Robinhood Would Likely Win Crypto Court Case With the SEC: KBW

KBW said it was surprising that the SEC issued the Wells Notice to Robinhood.

The broker does not expect any changes to the platform’s current US crypto operations or asset listings.

The report stated that Robinhood is more likely to win a case at the SEC than most of its US rivals.

Robinhood’s (HOOD) issuance of a Wells Notice by the Securities and Exchange Commission (SEC) is surprising given the company’s rather conservative approach to digital asset listings, KBW said in a research report on Monday.

KBW notes that Robinhood offers only fifteen cryptocurrencies on its US platform, while some of its peers offer more than two hundred digital assets.

“We do not expect any changes to HOOD’s current US crypto operations or asset listings and expect the SEC to file a lawsuit in the coming months,” wrote analysts led by Kyle Voigt.

“Our preliminary view is that HOOD will likely fight the SEC in court, and that HOOD has a higher likelihood of prevailing than most of its U.S. competitors (if it falls into similar situations) given its more stringent listing standards,” the authors wrote.

The report noted that crypto trading accounts for 12% of Robinhood’s revenue, and KBW hypothesizes that the SEC will likely go after a number of digital assets on the platform.

“From an income-at-risk perspective, the worst-case scenario is that the SEC continues to classify Ethereum as a {{ETH}} security – as this likely accounts for ~25% of HOOD’s crypto holdings/trading.” report added.

The broker has a market outperform rating on the stock with a $20 price target. Shares were trading around $18, up 1.3% in early trading Tuesday.

Robinhood shareholders won’t have complete clarity on the outcome of a potential legal case until late 2025 at the earliest, KBW said, citing the regulator’s ongoing case against crypto exchange Coinbase (COIN).

Read more: Robinhood Gains 2%, Erasing Early Losses Following SEC Wells Notice