Robinhood’s cryptocurrency division has agreed to pay a $3.9 million penalty to settle an investigation by the California Department of Justice (DOJ) regarding restrictions on customer cryptocurrency withdrawals between 2018 and 2022.
California Attorney General Rob Bonta announced the settlement on Wednesday, stating that the investigation found Robinhood Crypto prevented customers from withdrawing their cryptocurrency, forcing them to sell assets back to Robinhood to exit the platform. The company was also found to have misled customers by claiming it would connect to multiple trading venues to offer competitive pricing, which was not consistently the case.
“Robinhood misled customers and failed to meet its obligations under California’s consumer and investor protection laws,” Bonta said. “This settlement should send a strong message to all cryptocurrency companies that they must adhere to the same standards as traditional financial institutions.”
As part of the settlement, Robinhood has agreed to ensure that customers can transfer their crypto assets to external wallets and will provide clear disclosures about the platform’s custody practices. Additionally, Robinhood must notify customers of potential delays in settling trades with venues in cases of concerns about a cryptocurrency’s network security.
Robinhood’s general counsel, Lucas Moskowitz, expressed relief over the resolution, saying in a statement, “We are pleased to put this matter behind us. 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.”
Robinhood’s stock on Nasdaq closed down 1.34% at $19.11 following the news.
The company, which has been ramping up its presence in the crypto sector, recently announced plans to acquire crypto exchange Bitstamp, with the deal expected to close in the first half of 2025. In the second quarter of 2024, Robinhood reported that its cryptocurrency transaction revenues surged 161% year-on-year to $81 million, more than doubling its revenue from equity trades.
The settlement is the latest development in Robinhood’s continued push to expand its crypto offerings while addressing regulatory challenges.
