Florida AG Launches Investigation Into Robinhood Crypto Over Claims Of ‘Deceptive’ Low-Cost Trading

Robinhood Markets (HOOD) stock garnered attention on Thursday after Florida’s Attorney General, James Uthmeier, launched an investigation into Robinhood Crypto, alleging that it falsely promotes its platform as the least expensive way to purchase crypto.

“Robinhood has long claimed to be the best bargain, but we believe those representations were deceptive,” Uthmeier said in a statement. His office has issued a subpoena to uncover internal documents as they believe Robinhood is breaking Florida’s Deceptive and Unfair Practices Act.

The AG’s office stated that Robinhood generates revenue by routing customers’ trades to third-party firms, rather than charging consumers directly. These firms pay Robinhood for the opportunity to take the opposite side of its customers’ trades, also known as payment for order flow (PFOF).

“There is evidence that trading on Robinhood is actually more expensive than trading on competing platforms due to its PFOF structure versus competitors offering all-in trading costs. This is due to the fact that third parties that pay Robinhood for order flow might have to charge less favorable prices to the Robinhood customers they trade with to be profitable,” Uthmeier said.

Retail sentiment on Stocktwits was in the ‘neutral’ (51/100) territory, while retail chatter was ‘high’ early on Friday.

Robinhood Markets General Counsel Lucas Moskowitz said to Reuters that "pricing information to customers during the lifecycle of a trade that clearly outlines the spread or the fees associated with the transaction and the revenue Robinhood receives. We are proud to be a place where customers can trade crypto at the lowest cost on average."

The company has come under attention this month, as it launched so-called tokenized shares of SpaceX, OpenAI, and other private companies. “These 'OpenAI tokens' are not OpenAI equity. We did not partner with Robinhood, were not involved in this, and do not endorse it,” the Sam Altman-led firm clarified on X.

Robinhood stock has more than doubled this year, amid a recent rally in bitcoin prices.

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