Robinhood Pays SEC $65M to Settle Allegations It Misled Customers

Robinhood's commission-free trading model actually deprived customers of $34 million, the SEC alleged.

AccessTimeIconDec 17, 2020 at 2:30 p.m. UTC
Updated Sep 14, 2021 at 10:44 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The U.S. Securities and Exchange Commission (SEC) Thursday charged stock trading app Robinhood Financial with misleading customers on the source of its revenue and failing to secure them the best possible trades.

  • Robinhood, which offers commission-free trading, could afford to do so because its "largest revenue stream" came from the trading firms paying Robinhood to handle execution.
  • This "payment for order flow" partnership was not disclosed to customers, SEC alleged. And it came at the cost of best execution.
  • "The order finds that Robinhood provided inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission," the SEC said.
  • Robinhood settled the SEC charges with a $65 million penalty.
  • In a separate action Wednesday, Massachusetts state regulators hit Robinhood with allegations of "aggressive marketing" tactics.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


Read more about