Robinhood Says Dogecoin Is a Risk to Its Business

The trading app Robinhood thinks that Dogecoin, the "joke cryptocurrency" with a current market cap of $32 billion, is a risk to its business, according to a just released S-1 securities registration form the company filed with the Securities and Exchange Commission, which was published online today.

According to Robinhood's S-1, a substantial portion of the company's recent growth in net revenues was earned from cryptocurrency transactions in Dogecoin. More specifically, Robinhood said that for the first three months of 2021, 17 percent of its total revenue was derived from cryptocurrency transactions, compared to 4 percent for the last three months of 2020. While Robinhood currently allows users to buy and sell seven different cryptocurrencies, 34 percent of its cryptocurrency transaction-based revenue was attributable to Dogecoin. 

"If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected."

While Dogecoin's creator thinks its "very wrong" that his joke cryptocurrency is worth so much money, Dogecoin continues to increase in value and awareness because of rampant speculation, brands desperate for relevance, and tweets and memes posted by Elon Musk.

So many people want to get rich quickly, or simply get in on the joke that is Dogecoin, and one of the easiest ways to do that is via the Robinhood app. It's become such a major part of its business that, as the S-1 filing says, at this point, it will suffer "if the markets for Dogecoin deteriorate or if the price of Dogecoin declines, including as a result of factors such as negative perceptions of Dogecoin or the increased availability of Dogecoin on other cryptocurrency trading platforms."

The S-1 comes one day after the company settled a long list of Financial Industry Regulatory Authority (FINRA) violations for $70 million (a $57 million fine and  $13 million in customer restitution) for causing “widespread and significant harm” to customers thanks to how it handled options trading, service outages, trading halts, customer service, and incorrect information displayed on the platform.

“This action sends a clear message—all FINRA member firms, regardless of their size or business model, must comply with the rules that govern the brokerage industry, rules which are designed to protect investors and the integrity of our markets. Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later,” said Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement, in an announcement. “The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations, including FINRA’s finding that Robinhood communicated false and misleading information to millions of its customers.”