Robinhood is investigated by the FLORIDA General Prosecutor's office for presumably “misleading” prices in the cryptocurrency area
Robinhood crypto is under investigation in Florida because the company is accused of incorrectly advertising its platform as the cheapest way to buy cryptocurrencies.
In one Thursday press releasethe Attorney General of Florida, James Uthmeier, said that his office has evidence that indicates that crypto retailers actually pay more on average if they use Robinhood than with competing platforms.
“Crypto is an essential part of Florida's financial future, and the efforts of President (Donald) Trump to advance the crypto market will make America more and wealthier. If consumers buy and sell crypto-assets, they earn transparency in their transactions,” said Uthmeier. “Robinhood has long claimed to be the best offer, but we believe that these representations were misleading.”
At the center of Uthmeier's allegation is the business model of Robinhood, which on the payment for the order forwarding (Payment for Order Flow, PFOF) based. PFOF enables Robinhood to offer commission -free trade by generating income from it to forward customer transactions to Market Makers and in return to receive a share in the profit. Critics of this practice – the Robinhood also applies in stock trading – complain that PFOF represents an inherent conflict of interest and potentially motivates the company to forward customer transactions to the market maker who pays the highest commission and not to those who offer the best price for customers.
In 2020, Robinhood paid $ 65 million to settle a enforcement measure by the US stock exchange inspectorate Securities and Exchange Commission (SEC)in which the company was accused of having misrepresented the quality of the execution of customer orders. Robinhood did not clear the findings of the SEC. Under the former chairman Gary Gensler, the SEC considered a ban from PFOF, but ultimately decided against it. PFOF is banned in the United Kingdom and will also be prohibited in the European Union from next year.
Robinhood CEO Vlad Tenev has long defended the practice and in 2023 told CNBC that PFOF “will basically stay here.”
“Our disclosures are first -class – we open customers throughout the life cycle of a trade information that clearly represent the spread or the fees associated with the transaction as well as the income achieved by Robinhood. We are proud to be a place where the customer can act on average at the lowest costs of cryptocurrencies,” said Lucas Moskowitz, General Counter from Robinhood Markets, in one by E-mail transmitted.
Uthmeier's summons requires a wealth of information from Robinhood, including documentation, how the platform determines pricing for transaction discounts or PFOF practices with market makers, documents with comparative price analysis of other crypto exchanges as well as documents in connection with the sale or access to the crypto trade data of the users.
Until the end of the month, Robinhood has time to react to Uthmeier's summons.
