Robinhood Markets Inc. has become the next crypto trading platform to receive a threat of legal action from the Securities and Exchange Commission (SEC), adding to the sizable list of industry giants on the agency’s hit list.

In a Form 8-K filed on Saturday, the company said it received a Wells Notice from the SEC on May 4.

Allegations Against Robinhood

Specifically, SEC staff disclosed that they’d reached a “preliminary determination” to recommend the agency to file a lawsuit “alleging violations of Sections 15(a) and 17A of the Securities Exchange Act of 1934.”

Per the SEC’s website, Section 15(a) makes it unlawful for broker-dealers to effect or induce the purchase or sale of securities unless that broker is registered with the SEC. Meanwhile, Section 17A pertains to defrauding customers of their money through material misstatements or omissions.

Remedies may include “an injunction, a cease-and-desist order, disgorgement, pre-judgment interest, civil money penalties, and censure, revocation, and limitations on activities,” the filing stated.

Robinhood wrote on Monday that it was “disappointed” with the SEC’s decision after “years of good faith attempts” to comply and register.

“We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law,” said Dan Gallagher, Chief Legal, Compliance and Corporate Affairs Officer of Robinhood.

Robinhood’s stock, HOOD, remained relatively unaffected on Monday, trading 1.14% above Friday’s close at $18.16.

The SEC’s Next Crypto Target

Robinhood first received an investigative subpoena from the SEC in February 2023 related to its crypto operations.

In June, the exchange delisted popular crypto assets including Cardano (ADA), Solana (SOL) and Polygon (MATIC) from its platform after the SEC pressed similar charges against Binance and Coinbase asserting that those assets were unregistered securities.

Kraken was also charged for listing securities on its platform in November, despite electing to pay a $30 million fine for alleged securities violations related to its staking service earlier that year.

This time, Kraken and others have chosen to fight back against the SEC in court, joining a chorus of other firms claiming the digital assets on their platforms do not qualify as investment contracts.

Beyond centralized trading platforms, the SEC also threatened to sue decentralized exchange developer Uniswap Labs in April and is now battling Ethereum infrastructure provider Consensys over Ether (ETH)’s status as a security.

“It seems like theyre abusing the Wells process as a scare tactic now,” wrote Jake Chervinsky, Chief Legal Officer at crypto VC firm Variant Fund, to Twitter on Monday.

“The SEC allocates a grossly disproportionate amount of its resources to crypto, given that its actual purpose is to regulate equity and debt markets,” he added. “Every minute and taxpayer dollar spent on crypto is one not spent on the real mission that Congress created the SEC to pursue.”