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Robinhood's Former Ban on Crypto Withdrawals Draws $3.9M Settlement in California
The popular trading app's sunsetted ban on customer crypto withdrawals caught the ire of California's attorney general.
Updated Sep 5, 2024, 4:34 p.m. Published Sep 5, 2024, 1:59 a.m.
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Robinhood's crypto-trading subsidiary used to prevent customers from withdrawing the tokens they bought. Though Robinhood Crypto LLC abandoned that policy in 2022, on Wednesday its past practices earned a $3.9 million slap on the wrist from the state of California.
The California Department of Justice settled its investigation into what Robinhood's chief lawyer called "historical practices" in the popular trading app's crypto business from 2018 through 2022
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The state's investigation notably treated the various cryptocurrencies that people can buy and sell through Robinhood as commodities. By allowing customers to buy cryptos but failing to let them take personal custody of the assets, the company violated California commodities law, according to a press release from California's Department of Justice.
Under the settlement Robinhood must continue to allow its customers to withdraw their cryptocurrencies from the app, as well as update disclosures regarding its custody practices.
Robinhood Crypto had previously disclosed it received a number of subpoenas from the California Attorney General regarding its trading platform, its business and operations and its coin listings – in addition to its disclosures and custody of customer assets. A spokesperson at Robinhood said to CoinDesk: "there is no ongoing investigation and this resolves the CA AG inquiry."
"We are pleased to put this matter behind us," said Lucas Moskowitz, Robinhood Markets' general counsel in an emailed statement. "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 Crypto faces separate scrutiny from the U.S. Securities and Exchange Commission, which in May told the company it is preparing to file suit over alleged violations of federal securities laws.
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