Robinhood is preparing to lobby key pieces of legislation that if passed, could weigh on its business design.
The stock-trading start-up registered its in-house team to begin lobbying on Feb. 5, according to a new registration report examined by CNBC.
The filing offers a first look into what legislation the start-up strategies to target in the wake of Joe Biden becoming president and Democrats taking control of Congress. Some expenses on the registration report could adversely affect Robinhood’s income model of profiting off of client trades.
Among the bills Robinhood plans to target is the Wall Street Tax Act of 2019. It was presented by Rep. Peter DeFazio, D-Ore., and Sen. Brian Schatz, D-Hawaii, two years earlier, with the goal of imposing a 0.1% excise tax on certain financial transactions consisting of the purchase of stocks, bonds and derivatives.
Enforcing a trading tax has been floated as a method to dampen some of the crazy activity seen in recent weeks. Less trading could weigh on profits at Robinhood and other major online brokerage companies.
Regardless of not charging for it upfront, Robinhood and the rest of the industry rely on what’s referred to as payment for order circulation in lieu of commissions. Market makers, such as Castle Securities or Virtu, pay e-brokers for the right to perform consumer trades. The broker is then paid a small cost for the shares that are routed, which can add up to millions when clients trade as actively as they have actually been in current months.
Robinhood has actually become among Silicon Valley’s most valuable personal start-ups. It was last valued at $11.7 billion with backers including Sequoia and Andressen Horowitz. Regardless of the trading mayhem and pushback in January, several venture capital financiers informed CNBC the business is still on track for an IPO in 2021.
A Robinhood spokesperson declined to comment on the lobbying strategies.