Bitcoin and other cryptocurrencies have increased in popularity since Bitcoin was released in 2009, yet the cryptocurrency market remains unpredictable and volatile. Apps like Robinhood and influential people like Elon Musk have sky-rocketed the accessibility and demand for cryptocurrency in recent months. (Browne, CNBC). In a swing that paralleled the GameStop buying frenzy, a cryptocurrency called “Dogecoin” spiked as much as 800% in a single day. Id. Following the influx of Dogecoin buyers, Robinhood temporarily halted instant buying power for crypto to restrict trading. Id. Robinhood’s decision to restrict trading was contentious, but the decision exposed a major regulatory gap in both the public and private sectors of cryptocurrency trading.

In the United States, state governments, the federal government, administrations, and agencies have all given attention to cryptocurrency trading, but little formal rulemaking has occurred. (Dewey, Global Legal Insights). Generally, governmental regulations only impact cryptocurrency trading if the sale constitutes the sale of a security or if the sale is considered a money transmission in which a party to the sale is a money services business. Id. As such, the Commodities and Futures Trading Commission oversees cryptocurrency derivative contracts in which cryptocurrency assets are considered commodities. Id. This oversight occurs because the definition of “commodity” within the Commodity Exchange Act includes any contracts for future delivery. (7 U.S.C. § 1a(9)). These types of transactions are more common for institutional investors, as opposed to traders on Robinhood, due to the desire for regulation and the cash backing of the trades. (Bajpai, Investopedia).

Robinhood’s decision to restrict cryptocurrency trading is an example of an attempt to regulate in the public sector. However, this regulatory action was met with significant pushback as impacted investors voiced their negative feedback. For example, nearly 100,000 Robinhood users left one-star reviews on the Google Play Store to express their skepticism. (Peters, The Verge). This bombardment lowered Robinhood’s overall rating to one-star before Google removed the reviews. Id. Given the lack of governmental regulation, Robinhood’s restrictions seem to be fair game. These actions could set precedent for the private sector to self-regulate cryptocurrency trading in the future until the public sector steps in and imposes regulations across the crypto marketplace.

While the current legal framework largely allows for trading platforms like Robinhood to self-regulate, the amount of negative feedback surrounding Robinhood’s restriction of Dogecoin trading could lead to an imminent increase of regulation. (Dewey, Global Legal Insights). In fact, angry investors have voiced intentions to file a class action against Robinhood. (Wall Street Bets, Reddit). In a Reddit thread with nearly 20,000 comments, many of the impacted investors discuss the possibility of bringing their grievances to court and arguing that Robinhood’s restrictions were unlawful and caused damage to the investors. Id. However, given the above discussion on the current lack of regulations regarding cryptocurrency trading, it seems likely that there are no available legal standards with which the plaintiffs will succeed. Nevertheless, the 4.5 million users on the relevant Reddit thread still may generate enough attention for a court, legislative body, or agency to address the issues at hand and regulate accordingly.

It will be interesting to see if Robinhood users will be able to impact the framework of cryptocurrency regulation as much as they have impacted the marketplace recently. Although there is not a strong legal argument expressed on the Reddit thread in which many Robinhood users communicate, it is clear that there is a large demand for clarity, if not change, on how cryptocurrency trading is regulated. Given the overall idea of the free marketplace and the growing push against regulations, trading restrictions will need to be addressed by the government or a regulatory agency in the near future. With growing concern and pushback, it seems likely that restrictions by private bodies, such as Robinhood’s trade halt on Dogecoin, will be prevented by future regulations.