Robinhood lobbying targets legislation that could hurt its business model

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Robinhood is preparing a lobbying effort on key pieces of legislation that if passed, could weigh on its business model.

The stock trading start-up registered its in-house team to begin lobbying on Feb. 5, according to a new registration report reviewed by CNBC.

The filing gives a first glimpse into what legislation the start-up plans to target in the wake of Joe Biden becoming president and Democrats taking control of Congress. Some bills on the registration report could negatively impact Robinhood’s revenue model of profiting off of customer trades.

One of the bills Robinhood plans to focus on is the Wall Street Tax Act of 2019. It was introduced by Rep. Peter DeFazio, D-Ore., and Sen. Brian Schatz, D-Hawaii, two years ago, with the goal of imposing a 0.1% excise tax on certain financial transactions including the purchase of stocks, bonds and derivatives.

Imposing a trading tax has been floated as a way to dampen some of the frenzied activity seen in recent weeks. Less trading could weigh on profits at Robinhood and other major online brokerage firms.

Despite not charging for it upfront, Robinhood and the rest of the industry rely on what’s known as payment for order flow in lieu of commissions. Market makers, such as Citadel Securities or Virtu, pay e-brokers for the right to execute customer trades. The broker is then paid a small fee for the shares that are routed, which can add up to millions when customers trade as actively as they have been in recent months.

Robinhood has grown into one of Silicon Valley’s most valuable private start-ups. It was last valued at $11.7 billion with backers including Sequoia and Andressen Horowitz. Despite the trading chaos and pushback in January, multiple venture capital investors told CNBC the company is still on track for an IPO in 2021.

A Robinhood spokeswoman declined to comment on the lobbying plans.



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