WEBVTT - Robinhood’s Gallagher on Tokenization, Crypto 0:00:15.600 --> 0:00:19.160 Hello, and welcome to the Votes and Verdicts podcast, hosted 0:00:19.160 --> 0:00:23.160 by the litigation and policy team at Bloomberg Intelligence. Bloomberg 0:00:23.200 --> 0:00:26.599 Intelligence is the investment research platform on the Bloomberg Terminal, 0:00:26.960 --> 0:00:30.400 with five hundred analysts and strategists working across the globe 0:00:30.640 --> 0:00:34.319 and focused on all major markets. Our coverage includes over 0:00:34.360 --> 0:00:37.159 two thousand equities and credits, and we have outlooks on 0:00:37.159 --> 0:00:40.360 more than ninety industries and one hundred market indices, currencies 0:00:40.400 --> 0:00:45.320 and commodities. This podcast series examines the intersection of business 0:00:45.400 --> 0:00:49.199 policy and law. I'm Elliott Stein, an analysts with Bloomberg 0:00:49.240 --> 0:00:51.880 Intelligence covering financials litigation, and. 0:00:51.800 --> 0:00:53.680 My name is Nathan Dean, and I'm an analyst with 0:00:53.680 --> 0:00:55.880 Bloomberg Intelligence covering financials policy. 0:00:56.560 --> 0:00:59.959 So today is a very special episode because we are 0:01:00.120 --> 0:01:05.040 recording this almost exactly twelve months since we did our 0:01:05.080 --> 0:01:09.440 last episode with our very esteemed guest, Dan Gallagher, Chief 0:01:09.520 --> 0:01:14.520 Legal Compliance and Corporate Affairs Officer of Robinhood Markets. Dan, 0:01:14.680 --> 0:01:17.000 Welcome back to the Votes and Verdicts podcast. 0:01:17.360 --> 0:01:19.560 Hey guys, thanks for having me. I'm really excited to 0:01:19.600 --> 0:01:20.920 be back. We had a lot of fun last time. 0:01:21.040 --> 0:01:23.759 Yeah, agreed, and we're looking forward to doing this episode 0:01:23.760 --> 0:01:24.200 as well. 0:01:24.920 --> 0:01:25.520 So for our. 0:01:25.440 --> 0:01:27.839 Listeners, I definitely recommend that you go back and listen 0:01:27.880 --> 0:01:30.440 to our last episode with Dan from twenty twenty four. 0:01:32.319 --> 0:01:37.839 But and in that episode we went over his credentials extensively. 0:01:37.920 --> 0:01:40.760 But given Dan's impressive background, I think it's just worth 0:01:40.800 --> 0:01:46.040 highlighting a few of those credentials again. Prior to joining 0:01:46.120 --> 0:01:48.640 Robin Hood, Dan was partner and deputy chair of the 0:01:48.680 --> 0:01:51.880 securities department at the law firm Wilmer Hale. He also 0:01:51.960 --> 0:01:54.800 served as a Commissioner of the US Securities and Exchange 0:01:54.840 --> 0:01:59.080 Commission the SEC from twenty eleven to twenty fifteen, and 0:01:59.120 --> 0:02:02.320 he held several other positions at the SEC on the 0:02:02.360 --> 0:02:06.520 SEC staff prior to being an appointed commissioner. Dan's previous experience 0:02:06.520 --> 0:02:09.600 also includes serving as the chief legal officer at Mylin, 0:02:10.000 --> 0:02:13.440 a leading global pharmaceutical company, and as a president of 0:02:13.480 --> 0:02:15.720 a financial services consulting firm. 0:02:16.639 --> 0:02:18.520 All right, Dan, let's bring you in. 0:02:18.639 --> 0:02:22.560 Normally, we always ask our guests with the first question 0:02:22.600 --> 0:02:24.800 to tell us about their work history. But since we 0:02:24.840 --> 0:02:26.720 did that last time, and since I sort of just 0:02:26.760 --> 0:02:29.920 went over that in brief, why don't we sort of 0:02:30.320 --> 0:02:34.200 focus on the last twelve months since you were last on. Obviously, 0:02:34.240 --> 0:02:38.840 we're we were just passed the six month mark of 0:02:39.480 --> 0:02:42.840 the second Trump administration. So maybe to start off, you 0:02:42.880 --> 0:02:45.560 can give us an update on recent developments at robin 0:02:45.600 --> 0:02:49.359 Hood over the past year, and you know, maybe more specifically, 0:02:49.400 --> 0:02:53.360 how what has changed for the company, what's better, what's 0:02:53.440 --> 0:02:56.880 worse over the last six months under the Trump administration. 0:02:57.480 --> 0:03:00.280 Look, I couldn't be more excited to come and give 0:03:00.320 --> 0:03:04.720 you guys the update because a year ago, when when 0:03:04.720 --> 0:03:08.400 we were talking about the regulatory policy issues that we 0:03:08.400 --> 0:03:11.840 were dealing with at Robinhood, it was a pretty bleak, right. 0:03:11.919 --> 0:03:14.960 We had I think, as I told you at the time, 0:03:15.160 --> 0:03:18.919 five federal rules, all all aimed at our business model 0:03:18.960 --> 0:03:23.320 like scud missiles ready to blow us up. We had 0:03:23.880 --> 0:03:27.160 SEC enforcement all over us in fin reinforcement. I mean, 0:03:27.600 --> 0:03:32.120 it just was a very hostile environment in which to 0:03:32.720 --> 0:03:35.320 you know, provide financial services generally, but to be in 0:03:36.360 --> 0:03:39.200 at based brokerage and to be robin Hood. Quite frankly, 0:03:39.240 --> 0:03:41.760 there was you know, I think there was an actual 0:03:41.800 --> 0:03:46.240 prejudice against Robinhood by the prior administration and the agencies 0:03:46.320 --> 0:03:49.800 implementing their policies. And you know, I don't think it 0:03:49.840 --> 0:03:53.280 was appropriate, but I think there was one, and like 0:03:53.560 --> 0:03:59.320 Presto Changoh, since November, things could not be any more different. 0:04:00.480 --> 0:04:04.160 You know. We we have a very very knowledgeable and 0:04:04.240 --> 0:04:07.440 business friendly SEC chairman and Paul Atkins a good friend 0:04:07.480 --> 0:04:10.840 of mine, my my former boss. Uh, that's certainly one 0:04:10.880 --> 0:04:11.520 of my mentors. 0:04:11.560 --> 0:04:11.640 You know. 0:04:11.640 --> 0:04:13.080 I worked for him when he was a commissioner. I 0:04:13.080 --> 0:04:18.200 worked for him at Potoma Global Partners. And he understands 0:04:18.320 --> 0:04:22.240 the issues facing brokerage firms and other players in the 0:04:22.320 --> 0:04:25.640 in the capital markets. He's been living them for decades 0:04:25.760 --> 0:04:28.919 and and you know, very knowledgeable, but also you know, 0:04:29.000 --> 0:04:31.800 a free market guy and and not somebody who thinks 0:04:31.800 --> 0:04:34.000 that regulation is always the answer to any problem. So 0:04:34.080 --> 0:04:38.039 I you know, it's a an absolute sea change in 0:04:38.080 --> 0:04:42.240 the regulatory environment. I joke with my team here at 0:04:42.320 --> 0:04:43.960 robin Hood. You know, I have the I have the 0:04:44.040 --> 0:04:46.719 government affairs team, I have external affairs. I'm legal, you know, 0:04:46.720 --> 0:04:49.440 I've got corporate compliance and I you know, I said 0:04:49.440 --> 0:04:53.880 to these teams coming into January, guys, girls like we 0:04:54.760 --> 0:04:58.040 need to start thinking offensively. We need to start going 0:04:58.120 --> 0:05:02.240 front foot. You know, we got very very good at 0:05:02.279 --> 0:05:05.599 the defense at the back foot and that's great, and 0:05:05.839 --> 0:05:10.240 you know we're still alive. We weathered this storm largely intact, 0:05:10.240 --> 0:05:12.960 which is amazing. But now we have to start thinking, 0:05:13.600 --> 0:05:17.280 here's an environment in which we can actually help Robinhood 0:05:17.320 --> 0:05:21.000 progress and help Robinhood customers. What are the types of 0:05:21.040 --> 0:05:24.120 things we need to be doing to put some WS 0:05:24.160 --> 0:05:25.920 on the board, not just to defend, but to put 0:05:25.920 --> 0:05:29.200 some WS on the board. And it's just been really 0:05:29.240 --> 0:05:31.040 fun to use your brain in a different way. 0:05:31.440 --> 0:05:33.080 And what are some of the areas where you could 0:05:33.080 --> 0:05:35.120 see robin Hood sort of going on the offensive? 0:05:35.360 --> 0:05:38.760 Like you mentioned, there's a couple buckets see for me. 0:05:38.880 --> 0:05:42.719 One obviously is crypto. As you guys know and I 0:05:42.720 --> 0:05:46.080 think we talked about last year, we ran a very 0:05:46.200 --> 0:05:53.000 conservative crypto platform during the Biden administration. We didn't list 0:05:53.080 --> 0:05:56.080 four hundred coins, we didn't do staking, we didn't do lending, 0:05:56.080 --> 0:05:59.880 we didn't do all these things that our competitors in 0:06:00.000 --> 0:06:03.480 the crypto space were doing, all with a mind towards 0:06:03.480 --> 0:06:07.200 being respectful of what the then leadership at the SEC 0:06:07.279 --> 0:06:10.200 was saying, the rules are you know, and Gary was 0:06:10.240 --> 0:06:14.880 basically saying everything's a security and come in register. We 0:06:14.960 --> 0:06:17.480 disagreed on the everything as a security, but we did 0:06:17.520 --> 0:06:22.039 try to come in and register. We didn't do anything flagrantly, 0:06:22.320 --> 0:06:26.040 you know, in violation of the securities laws. We actually 0:06:26.640 --> 0:06:31.040 pretended like we were regulated. We operated our crypto entity 0:06:31.160 --> 0:06:34.680 like it was a broker. You know, we did tax reporting, 0:06:34.760 --> 0:06:38.960 we did fee disclosure to customers. We tried to create 0:06:39.000 --> 0:06:41.360 best execution in a world in which you know there's 0:06:41.360 --> 0:06:43.960 no MBBO. I mean, very hard thing to do, and 0:06:44.279 --> 0:06:46.760 we think that was all good for the customers. Could 0:06:46.800 --> 0:06:49.640 we have made more money, yeah, if we had listed 0:06:49.640 --> 0:06:53.560 more coins and done other allowed other features that the 0:06:53.560 --> 0:06:57.320 competitors were doing. We didn't, and you know, looking back 0:06:57.320 --> 0:06:58.719 on it, I think it was the right tact. And 0:06:58.839 --> 0:07:00.560 you know, we came out, we got a way l letter, 0:07:00.560 --> 0:07:03.320 we never got sued by the SEC. And now of 0:07:03.320 --> 0:07:06.520 course you have you know, Congress working on on crypto, 0:07:06.880 --> 0:07:09.400 and so we're working with Congress, we're working with the SEC. 0:07:10.120 --> 0:07:12.760 You know, we've been able to expand the platform with 0:07:12.840 --> 0:07:15.160 some clarity coming from the SEC on things like meaning 0:07:15.240 --> 0:07:18.800 coins and staking. But there's more to do. So so 0:07:18.960 --> 0:07:22.120 crypto is a big one for us. I would say, 0:07:22.640 --> 0:07:26.120 you know, market structure. If you remember right after Game Stop, 0:07:26.200 --> 0:07:28.840 this whole notion that payment for order flow is somehow 0:07:28.880 --> 0:07:33.080 bad and must be. I mean basically the last SEC 0:07:33.200 --> 0:07:35.000 was going to kill it with some of the rule 0:07:35.040 --> 0:07:38.840 proposals they came out with, you know, recognizing that it's 0:07:38.840 --> 0:07:41.760 not bad and it's you know, to the extent that 0:07:41.760 --> 0:07:43.880 people think it's a conflict or the other issues with it. 0:07:44.280 --> 0:07:49.640 What can we do, you know, proactively to alleviate any 0:07:49.680 --> 0:07:52.040 of those concerns. What kind of disclosure or other things 0:07:52.040 --> 0:07:55.640 can we do with payment for order flow? You know, 0:07:55.920 --> 0:07:58.040 can we work on And so those were thinking about that, 0:07:58.640 --> 0:08:01.680 and then you know, we're a public company two, uh, 0:08:02.000 --> 0:08:04.920 a big one at this point. You know, the companies 0:08:04.960 --> 0:08:08.360 really had a nice run and and you know we 0:08:08.360 --> 0:08:11.120 we have issues like other US public companies. It's hard 0:08:11.160 --> 0:08:14.520 to be a public company here. And you know Chairman 0:08:14.520 --> 0:08:17.560 Atkins has been talking about alleviating some of the burdens 0:08:17.560 --> 0:08:19.800 of being public, trying to get the IPO market started, 0:08:19.840 --> 0:08:21.960 things like that. All of that is good for us, 0:08:22.640 --> 0:08:26.040 right if we can you know, streamline some disclosure requirements 0:08:26.080 --> 0:08:29.320 and uh, you know, get more clarity on you know, 0:08:29.320 --> 0:08:33.160 accounting rules and other things. Obviously, we are and will 0:08:33.200 --> 0:08:36.000 remain a public company. It's good for us if there's 0:08:36.000 --> 0:08:38.760 more I pos right, we're not right now, we're not 0:08:38.840 --> 0:08:42.920 an EC firm, so we're not you know, taking private 0:08:43.120 --> 0:08:45.080 interests in private companies at this point. 0:08:45.800 --> 0:08:45.920 Uh. 0:08:46.280 --> 0:08:48.920 You know, for us, it's good if there's more stocks 0:08:48.960 --> 0:08:52.840 trading on the platform, and so we're very interested in 0:08:52.840 --> 0:08:56.840 that whole work stream on, you know, streamlining the idea 0:08:56.840 --> 0:08:57.840 of being a public company. 0:08:58.679 --> 0:09:00.720 You know, I'd love to come back and talk about crypto, 0:09:00.760 --> 0:09:02.320 and I think we will in a minute, But first 0:09:02.400 --> 0:09:06.280 I want to talk about tokenization because you know, we've seen, 0:09:06.360 --> 0:09:08.760 like you just mentioned, we've seen a tremendous difference between 0:09:08.800 --> 0:09:12.280 the Gary Gensler come in and registered mantra to what 0:09:12.280 --> 0:09:15.000 we're seeing under the chair, you know, you know, Chair 0:09:15.080 --> 0:09:18.599 Paul Ekins, And there was a lot of discussion of tokenization, 0:09:19.000 --> 0:09:22.400 and you know, when I was reading about the SEC's 0:09:22.400 --> 0:09:27.640 Crypto Task Force and Commissioner Purs's statement and tokenization, I 0:09:27.679 --> 0:09:29.640 just thought, this is something that I think is probably 0:09:29.640 --> 0:09:31.800 gonna be one of the biggest issues of twenty twenty 0:09:31.800 --> 0:09:34.200 five released for the second half. So can we first 0:09:34.240 --> 0:09:37.439 start off, can you explain to our listeners how tokenization 0:09:37.520 --> 0:09:41.119 of securities works and how is Robinhood thinking about tokenization? 0:09:42.480 --> 0:09:46.480 So, you know, unfortunately right now you don't see a 0:09:46.520 --> 0:09:49.479 lot of activity in the US as far as tokenizing 0:09:49.960 --> 0:09:53.840 stock trading. We certainly don't have it for public companies 0:09:53.920 --> 0:09:56.720 what we call the NMS equities, right, the NASDAC New 0:09:56.800 --> 0:10:00.959 York List in stocks. I know there's some limited amount 0:10:01.000 --> 0:10:06.079 of private company based blockchain trading going on, but it's 0:10:06.120 --> 0:10:12.640 still very nationent tokenization to me, it takes two flavors, right. 0:10:12.960 --> 0:10:15.880 It's sort of the current state, which is the idea 0:10:15.920 --> 0:10:19.480 that you could trade a token that's basically a mirror 0:10:19.520 --> 0:10:23.960 reflection of the underlying equity, right, that gives you the right, 0:10:25.400 --> 0:10:28.280 you know, the economic interests in that underlying equity. But 0:10:28.360 --> 0:10:30.920 it's a separate instrument, you know, kind of a derivative 0:10:31.000 --> 0:10:34.160 kind of not because it's really got the same features. 0:10:35.040 --> 0:10:37.679 But it trades on a blockchain, not in the traditional 0:10:38.400 --> 0:10:42.360 equity market structure, right, not on an exchange with DTC 0:10:42.559 --> 0:10:47.880 clearing it and brokers as intermediaries. That you know, there's 0:10:47.880 --> 0:10:49.560 a lot of discussion about that, and you know, the 0:10:49.640 --> 0:10:54.199 token versus the security, what rights do you have and 0:10:54.520 --> 0:10:56.760 other things like that. You know, under the UCC there's 0:10:56.800 --> 0:10:59.400 there's all sorts of debate. That's where a lot of 0:10:59.400 --> 0:11:03.760 talk has happened. Now. I think the end state canon 0:11:03.840 --> 0:11:08.560 should be where the token is the security, and that 0:11:08.679 --> 0:11:13.640 where companies are issuing securities, whether they be bonds or equities, 0:11:13.679 --> 0:11:18.480 into the blockchain, and that there's a recognition under state law. 0:11:18.679 --> 0:11:22.000 By the way, fun fact because I know you got 0:11:22.000 --> 0:11:25.000 a lot of lawyers listening, right the Delaware code. Fun 0:11:25.080 --> 0:11:31.120 fact that the Delaware Corporate Code was amended in twenty 0:11:31.160 --> 0:11:37.679 seventeen to allow recognition of tokens basically as equity interests 0:11:37.360 --> 0:11:42.400 in Delaware corporations. Not a lot of use for it yet, 0:11:42.520 --> 0:11:45.920 because you can do an issuance right it. It assumes 0:11:45.960 --> 0:11:48.000 that a company's going to do an issuance into the blockchain, 0:11:48.679 --> 0:11:51.199 but the secondary market trading side of it hasn't yet 0:11:51.240 --> 0:11:54.479 been figured out. And that's the real debate that Nathan's 0:11:54.760 --> 0:11:58.400 teed up here. So you can imagine a world though 0:11:58.400 --> 0:12:00.079 where you know, Texas, I don't know if they've on 0:12:00.120 --> 0:12:02.599 it yet, but they'll certainly if they haven't, they'll do 0:12:02.640 --> 0:12:05.080 it soon. Right where all the states are recognizing a 0:12:05.120 --> 0:12:08.480 different form and it's kind of like amending your the UCC, 0:12:08.760 --> 0:12:12.600 right you're just saying, yeah, that that's token. Is your interests? 0:12:13.760 --> 0:12:16.760 Is your security interest in that in that company, that's 0:12:16.760 --> 0:12:20.920 your equity position. We're not there yet. I do think 0:12:20.960 --> 0:12:22.960 that's where we should get to. So in the in 0:12:23.000 --> 0:12:26.880 the current atmosphere, we're talking about, okay, tokens that represent 0:12:26.920 --> 0:12:32.400 interests in underlying securities we haven't seen because of the 0:12:32.440 --> 0:12:35.600 existing rules. A lot of innovation in the space. Another 0:12:35.640 --> 0:12:37.680 fun fact I know you guys, I'll give you another 0:12:37.679 --> 0:12:41.360 one of rapid fire fund facts. Uh, there's a company 0:12:41.400 --> 0:12:44.559 called Paxos out there. I don't know if you've seen Paxos, 0:12:45.640 --> 0:12:51.240 great innovative company, amazing CEO Chad is terrific. They came 0:12:51.280 --> 0:12:54.440 in when Jay Clayton was SEC chairman and actually got 0:12:54.440 --> 0:12:57.600 a no action letter that allowed them on a very 0:12:57.679 --> 0:13:04.360 limited pilot basis to trade NMS equities in a blockchain. Now, 0:13:04.640 --> 0:13:06.800 it was very complicated because they had to kind of 0:13:07.559 --> 0:13:10.559 reverse the you know, or mirror image the trade into 0:13:10.600 --> 0:13:12.400 the DTC at the end of the day, and there 0:13:12.480 --> 0:13:14.920 was just a I think ten or so equities and 0:13:15.320 --> 0:13:17.040 but it was kind of cool. And if you read 0:13:17.040 --> 0:13:19.360 that no action letter, which is up on the SEC website, 0:13:19.960 --> 0:13:22.720 Paxos did this amazing job of laying out all the 0:13:22.760 --> 0:13:26.240 issues they faced and trying to provide that functionality and 0:13:26.280 --> 0:13:30.920 then requesting the relief which they got. And you know, 0:13:31.000 --> 0:13:33.400 when you read that list of issues to me, that 0:13:33.520 --> 0:13:38.640 just lays out the current impediments to blockchain based tokenized 0:13:38.679 --> 0:13:42.360 trading of equities today. You have to there's a requirement 0:13:42.400 --> 0:13:46.520 that DTC clear these equities. You've got transfer agent issues, 0:13:46.520 --> 0:13:49.360 you've got registration issues. Right. If you have a blockchain 0:13:50.240 --> 0:13:56.200 that's just continually processing transactions, there's there's folks acting in 0:13:56.240 --> 0:13:59.760 some capacity, right, or you know there's AI acting in 0:13:59.800 --> 0:14:03.320 some capacity in the blockchain. Are they acting like a broker? 0:14:03.360 --> 0:14:05.240 Are they acting like a transfer region? Are they acting 0:14:05.280 --> 0:14:07.640 like an exchange? Are they acting like a clearing agency? 0:14:08.160 --> 0:14:10.720 And if so, do they have to be registered with 0:14:10.840 --> 0:14:13.839 the SEC? Current law would tell you yes, but it 0:14:13.840 --> 0:14:16.600 would also tell you why this is silly, right, Like 0:14:16.640 --> 0:14:21.360 some of these registration categories become either redundant or just 0:14:21.400 --> 0:14:26.960 sort of superfluous in a blockchain based environment, and so 0:14:27.040 --> 0:14:30.440 that type of relief is going to be needed from 0:14:30.480 --> 0:14:33.920 the SEC. Right, we need relief from this requirement to 0:14:33.960 --> 0:14:38.080 go clear and settle at DTC or at least some 0:14:38.240 --> 0:14:41.280 relief where DTC is a node in the blockchain and 0:14:41.720 --> 0:14:46.560 you know, validating transactions, something where you know, the government 0:14:46.600 --> 0:14:50.560 gets comfortable that the protections that come with that registration 0:14:50.680 --> 0:14:55.640 category are still being provided in the blockchain, and we're 0:14:55.680 --> 0:14:56.960 not there yet. You know. 0:14:57.200 --> 0:14:59.600 I'm just amazed at the fact that somebody in Delaware 0:14:59.600 --> 0:15:02.280 in twenty seventeen had to force Sight to put that 0:15:02.360 --> 0:15:05.040 into the code. And if that person ever listens, I 0:15:05.080 --> 0:15:08.320 hope they decided to buy bitcoin, because it just amazes 0:15:08.360 --> 0:15:11.320 me that just that many years ago they were able. 0:15:11.120 --> 0:15:15.320 To do that. And full props on that one. You know. 0:15:15.840 --> 0:15:18.600 A sub fun fact to the maiden fun fact is 0:15:18.640 --> 0:15:22.200 that Jack Markell was the governor of Delaware at the 0:15:22.200 --> 0:15:26.920 time and just an amazingly great guy. Actually sat on 0:15:26.960 --> 0:15:30.160 a board with him of a company, a blockchain company. 0:15:30.920 --> 0:15:35.120 He later became the ambassador to I don't know if 0:15:35.120 --> 0:15:37.600 it's to the a Vatican or to Italy. I think 0:15:37.600 --> 0:15:41.240 it might have been to Italy under Biden, but he 0:15:41.920 --> 0:15:45.160 was Italy, it was Italy. Yeah, I mean, just an 0:15:45.200 --> 0:15:48.480 amazing guy, great guy, you know, just a fun person, 0:15:48.640 --> 0:15:51.720 generally super smart, but had that foresight because were almost 0:15:51.840 --> 0:15:56.200 ten years later and that provision sitting there. So I just. 0:15:56.160 --> 0:16:00.160 Got technically it was Italy and San Marino. Oh we 0:16:00.160 --> 0:16:01.240 should have him on the podcast. 0:16:01.280 --> 0:16:04.160 I love that. Yeah, you should get Dak Markel. He'd 0:16:04.200 --> 0:16:04.880 be a fun one. 0:16:05.680 --> 0:16:08.080 So just one follow up on the tokenization. You you 0:16:08.320 --> 0:16:12.320 listed out a lot of things like disclosures and compliance 0:16:12.480 --> 0:16:15.800 and you know, things that he certainly excites Elliott and I, 0:16:15.880 --> 0:16:18.760 but you know, for certain other you know folks out there, 0:16:19.120 --> 0:16:22.480 you know, it may be more of a political handcuff 0:16:22.560 --> 0:16:25.280 or more of a detriment towards innovation. 0:16:25.800 --> 0:16:28.800 Do you think as the SEC embarks. 0:16:28.360 --> 0:16:32.640 With this tokenization work that their views, maybe it's a 0:16:32.680 --> 0:16:36.040 conditioner or person's view, that tokenization securities are still securities 0:16:36.080 --> 0:16:38.760 and so forth like that. Are they going to stave 0:16:38.800 --> 0:16:40.920 off any of the perceived benefits or do you think 0:16:40.960 --> 0:16:44.680 that the compliance and disclosure aspects will actually just be 0:16:44.760 --> 0:16:45.960 able to foster innovation. 0:16:46.840 --> 0:16:49.320 I think the latter, I mean, and it's funny. I 0:16:49.360 --> 0:16:52.160 talked to Commissioner Purse after she put her statement out 0:16:52.800 --> 0:16:55.280 and I said, I agree with everything you said. I mean, 0:16:55.280 --> 0:16:58.600 this should be fully regulated, right and and it should 0:16:58.640 --> 0:17:02.320 be you know, Blessed by the SEC. There was this 0:17:02.760 --> 0:17:05.760 meme out there that you know, the crypto industry was 0:17:05.800 --> 0:17:09.560 coming in and asking the SEC, you know, basically, let 0:17:09.680 --> 0:17:12.600 us hokenize stock trading and don't apply any of the 0:17:12.680 --> 0:17:15.760 rules to us. Now, if any of them were dumb 0:17:15.880 --> 0:17:21.040 enough to actually ask for that, they warranted her notice 0:17:21.080 --> 0:17:24.480 about tokens and they shouldn't be in DC. If you 0:17:24.520 --> 0:17:28.040 ask me, we would never do that because we're realists. 0:17:28.080 --> 0:17:31.640 And also, you know, as I mentioned that a lot 0:17:31.640 --> 0:17:36.480 of protections for customers come with these impediments to tokenization, 0:17:36.560 --> 0:17:40.119 right the registration categories and the requirement to clear and 0:17:40.160 --> 0:17:44.560 settle to etc. Is born of really good rationale. It's 0:17:44.600 --> 0:17:46.520 that you want to know that where your securities are. 0:17:46.600 --> 0:17:49.280 You want, you know, not to have to trust some 0:17:49.320 --> 0:17:52.000 blockchain or some cold wallet or something else that you 0:17:52.040 --> 0:17:56.040 can't verify. But how do we replicate that or how 0:17:56.040 --> 0:17:59.159 do we give some comfort to the government and therefore 0:17:59.160 --> 0:18:01.280 to customers. But you know, what we come up with 0:18:01.320 --> 0:18:03.879 on a blockchain is just as good, or quite frankly, 0:18:03.920 --> 0:18:06.760 it's going to be even better. That's the challenge. And 0:18:06.800 --> 0:18:08.520 I think we can get there, I really do, and 0:18:08.520 --> 0:18:11.080 I think we have to get there quickly. I mean, 0:18:11.280 --> 0:18:12.720 you know, I'm acting like we have three and a 0:18:12.760 --> 0:18:17.080 half years here because we've been living you know, every 0:18:17.119 --> 0:18:19.000 four years, we have a different economy and a different 0:18:19.040 --> 0:18:20.679 I mean, it's just crazy. So I have to assume 0:18:20.680 --> 0:18:23.720 the worst, you know, that we'll get a highly you know, 0:18:23.760 --> 0:18:26.320 a repeat of the Biden administration here in twenty eight. 0:18:26.440 --> 0:18:29.640 So let's get something together. Let's do it quickly, let's 0:18:29.680 --> 0:18:34.440 lock it in. While we have Paul Atkins, you know, 0:18:34.520 --> 0:18:36.480 who's a really you know, I would say, a visionary 0:18:36.480 --> 0:18:38.280 when it comes to some of this stuff. While we 0:18:38.320 --> 0:18:43.320 have hester still around, and while we have you know, folks, 0:18:43.520 --> 0:18:45.800 whether it be at Finner A, DTC elsewhere, who are 0:18:45.840 --> 0:18:49.359 really interested quite frankly and being part of this. I 0:18:49.560 --> 0:18:51.240 actually give DTC a lot of credit. 0:18:51.400 --> 0:18:54.680 Yeah, just one last question on the tokenization. Do you 0:18:54.680 --> 0:18:59.520 see any differences between you know, trying to put some 0:18:59.560 --> 0:19:04.600 sort of tory framework around tokenization of publicly issued securities 0:19:04.720 --> 0:19:06.720 versus private markets. 0:19:07.160 --> 0:19:11.520 Yeah, they're actually pretty big differences. I think. I think 0:19:11.520 --> 0:19:14.680 eventually the public companies will just come along because it's 0:19:14.760 --> 0:19:18.280 kind of like, what's the difference you know, if I 0:19:18.280 --> 0:19:22.280 if I'm my stock is trading on ancient infrastructure now, 0:19:22.440 --> 0:19:24.720 and it's clunky and there's a two day settlement cycle. 0:19:25.600 --> 0:19:27.280 What do I a is the issue or care if 0:19:27.320 --> 0:19:30.919 it's in a more efficient blockchain, real time settlement, you 0:19:30.960 --> 0:19:33.080 know all the other benefits that come with that. So 0:19:33.280 --> 0:19:35.600 I actually think for them it's just sort of a 0:19:35.600 --> 0:19:39.040 commoditized experience and they'll they'll be fine with it. On 0:19:39.119 --> 0:19:43.200 the private side, you have, I think each each company's 0:19:43.200 --> 0:19:46.480 idiosyncratic and in their view of this, right do they 0:19:46.600 --> 0:19:52.399 want the transparency, the liquidity, everything that comes with having 0:19:52.440 --> 0:19:56.399 your equities, you know, being traded on a blockchain. Some do, 0:19:56.560 --> 0:20:00.640 some don't, you know, you could you know, we had 0:20:01.400 --> 0:20:04.640 recently we announced in the EU we had some tokens 0:20:04.640 --> 0:20:08.240 on SpaceX and open ai and you know, you know 0:20:08.560 --> 0:20:10.760 open Ai I would say, uh, you know, issued a 0:20:10.760 --> 0:20:12.359 public statement saying, you know, we had no part of 0:20:12.400 --> 0:20:15.280 this or whatever, and and you know I respect that, 0:20:15.359 --> 0:20:18.960 And I think, you know, for them, it's less exciting 0:20:19.000 --> 0:20:21.920 than it might be for SpaceX or some other even 0:20:21.960 --> 0:20:25.520 smaller company to have a market, you know, a more 0:20:25.560 --> 0:20:30.960 accessible market in their equity. So we'll see. I do 0:20:31.040 --> 0:20:34.560 think I I think it will become a very good 0:20:34.600 --> 0:20:38.800 thing eventually for private companies you know right now just 0:20:38.880 --> 0:20:42.840 even even uh you know, keeping track of your holders 0:20:43.080 --> 0:20:46.399 and vesting events and all these other things. I mean, 0:20:46.440 --> 0:20:50.440 you have great services out there like Karta and others, 0:20:50.720 --> 0:20:52.760 you know, but I think and you know, even the 0:20:52.760 --> 0:20:55.359 blockchain can do the same and more. And I know 0:20:55.440 --> 0:20:58.320 even the Kartas of the world are getting involved in 0:20:58.320 --> 0:21:01.640 blockchain initiatives and things like that. So yeah, I think 0:21:01.720 --> 0:21:03.920 this is all for the good, guys, and I think 0:21:03.920 --> 0:21:07.439 it's all for the good for customers and what we 0:21:07.640 --> 0:21:09.760 what we're coming up against though, and what you know, 0:21:09.760 --> 0:21:12.679 we have to deal with their vested interests. Right. You 0:21:12.760 --> 0:21:15.919 have you know, major institutions in the US that that 0:21:16.600 --> 0:21:20.520 you know can't innovate quickly, that runs you know, these 0:21:20.880 --> 0:21:25.880 mainframes in buildings and you know, that operate on antiquated 0:21:26.280 --> 0:21:31.480 infrastructure that the current market structure works for them. And 0:21:31.600 --> 0:21:35.800 they're powerful and you know they they're on the boards 0:21:35.840 --> 0:21:39.400 of the important institutions. They're in Washington with with big 0:21:39.440 --> 0:21:42.959 lobbying forces. So we're gonna have to kind of overcome that. 0:21:43.160 --> 0:21:46.400 And I think the advancement of crypto and the legitimization 0:21:46.520 --> 0:21:48.240 of crypto, which I know you guys want to talk 0:21:48.280 --> 0:21:51.639 about too in Congress is going to help us on 0:21:51.720 --> 0:21:55.840 the crypto related which is really just the blockchain innovation 0:21:55.920 --> 0:21:57.840 that we're going to have on the equities and fixed 0:21:57.840 --> 0:21:58.600 income side. 0:21:59.040 --> 0:22:00.960 And we're going to talkbout crypto a little more, but 0:22:01.000 --> 0:22:04.720 before we get there, we'll leave the audience in suspense 0:22:04.760 --> 0:22:08.480 on that. Let's talk AI a little because yesterday, which 0:22:08.520 --> 0:22:12.240 was July twenty third, the President rolled out his AI 0:22:12.400 --> 0:22:17.960 Action Plan, which you know, to summarize, basically encourages eliminating 0:22:18.040 --> 0:22:23.080 regulations and barriers that unduly burden innovation in artificial intelligence. 0:22:24.040 --> 0:22:29.080 And I know in March, SEC Commissioner Mark Uyada said 0:22:29.119 --> 0:22:33.000 something similar that financial regulators should take a technology neutral 0:22:33.040 --> 0:22:35.800 approach to AI, and that he was concerned about the 0:22:35.840 --> 0:22:41.359 SEC potentially placing unnecessary barriers on artificial intelligence. I wanted 0:22:41.359 --> 0:22:44.520 to get your perspective, you know, from your seat, what 0:22:44.600 --> 0:22:49.240 do you see, as you know, barriers affecting robin Hood 0:22:49.440 --> 0:22:53.600 and your competitors and peers in the financial regulatory space, 0:22:53.640 --> 0:22:55.760 and you know, how do they affect Robinhood, how does 0:22:55.760 --> 0:22:58.560 it affect robin Hood's customer base, and what are the 0:22:58.600 --> 0:23:01.840 policy responses that you'd like to see coming from Washington 0:23:01.880 --> 0:23:03.000 to foster AI. 0:23:03.760 --> 0:23:07.879 Yeah, great question, and you know, sort of the macro 0:23:08.080 --> 0:23:13.120 answer is that the barrier for us at robin Hood 0:23:13.280 --> 0:23:16.280 with our primary regulators right with with the SEC, with FINRA, 0:23:16.800 --> 0:23:19.440 I guess CFTC also now since I last talked to 0:23:19.480 --> 0:23:23.040 you guys, we registered in FCM with the CFTC and 0:23:23.080 --> 0:23:26.680 the States and our and now our international operations. All 0:23:26.720 --> 0:23:31.200 the rules and laws are written with human beings in mind, 0:23:31.600 --> 0:23:34.679 right and now some you could read to allow for 0:23:34.760 --> 0:23:38.680 technology or not. Some might actually speak to human actions 0:23:38.720 --> 0:23:43.639 and regulating human actions. But you know, and we've encountered this, 0:23:43.800 --> 0:23:46.200 I mean, I would say most specifically with FINRA over 0:23:46.240 --> 0:23:48.639 the years, where the rules just have not kept pace 0:23:49.440 --> 0:23:53.680 with the advancement of technology. And I give Robert Cook 0:23:53.840 --> 0:23:55.560 over at Fenneral a lot of credit. He's on the 0:23:55.840 --> 0:23:58.440 you know, this modernization kick where they're going to modernize 0:23:58.440 --> 0:24:00.439 the rules. I wish they had done that before they 0:24:00.480 --> 0:24:04.199 brought enforcement actions against me for you know, not not 0:24:04.359 --> 0:24:07.560 fitting their rules because the rules are from nineteen fifty. 0:24:07.720 --> 0:24:13.000 But you know, so really it's this sort of macro 0:24:13.080 --> 0:24:15.800 issue of how do we make sure if we're going 0:24:15.880 --> 0:24:18.120 to do things with AI that we used to use 0:24:18.200 --> 0:24:23.280 humans for How do we make sure the regulators get comfortable, 0:24:23.960 --> 0:24:27.480 you know, without amending their rules necessarily to say specifically 0:24:27.560 --> 0:24:29.600 that AI can do it? But how do we get 0:24:29.600 --> 0:24:34.880 them comfortable that AI can do what humans did yesterday? 0:24:34.920 --> 0:24:37.959 They can AI can do it today? And what are 0:24:37.960 --> 0:24:41.280 the controls around that? So you know, if I was 0:24:41.840 --> 0:24:43.960 running the SEC, if I was running you know, finner 0:24:43.960 --> 0:24:46.520 A CFTC, I think I would just start from like 0:24:46.600 --> 0:24:51.359 this main thesis that we don't have to go amend 0:24:51.359 --> 0:24:53.680 every rule to say AI because once you do that, 0:24:53.760 --> 0:24:56.520 then you know the next thing comes along. Right, But 0:24:56.720 --> 0:25:00.439 you have to recognize that AI can do everything that 0:25:00.560 --> 0:25:03.440 humans can do, probably do it better. But what we 0:25:03.480 --> 0:25:06.879 want to see as a regulator is that your AI 0:25:07.040 --> 0:25:09.720 does what you think it does right, that that you 0:25:09.840 --> 0:25:13.159 understand the code, you understand how it operates, and that 0:25:13.200 --> 0:25:16.760 the outputs are consistent with what you say the output 0:25:16.840 --> 0:25:20.400 should be. Right. So, if I'm a brokerage firm, make 0:25:20.480 --> 0:25:24.040 me have policies and procedures on AI, you know, make 0:25:24.119 --> 0:25:28.000 me write my code description in plain English so that 0:25:28.040 --> 0:25:30.239 examiners can come in and understand what it does. Let 0:25:30.320 --> 0:25:33.560 them test outputs to see if it's actually working right, 0:25:33.680 --> 0:25:37.240 But otherwise let it, let it work like a human, 0:25:37.359 --> 0:25:40.159 have supervision of it, right, make sure that there's somebody 0:25:41.320 --> 0:25:43.960 that's going to ensure it's operating in that way that 0:25:44.080 --> 0:25:46.160 tests it. You know, have internal lot of testing whatever 0:25:46.200 --> 0:25:49.080 you want to do by way of controls. But that's it. 0:25:49.240 --> 0:25:52.880 Don't don't try to get in there and regulate AI. Right. 0:25:52.960 --> 0:25:57.359 And a great example it's just use the investment advisory 0:25:57.400 --> 0:26:00.520 business right where you're you have a fiduciary reallylationship with 0:26:00.560 --> 0:26:03.200 your customer. You guys have seen the rise of robo 0:26:03.240 --> 0:26:07.160 advisors over the last twenty years, right, type of AI, right, 0:26:07.240 --> 0:26:10.320 I mean, you know, not not very sophisticated in the 0:26:10.359 --> 0:26:16.240 early stages. But what can that AI do that or 0:26:16.240 --> 0:26:19.000 a human do that the AI can't when it comes 0:26:19.040 --> 0:26:23.600 to recommending stocks and bonds and other you know, trading strategies. 0:26:24.880 --> 0:26:28.480 The answer pretty soon is, you know, as AI develops, 0:26:28.480 --> 0:26:31.240 it's gonna be nothing, right, I mean, the AI theoretically 0:26:31.280 --> 0:26:33.560 should be better. It's going to take out the emotion 0:26:33.680 --> 0:26:35.919 of it and just get to the bottom line. You know, 0:26:36.000 --> 0:26:40.440 this is the best recommendation for you, like this trading strategy, 0:26:41.359 --> 0:26:44.280 and so you know, why do you have to write 0:26:44.280 --> 0:26:46.360 a whole rule set about that. The rule set today 0:26:46.400 --> 0:26:49.040 anticipates that Nathan's on the phone, you know, telling you 0:26:49.080 --> 0:26:52.880 Elliott what to do. Who cares if ahis doing it right? 0:26:53.040 --> 0:26:55.840 And I think if we get into this mindset of, 0:26:55.920 --> 0:26:57.640 oh my god, we have to go in and have 0:26:58.000 --> 0:27:02.160 the rule for AI for advisory, it'll never happen. It'll 0:27:02.200 --> 0:27:06.359 take three years, right, and it'll be like, oh gosh, 0:27:06.600 --> 0:27:08.359 now I'm going to start trying to write a rule 0:27:08.440 --> 0:27:11.399 that tells you how to code, or that tells you 0:27:11.440 --> 0:27:14.080 what databases the AI can look at, or you know, 0:27:14.080 --> 0:27:16.560 whatever it is, and we're just going to go off, 0:27:17.119 --> 0:27:20.159 you know, off track. Instead, I think they should just 0:27:20.280 --> 0:27:24.280 do a very principles based AI can do what humans do. 0:27:24.560 --> 0:27:28.359 We get it, have supervision, have policies and procedures, let 0:27:28.440 --> 0:27:31.320 you innovate, and let's see how it goes. 0:27:31.440 --> 0:27:35.040 So and well, I was going to say, I know, 0:27:35.119 --> 0:27:39.080 Robin Hood in its policy position website says that you know, 0:27:39.200 --> 0:27:43.320 it envisions a regulatory environment that foster's collaboration between the 0:27:43.359 --> 0:27:48.040 industry and regulators. Are you seeing advancement in that area, 0:27:48.119 --> 0:27:49.399 especially in the last six months. 0:27:49.800 --> 0:27:51.720 I mean, again, it's sort of night and day in 0:27:51.760 --> 0:27:54.720 the last six months. I think you heard it from 0:27:55.680 --> 0:27:58.600 you know SEC leadership in the last administration. You heard 0:27:58.600 --> 0:28:00.960 it from the White House like this fear of AI. 0:28:01.720 --> 0:28:03.480 We need to control it, we need to rein it in. 0:28:03.600 --> 0:28:06.240 We need And it wasn't sort of a focus on 0:28:06.359 --> 0:28:10.080 the positives, right And you saw this report yesterday, the 0:28:10.080 --> 0:28:14.399 executive order from this administration. It's all largely focused on 0:28:14.440 --> 0:28:18.440 the positives and and you know, eliminating barriers to using 0:28:18.480 --> 0:28:23.760 AI and so yes, it's a much more collaborative environment. 0:28:24.440 --> 0:28:27.600 I mean, I've had great conversations directly with the senior 0:28:27.600 --> 0:28:30.600 folks at FINRA about you know, our intent to to 0:28:30.760 --> 0:28:33.720 really start rolling out a lot more AI use cases. 0:28:34.600 --> 0:28:36.639 We've got some great stuff going. We have AI c 0:28:36.920 --> 0:28:40.480 X agents, you know, doing customer service. We rolled out 0:28:40.520 --> 0:28:44.360 AI based we call it core Tex. It's a digest 0:28:44.440 --> 0:28:48.640 that can you know, give give our customers more information 0:28:48.720 --> 0:28:53.280 about particular stocks, you know, and what's happening with them 0:28:53.320 --> 0:28:57.280 and what's moving you know, prices, things like that. I 0:28:57.560 --> 0:29:00.640 I want to get to a world in which you know, 0:29:00.880 --> 0:29:04.240 in the broker not just for advisory, but you know 0:29:04.280 --> 0:29:08.080 in the broker that we're actually making recommendations to customers 0:29:08.160 --> 0:29:12.280 using AI. The advisor that we rolled out is not 0:29:13.200 --> 0:29:16.080 an AI based advisor. We actually have a you know, 0:29:16.280 --> 0:29:20.000 a very experienced person, Steph Guild running that who was 0:29:20.040 --> 0:29:22.560 on Wall Street, was at JP Morgan for I think 0:29:22.560 --> 0:29:26.640 a couple decades and you know, expert in wealth management. 0:29:27.160 --> 0:29:29.480 And that's sort of the value add touched there. But 0:29:30.400 --> 0:29:33.239 I do I do think more and more we're going 0:29:33.280 --> 0:29:36.400 to see a move to AI on the advisory site. 0:29:36.480 --> 0:29:38.880 So the time has come for what we've all been 0:29:38.880 --> 0:29:40.960 waiting for. Let's go back to crypto. You know. 0:29:41.120 --> 0:29:47.520 So we actually saw significant progress in Washington when Congress 0:29:47.520 --> 0:29:49.840 passed the Genius Act, the Stable Coin Bill, and the 0:29:49.840 --> 0:29:52.600 House passed the Clarity Act, also known as what we've 0:29:52.600 --> 0:29:53.040 been calling the. 0:29:53.040 --> 0:29:57.560 Crypto Market Structure Bill. And you know, I'd like to say, like, 0:29:57.720 --> 0:30:00.000 so you've got the Genius Act, You've got this Clarity Act, 0:30:00.120 --> 0:30:04.800 which defines you know, what cryptocurrencies should fall in more 0:30:04.800 --> 0:30:07.959 of the securities bucket versus what falls in the commodities bucket. 0:30:08.440 --> 0:30:11.520 Gives the CFTC authority over the spot markets. But you 0:30:11.560 --> 0:30:14.280 also have the sec under chair Atkins doing some work. 0:30:14.320 --> 0:30:18.040 You'll most likely have the CFTC under future chair Brian 0:30:18.160 --> 0:30:20.080 Quinten's doing some work just because I'm going to go 0:30:20.080 --> 0:30:22.200 out and Limbs say that Senate's going to confirm him. 0:30:22.440 --> 0:30:25.360 You know, how does Robin Hoods think about all these 0:30:25.400 --> 0:30:29.200 pieces of the puzzle and if you had your druthers, 0:30:29.280 --> 0:30:32.160 what would the best endgame scenario look like for you 0:30:32.200 --> 0:30:32.800 in the company. 0:30:33.160 --> 0:30:36.120 Yes, so, look, I'm a genius act. We were super excited. 0:30:36.200 --> 0:30:40.000 Blad and Johan Crabat are head of Crypto. We're at 0:30:40.040 --> 0:30:43.520 the White House for the signing ceremony that they sat 0:30:43.600 --> 0:30:47.280 Blad between Chairman Atkins and Commissioner Purse. I told him, 0:30:47.360 --> 0:30:51.200 be careful what you say you're sitting with the sec. 0:30:52.520 --> 0:30:54.680 But it was a great moment I think for crypto 0:30:54.800 --> 0:30:58.480 and and for the country, you know, to legitimize stable 0:30:58.520 --> 0:31:00.520 coins and to really take a big step forward. I 0:31:00.520 --> 0:31:06.040 think for cryptover at large. So and look stable coins, 0:31:06.120 --> 0:31:10.200 you know it got a lot of bipartisan support. I 0:31:10.240 --> 0:31:13.800 think it's gonna be like tokenization, and actually it'll be 0:31:13.840 --> 0:31:17.280 intrinsically eyed to tokenization. Once you're in the blockchain, right 0:31:17.320 --> 0:31:19.760 and you're using a stable coin to pay for your 0:31:19.800 --> 0:31:23.640 Tesla stock, and it settles instantaneously and you know, your 0:31:23.920 --> 0:31:27.680 your us DC is traded for your you know, TESLA 0:31:27.680 --> 0:31:30.000 token immediately and it's in your account and you see it. 0:31:30.040 --> 0:31:32.880 I mean, this is this is the future, right, But 0:31:32.960 --> 0:31:37.520 we needed to legitimize stable coins first, because again, the 0:31:37.600 --> 0:31:41.000 last administration is super hostile, you know, saying that stable 0:31:41.000 --> 0:31:45.560 coins are security, stable coins are mutual funds. You know, 0:31:45.600 --> 0:31:48.960 a lot of debate about their status too, which you know, 0:31:48.960 --> 0:31:51.320 seemed a little silly to me, but but that's just 0:31:51.320 --> 0:31:55.200 what it was. Uh. Clarity is is really where the 0:31:55.240 --> 0:32:00.560 gain is, right, Clarity. You know, creating the market structure 0:32:00.600 --> 0:32:03.840 for crypto is a huge moment and I don't think 0:32:03.840 --> 0:32:06.360 we've seen anything like this guy since Dodd Frank and 0:32:06.480 --> 0:32:10.880 derivatives quite frankly. Where Congress has decided we're going to 0:32:10.920 --> 0:32:15.240 think about a market that exists, a multi trillion dollar market, right, 0:32:15.280 --> 0:32:18.520 which we had with derivatives, which we do have with crypto, 0:32:19.080 --> 0:32:21.040 and we're going to create the market structure for it. 0:32:21.040 --> 0:32:24.480 We're going to allocate responsibility. We're going to be prescriptive 0:32:24.480 --> 0:32:29.560 here and maybe principle there. And you know, I think 0:32:30.040 --> 0:32:32.920 it's they've made great progress with it. I think there's 0:32:33.280 --> 0:32:36.120 you know, going to be some peaks and changes obviously 0:32:36.160 --> 0:32:38.560 to it before it ever gets you know, to the 0:32:38.560 --> 0:32:43.320 President's desk for Robinhood. You know, we can pretty much 0:32:43.360 --> 0:32:46.760 operate in any environment, I would say. So we're feeling, 0:32:47.600 --> 0:32:50.760 from a business model perspective, pretty hedged with respect to 0:32:50.800 --> 0:32:55.840 wherever they come out on Clarity. We've got our you know, 0:32:55.960 --> 0:32:59.720 CFTC registered, NFA registered at FCM. We've got our broker dealer, 0:32:59.720 --> 0:33:02.280 which is obviously you know, the biggest chunk of our 0:33:02.320 --> 0:33:05.920 business and and historical business line at robin Hood. We've 0:33:05.920 --> 0:33:09.560 got our crypto unit, which is heretofore unregistered but can 0:33:09.640 --> 0:33:13.600 be if need be. It's and it's just kind of 0:33:13.720 --> 0:33:17.720 fun when we sit back and look at you know, okay, well, 0:33:17.720 --> 0:33:22.160 if it's SEC regulated, you know, for whatever purpose the 0:33:22.240 --> 0:33:25.760 you know, the Clarity Act. Obviously there's a strong deference 0:33:25.840 --> 0:33:30.440 to c FTC, but there's obviously a pathway for SEC registration. 0:33:31.440 --> 0:33:33.800 What can we do there, What can we do on 0:33:33.840 --> 0:33:38.320 the CFTC side, What do we do with our regulated identities? 0:33:38.400 --> 0:33:40.960 I mean, one thing though, is for sure, and this 0:33:41.120 --> 0:33:44.000 is where I think, you know, a bunch of folks 0:33:44.000 --> 0:33:47.520 in the crypto community are waking up to what regulation 0:33:47.680 --> 0:33:51.240 actually means. You know that that even the lightest touch 0:33:51.520 --> 0:33:55.760 regulation where you you you're registered as X y Z 0:33:55.960 --> 0:33:59.480 entity uh with whatever agency, but you all of a 0:33:59.480 --> 0:34:04.160 sudden have reporting obligations, you have books and records requirements, 0:34:04.160 --> 0:34:07.360 you get examined, maybe you have some appital requirements. Whatever 0:34:07.400 --> 0:34:09.880 comes with it is a hell of a lot more 0:34:09.920 --> 0:34:14.319 than existed today right when you have nothing. Right, So, 0:34:14.400 --> 0:34:17.120 the the idea of give me regulation, you know, which 0:34:17.160 --> 0:34:20.440 you've heard as a mantra from the community versus the 0:34:20.480 --> 0:34:25.239 reality of man, this is actually pretty tough, and there's 0:34:25.280 --> 0:34:27.799 a lot of programming that needs to be done, a 0:34:27.800 --> 0:34:32.000 lot of tech spend, and you know, hiring you know, 0:34:32.080 --> 0:34:35.319 experienced compliance professionals, things like that. I don't think that's 0:34:35.320 --> 0:34:38.120 fully sunk in yet, but as the debate about clarity 0:34:38.160 --> 0:34:40.560 goes on, you're seeing more and more attention paid. 0:34:40.360 --> 0:34:42.800 To that what happens if clarity doesn't pass? 0:34:43.160 --> 0:34:44.839 You know, I hope, I gosh, I hope we don't 0:34:44.840 --> 0:34:48.960 face that. But you know, I testified after I talked 0:34:48.960 --> 0:34:51.120 to you guys. I testified in the fall last year 0:34:51.840 --> 0:34:55.440 in House Financial Services, and I laid out pretty cleanly 0:34:56.239 --> 0:35:00.400 that you know, the existing statutory authority. I just agreed 0:35:00.440 --> 0:35:04.240 with Gary Gensler when he said the existing securities laws 0:35:04.320 --> 0:35:10.560 accommodate crypto. I disagree with that because the existing securities 0:35:10.640 --> 0:35:14.359 laws literally didn't from an infrastructure standpoint, you know, all 0:35:14.400 --> 0:35:16.359 the things we talked about with tokenization, all that, they 0:35:16.400 --> 0:35:19.760 just don't allow for it. Right, They issued disclosure pieces 0:35:19.880 --> 0:35:25.239 all this. But the existing securities laws, as modified through 0:35:25.280 --> 0:35:31.319 the use of exemptive authority at the SEC, can accommodate crypto. Right, 0:35:31.400 --> 0:35:33.759 Maybe not in a way that you'd like. Maybe you'd 0:35:33.800 --> 0:35:37.760 prefer Congress to act. I would, given what the current 0:35:38.480 --> 0:35:41.319 Supreme Court has said about you know, major issues and 0:35:41.360 --> 0:35:43.399 other things like that, Right, I would want a little 0:35:43.440 --> 0:35:47.960 more certainty from Congress. But if the SEC used the 0:35:48.000 --> 0:35:50.800 exemptive authority that was given to it by Congress in 0:35:50.880 --> 0:35:54.719 nineteen ninety six in Ismia, right, which was I mean 0:35:54.960 --> 0:35:58.440 a brilliant stroke by Congress at the time and again 0:35:58.640 --> 0:36:03.040 hugely bipartisan, where they said, geez, things are moving fast 0:36:03.280 --> 0:36:06.560 in markets. Let's give the SEC this exemptive authority that'll 0:36:06.640 --> 0:36:11.440 allow it to kind of with a scalpel, exempt people 0:36:11.480 --> 0:36:15.520 from certain provisions of the securities laws to accommodate new technologies, 0:36:15.600 --> 0:36:18.920 changes in the markets and the like, and people forget that. 0:36:19.040 --> 0:36:23.120 Back in ninety seven, the sec under Arthur Levitt used 0:36:23.160 --> 0:36:28.200 that authority to create Reggaets. Right. They saw these platforms 0:36:28.239 --> 0:36:33.440 that were rising and were great as far as efficiencies, 0:36:33.600 --> 0:36:37.359 and we're driving prices down, good for investors, but they 0:36:37.480 --> 0:36:40.120 kind of were in exchange. And instead of saying you're 0:36:40.120 --> 0:36:42.279 all in exchange and putting them out of business, they 0:36:42.320 --> 0:36:45.920 came in creating Reggaets and you know, a thousand ships 0:36:45.920 --> 0:36:48.920 sailed from that and so and they cite it. I mean, 0:36:48.960 --> 0:36:51.879 it's really great. And the forward to that rule they say, 0:36:51.960 --> 0:36:55.560 Congress gave us this authority so we could accommodate new technology. 0:36:55.680 --> 0:37:01.160 So section thirty six in the thirty four, which you 0:37:01.200 --> 0:37:04.279 know is the exempt of authority from NISMIA, they could 0:37:04.360 --> 0:37:06.960 use that. I know there's other provisions in the rest 0:37:06.960 --> 0:37:10.560 of the securities laws too that mirror that. And you 0:37:10.600 --> 0:37:12.280 go in, you carve it up and you say, okay, 0:37:12.400 --> 0:37:17.400 let's create a rule set that accommodates crypto. Recognize that 0:37:17.440 --> 0:37:21.200 it's temporary until Congress can finally act, but get something 0:37:21.239 --> 0:37:23.720 in place where people are registered and there's some basic 0:37:24.360 --> 0:37:29.640 investor protections provided right, some level of transparency, reporting, examination, books, 0:37:29.640 --> 0:37:32.479 and records, that sort of thing should be done, could 0:37:32.480 --> 0:37:34.920 have been done, could have been done, you know, the 0:37:34.960 --> 0:37:37.719 sec could have done it last four years. We showed 0:37:37.760 --> 0:37:40.399 them how to do it at Robinhood. When Gary said 0:37:40.400 --> 0:37:43.399 coming in register, we said, okay, here do this for us, 0:37:43.719 --> 0:37:46.840 and we will because right now we can't under the 0:37:46.840 --> 0:37:50.040 securities laws. And we came in asked for no action, relief, 0:37:50.040 --> 0:37:53.160 exemptor relief, whatever it was, and showed them where the 0:37:53.239 --> 0:37:56.040 rules don't work, and they had no interest none. 0:37:57.560 --> 0:38:00.400 I wanted to shift topics a little bit because this 0:38:00.440 --> 0:38:02.839 is another area that's been in the news a lot, 0:38:03.200 --> 0:38:10.200 prediction markets, particularly as it relates to sports events, and 0:38:10.880 --> 0:38:13.799 how we should think about event contracts in relation to 0:38:13.960 --> 0:38:18.359 sports gambling. I know robin Hood and CALCI have both 0:38:18.400 --> 0:38:24.640 received cease and desist letters from various states such as 0:38:24.719 --> 0:38:28.799 New Jersey and Nevada, you know, concerning event contracts on 0:38:28.840 --> 0:38:31.319 sport and events, and some of the states say that 0:38:31.360 --> 0:38:36.919 the contracts represent unauthorized sports gambling. I'm following a couple 0:38:36.920 --> 0:38:40.719 of cases where CALSI sued New Jersey and Nevada, and 0:38:40.880 --> 0:38:45.040 it'd want preliminary rulings, essentially allowing CALS to continue offering 0:38:45.080 --> 0:38:47.560 those event contracts at least for now as the litigation 0:38:47.600 --> 0:38:50.399 plays out. I think Robinhood sort of took a little 0:38:50.400 --> 0:38:52.279 bit of a different approach, and I know in a 0:38:52.320 --> 0:38:54.759 couple of instances they removed the event contracts from their 0:38:54.800 --> 0:38:58.600 offerings related to March Madness and the Super Bowl. I'm 0:38:58.920 --> 0:39:01.080 I really am interested in and your thoughts on how 0:39:01.080 --> 0:39:03.680 we should just generally, how should we think about event 0:39:03.800 --> 0:39:08.480 contracts when it comes to sports, you know, how is 0:39:08.560 --> 0:39:14.000 it different from sports gambling. And I'm curious also why 0:39:14.080 --> 0:39:17.319 robin Hood sort of took a different approach than Cal 0:39:17.440 --> 0:39:20.480 she did by removing those contracts rather than trying to 0:39:20.480 --> 0:39:21.440 contest them in court. 0:39:22.440 --> 0:39:25.840 Yes, so, look at the highest level, I think prediction 0:39:25.960 --> 0:39:30.279 markets are incredibly exciting. I think it's an awesome I mean, 0:39:30.320 --> 0:39:32.280 it is an asset class I just but I actually 0:39:32.320 --> 0:39:35.839 just think it's such a useful tool. You know, we 0:39:35.920 --> 0:39:39.520 ran the presidential election contract on our platform. I mean 0:39:39.520 --> 0:39:41.879 it was like spot on. I mean, I don't even 0:39:41.880 --> 0:39:44.160 know if there was any deviation from the actual results. 0:39:45.080 --> 0:39:48.080 It was so much more informative than what you'd read 0:39:48.200 --> 0:39:51.720 in the polls. That. You know, it really just proves 0:39:51.760 --> 0:39:55.480 the power of the crowd, you know, is is very mighty. 0:39:55.600 --> 0:39:59.320 So so at a general level, I think it's it's great. 0:40:00.080 --> 0:40:03.040 But you do then get into some pretty thorny issues, right, 0:40:03.480 --> 0:40:07.239 what what should the limitations be on what those contracts 0:40:07.280 --> 0:40:10.279 can cover? Elections are one thing, and the judge in 0:40:10.320 --> 0:40:14.360 the Calcie case in d C said those are not prohibited, 0:40:14.480 --> 0:40:17.600 that those those can be you know, covered by the 0:40:17.640 --> 0:40:23.719 CEA and and and that was the case against cal Case. Yeah, 0:40:23.840 --> 0:40:25.799 and I think that was the right decision by the 0:40:25.800 --> 0:40:30.200 court there. And you know there are proscriptions right in 0:40:30.239 --> 0:40:33.080 the wall that say you can't you know, national or 0:40:33.560 --> 0:40:36.879 you know, you couldn't have like assassination odds or things 0:40:36.880 --> 0:40:40.040 like that. That really but that's a slippery slope from 0:40:40.080 --> 0:40:44.840 a policy perspective. What's okay and what's not right? There's 0:40:44.680 --> 0:40:49.560 the main body of event contracts and prediction is pretty obvious, Right, 0:40:49.640 --> 0:40:53.440 is the FED going to raise rates? You know, Uh, 0:40:53.719 --> 0:40:56.120 is there going to be a hurricane in the Gulf? 0:40:56.520 --> 0:40:59.720 You know in August that those sorts of things, Uh, 0:40:59.800 --> 0:41:03.160 you know, elections are another flavor. And then of course, 0:41:03.280 --> 0:41:08.040 you know, you get into sports and you know, I 0:41:08.080 --> 0:41:12.000 would say, you know, to your question, we're all about 0:41:12.640 --> 0:41:17.680 providing access to our customers to everything that is suitable 0:41:17.719 --> 0:41:22.360 for our regulated entities to offer. So on the brokerage side, 0:41:23.040 --> 0:41:25.319 you know, it's we do the listed equities. We do 0:41:25.360 --> 0:41:28.239 three hundred bulletin board stocks that are really mostly eighty 0:41:28.400 --> 0:41:32.960 rs of big blue chip companies. We have you know, crypto, 0:41:33.040 --> 0:41:36.080 but that's a limited offering, you know, to we choose 0:41:36.080 --> 0:41:37.840 what we want to offer on the crypto side, and 0:41:37.840 --> 0:41:42.440 that's generally more liquid instruments and the like. And then 0:41:42.480 --> 0:41:47.440 on the event contract side, this is still evolving right that. 0:41:47.560 --> 0:41:51.719 You saw Russ Benham, who's terrific by the way, you know, 0:41:52.200 --> 0:41:55.080 proposed a rule that would have prohibited you know, any 0:41:55.120 --> 0:41:58.560 types of sports e end contracts. That that rule is still, 0:41:58.560 --> 0:42:01.480 i guess technically pending. So the CFTC has kind kind 0:42:01.520 --> 0:42:05.760 of caught midstream right now. They started policymaking, they didn't 0:42:05.800 --> 0:42:08.839 conclude it. There was litigation. The litigation muddied it up 0:42:09.520 --> 0:42:12.480 a bit, and in the meantime, you know, Calshi and 0:42:13.120 --> 0:42:17.640 crypto dot Com I think and ibkr's entity have been 0:42:17.719 --> 0:42:21.359 offering the contracts. We got our registration, you know our 0:42:21.400 --> 0:42:25.080 FCM registration and we're able to provide access to those 0:42:25.200 --> 0:42:29.480 you know, through CALSHI, through others, and you know, have 0:42:29.600 --> 0:42:34.600 decided to do it when we were threatened, you know, 0:42:34.640 --> 0:42:38.360 with by states saying hey, we think this is illegal. 0:42:38.480 --> 0:42:40.640 We've been trying to be very deferential to the states. 0:42:40.680 --> 0:42:45.799 I get it, like intellectually, practically speaking, I understand where 0:42:45.800 --> 0:42:48.360 they're coming from. Right, you have states like New Jersey 0:42:48.360 --> 0:42:51.680 and Nevada that look at the institution of gambling in 0:42:51.719 --> 0:42:56.200 those states, right, it's critically important to those states tax revenues, 0:42:56.239 --> 0:42:58.600 I mean, the number of people employed. Like it's just 0:42:58.640 --> 0:43:02.640 a big deal. And you know, I think at Robinhood, 0:43:02.640 --> 0:43:04.799 we've decided to look, so many of our customers are 0:43:04.920 --> 0:43:11.600 interested in either sports, betting off you know, using other apps. 0:43:11.640 --> 0:43:15.560 You know, they're there have other accounts. Maybe we you know, 0:43:15.600 --> 0:43:18.560 instead of them going off Robinhood, we could offer this here. 0:43:19.080 --> 0:43:24.120 Whether that be whether a state regulated product or a 0:43:24.160 --> 0:43:28.840 CFTC regulated product, you know, is still a bit of 0:43:28.880 --> 0:43:31.440 an open question. But in the meantime, since the CFTC 0:43:31.600 --> 0:43:36.200 regulated product has become available, and quite frankly, you know, 0:43:36.239 --> 0:43:39.480 the courts of affirm that there's preemption we're offering it, 0:43:39.840 --> 0:43:43.279 you know, expecting that there'll be more clarity down the road, 0:43:43.480 --> 0:43:45.840 right that eventually we already have a built in circuit 0:43:45.880 --> 0:43:49.279 split you know in the court that the Supreme Court 0:43:49.320 --> 0:43:52.520 will eventually get pulled in and and weigh into it. 0:43:52.640 --> 0:43:55.640 So we're trying our best to be respectful of the 0:43:55.680 --> 0:43:59.440 interests of the states, the Indian tribes. We're not saying, oh, geez, 0:43:59.480 --> 0:44:04.120 you have you know, oh, we totally disregard your interests here. 0:44:04.840 --> 0:44:06.320 But at the same time we're trying to balance that 0:44:06.440 --> 0:44:10.240 with what the customers want and quite frankly, if it's legal, 0:44:10.640 --> 0:44:12.759 we should be able to provide it, and in the 0:44:12.800 --> 0:44:13.799 courts of affirm. 0:44:13.520 --> 0:44:13.880 That it is. 0:44:14.800 --> 0:44:16.920 So it's my my pleasure to come in with the 0:44:16.920 --> 0:44:20.160 most difficult question of the day. Last year, we asked 0:44:20.160 --> 0:44:22.759 you what three pieces of music you would take on 0:44:22.800 --> 0:44:25.040 a desert island, and I think you two is the 0:44:25.080 --> 0:44:28.120 almost the immediate answer that came out, you know, from 0:44:28.520 --> 0:44:29.800 from your answer. 0:44:30.080 --> 0:44:31.400 So I have a different question today. 0:44:31.840 --> 0:44:34.120 Let's say that you're going to go over to your 0:44:34.120 --> 0:44:37.000 London office and you've got seven hours on a plane. 0:44:37.960 --> 0:44:41.360 What types of television or movies are you bringing with 0:44:41.400 --> 0:44:45.960 you have you seen anything recently that really is you know, 0:44:46.200 --> 0:44:48.040 you're thinking some great quality work. 0:44:49.120 --> 0:44:51.719 You know. I've been on a little bit of like 0:44:51.760 --> 0:44:55.879 a Netflix binge thing, and I'm fortunate. I'm like, I'm 0:44:55.880 --> 0:44:59.040 coming up dry. I've seen it all right, and I 0:44:59.080 --> 0:45:01.160 and I fly you now you a lot, and so 0:45:01.239 --> 0:45:03.600 I'm kind of stuck with whatever. You go to that 0:45:03.719 --> 0:45:08.080 box collection thing on United TV, and and I made 0:45:08.160 --> 0:45:11.200 it blissfully. I've been flying to some pretty far from places, 0:45:11.200 --> 0:45:13.560 so I made it all the way through Landman two 0:45:13.640 --> 0:45:18.120 seasons on Netflix, and that was unbelievable. Billy Bob Thorton. 0:45:18.160 --> 0:45:21.280 I mean just I had no idea what to expect. 0:45:21.280 --> 0:45:23.040 I heard from one of my colleagues, this is great. 0:45:23.080 --> 0:45:25.080 I didn't even know what it was about. And I 0:45:25.160 --> 0:45:29.040 just it's like, he's so incredible, and it was, you know, 0:45:29.280 --> 0:45:31.480 I was I think I landed in Dulles and I 0:45:31.520 --> 0:45:33.600 still had like ten minutes left of the last one. 0:45:33.600 --> 0:45:35.480 I'm like, oh god, oh god, I hope the gage's 0:45:35.520 --> 0:45:37.279 not open, you know, that sort of thing which never 0:45:37.320 --> 0:45:42.239 happens the plane. I was like, because I can't watch 0:45:42.239 --> 0:45:43.640 it home, I can't pick it back up. 0:45:43.719 --> 0:45:43.880 You know. 0:45:46.880 --> 0:45:52.239 I love Yellowstone and all the prequels and sequel I 0:45:52.320 --> 0:45:55.279 just think all of that is so well done. Unfortunately 0:45:55.719 --> 0:45:58.359 I've run my course on that one too. I kind 0:45:58.360 --> 0:46:02.400 of like, you know, I kind of like, you know, 0:46:02.480 --> 0:46:05.799 some of the you know, war movies or you know, 0:46:05.880 --> 0:46:08.680 that whole genre, you know, whether it be you know, 0:46:08.800 --> 0:46:11.040 some of the you know, World War two movies or 0:46:11.080 --> 0:46:12.879 other things. I always get a kick out of those, 0:46:13.560 --> 0:46:16.799 the modern, more modern ones, you know. Like I mean, 0:46:16.880 --> 0:46:19.640 I sort of got I watch American Sniper like every time. 0:46:19.680 --> 0:46:22.799 I can't get past it. Every time I'm like, oh, 0:46:22.880 --> 0:46:24.360 maybe I'll just watch a few minutes of it, and 0:46:24.440 --> 0:46:26.640 of course two hours later, you know, my head's turned 0:46:26.640 --> 0:46:29.640 and I've watched the whole thing again. So but I'm 0:46:29.719 --> 0:46:31.319 kind of it's like my you know we talked about 0:46:31.320 --> 0:46:33.160 with music, I'm kind of all over the place, you know. 0:46:33.600 --> 0:46:36.799 I like taking recommendations from folks, and I kind of 0:46:36.840 --> 0:46:39.400 like watching a little bit of a little bit of everything. 0:46:39.440 --> 0:46:44.480 But I have a nineteen hour flight coming up on Sunday, 0:46:45.200 --> 0:46:48.960 so h Lucas Moskowitz our GC here and I've been 0:46:49.000 --> 0:46:51.040 talking about, like God, we got to download some stuff 0:46:51.160 --> 0:46:54.560 because I don't think the airline has enough to keep 0:46:54.560 --> 0:46:55.560 me interested. 0:46:55.719 --> 0:46:58.320 Yeah, although you'll maybe you'll wind up watching American Sniper 0:46:58.360 --> 0:46:59.239 ten times. 0:46:59.560 --> 0:47:01.440 Well, what you guys have any recommendation for me? 0:47:01.960 --> 0:47:02.160 Yeah? 0:47:02.200 --> 0:47:04.040 If I don't know, if you know Star Wars, but 0:47:04.160 --> 0:47:06.759 and Or season two was amazing. I mean it's it's 0:47:06.760 --> 0:47:09.320 not just a sto Wars, but I really really. 0:47:09.080 --> 0:47:10.319 Like that one on North season two. 0:47:10.480 --> 0:47:14.000 Okay, just watch season one in season two, Okay, Okay. 0:47:13.719 --> 0:47:16.319 We just started watching The Waterfront, which we really enjoy 0:47:16.400 --> 0:47:19.680 so far. Oh okay, Unfortunately, I think we're going to 0:47:19.760 --> 0:47:22.160 have to leave it there. These were great recommendations, Dan, 0:47:22.400 --> 0:47:26.120 and as always, really great insights into our evolving markets 0:47:26.160 --> 0:47:30.000 and the evolving regulatory landscape. We really appreciate you coming 0:47:30.040 --> 0:47:32.960 back on votes and verdicts and sharing your time and 0:47:33.040 --> 0:47:36.440 insights with us. We hope to have you again soon. 0:47:36.520 --> 0:47:40.440 You're I believe, only our second repeat guests so far, 0:47:40.600 --> 0:47:44.120 so maybe you'll be our first free pet fun. I'll 0:47:44.280 --> 0:47:47.120 accept the invitation if you'll have me awesome and our 0:47:47.160 --> 0:47:50.480 safe travels on your upcoming flight. And as a reminder 0:47:50.560 --> 0:47:52.720 to our listeners, you can read all of our Bloomberg 0:47:52.760 --> 0:47:57.680 intelligence research on the Bloomberg terminal at Big With that, 0:47:57.920 --> 0:47:59.439 thank you again and have a great day.