Robinhood To Prevail Against SEC Despite Wells Notice: KBW
The Securities and Exchange Commission’s (SEC) recent issuance of a Wells Notice to Robinhood (HOOD) has taken analysts at Keefe, Bruyette & Woods (KBW) by surprise. KBW released a research report on Monday, highlighting Robinhood’s conservative approach to digital asset listings.
Key points:
- Robinhood offers only 15 cryptocurrencies on its U.S. platform, compared to 200+ offered by some peers.
- KBW expects no change to Robinhood’s current U.S. crypto operations or asset listings.
- Analysts believe Robinhood would likely fight the SEC in court and have a higher likelihood of prevailing than most U.S. competitors.
- Crypto trading accounts for 12% of Robinhood’s revenue, with the SEC likely targeting a subset of digital assets.
- The worst-case scenario would be if the SEC categorizes Ether (ETH) as a security, which could impact ~25% of Robinhood’s crypto assets and trading.
According to the KBW report, Robinhood distinguishes itself from its competitors by maintaining a highly selective approach to the cryptocurrencies it offers on its platform. While some of its peers provide access to more than 200 digital assets, Robinhood has chosen to limit its offerings to just 15 cryptocurrencies for U.S. users.
Read more: Crypto Investment Products Record $251M In Outflows For Fourth Straight Week
KBW analysts surprised at SEC’s Robinhood decision
Given this conservative stance, KBW analysts, led by Kyle Voigt, expressed their surprise at the SEC’s decision to issue a Wells Notice to the company.
According to the report, KBW expects no immediate changes to Robinhood’s current US crypto operations or the digital assets it lists. Instead, the analysts anticipate that the SEC will likely bring forward a suit within the coming months.
However, KBW’s preliminary view suggests that Robinhood would be inclined to fight the SEC in court and has a higher likelihood of prevailing compared to most of its U.S. competitors if faced with similar situations.
The analysts attribute this assessment to Robinhood’s stricter listing standards, which could work in the company’s favor during legal proceedings.
Read more: Australia’s Tax Office Demands Data On 1.2 Million Crypto Accounts: Report
The potential impact of the SEC’s action on Robinhood’s revenue is also addressed in the KBW report. Crypto trading currently accounts for approximately 12% of the company’s overall revenue.
The analysts assume that the SEC will likely target a subset of the digital assets offered on the platform rather than pursuing a blanket ban.
In a worst-case scenario, KBW suggests that if the SEC chooses to categorize Ethereum (ETH) as a security, it could have the most significant impact on Robinhood’s crypto-related revenue. The report estimates that ETH likely makes up around 25% of the company’s crypto assets and trading volume.
