Robinhood, the US-based digital trading app, has announced that it will no longer support three major cryptocurrencies on its platform. The company has advised its users to sell or transfer their holdings before the deadline of June 27, after which the tokens will be automatically sold and converted to buying power on the app.
Reason for Delisting
The decision was made after one of Robinhood’s regular reviews of the sector, but the company did not disclose the exact reason behind the delisting. However, Polygon (MATIC), Cardano (ADA), and Solana (SOL) were recently labeled as securities by the Securities and Exchange Commission (SEC) in its lawsuits against Coinbase and Binance.
The SEC claims that these tokens are securities because they were initially issued as a fundraising tool for the companies behind them, and buyers were “reasonably” led to expect that their investments would be used to grow the projects, which would yield profits for them. SEC Chair Gary Gensler clarified in public remarks that, in the SEC’s view, these tokens meet the definition of an investment contract under the Howey Test.
Impact on the Industry
The SEC’s lawsuit also lists FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO as securities. Robinhood’s decision to delist three of the cryptocurrencies mentioned in the list from its platform comes during the same week that the SEC filed its landmark lawsuits against the crypto giants.
The company has remained silent on whether the enforcement actions influenced the decision. Nevertheless, Robinhood’s primary market is the US, and ensuring regulatory compliance is a matter of survival. It is unclear whether the SEC will expand the list to include other cryptocurrencies or how its actions will impact the industry.
Now that the SEC has formally made its position known and filed suit accordingly, the question will now pass from the court of public opinion to the courts themselves. Robinhood’s decision to end support for three major cryptocurrencies highlights the importance of regulatory compliance in the crypto industry. As the industry continues to grow and evolve, it is likely that more regulatory scrutiny will follow.