until late 2025 at the earliest, citing the regulator’s ongoing case against crypto exchange Coinbase (COIN).

Edited by Parikshit Mishra.


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Will Canny is CoinDesk's finance reporter.

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