Florida’s Attorney General has launched an investigation into crypto broker Robinhood

What’s new? Florida Attorney General James Uthmeier has launched an investigation into the marketing strategy of the crypto broker Robinhood’s cryptocurrency division. The platform is alleged to have misled customers by falsely advertising itself as a provider of the cheapest services for buying digital assets.

Press release

What else is known? The investigation was initiated at a time when crypto regulation under the influence of the Trump administration is changing significantly towards a more friendly one. This year, for example, the Securities and Exchange Commission (SEC) completed investigations into a number of crypto companies, including Robinhood.

But the state-level investigation focuses specifically on consumer protection, not violations of federal securities laws. It focuses on Robinhood’s business model, which involves no direct fees for customers and generates revenue by paying third-party companies for order flow.

Thus, Robinhood routes client trades to third-party companies that pay the platform for the opportunity to take the opposite side in client trades.

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Notably, the promotion strategy has already caused problems for the company in the past. In 2020, for example, the SEC fined Robinhood $65 million for failing to disclose that this business model could lead to poor deal execution for clients.

As part of the new investigation, Attorney Uthmeier said that Robinhood positioned itself as a platform that offered the “lowest cost on average” of crypto trading and promised customers “the most crypto for your money” but trading on the platform could actually be more expensive compared to competitors because of its order flow structure.

So far, prosecutors have issued a subpoena to Robinhood Crypto demanding internal documents and warning it of violating Florida’s Deceptive and Unfair Trade Practices Act for making potentially false claims of value to its customers.

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The subpoena, which must be answered by July 31, seeks extensive documentation, including organizational charts, marketing materials, employee training records, and detailed records of all user transactions in Florida through 2024.

The prosecutor’s office also demanded documents on how the platform determines transaction discounts, training materials for employees discussing the cost of trading with users, and records related to selling or giving third parties access to user transaction data.

Along with this, the Attorney General stated:

“Crypto is a vital component of Florida’s financial future, and President Trump’s efforts to advance the crypto market will make America stronger and wealthier.”