HOOD Faces Legal Probe in Florida: Will Regulatory Woes Derail Growth?

Florida Attorney General James Uthmeier has initiated an investigation into Robinhood Crypto, LLC, a subsidiary of Robinhood Markets, Inc. HOOD. As part of the investigation, a subpoena has been issued to obtain internal documents and the company has until July 31 to respond.

Robinhood Crypto has been accused of violating Florida’s Deceptive and Unfair Practices Act by falsely promoting its platform as the most affordable one to buy crypto, even though evidence suggests otherwise.

James Uthmeier stated, “Crypto is a vital component of Florida’s financial future and President Trump’s efforts to advance the crypto market will make America stronger and wealthier. When consumers buy and sell crypto assets, they deserve transparency in their transactions. Robinhood has long claimed to be the best bargain, but we believe those representations were deceptive.”

Robinhood has been facing regulatory scrutiny of late. Earlier this week, CNBC reported that the firm is under investigation by Lithuania's central bank, its lead regulator in the European Union, regarding its newly launched tokenized equity products.
 
In March 2025, two units of Robinhood agreed to pay $26 million to settle the Financial Industry Regulatory Authority’s allegations for failing to respond to red flags about potential misconduct and not verifying the identities of thousands of customers. In January 2025, the company agreed to pay a $45 million fine for violating more than 10 securities law provisions.

Since HOOD operates in a highly regulated industry, it is exposed to regulatory risks, resulting in hefty fines and restrictions that may affect its profitability.

Lawsuits Faced by HOOD’s Peers

Like Robinhood, its peers Charles Schwab SCHW and LPL Financial LPLA have faced legal scrutiny in the past.

In January, LPL Financial faced regulatory action after the Securities & Exchange Commission charged it with willful violations of anti-money laundering (AML)regulations, citing failures in customer identification and oversight of high-risk accounts. To settle the charges, LPL Financial agreed to pay an $18 million penalty and implement reforms to its AML policies.

In October 2024, Schwab faced a regulatory action following a lawsuit filed by Silver Miller. Schwab was accused of failing to prevent a $30 million fraud scheme targeting senior citizens, despite insider data breaches, red flags of elder abuse and lapses in enforcing KYC/AML protocols.

Robinhood’s Price Performance, Valuation & Estimate Analysis

Shares of Robinhood have jumped 164.9% so far this year compared with the industry’s growth of 17.6%.

From a valuation standpoint, HOOD trades at a forward price-to-earnings ratio of 71.40, well above the industry.

The Zacks Consensus Estimate for Robinhood’s 2025 and 2026 earnings indicates year-over-year growth of 13.8% and 22.2%, respectively. Over the past week, earnings estimates for 2025 have been revised upward, while 2026 estimates remained unchanged.
 

Robinhood currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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