10-30-2025 
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Fintech unicorn Robinhood is facing an investigation at the hands of the U.S. Securities and Exchange Commission (SEC) over alleged failures to disclose that it was profiting from passing customer orders to market makers.
The app-based platform is alleged to have failed in its duty to disclose the information, with its ‘How We Make Money’ page silent on sales of its order flow.
In reality, Robinhood has been selling customer orders to market makers, which could constitute a material fact, the Wall Street Journal has reported. Under U.S. securities law, brokerages are required to fully disclose material facts to investors to enable informed decision making.
While the information was not shared with investors, Robinhood did disclose this source of revenue to regulators. Nevertheless, the SEC will investigate to determine whether this constitutes a breach of Robinhood’s obligations to their investors.
The practice of selling order flow is common, with brokerage firms often compensated for passing along customer orders to market makers. The process is more efficient for brokerages while delivering an additional revenue stream, while for market makers, provides a steady flow of orders.
However, despite the practice being completely above board, some have suggested it creates a conflict of interests with brokerages.
Robinhood has now updated its information to investors to include the fact that it passes orders to market makers. This, it argues, creates better prices for customers.
The SEC investigation is reported to be at an advanced stage, and while no agreement has yet been announced, sources close to the matter say an eventual fine could run in excess of $10 million. There is also the option of an early settlement, which would allow Robinhood to avoid an admission of wrongdoing.
Robinhood currently offers a range of trading facilities, including access to 17 digital currency markets, through its trading platform.
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