It’s a great day for Robinhood (NASDAQ:HOOD) and its shareholders. Today, the trading platform was handed a major victory after the 11th U.S. Circuit Court of Appeals in Atlanta ruled 3-0 in its favor regarding the trading restriction of 13 meme stocks back in 2021. These stocks included AMC Entertainment (NYSE:AMC), GameStop (NYSE:GME) and Bed Bath & Beyond (OTCMKTS:BBBYQ), among others. In a proposed class action, shareholders of the 13 stocks alleged that they suffered damages because they were restricted from trading.
“When Robinhood restricted its customers’ ability to buy meme stocks, it took a sizable — and perhaps justifiable — hit in the court of public opinion,” wrote Circuit Judge Britt Grant. “But in this court, Robinhood is only accountable for specific legal duties.”
The court’s decision echoed a ruling by Chief Judge Cecilia Altonaga in November 2021. On top of that, the Atlanta court also dismissed claims that alleged Robinhood was negligent in protecting its customers from losing money and that it unsuccessfully ensured that its “mission critical systems” worked accordingly.
Robinhood Wins Meme Stocks Appeal
However, Robinhood isn’t completely out of the woods yet. Earlier this week, the WSJ reported that Robinhood is currently being investigated for the quality of its trade executions. In a regulatory filing, the company noted:
“The New York Attorney General is conducting an investigation into brokerage execution quality. We are cooperating with this investigation.”
In the past five years, Robinhood has coughed up approximately $175 million in fines to settle with regulators such as the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and state regulators. The most recent payout was an expected $30 million fine in order to settle an investigation into its cybersecurity and anti-money-laundering practices.
These investigations and fines have eroded users’ trust in the platform. During the second quarter, monthly average users (MAUs) decreased sequentially to 10.8 million from 11.8 million. At the same time, transaction-based revenue fell by 7% quarter-over-quarter (QOQ) to $193 million. Transaction-based revenue consists of options, cryptocurrencies and equities, all of which fell by at least 5% from the prior quarter. Cryptocurrency revenue faced the largest drop of 18%, falling to $31 million.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
