- AMC CEO Adam Aron went guns blazing against Robinhood’s unauthorized tokenization of its stocks.
- The exec questioned the US SEC for allowing such a practice, while former commissioner Dan Gallagher defended the legality of Robinhood’s Stock Tokens.
- Robinhood’s tokenized RWAs have already surpassed $161.88 million, with AMC’s tokenized stocks contributing $7.6 million in the float.
Adam Aron, CEO of publicly traded AMC Theatres, has called out Vladimir “Vlad” Tenev, CEO of Robinhood Markets, for launching tokenized stocks bearing their company’s name. The former accused the latter of leveraging synthetic shares to circumvent US securities laws.
The matter ignited debate among industry stakeholders, with both sides of the argument gaining plenty of support.
Key Features of Robinhood’s Stock Tokens
Over the past few days, Aron has been firing up his social media account. His primary concern revolved around Robinhood’s “Stock Tokens.”
The product refers to tokenized real-world assets leveraging Robinhood Chain, a Layer-2 Ethereum (ETH)-compatible blockchain built by the Robinhood investing and trading platform. The company’s Jersey-registered entity, Robinhood Assets, issues the instrument.
According to Robinhood, Stock Tokens offer investors economic exposure to underlying securities, including US shares and exchange-traded funds (ETFs). However, they don’t grant investors legal or beneficial rights in, or against the issuer of, those underlying securities.
Robinhood issues Stock Tokens as standard ERC-20 tokens. They derive their value from Chainlink’s (LINK) live Price Feeds, which bridge real-world data onchain.
Holders can trade or transfer Robinhood’s Stock Tokens. Likewise, they can integrate the assets into onchain applications. These products stand out for their self-custodial and 24/7 features, allowing users to store them in their crypto wallets and manage or trade them around the clock.
To date, Robinhood’s Stock Tokens provide investors exposure to more than 190 companies and ETFs. These include shares of NVIDIA, Apple, Google, and AMC.
Robinhood’s Stock Tokens operate outside of US securities laws. As a result, the company has excluded US residents and enterprises from engaging with its investment product. The same restrictions also apply in Canada, Switzerland, the UK, and other jurisdictions. Additionally, international sanctions prevent it from offering the RWA tokens in Iran, North Korea, Russia, Venezuela, Ukraine, and other jurisdictions it classifies as Prohibited Investors.
AMC CEO Adam Aron’s Criticism of Robinhood’s Move
Aron, quoting Robinhood’s product description, highlighted that Robinhood’s Stock Tokens are outside the range of US securities laws. He stated that he found the company’s tactic as “contemptible, outrageous, disgusting, detestable, inexcusable, [and] vile.”
The AMC CEO clarified that they have no connection with the tokens in question and do not condone their trade and distribution. He claimed that their securities counsel is already studying the issue.
Tenev simply responded to Aron’s rant with “What’s the concern?” The Robinhood CEO indifference ignited the discussion between their camps.
Aron emphasized that US securities are in place to protect investors. At the same time, companies allocate millions of dollars annually for compliance. Robinhood’s actions undermine such efforts and create an unfair playing field by setting up shop in jurisdictions outside the US.
What’s more, Aron argued that unauthorized stock tokens dilute AMC and other companies’ capital-raising controls. He noted that the business’s past issuance of equity to strengthen its balance sheet was vital to its success. The CEO explained that Robinhood’s “fictitious synthetic equity market” decouples stock token ownership from the entity it represents.
Aron also pointed out that the model deprives shareholders of various perks guaranteed under regulated markets. These include voting rights, attendance at shareholder meetings, and receiving formal corporate disclosures or notices.
AMC’s boss said the “quasi-fake market” Robinhood created on the island of Jersey is adding to the public’s distrust in financial institutions. With that, he demanded that the popular trading platform “voluntarily cease and desist” from trading AMC stock tokens, or else it would be forced to file the necessary legal action.
Furthermore, Aron blasted the US Securities and Exchange Commission’s (SEC) failure to intervene as companies bypass securities laws under the guise of wrapped stocks.
Robinhood’s Response to AMC’s Potential Lawsuit Buildup
Dan Gallagher, former SEC commissioner and now Robinhood’s Chief Legal Officer, took Aron’s challenge. He urged the company to send its lawyers so they can “educate them,” to which Tenev replied with strong support.
Aron later conceded that the Stock Tokens may be legal outside US jurisdiction. Nonetheless, he believes that they display a “terrible lapse of judgment on Robinhood’s part. He questioned the way the company is advertising its tokenized stocks on its US site, too.
“By your own admission, in this instance you are not adhering to US securities laws, and therefore you can not offer or sell these offshore island of Jersey tokens to US persons,” Aron reasoned out. “And yet, your company boasts about them on your US website. This practice is something that you should not be standing behind.”
Some people rallied behind Robinhood, admonishing Aron for his hypocrisy after supposedly rugging on investors at the height of the AMC meme stock mania in 2021. He notably promoted AMC stocks to “apes,” a dedicated group of retail traders putting coordinated buying pressure in meme stocks, only to sell off millions of dollars in his personal holdings while repeatedly diluting AMC’s stock through massive equity offerings to pay off corporate debt.
The business’s decisions shifted sentiment against the stock as the CEO’s sell-off raised doubts about the business’s long-term sustainability. Worse still, the dilution further added to investors’ losses by eroding shareholder value.
Robinhood’s RWA Tokens
Amid the heightened debate on its Stock Tokens, Robinhood’s RWA value has already surpassed $161.88 million during the weekend, per RWA.xyz data. AMC accounts for roughly 4.69% of the trading platform’s tokenized stocks, with a total asset value of $7.6 million.
In the stock market, Robinhood now has a market cap of $109.79 billion, while AMC is valued at $2.37 billion.
