ARK Invest, the investment management firm founded by veteran investor Cathie Wood, has begun selling large amounts of shares of the cryptocurrency-friendly stockbroker Robinhood (HOOD) to repel. On March 25, ARK dumped 1.6 million Robinhood shares from its three funds. According to TradingView, the amount is $31.5 million. The largest portion, 1,247,181 shares, was moved out of the ARK Innovation ETF (ARKK) worth around $24 million. ARK also sold 275,933 and 128,137 HOOD shares from the ARK Next Generation Internet ETF (ARKW) and ARK Fintech Innovation ETF (ARKF), respectively.
Robinhood's recent sale by ARK is the largest since the company began actively accumulating HOOD shares last year. The sale came amid a major hit for Robinhood, with its price rising 36% in the last 30 days. Previously, the company sold smaller portions of Robinhood shares, with most of those sales compelled by compliance with Rule 12d3-1. The regulation prohibits funds from acquiring more than 5% of the value of their total assets in securities. After selling $24 million worth of Robinhood stock, ARK retains HOOD as its eighth-largest portfolio asset, accounting for 4.3% of its total $8.2 billion in assets under management. The top three assets are Coinbase (COIN), which accounts for 10.6% as of March 26, Tesla (TSLA), and Roku (ROKU), representing 8.4% and 7.5%, respectively.
While ARK separated from Robinhood, it continued to buy additional shares in the online gaming platform Roblox (RBLX). On March 25, ARK acquired 740,115 Roblox shares for its three funds, including ARKK, ARKW, and ARKF. The amount is worth $27 million at Monday's closing price. In addition to the Robinhood sale, ARK continued to sell Coinbase shares, selling 4,291 coins on Monday. The sale was worth about $21 million as of Tuesday morning, according to TradingView data. Founded in 2013, Robinhood is a cryptocurrency-friendly stock trading app that allows users to trade cryptocurrencies such as $70,534 worth of Bitcoin BTC and $3,642 worth of Ether ETH, in addition to stocks, ETFs, options, and other assets. On March 20, 2024, Robinhood launched the Android version of its self-custody wallet, the Robinhood Wallet App.
The tokens are distributed for free and unasked for, so they’re not securities, according to the suit. Beba, a Texas clothing company run by African immigrants, and the DeFi Education Fund have teamed up to defend the company’s recent airdrop of BEBA tokens against potential actions by the United States Securities and Exchange Commission by seeking a declaratory judgment from the U.S. District Court for Western Texas. In a suit filed on March 25, the plaintiffs also asked the court for clarification of the limits of the SEC’s authority considering the Administrative Procedures Act (APA).
According to the lawsuit, Beba has created 100,000 BEBA tokens and has issued 60,880 of them to date. The tokens are intended to be traded freely and are expected to increase in value. The SEC “will take the position that BEBA tokens are investment contracts and that the airdrop is a securities transaction subject to the registration requirements of the Securities Act of 1933,” it said. However, the plaintiffs argued that the recipients of the tokens did nothing to qualify for the airdrop or took actions that did not involve “meaningful consideration,” such as “following” Beba on social media. Therefore, there is no joint venture in the airdrop. Beba also did not promise to take steps to increase the value of the token. Therefore, the airdrop does not constitute a contract within the meaning of the Howey test, they argued.
However, token holders are entitled to a discount on an item sold by Beba. This offer was compared to a customer loyalty program. The lawsuit not only defended the airdrop but also challenged the SEC's policies under Chairman Gary Gensler. The SEC is violating the APA, it said, because the law requires agencies to do so openly, clearly, and with public input when creating new rules. The lawsuit sought a declaration that Defendant [the SEC] violated both procedurally and substantively the APA when it adopted a new unwritten policy that almost all digital assets are securities and most transactions in digital assets are securities transactions. It also asked the court to strike down the alleged policy or prevent the SEC from enforcing it.
Grayscale, the investment management firm, is proposing that Ether ETFs be approved despite recent rumours about the U.S. securities regulator’s “lack of engagement” with applicants. “I don't think the perceived lack of engagement from regulators should be an indication of one outcome or the other. Personally, that doesn't deter me, and I think ETFs should be approved,” said Craig Salm, chief legal officer at Grayscale, in a March 25 post on X.
However, ETF issuers who want to integrate staking into their Ether spot ETFs would have an additional problem to “discuss” with the regulator. These applicants include Ark 21Shares, Fidelity, and Franklin Templeton. Bloomberg ETF analysts Eric Balchunas and James Seyffart recently expressed concern about the SEC's "lack of commitment" and have since cut their chances of a spot Ether being approved in May to 25%.
Salm said the recent approval of Ether futures ETFs and the regulation of these products as commodity futures put Ether spot ETFs in a good position for approval because futures and spot products have a high correlation. Last week, Coinbase Chief Legal Officer Paul Grewal and former Commodity Futures Trading Commission Commissioner Brian Quintenz reached a similar conclusion. BlackRock, VanEck, ARK 21Shares, Fidelity, Invesco Galaxy, Grayscale, Franklin Templeton, and Hashdex are among the ETF applicants vying for SEC approval. The SEC has until May 23 to decide on VanEck's application, and analysts expect all applicants to learn their fate on that day.
