TL;DR
- Robinhood warned that the SEC’s temporary exemption does not provide enough regulatory certainty to attract substantial investments.
- The company believes specific legislation is needed to establish lasting rules and allow it to expand its tokenization services in the United States.
- Cryptocurrency revenue fell 55% year over year in the third quarter to $120 million. Meanwhile, its prediction markets business recorded strong growth.
Robinhood called for more comprehensive regulation of the tokenized stock market in the United States, arguing that temporary exemptions from the Securities and Exchange Commission (SEC) do not provide enough certainty to attract substantial capital.
During the company’s third-quarter earnings call, CEO Vlad Tenev welcomed the SEC’s innovation exemption but warned that companies and investors need to know what regulatory conditions will apply several years from now.
According to Tenev, uncertainty about what will happen in five years could prevent customers from committing substantial assets to this technology. He therefore believes additional rulemaking or specific legislation is necessary.
Robinhood Seeks Permanent Rules for Tokenized Stocks
The company is working to expand its tokenization products in the United States, although its existing instruments differ legally from traditional shares.
Robinhood offers approximately 200 stock tokens on Robinhood Chain, backed by underlying shares. However, they are structured as tokenized debt securities, providing economic exposure without granting the same rights as conventional shares.
This distinction prevents the existing products from qualifying for the SEC’s exemption, which requires equivalent investor rights, including dividends and voting rights.
Tenev also confirmed that Robinhood plans to launch tokens linked to shares of private companies outside the United States, subject to the necessary regulatory approvals. For the U.S. market, the company is seeking a structure that complies with restrictions applicable to accredited investors.
Tokenization also faces resistance from some companies. Microsoft, Alphabet, and Goldman Sachs were among 16 companies that objected to the trading of their tokenized shares on the proposed OKXICE platform.
According to a Binance Research projection, the tokenized equities market could reach $349 billion by 2030, compared with $4.43 billion recorded in mid-September.
Crypto Revenue Plunges
Tenev’s comments coincided with the release of Robinhood’s financial results, which showed a 55% year-over-year decline in cryptocurrency revenue, to $120 million.
Notional digital asset trading volume fell 38% to $50 billion. Trading through the Robinhood app declined 48% to $21 billion, while Bitstamp recorded a 28% decrease to $29 billion.
Meanwhile, revenue from event contracts in its prediction markets business increased sixfold to $173 million, with 16.4 billion contracts traded.
Robinhood’s total net revenue rose 12% to a record $1.42 billion, although it fell short of analysts’ expectations. Adjusted earnings per share came in at $0.60, four cents below estimates.
