Robinhood Agrees to $3.9M Settlement Over Crypto Withdrawal Restrictions
Robinhood will pay a $3.9M penalty to the California Department of Justice for restricting crypto withdrawals between 2018 and 2022.
Key points:
- $3.9M penalty: Robinhood to pay California DOJ.
- Crypto restrictions: Users could not withdraw crypto from 2018 to 2022.
- Forced sales: Customers had to sell crypto back to Robinhood.
- False advertising: Platform misled users about trading prices.
- Compliance requirements: Robinhood must allow crypto withdrawals and clarify custody terms.
California DOJ Cracks Down on Robinhood’s Crypto Practices
Robinhood is facing a $3.9M penalty after an investigation by the California Department of Justice (DOJ). The settlement resolves allegations that, between 2018 and 2022, Robinhood prevented its users from withdrawing cryptocurrency from the platform.
Consequently, users were forced to sell their digital assets back to Robinhood if they wanted to exit their positions. This controversial policy, therefore, prompted a thorough investigation, which has now resulted in the penalty.
Read more: Robinhood To Prevail Against SEC Despite Wells Notice
Moreover, the DOJ found that Robinhood misled customers by falsely advertising that it provided access to competitive pricing across multiple trading venues. In reality, this wasn’t always the case.
As California Attorney General Rob Bonta emphasized, companies—whether traditional or cryptocurrency-focused—must follow the state’s consumer protection laws.
As part of the settlement, Robinhood must ensure users can withdraw their crypto freely. Additionally, the company will now make clearer disclosures about the custody of assets and possible delays in settlement during network security incidents.
Despite this setback, Robinhood continues to bet heavily on crypto trading. In fact, it recently announced plans to acquire the crypto exchange Bitstamp by 2025.
Read more: Robinhood to Acquire Bitstamp in $200 Million Deal
Lucas Moskowitz, Robinhood’s general counsel, expressed satisfaction with the settlement, saying it allows the company to move forward while making cryptocurrency more accessible and affordable.
