Robinhood Crypto is under investigation in Florida for allegedly falsely advertising its platform as the least expensive way to buy crypto.
In a Thursday press statement, Florida Attorney General James Uthmeier said his office has evidence to suggest that crypto traders actually pay more, on average, when using Robinhood than when using competing platforms.
“Crypto is a vital component of Florida’s financial future, and President [Donald] Trump’s efforts to advance the crypto market will make America stronger and wealthier. When consumers buy and sell crypto assets, they deserve transparency in their transactions,” Uthmeier said. “Robinhood has long claimed to be the best bargain, but we believe those representations were deceptive.”
At the heart of Uthmeier’s allegation is Robinhood’s payment for order flow (PFOF) business model. PFOF allows Robinhood to offer commission-free trading by instead generating revenue from routing its customer trades through market makers in exchange for a cut of the profits. Critics of the practice — which Robinhood also uses for stock trading — have complained that PFOF presents an inherent conflict of interest, potentially incentivizing the company to route customers’ trades through the market maker offering the most commission, not the one with the best price for customers.
In 2020, Robinhood paid $65 million to settle a U.S. Securities and Exchange Commission (SEC) enforcement action alleging that the company misrepresented the quality of its executions of customer trades. Robinhood did not admit or deny the SEC’s findings. Under former Chair Gary Gensler, the SEC considered banning PFOF but ultimately did not. PFOF is banned in the United Kingdom and will be banned in the European Union beginning next year.
Robinhood CEO Vlad Tenev has long defended the practice, telling CNBC in 2023 that PFOF was “inherently here to stay.”
“Our disclosures are best-in-class — We disclose 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,” said Robinhood Markets General Counsel Lucas Moskowitz in an emailed statement.
Uthmeier’s subpoena is seeking a slew of information from Robinhood, including documentation of how the platform determines pricing for transaction rebates or PFOF practices with market makers, documents containing comparative price analyses of other crypto exchanges, and documents relating to the sale or access of users’ crypto trading data.
Robinhood has until the end of the month to respond to the Uthmeier’s subpoena.