Robinhood's crypto operations may face enforcement actions from the SEC, causing its shares to drop 2%.

According to the trading firm, the Securities and Exchange Commission may soon take enforcement action against.

On Monday, Robinhood revealed that it received a warning from the regulator over the weekend, stating that the company could face charges after the completion of an investigation.

Despite years of trying to collaborate with the SEC for regulatory guidance, including our effort to register our U.S. crypto business, we are disheartened that the agency has issued a Wells Notice.

"We strongly believe that the assets listed on our platform are not securities and we are eager to collaborate with the SEC to demonstrate the weaknesses in any potential case against Robinhood Crypto," he stated.

Shares of the stock were recently trading up 1%.

Robinhood has been found by the SEC to have violated securities law in relation to its crypto business, including its cryptocurrency listings, custody, and platform operations.

On May 4, 2024, Robinhood Crypto was served with a "Wells Notice" from the SEC's staff, stating that they had made a preliminary determination to recommend that the SEC file an enforcement action against RHC for alleged violations of Sections 15(a) and 17A of the Securities Exchange Act of 1934, as amended.

"The possible course of action may entail a civil injunctive action, public administrative proceeding, and/or a cease-and-desist proceeding, and may seek remedies such as 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 on Wednesday.