Robinhood has agreed to a $9 million settlement in a long-standing class-action lawsuit over unsolicited text messages sent via its “refer-a-friend” program. The lawsuit, filed in Washington, accused the popular crypto and stock trading platform of violating state consumer protection laws.
On July 17, Judge Barbara Rothstein of the U.S. District Court for the Western District of Washington approved the settlement, finding the terms fair, reasonable, and adequate given the complexities and risks of prolonged litigation. The settlement also includes $2.2 million in attorney fees.
The lawsuit, initiated by Terrell Marshall Law Group and Berger Montague, represented all Washington state residents who received unsolicited referral program texts from Robinhood between August 2017 and February 2024, excluding those who consented to such messages.
Robinhood’s referral program allowed users to send text invitations to their contacts, encouraging them to join the platform. This practice was deemed a violation of Washington’s Commercial Electronic Mail Act and Consumer Protection Act in the 2021 lawsuit.
Following the settlement news, Robinhood’s stock (HOOD) dropped 1.8% to $24.18 in after-hours trading on July 18. Despite this, the company’s share prices have doubled since the start of the year.
This isn’t the first legal challenge for Robinhood. In May, the U.S. Securities and Exchange Commission announced plans to take legal action against the firm, alleging violations in its crypto trading operations. However, this hasn’t deterred Robinhood from expanding its presence in the crypto market, evidenced by its recent acquisition of the leading crypto exchange Bitstamp in June.
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