The settlement follows an investigation into Robinhood platform outages in March 2020 spearheaded by a regulators in seven states including California and Alabama.

Retail trading platform Robinhood is set to pay up to $10.2 million in penalties for operational and technical failures that harmed investors, according to a Thursday announcement from a California regulator.

The California Department of Financial Protection and Innovation (DFPI) has joined the multi-state settlement, which followed a North American Securities Administrators Association (NASAA) investigation into Robinhood platform outages in March 2020.

“In addition, prior to March 2021, there were deficiencies at Robinhood in its review and approval process for options and margin accounts, weaknesses in the firm’s monitoring and reporting tools, and insufficient customer service and escalation protocols that in some cases left Robinhood users unable to process trades even as the value of certain stocks was dropping,” the DFPI said.

The investigation was spearheaded by securities regulators in California, Alabama, Colorado, Delaware, New Jersey, South Dakota and Texas.

This isn’t Robinhood’s first multi-million dollar penalty. In 2021, Robinhood’s crypto arm said it was set to pay a $30 million settlement to the New York State Department of Financial Services (NYDFS) over violations of regulatory requirements. This came after a $65 million payment to the U.S. Securities and Exchange Commission in 2020 to settle allegations the platform misled investors. The platform was also slapped with a $70 million fine by the Financial Industry Regulatory Authority (FINRA) for failing to protect customers.

“Robinhood repeatedly failed to serve its clients, but this settlement makes clear that Robinhood must take its customer care obligations seriously and correct these deficiencies,” NASAA President Andrew Hartnett said in a press statement.

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The California Assembly passed the bill, which would create a licensing regime and stablecoin stipulations, at the end of August.

California Governor Gavin Newsom (D) vetoed a crypto licensing and regulation bill seen as a possible West Coast version of New York’s “BitLicense” on Friday.

Assembly Bill 2269, sponsored by Assemblymember Tim Grayson (D), would have created a licensing regime for anyone hoping to facilitate crypto transactions, likening it to how money transmissions are currently overseen by the Money Transmission Act. It was one of eight bills Newsom vetoed Friday, He signed 21 other bills, addressing issues ranging from crossing signals to cybersecurity to infrastructure concerns.

“On May 4, 2022, I issued Executive Order N-9-22 to position California as the first state to establish a transparent regulatory environment that both fosters responsible innovation, and protects consumers who use digital asset financial services and products – all within the context of a rapidly evolving federal regulatory picture,” Newsom wrote in a message explaining his veto.

“Over the last several months, my Administration has conducted extensive research and outreach to gather input on approaches that balance the benefits and risk to consumers, harmonize with federal rules, and incorporate California values such as equity, inclusivity, and environmental protection.”

It would be “premature” to create a licensing regime without considering feedback from this executive order, Newsom wrote. He also pointed to the possibility of future federal legislation or regulations.

The California assembly passed the bill last month. If it had been signed into law, it would have required California-licensed entities to only interact with stablecoins issued by banks or otherwise licensed by the state Department of Financial Protection and Innovation (the ban would have been phased out by 2028); forced stablecoin issuers to remain fully backed by reserves (at least an amount equivalent to the number of stablecoins in circulation); and set up a licensing and examination regime for crypto companies.

“A more flexible approach is needed to ensure regulatory oversight can keep up with rapidly evolving technology and use cases, and is tailored with the proper tools to address trends and mitigate consumer harm,” Newsom wrote in his letter.

Newsome also noted that the new licensing and regulatory regime would require a multimillion dollar loan, which has not been accounted for in California’s annual budget process.

“I am committed to working collaboratively with the Legislature to achieve the appropriate regulatory clarity once federal regulations come into sharper focus for digital financial assets, while ensuring California remains a competitive place for companies to invest and innovate,” he concluded.

In a tweet, Grayson said he would “continue to work to protect California’s consumers,” noting that the Assembly had “overwhelmingly” voted in favor of the bill, which received 71 yes votes, zero no votes and nine abstentions.

“The cryptocurrency market is under-regulated at best and deliberately rigged against everyday consumers at worst,” he said. “A financial market cannot be considered healthy if there are no guardrails in place to protect consumers from scams and bad actors.”

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