Robinhood Markets (HOOD) is being investigated by the Florida Attorney General (AG) for allegedly claiming to offer the lowest average costs for buying and selling cryptocurrencies. Florida Attorney General James Uthmeier launched the investigation for potential violations of Florida’s Deceptive and Unfair Practices Act and has issued a subpoena requesting multiple documents. Robinhood has until July 31 to respond to the subpoena.
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Commenting on the probe, Robinhood General Counsel Lucas Moskowitz told Cointelegraph that the company clearly discloses pricing information to customers throughout the lifecycle of a trade and “outlines the spread or the fees associated with the transaction and the revenue Robinhood receives.”
Here’s Why Florida Launched the Probe
Uthmeier stated that crypto is set to become a vital component of Florida’s financial future. President Donald Trump has also suggested that the crypto market could make America stronger and wealthier. Amid this optimism and the increasing adoption of cryptocurrencies, consumers need absolute transparency when conducting transactions. The Attorney General believes that although Robinhood has claimed to be the best and the lowest-cost option, those “representations were deceptive.”
Robinhood earns revenue through a system called payment for order flow (PFOF) instead of charging direct commissions on trades. The company routes customers’ trades to third-party firms, which pay Robinhood a fee for the opportunity to take the opposite side of the trade. These third-party firms may be offering less favorable prices to Robinhood’s customers to maintain their own profitability.
By engaging in this system, Uthmeier believes that Robinhood could be charging customers more than competing firms. Hence, Robinhood’s claims of giving customers “the most crypto for your money” are misleading. The subpoena demands several documents, including marketing materials, data on fee structures, data on all trades with Florida users in 2024, agreements with market makers, and competitive pricing analysis.
What Is the Future of HOOD Stock?
Analysts remain divided on Robinhood’s long-term stock outlook. On TipRanks, HOOD stock has a Moderate Buy consensus rating based on 15 Buys, five Holds, and one Sell rating. Also, the average Robinhood price target of $79.85 implies 19.1% downside potential from current levels. Year-to-date, HOOD stock has surged nearly 165%.
