Florida Probes Robinhood Crypto Over ‘Deceptive’ Claims Of Low-Cost Trading

Robinhood Crypto LLC is being investigated by Florida’s attorney general, which accuses it of misleading customers about the platform’s costs.

According to a July 10 statement by Florida’s attorney general’s office, Robinhood’s claims to be the “least expensive way to purchase crypto” are “deceptive” and lack any substantiating evidence. 

Subpoena

Robinhood Crypto Issued A Supoena 

As part of the investigation, the trading firm has been hit with a subpoena by the attorney general demanding all marketing material and internal documents related to the company’s crypto services and fee structure. 

Attorney General James Uthmeier said in the statement that crypto is “a vital component of Florida’s financial future,” and accused Robinhood of breaking Florida’s Deceptive and Unfair Practices Act.

“When consumers buy and sell crypto assets, they deserve transparency in their transactions,” Uthmeier added.

Robinhood’s general counsel Lucas Moskowitz responded to the investigation by saying that the company’s disclosures are “best-in-class.” 

Probe Will Analyze If Robinhood’s Trading System Negatively Impacts Traders

The investigation will look into how Robinhood’s trading system interacts with third party service providers. 

Robinhood is able to make money by sending its customers’ trades to third-party companies, who then pay the company for the opportunity to fulfill those trades. This system is called payment for order flow (PFOF).

By making use of that system, Robinhood can let their customers trade without charging them a commission because they are generating revenue from the paying third parties. 

With the investigation, Florida’s attorney general will examine if Robinhood’s system is actually commission-free and does not come at a hidden cost for users of the platform.

The investigation comes after Robinhood’s shares (HOOD) closed yesterday’s trading session at $98.70, up more than 4%. In after-hours trading, HOOD had tumbled almost 1% as of 3:30 a.m. EST, according to Yahoo Finance. 

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