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Robinhood Would Likely Win Crypto Court Case With the SEC: KBW
The platform being issued a Wells Notice by the SEC is surprising given the company’s conservative approach to digital assets listings, the report said.
Updated May 7, 2024, 6:49 p.m. Published May 7, 2024, 9:42 a.m.
- The SEC issuing Robinhood a Wells Notice is surprising, KBW said.
- The broker expects no change to the platform’s current U.S. crypto operations or asset listings.
- Robinhood has a higher likelihood of winning a case with the SEC than most of its U.S. competitors, the report said.
Robinhood (HOOD) being issued a Wells Notice by the Securities and Exchange Commission (SEC) is surprising given the company’s very conservative approach to digital asset listings, KBW said in a research report on Monday.
KBW notes that Robinhood only offers fifteen cryptocurrencies on its U.S. platform, while some of its peers offer more than two hundred digital assets.
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“We expect no change to HOOD’s current U.S. crypto operations or asset listings - and expect the SEC to bring forward a suit within the coming months,” analysts led by Kyle Voigt wrote.
“Our preliminary view is that HOOD would likely fight the SEC in court and has a higher likelihood to prevail than most U.S. competitors (if put in similar situations) given HOOD’s stricter listings standards,” the authors wrote.
Crypto trading makes up 12% of Robinhood’s revenue, the report said, and KBW assumes that the SEC will likely go after a subset of digital assets on the platform.
“The worst case scenario from a revenue-at-risk perspective is if the SEC chooses to move forward with categorizing ether as a security - as this likely makes up ~25% of HOOD’s crypto assets/trading,” the report added.
The broker has a market perform on the stock with a $20 price target. The shares were trading 1.3% higher in early trading on Tuesday at around $18.
KBW said that Robinhood shareholders won’t have full clarity on the outcome of a potential legal case until late 2025 at the earliest, citing the regulator’s ongoing case against crypto exchange Coinbase (COIN).
Read more: Robinhood Gains 2%, Erasing Early Losses Following SEC Wells Notice
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