“After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business,” Dan Gallagher, Robinhood’s chief legal, compliance and corporate affairs officer, wrote in a blog post.

“We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law,” he said.  

Shares of the stock initially fell 2% but have reversed. They were recently trading up 1%.

Robinhood had disclosed in February that it received subpoenas from the SEC related to its crypto business — specifically its cryptocurrency listings, custody and platform operations. According to Monday’s filing, the SEC has now found reason to suggest Robinhood violated securities law.

“On May 4, 2024, [Robinhood Crypto] received a ‘Wells Notice’ from the Staff of the SEC … stating that the Staff has advised RHC that it made a ‘preliminary determination’ to recommend that the SEC file an enforcement action against RHC alleging violations of Sections 15(a) and 17A of the Securities Exchange Act of 1934, as amended,” the filing said.

“The potential action may involve a civil injunctive action, public administrative proceeding, and/or a cease-and-desist proceeding and may seek remedies that include an injunction, a cease-and-desist order, disgorgement, pre-judgment interest, civil money penalties, and censure, revocation, and limitations on activities.”

Robinhood is due to report its quarterly earnings Wednesday.