In brief
- Florida AG James Uthmeier launched a state-level probe into Robinhood Crypto’s “lowest cost on average” marketing.
- The AG issued a subpoena seeking documents on pricing, marketing, and user trade data to assess potential consumer deception.
- The investigation focuses on Robinhood’s payment for order flow model, which may lead to higher costs despite low-fee claims.
Florida Attorney General James Uthmeier has launched an investigation into Robinhood Crypto, alleging the popular trading platform has misled customers by falsely promoting itself as the least expensive way to purchase digital assets.
“Robinhood has long claimed to be the best bargain, but we believe those representations were deceptive,” Attorney General James Uthmeier said in a statement Wednesday.
The office has issued a subpoena for internal documents, alleging that Robinhood Crypto is violating Florida’s Deceptive and Unfair Trade Practices Act by making potentially false cost representations to consumers.
“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,” Uthmeier said.
In a statement shared with Decrypt, Lucas Moskowitz, General Counsel at Robinhood Markets, Inc said that the firm’s disclosures are “best-in class.” He added that, “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.”
The probe comes at a time when crypto regulation is undergoing a significant shift under the Trump administration, with the SEC recently ending investigations into numerous crypto companies, including Robinhood itself, just months ago.
However, the state-level investigation focuses specifically on consumer protection rather than federal securities violations.
The investigation targets Robinhood’s business model, which generates revenue through payment for order flow rather than charging direct commissions.
Under this structure, Robinhood routes customer trades to third-party firms that pay the platform for the opportunity to take the opposite side of customer trades.
The Florida probe marks a renewed focus on Robinhood’s controversial payment for order flow model, the same practice that drew a $65 million SEC fine in 2020 for failing to disclose how it could lead to inferior trade execution for customers.
The AG’s office said that while Robinhood markets itself as offering the “lowest cost on average” for crypto trading and promises to deliver customers “the most crypto for your money,” evidence allegedly suggests trading on the platform may actually be more expensive than competitors due to its order flow structure.
The subpoena, which requires a response by July 31, seeks extensive documentation, including organizational charts, marketing materials, employee training documents, and detailed records of all Florida user trades in 2024.
The request also seeks documents showing how the platform determines pricing for transaction rebates, training materials for personnel discussing crypto trading costs with users, and records related to the sale or access of users’ cryptocurrency trading data.
“Ideally, any representation made publicly by a business must be substantiated with credible evidence,” Hargun Singh, Web3 lawyer and associate at Luthra and Luthra Law Offices India, told Decrypt.
“In this context, the subpoena issued to Robinhood Crypto appears to stem from a prima facie view that trading on its platform may, in fact, be more expensive than on competing platforms, directly contradicting its marketing claims of being the ‘lowest cost’ option.”
To defend against the allegations, Singh said Robinhood would need to “produce substantive evidence supporting its claims regarding lower pricing” and show transparency by disclosing details about its “pricing methodology” and the “impact of payment for order flow arrangements on crypto trade execution and pricing for users.”
Robinhood is “unlikely to succeed in challenging the subpoena on jurisdictional grounds” since consumer protection laws often have “extraterritorial applicability” when deceptive advertising affects residents within a specific jurisdiction,” he said.
This article has been updated to include comments from Robinhood.
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