Robinhood Probed by Florida AG’s Office Over Allegedly ‘Deceptive’ Crypto Pricing Claims

Robinhood Crypto is beneath investigation in Florida for allegedly falsely promoting its platform because the least costly method to purchase crypto.

In a Thursday press assertion, Florida Attorney General James Uthmeier stated his workplace has proof to recommend that crypto merchants truly pay extra, on common, when utilizing Robinhood than when utilizing competing platforms.

“Crypto is a vital component of Florida’s financial future, and President [Donald] Trump’s efforts to advance the crypto market will make America stronger and wealthier. When consumers buy and sell crypto assets, they deserve transparency in their transactions,” Uthmeier stated. “Robinhood has long claimed to be the best bargain, but we believe those representations were deceptive.”

At the center of Uthmeier’s allegation is Robinhood’s fee for order move (PFOF) enterprise mannequin. PFOF permits Robinhood to supply commission-free buying and selling by as a substitute producing income from routing its buyer trades via market makers in change for a lower of the earnings. Critics of the apply — which Robinhood additionally makes use of for inventory buying and selling — have complained that PFOF presents an inherent battle of curiosity, probably incentivizing the corporate to route prospects’ trades via the market maker providing essentially the most fee, not the one with one of the best value for purchasers.

In 2020, Robinhood paid $65 million to settle a U.S. Securities and Exchange Commission (SEC) enforcement motion alleging that the corporate misrepresented the standard of its executions of buyer trades. Robinhood didn’t admit or deny the SEC’s findings. Under former Chair Gary Gensler, the SEC thought of banning PFOF however in the end didn’t. PFOF is banned within the United Kingdom and will likely be banned within the European Union starting subsequent 12 months.

Robinhood CEO Vlad Tenev has lengthy defended the apply, telling CNBC in 2023 that PFOF was “inherently here to stay.”

“Our disclosures are best-in-class — We disclose pricing information to customers during the lifecycle of a trade that clearly outlines the spread or the fees associated with the transaction and the revenue Robinhood receives. We are proud to be a place where customers can trade crypto at the lowest cost on average,” stated Robinhood Markets General Counsel Lucas Moskowitz in an emailed assertion.

Uthmeier’s subpoena is in search of a slew of data from Robinhood, together with documentation of how the platform determines pricing for transaction rebates or PFOF practices with market makers, paperwork containing comparative value analyses of different crypto exchanges, and paperwork regarding the sale or entry of customers’ crypto buying and selling information.

Robinhood has till the tip of the month to answer the Uthmeier’s subpoena.