Florida Investigates Robinhood Crypto Over Cost Claims

Florida's Attorney General, James Uthmeier, has launched a formal investigation into Robinhood Crypto LLC, focusing on the company's claims of offering the lowest-cost method for cryptocurrency trading. The state alleges that Robinhood has failed to provide clear evidence supporting these claims, potentially misleading consumers and violating Florida’s Deceptive and Unfair Trade Practices Act.

The investigation centers on Robinhood's payment for order flow (PFOF) model, where the company sends orders to third-party firms that pay small fees to process each trade. This model raises concerns about increased trading costs for users, as third-party firms may offer less favorable prices to maximize their profits. The Attorney General's office is examining whether this structure affects trade fairness and transparency, potentially harming consumers.

In response to the investigation, Robinhood has been issued a subpoena demanding internal documents that support the company's cost-related advertising claims. The company must submit these documents by the end of July. This probe is part of ongoing regulatory pressure on Robinhood, which previously faced legal action in December 2020 for misleading statements about trade execution quality. The U.S. Securities and Exchange Commission fined the company $45 million for these inaccuracies, raising similar concerns within the crypto segment.

Regulators at the federal level have also focused on PFOF practices, introducing new rules requiring brokers to disclose trade execution details. These disclosures aim to protect retail investors and ensure pricing transparency. The investigation into Robinhood's crypto trading practices highlights the broader scrutiny of the company's business model and its impact on consumers.