The settlement with the California Department of Justice resolves disputes over the platform’s practices from 2018 to 2022.
On September 4th, Robinhood Crypto, the division of the popular U.S. trading app, reached a $3.9 million settlement with the California Department of Justice to resolve an investigation into alleged unfair practices regarding the inability to withdraw cryptocurrencies from the platform.
The investigation revealed that from 2018 to 2022, Robinhood did not allow customers to withdraw their cryptocurrencies from the app, limiting operations to simple buying and selling. According to the California Department of Justice, the company violated state commodity law by allowing customers to purchase cryptocurrencies but preventing them from taking direct possession. This practice deprived users of effective control over their digital assets, in violation of the regulations in force in the state of California.
For Attorney General Rob Bonta, the company also misled users by advertising access to multiple exchanges to ensure the best buying and selling prices, which was not always true.
As part of the settlement, Robinhood will be required to ensure that customers can withdraw and transfer their digital assets to external wallets. Additionally, the company must clearly communicate that the platform will hold the cryptocurrencies and may delay fund withdrawals in the event of issues.
Lucas Moskowitz, Robinhood’s general counsel, stated that the company is pleased to have resolved the issue and that the settlement definitively addresses the Attorney General’s concerns about past practices.
However, Robinhood Crypto is facing further legal troubles. Last May, the SEC announced its intention to file a lawsuit against the company. The charges concern alleged violations of federal securities laws.
Last June, Robinhood announced the acquisition of Bitstamp, with the deal expected to close in the first half of 2025. In the second quarter of 2024, revenues from cryptocurrency transactions grew by 161% year-on-year, reaching $81 million and surpassing the revenues generated from stock trading.
