Robinhood Crypto is under investigation in Florida to allegedly false to advertise his platform as the cheapest way to buy crypto.
In a press release from Thursday, Florida Attorney General James Uthmeier said his office has proof of suggesting that crypto traders actually pay more, on average when using Robinhood than when using competing platforms.
“Crypto is an important component of Florida’s economic future and president [Donald] Trump’s efforts to promote the crypto market will make America stronger and richer. When consumers buy and sell crypto assets, they deserve transparency in their transactions, “said Uthmeier.” Robinhood has long claimed to be the best negotiation, but we believe these representations were misleading. “
In the heart of Uthmeier’s claim is Robinhood’s payment for order flow (PFOF) Business model. PFOF allows Robinhood to offer commission -free trade by instead generating revenue from directing its customer trade through market producers in exchange for a cut of profits. Critics of practice – as Robinhood also uses for stock trading – has complained that PFOF presents an inherent conflict of interest that potentially incentives the company to route customers’ trades through the market manufacturer, which offers the most commission, not the one with the best price for customers.
In 2020, Robinhood paid $ 65 million to settle a US Securities and Exchange Commission (SEK) Enforcement measure that claimed that the company mistakenly represented the quality of its executions of customer trade. Robinhood admitted or denied did not deny SEC’s findings. Under former President Gary Gensler, SEC was considering banning PFOF, but did not eventually do. PFOF is banned in the UK and will be banned in the European Union, which begins next year.
Robinhood CEO Vlad Tenev has long defended practice and tells CNBC in 2023 that PFOF was “inherent here to stay.”
“Our revelations are best in the class-we pass on prices to customers during a life cycle for a trade that clearly outlines the spread or fees associated with the transaction, and revenue Robinhood receives. We are proud to be a place where customers can deal with Krypto on average at the lowest costs,” in an e-mail statement.
Uthmeier’s subpoena is looking for a number of information from Robinhood, including documentation of how the platform determines pricing for transaction discounts or PFOF practices with market manufacturers, documents containing comparative pricing analyzes of other crypto exchanges, and documents relating to sales or access to users’ cryptodrading data.
Robinhood has until the end of the month to respond to Uthmeier’s subpoena.
