SEC Faces Backlash from Digital Chamber Over Wells Notice to Robinhood’s Crypto Trading (RH Crypto)

• The Digital Chamber, a crypto trade association, has criticized the US Securities and Exchange Commission (SEC) for issuing a Wells Notice to Robinhood Crypto.
• The Chamber has called this an alarming development and an example of the regulator’s unchecked regulatory overreach.
• Robinhood has expressed profound disappointment over receiving a Wells Notice, despite its strong compliance.

The Digital Chamber criticizes SEC for issuing a Wells Notice to Robinhood Crypto, calling it an example of unchecked regulatory overreach. This comes after Robinhood’s response expressing disappointment over the notice.

Digital Chamber’s Criticism of SEC’s Actions

The Digital Chamber has slammed the SEC for issuing a Wells Notice to Robinhood Crypto, terming it as an “alarming development.” The Chamber sees this as another instance of the regulator’s “unchecked regulatory overreach,” similar to previous ones. The SEC has previously issued Wells Notices to major industry players like Uniswap and Consensys. A Wells Notice informs the recipient that the regulator has concluded an investigation against them and plans to file an enforcement action.

Robinhood’s Response to the Wells Notice

Robinhood expressed profound disappointment over receiving a Wells Notice. “After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business,” Dan Gallagher, Chief Legal Officer at Robinhood stated. “We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law.”

SEC Undermines Innovation: Digital Chamber

The Chamber agreed with Robinhood’s reply, adding that the SEC has chosen a path that significantly undermines innovation and investor protection in the crypto space. “When Congress is actively deliberating legislation that would define regulatory jurisdictions for digital-assets, the SEC’s actions contradict the legislative process.” The Chamber further said that SEC’s “aggressive stance” has bypassed its investor protection mandate. As a result, the Chamber has urged for immediate legislative action to address such judicial discrepancies and clarify the regulatory framework.

Industry Experts Respond to SEC’s Actions

Top legal experts in the crypto industry have raised concerns over the SEC’s several Wells Notices. Jake Chervinsky, Variant Fund’s Chief Legal Officer, expressed his dismay over SEC’s enforcement intentions on Twitter. He noted that if the SEC brings as many enforcement actions as it has sent Wells notices, it will be in violation of both the law and its Congressional mandate. Adam Cochran, who runs the niche venture fund Cinneamhain Ventures, noted that the Wells Notice targeting Robinhood is “yet another fumble in the ever-miscalculated steps of this SEC.”

Conclusion

The Digital Chamber’s criticism of the SEC’s issuance of a Wells Notice to Robinhood Crypto highlights the ongoing tension between regulatory bodies and crypto businesses. As the crypto industry continues to grow, clear and fair regulatory frameworks are needed to ensure innovation and investor protection. The industry awaits the SEC’s response to these criticisms and the potential implications for the future of crypto regulation.