Robinhood’s cryptocurrency division leads to significant earnings surpassing expectations

Online brokerage Robinhood Markets reported a strong first-quarter profit, surpassing expectations thanks to robust crypto trading volumes and increased net interest revenue. The approval of the first spot bitcoin ETFs in the U.S. in January boosted sentiment towards the crypto industry, which had been struggling in recent years.

Despite the positive earnings report, Robinhood disclosed that its U.S. crypto trading arm received a Wells notice from the SEC, indicating potential enforcement action against the company. Financial services analyst Lauren Ashcraft noted that the notice could impact the company’s revenue stream, but Robinhood remains hopeful of resolving the situation.

CFO Jason Warnick defended the company’s crypto business practices, stating that they have been cautious in their offerings and have not engaged in activities criticized by the SEC. In addition to crypto trading, trading in equities and options also performed well, with transaction-based revenue increasing by 59%.

Net interest revenue saw a significant jump of 22% to $254 million, benefiting from the Federal Reserve’s policy tightening. The company reported a profit of $157 million for the quarter, compared to a loss of $511 million in the same period last year. Net revenues increased by 40% to $618 million, leading to a 3% increase in shares after the earnings report.

Despite the Wells notice from the SEC, Robinhood remains optimistic about its future prospects and is prepared to contest any claims made by the regulator. The company’s strong performance in the first quarter reflects a positive outlook for the online brokerage industry.