Robinhood Under Fire: Florida Probes ’Low-Cost’ Crypto Claims in Marketing Blitz

Florida regulators take aim at Robinhood’s crypto pitch—accusing the trading app of oversimplifying risks while chasing retail investors.

Subheader: When ‘Low-Cost’ Doesn’t Mean Low-Risk

The investigation zeroes in on marketing tactics that allegedly downplayed volatility, with no mention of the 70%+ drops some assets saw last cycle. Classic ‘buy the dip’ meets regulatory scrutiny.

Subheader: Compliance or Crackdown?

Sources suggest the probe could hinge on whether ‘low fees’ were framed as a gateway to easy profits—a narrative that’s burned crypto newbies before. Meanwhile, Robinhood’s legal team scrambles to reframe the messaging.

Closing jab: Nothing spices up a bear market like regulators dusting off their measuring tapes. Next up: Florida man demands compensation for his lost Dogecoin millions.

Robinhood’s Zero-Commission Model Masks Revenue From Trade Routing

Robinhood allows users to trade cryptocurrencies and stocks without charging direct commissions. However, the company generates revenue through a process called payment for order flow, or PFOF. Under this model, Robinhood routes trades to third-party market makers, who pay the firm for the opportunity to execute those trades.

Critics argue that PFOF can obscure true costs for customers, potentially resulting in worse prices. Although legal and disclosed in filings, the practice has drawn regulatory scrutiny in recent years, especially in volatile markets.

The Menlo Park-based company is also under pressure abroad. Earlier this week, EU regulators launched investigations into Robinhood’s blockchain-based “Stock Tokens,” which have become a source of controversy after OpenAI publicly disavowed any connection to the investment product launched on June 30.

Robinhood Defends Fee Transparency as State Probe Examines Hidden Costs

In its announcement, the AG’s office accused the Menlo Park-based company of “falsely promoting” its platform as the “least expensive way to purchase crypto.” It added that the subpoena, which demands a response by July 31, WOULD help determine if PFOF compromises transparency or results in hidden fees for users.

Responding to the investigation, Robinhood’s General Counsel Lucas Moskowitz reportedly said the company clearly discloses pricing during every trade and shows users any spread or fees applied. “We are proud to be a place where customers can trade crypto at the lowest cost on average,” he said.

Robinhood didn’t return Cryptonews’ request for comment by press time.

According to regulatory filings, PFOF made up roughly 15%-20% of Robinhood’s revenue in 2023. While the company has defended the model as a way to keep trading accessible, regulators and consumer advocates remain wary of the potential for behind-the-scenes costs.