Robinhood’s crypto trading subsidiary, Robinhood Crypto LLC, had a policy in place that prevented customers from withdrawing their purchased tokens. However, this policy has been lifted in 2022. Still, the state of California fined Robinhood heavily for its past practices.

The California Department of Justice investigated Robinhood’s crypto dealings between 2018 and 2022, examining what it described as “historic practices.” During the investigation, it was stated that various cryptocurrencies offered by Robinhood were considered commodities.

Allowing customers to purchase cryptocurrencies while not allowing those assets to become personal property means the company is violating California commodities laws. In the statement made by the Ministry of Justice, it was stated that Robinhood was punished for these violations.

Under the agreement, Robinhood must allow customers to continue withdrawing their crypto from the app and update disclosures about its ownership practices. The company will fulfill these post-penalty regulations and ensure that cryptocurrencies are taken into personal possession by users.

It was also stated that Robinhood Crypto had previously received many subpoenas from the California Attorney General’s Office regarding its trading platform, business and operations, and coin listings. This has affected the company’s relationship with regulators and increased the need for compliance.

In a statement from Robinhood, a spokesperson said, “There is no ongoing investigation and this situation is finalizing the investigation by the California Attorney General’s Office.”

“We are pleased to put this matter behind us,” said Lucas Moskowitz, general counsel of Robinhood Markets. Moskowitz stated that the agreement fully resolved the Attorney General’s concerns about historical practices and that they will continue to make cryptocurrency more accessible and affordable.

However, Robinhood Crypto’s problems don’t end there. The company is facing separate scrutiny from the U.S. Securities and Exchange Commission (SEC).

In May, the SEC said it was preparing to file a lawsuit alleging Robinhood violated federal securities laws. This suggests Robinhood is under more pressure to comply with regulatory rules and resolve legal issues.

Robinhood’s past ban on customer cryptocurrency withdrawals has resulted in the company receiving a large fine and its dealings with regulators being closely monitored.

The company is trying to comply in the wake of this fine by updating its ownership practices and reorganizing its cryptocurrency withdrawal processes. However, the investigation by the SEC will determine how it will affect Robinhood’s regulatory compliance and its role in the cryptocurrency market.