Skip to main content

Massachusetts’ top securities regulator, Bill Galvin, doesn’t play nice. And he had issues with Robinhood’s confetti feature—and much else besides about the trading app—long before l’affaire GameStop brought it to the attention of other authorities, ones that Robinhood is prepared to listen to. Because it’s making quite clear it’s not prepared to listen to Galvin.

Robinhood… called the regulator "elitist" and said it was seeking to "reinstate the financial barriers that Robinhood was founded to break down…." Robinhood in its lawsuit argued that Galvin lacked authority to override a long-standing conclusion by Massachusetts' top court that brokerage firms like itself are not considered fiduciaries of their customers…. Robinhood said the rule also creates an obstacle for federal regulation, saying the U.S. Securities and Exchange Commission in 2019 adopted its own rule governing brokerage firms that explicitly rejected the standard Galvin was enforcing.

So Robinhood wants to play hardball? That suits Galvin just fine, thank you very much, even before he learned of the company’s latest little customer-service headache.

Massachusetts regulators on Thursday sought the revocation of Robinhood's broker-dealer license after charging that it encourages inexperienced investors to place risky trades without limits…. Galvin, viewed nationally as an aggressive state securities regulator, in a statement called the lawsuit "another example of Robinhood's complete rejection of responsibility to their customers."

With 2020 tax bills coming due, a wave of new retail traders are waking up to the fact that it can be difficult, and often impossible, to make tax-minimizing moves on new brokerage platforms such as Robinhood, Webull, SoFi, Uphold and Some don’t allow trading within tax-favored retirement accounts such as IRAs. Traders can also find it hard to track their “wash sales” that reduce tax benefits if they buy a stock within 30 days of selling the same stock at a loss…. Despite the new platforms’ sophisticated technology they don’t make it easy to deploy a tax-wise technique known as “specific-lot identification.” Investors use it to lower their taxes, sometimes significantly, by choosing which shares to sell if they have lots bought at different prices and aren’t selling all of them….

On Robinhood’s webpage about tax lots, the firm doesn’t tell customers they have the option of selling specific lots…. In the fine print of trade confirmations sent to customers after they’ve sold shares, Robinhood does offer the option of specifying lots. But the process is complicated.

Well, if you’re moving away from Robinhood, either for tax reasons or in the unlikely event that Galvin kills it, a former Goldman Sachs executive would be more than happy to put your money in another thing beloved of the day-trading Redditor set.

Galaxy Digital Holdings Ltd., a bitcoin-focused firm offering banking and institutional services, named former Goldman Sachs Group Inc. executive Michael Daffey as its chairman ahead of a planned U.S. stock offering later this year…. On Monday, it filed a submission with the Securities and Exchange Commission for a bitcoin-focused exchange-traded fund….

“There’s a dearth of good, public equities in the crypto space,” [Galaxy CEO Michael] Novogratz said. “I think you’ll see other companies try to fill out that portfolio.”

I suppose now’s not the friendliest time to point out that cryptos have their own regulatory (and tax!) issues….

Bitcoin fell early on Friday, after Turkey’s central bank decided to ban the use of cryptocurrencies for payments from the end of the month…. Turkey isn’t the only country looking to take tough measures on digital assets. India is reportedly set to propose a law banning cryptocurrencies and making trading or even holding assets punishable with a fine.

Massachusetts regulators seek to revoke Robinhood’s license; brokerage sues [Reuters]
New Investors Discover Tax Pitfalls of Robinhood and Other Trading Apps [WSJ]
Bitcoin Firm Galaxy Digital Names Ex-Goldman Executive Michael Daffey as Chairman [WSJ]
Bitcoin falls as Turkey bans cryptocurrency payments [MarketWatch]

For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.



Sheriff Of Boston-ham Comes For Robinhood

Massachusetts has some problems with the Millennial trading-game app.


President Biden Direct Regulators To Really Seriously Think About This Bit-Thingies

Grandpa Joe’s not quite sure what to do with these newfangled doohickies. But hedge funds are.


Robinhood Finds Sympathetic Regulatory Shoulder To Settle With

FINRA can always be counted on to offer a relative bright spot in a legal and regulatory hellscape.

By US government [Public domain], via Wikimedia Commons

Gary Gensler Stands Astride History Yelling Stop

Actually, he’s not saying anything. Just suing.


SEC Drags GameStop Wash Traders For Dirty Deeds

There was at least one thing you allegedly couldn’t do during the madness.


Robinhood To Stick To Sherwood Forest, Maryland For Now

It’s not you, England (read: Brexit). It’s us (read: glitches, etc.).