Robinhood Faces Backlash Over Tokenized Stocks for OpenAI SpaceX

Robinhood has recently announced a tokenized stock giveaway for OpenAI and SpaceX, offering digital tokens tied to the equity of these high-profile companies. However, this move has sparked controversy, with OpenAI denying any involvement and stating that the tokens do not represent real equity in the company. OpenAI emphasized that it did not approve any transfer of shares and has no partnership with Robinhood. Elon Musk, CEO of SpaceX, also weighed in, calling OpenAI’s equity “fake.”

Robinhood’s tokenized stocks are set to launch on the Ethereum layer-2 scaling network, Arbitrum. The company claims that these tokens provide investors with indirect exposure to private markets, although they do not offer the same benefits as traditional stocks, such as owning the underlying stock or voting rights. Instead, investors are buying tokenized contracts that follow the price of the stocks, recorded on a blockchain.

Some investors argue that the tokens still reflect legitimate exposure to the companies, despite OpenAI’s denial. However, the legal and regulatory landscape surrounding these tokenized stocks is complex. Kurt Watkins, founder of a U.S.-based legal firm, noted that the offering would likely face severe scrutiny from the SEC due to its lack of transparency and legal ambiguity. The tokens lack meaningful underlying rights and could face liquidity issues, making them commercially unviable in the U.S. market.

Criticism has also been directed at the design of Robinhood’s tokenized contracts, with some labeling them a “walled garden.” This design restricts the tokens from interacting with decentralized finance (DeFi) protocols, potentially giving centralized finance platforms like Robinhood an advantage. The controversy highlights the challenges and complexities of tokenizing private company equity and the need for clear regulatory frameworks to protect investors.