Robinhood to settle $3.9 million penalty with California DOJ over past crypto withdrawal restrictions

Robinhood’s cryptocurrency arm has settled an investigation into its past practice with a $3.9 million penalty as it failed to allow customers to withdraw crypto from 2018 to 2022.

In a statement released Wednesday, California’s Department of Justice said that Attorney General Rob Bonta has secured the $3.9 million settlement with Robinhood Crypto. The investigation concluded that customers could not withdraw their cryptocurrency and were forced to sell it back to Robinhood to exit the trading platform.

“Robinhood misled customers by advertising it would connect to multiple trading venues to ensure customers receive the most competitive prices between the venues, which was not always true,” the California DOJ said.

“Our investigation and settlement with Robinhood should send a strong message: Whether you're a brick-and-mortar store or a cryptocurrency company, you must adhere to California's consumer and investor protection laws,” Bonta said.

As part of the settlement, Robinhood must ensure its customers can withdraw their crypto assets from Robinhood and transfer them to their wallets. It also has to make clear to users that the platform will custody crypto and may delay settlement with trading venues “in the event of an incident that raises concerns about a cryptocurrency asset’s network security.”

Lucas Moskowitz, Robinhood's general counsel, emailed a statement to The Block stating that the company is pleased to “put this matter behind us.”

“The settlement fully resolves the Attorney General's concerns related to historical practices, and we look forward to continuing to make crypto more accessible and affordable to everyone,” Moskowitz said.

Robinhood’s stock on Nasdaq closed down 1.34% at $19.11 on Wednesday.

Robinhood appears to be betting big on crypto trading. In June, it announced that it would acquire crypto exchange Bitstamp. The deal is expected to close in the first half of 2025. 

In the second quarter of this year, Robinhood’s crypto transaction-based revenues expanded to $81 million, up 161% year-on-year. That figure doubled the company’s transaction revenues from equities during the quarter.