According to a research report by KBW on Monday, the issuance of a Wells Notice to Robinhood (HOOD) by the Securities and Exchange Commission (SEC) came as a surprise, considering the company's cautious approach to digital asset offerings. KBW highlighted that Robinhood's U.S. platform offers only fifteen cryptocurrencies, significantly fewer than some of its competitors, which offer over two hundred digital assets.
The analysts, led by Kyle Voigt, expressed the expectation that Robinhood's current U.S. crypto operations and asset listings would remain unchanged, anticipating that the SEC would likely file a lawsuit in the coming months. They suggested that Robinhood would likely contest the SEC in court and might have a higher chance of success compared to its U.S. competitors due to its stricter listing standards.
Highlighting that crypto trading contributes 12% to Robinhood's revenue, KBW speculated that the SEC might target specific digital assets on the platform. The report mentioned that the worst-case scenario in terms of revenue risk would be if the SEC categorized ether (ETH) as a security, as it represents approximately 25% of Robinhood's crypto assets and trading volume.
KBW maintained a market perform rating on Robinhood's stock with a price target of $20. As of early trading on Tuesday, the shares were up by 1.3% to around $18. The report also indicated that Robinhood shareholders might not have clarity on the potential legal outcome until at least late 2025, citing the ongoing SEC case against crypto exchange Coinbase (COIN).
May 2024, Cryptoniteuae