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Florida’s chief prosecutor has initiated an inquiry into trading platform Robinhood, accusing it of misleadingly advertising its crypto services as the most affordable on the marketplace.
However, Lucas Moskowitz, Robinhood’s chief legal officer, informed Cointelegraph in a statement that the platform is open about its fees, and users trade crypto at the lowest average cost.
In a declaration on Thursday, Florida Attorney General James Uthmeier charged Robinhood with violating Florida’s Deceptive and Unfair Practices Act and issued a subpoena requesting various documents from the platform.
“Crypto is an essential part of Florida’s economic future,” and when “consumers engage in buying and selling crypto assets, they deserve clarity in their transactions,” stated Uthmeier.
“Robinhood has long insisted it offers the best deal, but we believe those claims were misleading.”
On its site, Robinhood asserts that traders can purchase and sell crypto at the lowest average costs in the US.
Attorney general claims payment for order flow is the culprit
Robinhood earns revenue through payment for order flow (PFOF), which Florida’s attorney general contends makes the platform pricier because “third parties that compensate Robinhood for order flow might need to impose less favorable prices” to stay profitable.
Brokerage firms utilizing PFOF receive a fee for directing orders and executing trades to a specific market maker or exchange, generally in fractions of a penny per share.
In a December 2023 CNBC interview, Robinhood CEO Vlad Tenev defended the practice amidst worries that it created a conflict of interest where brokers weren’t consistently acting in clients’ best interests.
Robinhood accepted to pay a $65 million penalty in December 2020, without admitting guilt, to resolve allegations from the SEC claiming, among other issues, that Robinhood deceptively stated its customers’ orders were executed at prices lower than other brokers.
Robinhood contends its operations are transparent
Robinhood General Counsel Lucas Moskowitz told Cointelegraph that the “disclosures are top-tier.”
“We provide pricing information to customers throughout the trade lifecycle that distinctly outlines the spread or the fees linked with the transaction and the revenue Robinhood receives,” he remarked.
“We take pride in being a platform where customers can trade crypto at the lowest average cost,” Moskowitz emphasized.
Robinhood has until the end of July to address the subpoena.
Related: Private firms are eager to join Robinhood’s tokenized equity platform: CEO
Stock rises at the end of trading
Robinhood investors seemingly dismissed the report regarding Florida’s investigation, as the stock closed Thursday’s trading session up 4.4% to $98.70 coinciding with a crypto market surge.
It is now merely a stone’s throw from its all-time peak of $100.88.
However, in after-hours trading, the stock fell slightly to $97.23, reflecting a decrease of 1.49%.
In the past month, its shares have experienced a 30% climb, which has been linked to its strategic adoption of blockchain technology and tokenization.
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