Florida AG Investigates Robinhood Over Crypto Costs Allegations

Robinhood, a popular trading platform, is under scrutiny from Florida Attorney General James Uthmeier for allegedly misleading consumers about the costs of its cryptocurrency services. The investigation centers on claims that Robinhood's marketing practices are deceptive, violating Florida’s Deceptive and Unfair Practices Act. Uthmeier emphasized the importance of transparency in digital asset transactions, given the significance of crypto in Florida’s financial future.

The core of the dispute revolves around Robinhood’s use of payment for order flow (PFOF), a practice where brokers receive compensation from third parties for routing trades through them. Critics, including Uthmeier, argue that this model may result in less favorable execution prices for customers, despite the appearance of commission-free trading. Uthmeier noted that third parties paying Robinhood for order flow might need to charge less favorable prices to remain profitable.

This is not the first time Robinhood has faced scrutiny over its pricing claims. In 2020, the company settled with the SEC for $65 million over allegations of misleading customers about order execution, though it did not admit wrongdoing. Robinhood’s general counsel, Lucas Moskowitz, defended the company’s practices, stating that its disclosures are transparent and that customers are well-informed about pricing and revenue throughout the trading process. Moskowitz asserted that Robinhood offers the lowest average cost for crypto trading. The company has until the end of July to respond to the state’s subpoena.

Despite the legal challenges, Robinhood’s stock has shown resilience. The company’s stock price rose 4.4% on Thursday, closing at $98.70, buoyed by a broader crypto market rally. This puts the stock just below its all-time high of $100.88. In after-hours trading, the stock pulled back slightly to $97.23, down 1.49%. Over the past month, Robinhood shares have rallied by 30%, driven by growing investor optimism around the firm’s strategic expansion into blockchain technology and asset tokenization.

In other legal news, Hayden Davis, the creator of the LIBRA meme coin and co-founder of Kelsier Ventures, is seeking dismissal of a class-action lawsuit in New York. Davis argues that the court lacks jurisdiction, as he has no meaningful connection to New York and did not specifically target New York residents when promoting LIBRA. The token gained international attention after Argentine President Milei publicly praised it, but it collapsed by 94% in February, leading to widespread investor outrage.

The class-action lawsuit, brought by a group of LIBRA investors led by Omar Hurlock, accuses Davis and his brothers, Gideon and Thomas Davis, of misleading the public by suggesting the token would benefit Argentina’s economy while allegedly siphoning over $100 million through manipulated liquidity pools. Davis argued that continuing the case in New York would violate constitutional due process, as the suit does not sufficiently establish personal jurisdiction over him. He also disputed allegations that his public comments, including a promise to repurchase certain LIBRA tokens, were made with any intentional connection to New York.

Earlier in May, the plaintiffs succeeded in getting a temporary order directing stablecoin issuer Circle to freeze more than $57 million in USDC allegedly connected to the LIBRA project. The token’s dramatic rise and fall even led to political turmoil in Argentina, where opposition parties accused President Milei of involvement and called for his impeachment. However, Milei was cleared of any wrongdoing by Argentina’s anti-corruption watchdog, and no official action was taken against him.

Davis requested that the case be dismissed without prejudice, which could allow the plaintiffs to potentially file the lawsuit in another jurisdiction.

Legal drama is not confined to the crypto industry. The Midas Project, a nonprofit watchdog focused on artificial intelligence, recently filed a complaint with the US Internal Revenue Service (IRS), accusing OpenAI of potential tax law violations that could jeopardize its nonprofit status. The complaint alleges serious conflicts of interest in OpenAI’s board, including CEO Sam Altman’s dual role overseeing both the nonprofit and its for-profit operations. The Midas Project claims this creates a situation where Altman could personally benefit at the expense of the public interest.

The watchdog also claims OpenAI has abandoned key safeguards, misused charitable funds, and structured its board in a way that violates federal nonprofit regulations. It also pointed out that board members like Bret Taylor, Adam D’Angelo, and Adebayo Ogunlesi have financial interests that could compromise the organization’s mission. The group argues that as OpenAI moves toward more advanced AI systems, weakening nonprofit protections could endanger the public good.

OpenAI was founded in 2015 as a nonprofit to ensure the safe development of artificial general intelligence, but reportedly explored a for-profit conversion in late 2023.