UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
______________________
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022March 31, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ________ to ________
Commission File Number: 001-40691
______________________
Robinhood Markets, Inc.
(Exact name of registrant as specified in its charter)
______________________
Delaware 46-4364776
(State or other jurisdiction of
incorporation or organization)		 (IRS Employer
Identification No.)
85 Willow Rd
Menlo Park, CA 94025
(Address of principal executive offices, including zip code)
(844) 428-5411
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock
$0.0001 par value per share		HOODThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒   No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ý     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer oý     Accelerated filer o    Non-accelerated filer ýo  Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  ☒
As of October 31, 2022,May 4, 2023, the numbers of shares of the issuer’s Class A and Class B common stock outstanding were 758,805,255775,510,054 and 127,955,246.127,445,988.



TABLE OF CONTENTS
PART I - FINANCIAL INFORMATIONPAGE
ITEM 1.
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56
Condensed Consolidated Statements of Comprehensive Loss
67
78
89
12Note 1 - Description of Business and Summary of Significant Accounting Policies
11
Note 2 - Recent Accounting Pronouncements
13
Note 3 - Revenues
14
Note 4 - Allowance for Credit Losses
15
Note 5 - Investments and Fair Value Measurement
15
Note 6 - Income Taxes
19
Note 7 - Securities Borrowing and Lending
19
Note 8 - Financing Activities and Off-Balance Sheet Risk
21
Note 9 - Common Stock and Stockholders' (Deficit) Equity
22
Note 10 - Net Income (Loss) per Share
24
Note 11 - Related Party Transactions
25
Note 12 - Leases
25
Note 13 - Commitments & Contingencies
26
ITEM 2.
3732
ITEM 3.
5647
ITEM 4.
5748
ITEM 1.
5849
ITEM 1A.
5950
ITEM 2.
11099
ITEM 3.
111100
ITEM 4.
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ITEM 5.
111100
ITEM 6.
112101
113103

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CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) of Robinhood Markets, Inc (together with its subsidiaries, “we”, “Robinhood”, or the “Company”) contains forward-looking statements (as such phrase is used in the federal securities laws), which involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “believe,” “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “estimate,” “predict,” “potential”, or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. This Quarterly Report includes, among others, forward-looking statements regarding our:regarding:
•expectations regarding the costs and effects of the April 2022 Restructuring and the August 2022 Restructuring;
•our expectations regarding legal and regulatory proceedings and investigations;
•expectations regarding our pending transaction with Ziglu Limited;intent to expand our operations outside of the United States and our goal to offer brokerage services in the U.K. by the end of 2023;

•our expectations about the sufficiencyfor no credit losses for our held-to-maturity investments that are obligations of states and political subdivisions and securities issued by U.S. government sponsored agencies;

•our available cash, available borrowings, and cash frombelief that, based on our current level of operations, our primary sources of liquidity will be adequate to meet our current liquidity needs for the next 12 months; and
•expectations regarding our usebelief that the 2021 Founders Award Cancellation (defined below) will lower our operating expenses by up to $50 million per quarter starting in the second quarter of the net proceeds from our initial public offering (“IPO”).2023.
Our forward-looking statements are subject to a number of known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual future results, performance, or achievements to differ materially from any future results expressed or implied in this Quarterly Report. Reported results should not be considered an indication of future performance. Factors that contribute to the uncertain nature of our forward-looking statements include, among others:
•our limited operating history;experience at our current scale;
•the difficulty of managing our business effectively, including the size of our workforce, and the risk of continued declining or negative growth;
•the fluctuations in our financial results and key metrics from quarter to quarter;
•our reliance on transaction-based revenue, including payment for order flow (“PFOF”), and the risk of new regulation or bans on PFOF and similar practices;
•our exposure to fluctuations in interest rates and rapidly changing interest rate environments;
•the difficulty of raising additional capital (to satisfy anyprovide liquidity needs and support business growth and objectives) on reasonable terms, orif at all;
•the need to maintain capital levels required by regulators and self-regulatory organizations;organizations (“SROs”);
•the risk that we might mishandle the cash, securities, and cryptocurrencies we hold on behalf of customers, and our exposure to liability for processing, operational, or technical errors in clearing functions;
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•the impact of negative publicity on our brand and reputation;
•the risk that changes in business, economic, or political conditions that impact the global financial markets, or a systemic market events,event, might harm our business;
•our dependence on key employees and a skilled workforce;
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•the difficulty of complying with an extensive, complex, and complexchanging regulatory environment and the need to adjust our business model in response to new or modified laws and regulations;
•the possibility of adverse developments in pending litigation and regulatory investigations;
•the effects of competition;
•our need to innovate and invest in new products and services in order to attract and retain customers and deepen their engagement with us in order to maintain growth;
•our reliance on third parties to perform some key functions and the risk that processing, operational or technological failures could impair the availability or stability of our platform;
•the risk of cybersecurity incidents, theft, data breaches, and other online attacks;
•the difficulty of processing customer data in compliance with privacy laws;
•our need as a regulated financial services company to develop and maintain effective compliance and risk management infrastructures;
•the volatility of cryptocurrency prices and trading volumes;
•the risk that our platform could be exploited to facilitate illegal payments; and
•the risk that substantial future sales of Class A common shares in the public market, or the perception that they may occur, could cause the price of our stock to fall.
Because some of these risks and uncertainties cannot be predicted or quantified and some are beyond our control, you should not rely on our forward-looking statements as predictions of future events. More information about potential risks and uncertainties that could affect our business and financial results is included in the section of this Quarterly Report titled “Risk Factors” and our other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available on the SEC’s web site at www.sec.gov. Moreover, we operate in a very competitive and rapidly changing environment; new risks and uncertainties may emerge from time to time and it is not possible for us to predict all risks nor identify all uncertainties. The events and circumstances reflected in our forward-looking statements might not be achieved and actual results could differ materially from those projected in the forward-looking statements. Except as otherwise noted, all forward-looking statements are made as of the date we file this Quarterly Report, and are based on information and estimates available to us at this time. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Except as required by law, Robinhood assumes no obligation to update any of the statements in this Quarterly Report whether as a result of any new information, future events, changed circumstances, or otherwise. You should read this Quarterly Report with the understanding that our actual future results, performance, events, and circumstances might be materially different from what we expect.

We use the "Overview" tab of our Investor Relations website (accessible at investors.robinhood.com/overview) and its blog, Under the Hood (accessible at blog.robinhood.com), as means of disclosing information to the public in a broad, non-exclusionary manner for purposes of the SEC’s Regulation Fair Disclosure (“Reg. FD”). Investors should routinely monitor those web pages, in addition to our press
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releases, SEC filings, and public conference calls and webcasts, as information posted on them could be deemed to be material information. The contents of our websites are not intended to be incorporated by reference into this Quarterly Report or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETSSTATEMENTS OF OPERATIONS
(Unaudited)Unaudited)
December 31,September 30,
(in millions, except share and per share data)20212022
Assets
Current assets:
Cash and cash equivalents$6,253 $6,187 
Cash and cash equivalents segregated under federal and other regulations3,992 2,954 
Receivables from brokers, dealers, and clearing organizations88 75 
Receivables from users, net6,639 4,046 
Securities borrowed— 139 
Deposits with clearing organizations328 201 
Asset related to user cryptocurrencies safeguarding obligation— 9,361 
User-held fractional shares1,834 1,029 
Investments27 32 
Prepaid expenses92 80 
Other current assets30 41 
Total current assets19,283 24,145 
Property, software, and equipment, net146 151 
Goodwill101 100 
Intangible assets, net34 27 
Restricted cash24 22 
Operating lease right-of-use-assets129 100 
Non-current prepaid expenses44 27 
Other non-current assets8 29 
Total assets$19,769 $24,601 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses$252 $203 
Payables to users6,476 5,396 
Securities loaned3,651 1,423 
User cryptocurrencies safeguarding obligation— 9,361 
Fractional shares repurchase obligation1,834 1,029 
Operating lease liabilities22 22 
Other current liabilities112 75 
Total current liabilities12,347 17,509 
Operating lease liabilities, non-current129 138 
Total liabilities12,476 17,647 
Commitments and contingencies (Note 15)
Stockholders’ equity:
Class A common stock, $0.0001 par value. 21,000,000,000 shares authorized, 735,957,367 shares issued and outstanding as of December 31, 2021; 21,000,000,000 shares authorized, 756,758,543 shares issued and outstanding as of September 30, 2022.— — 
Class B common stock, par value $0.0001. 700,000,000 shares authorized, 127,955,246 shares issued and outstanding as of December 31, 2021; 700,000,000 shares authorized, 127,955,246 shares issued and outstanding as of September 30, 2022.— — 
Class C common stock, par value $0.0001. 7,000,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021; 7,000,000,000 shares authorized, no shares issued and outstanding as of September 30, 2022.— — 
Additional paid-in capital11,169 11,694 
Accumulated other comprehensive income (loss)1 (1)
Accumulated deficit(3,877)(4,739)
Total stockholders’ equity7,293 6,954 
Total liabilities and stockholders’ equity$19,769 $24,601 

December 31,March 31,
(in millions, except share and per share data)20222023
Assets
Current assets:
Cash and cash equivalents$6,339 $5,459 
Cash segregated under federal and other regulations2,995 4,213 
Receivables from brokers, dealers, and clearing organizations76 112 
Receivables from users, net3,218 3,152 
Securities borrowed517 844 
Deposits with clearing organizations186 247 
Asset related to user cryptocurrencies safeguarding obligation8,431 11,489 
User-held fractional shares997 1,217 
Held-to-maturity investments— 290 
Prepaid expenses86 90 
Other current assets72 75 
Total current assets22,917 27,188 
Property, software, and equipment, net146 137 
Goodwill100 100 
Intangible assets, net25 23 
Non-current held-to-maturity investments— 195 
Non-current prepaid expenses17 11 
Other non-current assets132 131 
Total assets$23,337 $27,785 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses$185 $203 
Payables to users4,701 4,986 
Securities loaned1,834 2,609 
User cryptocurrencies safeguarding obligation8,431 11,489 
Fractional shares repurchase obligation997 1,217 
Other current liabilities105 113 
Total current liabilities16,253 20,617 
Other non-current liabilities128 122 
Total liabilities16,381 20,739 
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.0001 par value. 210,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and March 31, 2023.— — 
Class A common stock, $0.0001 par value. 21,000,000,000 shares authorized, 764,888,917 shares issued and outstanding as of December 31, 2022; 21,000,000,000 shares authorized, 772,702,942 shares issued and outstanding as of March 31, 2023.— — 
Class B common stock, $0.0001 par value. 700,000,000 shares authorized; 127,862,654 shares issued and outstanding as of December 31, 2022; 700,000,000 shares authorized, 127,538,580 shares issued and outstanding as of March 31, 2023.— — 
Class C common stock, $0.0001 par value. 7,000,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and March 31, 2023.— — 
Additional paid-in capital11,861 12,462 
Accumulated deficit(4,905)(5,416)
Total stockholders’ equity6,956 7,046 
Total liabilities and stockholders’ equity$23,337 $27,785 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended
September 30,		Nine Months Ended
 September 30,
(in millions, except share and per share data)2021202220212022
Revenues:
Transaction-based revenues$267 $208 $1,138 $628 
Net interest revenues63 128 193 257 
Other revenues35 25 121 93 
Total net revenues365 361 1,452 978 
Operating expenses:
Brokerage and transaction44 33 123 94 
Technology and development679 185 952 695 
Operations108 64 276 241 
Marketing87 19 283 77 
General and administrative790 234 1,039 728 
Total operating expenses1,708 535 2,673 1,835 
Change in fair value of convertible notes and warrant liability25 — 2,045 — 
Other expense (income), net(1)— (1)2 
Loss before income taxes(1,367)(174)(3,265)(859)
Provision for (benefit from) income taxes(50)1 (1)3 
Net loss$(1,317)$(175)$(3,264)$(862)
Net loss attributable to common stockholders:
Basic$(1,317)$(175)$(3,264)$(862)
Diluted$(1,317)$(175)$(3,264)$(862)
Net loss per share attributable to common stockholders:
Basic$(2.06)$(0.20)$(8.85)$(0.99)
Diluted$(2.06)$(0.20)$(8.85)$(0.99)
Weighted-average shares used to compute net loss per share attributable to common stockholders:
Basic638,168,188 882,356,575 368,518,894 875,055,571 
Diluted638,168,188 882,356,575 368,518,894 875,055,571 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
Three Months Ended
 September 30,		Nine Months Ended
 September 30,
(in millions)2021202220212022
Net loss$(1,317)$(175)$(3,264)$(862)
Other comprehensive loss, net of tax:
Foreign currency translation— (1)— (2)
Total other comprehensive loss, net of tax— (1)— (2)
Total comprehensive loss$(1,317)$(176)$(3,264)$(864)
Three Months Ended
 March 31,
(in millions, except share and per share data)20222023
Revenues:
Transaction-based revenues$218 $207 
Net interest revenues55 208 
Other revenues26 26 
Total net revenues299 441 
Operating expenses:
Brokerage and transaction31 36 
Technology and development268 199 
Operations91 42 
Marketing32 26 
General and administrative268 647 
Total operating expenses690 950 
Loss before income taxes(391)(509)
Provision for income taxes1 2 
Net loss$(392)$(511)
Net loss attributable to common stockholders:
Basic$(392)$(511)
Diluted$(392)$(511)
Net loss per share attributable to common stockholders:
Basic$(0.45)$(0.57)
Diluted$(0.45)$(0.57)
Weighted-average shares used to compute net loss per share attributable to common stockholders:
Basic867,769,168 896,924,695 
Diluted867,769,168 896,924,695 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCOMPREHENSIVE LOSS
(Unaudited)
Nine Months Ended
 September 30,
(in millions)20212022
Operating activities:
Net loss$(3,264)$(862)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization17 44 
Impairment of long-lived assets— 47 
Provision for credit losses62 28 
Share-based compensation1,253 494 
Change in fair value of convertible notes and warrant liability2,045 — 
Other— 8 
Changes in operating assets and liabilities:
Segregated securities under federal and other regulations85 — 
Receivables from brokers, dealers, and clearing organizations— 13 
Receivables from users, net(2,805)2,565 
Securities borrowed— (139)
Deposits with clearing organizations(91)127 
Operating lease right-of-use assets(86)8 
Current and non-current prepaid expenses(112)29 
Other current and non-current assets771 (3)
Accounts payable and accrued expenses118 (45)
Payables to users914 (1,080)
Securities loaned1,209 (2,228)
Current and non-current operating lease liabilities100 (2)
Other current and non-current liabilities(826)(37)
Net cash used in operating activities(610)(1,033)
Investing activities:
Purchase of property, software, and equipment(46)(25)
Capitalization of internally developed software(13)(22)
Acquisitions of a business, net of cash acquired(119)— 
Purchase of investments— (27)
Sales of investments— 19 
Other(2)(16)
Net cash used in investing activities(180)(71)
Financing activities:
Proceeds from issuance of common stock in connection with initial public offering, net of offering costs2,058 — 
Proceeds from issuance of common stock under the Employee Stock Purchase Plan— 13 
Taxes paid related to net share settlement of equity awards(412)(9)
Proceeds from issuance of convertible notes and warrants3,552 — 
Payments of debt issuance costs— (10)
Draws on credit facilities1,958 21 
Repayments on credit facilities(1,958)(21)
Proceeds from exercise of stock options, net of repurchases12 6 
Net cash provided by financing activities5,210 — 
Effect of foreign exchange rate changes on cash and cash equivalents— (2)
Net increase (decrease) in cash, cash equivalents, segregated cash and restricted cash4,420 (1,106)
Cash, cash equivalents, segregated cash and restricted cash, beginning of the period6,190 10,270 
Cash, cash equivalents, segregated cash and restricted cash, end of the period$10,610 $9,164 
Cash and cash equivalents, end of the period$6,167 $6,187 
Segregated cash, end of the period4,418 2,954 
Restricted cash (current and non-current), end of the period25 23 
Cash, cash equivalents, segregated cash and restricted cash, end of the period$10,610 $9,164 
Supplemental disclosures:
Cash paid for interest$6 $6 
Cash paid for income taxes, net of refund received$3 $4 
Non-cash operating activities:
Asset related to user cryptocurrencies safeguarding obligation$— $9,361 
User cryptocurrencies safeguarding obligation$— $9,361 
Non-cash financing activities:
Unpaid offering costs in connection with initial public offering$5 $— 
Three Months Ended
 March 31,
(in millions)20222023
Net loss$(392)$(511)
Foreign currency translation(1)— 
Total other comprehensive loss, net of tax(1)— 
Total comprehensive loss$(393)$(511)
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITYCASH FLOWS
(Unaudited)

Redeemable convertible preferred stock
Common stock(1)
Additional
paid-in
capital		Accumulated other comprehensive
income		Accumulated
deficit		Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmountSharesAmount
Balance as of June 30, 2021412,742,897 $2,180 232,609,957 $— $151 $1 $(2,137)$(1,985)
Net loss— — — — — — (1,317)(1,317)
Shares issued in connection with stock option exercise, net of repurchases— — 2,238,444 — 6 — — 6 
Issuance of common stock in connection with initial public offering, net of issuance costs— — 56,729,194 — 2,052 — — 2,052 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld— — 13,759,434 — (412)— — (412)
Conversion of preferred stock to common stock(412,742,897)(2,180)412,742,897 — 2,180 — — 2,180 
Conversion of convertible notes to common stock— — 137,305,156 — 5,218 — — 5,218 
Reclassification of warrant liability to stockholders' equity— — — — 380 — — 380 
Share-based compensation— — — 0— 01,262 0— 0— 1,262 
Balance as of September 30, 2021— $— 855,385,082 $— $10,837 $1 $(3,454)$7,384 
________________
(1)The share amounts listed above combine common stock, Class A common stock and Class B common stock. In connection with the completion of our initial public offering , all previously outstanding shares of common stock were reclassified into Class A common stock and Class B common stock. Refer to Note 1 of the Annual Report on Form 10-K for the year ended December 31, 2021 for more information.

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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited)
Redeemable convertible preferred stockCommon stockAdditional
paid-in
capital		Accumulated other comprehensive lossAccumulated
deficit		Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmountSharesAmount
Balance as of June 30, 2022— $— 878,257,164 $— $11,581 $— $(4,564)$7,017 
Net loss— — — — — — (175)(175)
Shares issued in connection with stock option exercise, net of repurchases— — 289,539 — 1 — — 1 
Issuance of common stock upon settlement of RSUs— — 6,437,108 — — — — — 
Shares withheld related to net share settlement— — (270,022)— (2)— — (2)
Change in other comprehensive income— — — — — (1)— (1)
Share-based compensation— — — — 114 — — 114 
Balance as of September 30, 2022— $— 884,713,789 $— $11,694 $(1)$(4,739)$6,954 
Three Months Ended
 March 31,
(in millions)20222023
Operating activities:
Net loss$(392)$(511)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization12 20 
Provision for credit losses8 9 
Share-based compensation220 598 
Other— 5 
Changes in operating assets and liabilities:
Receivables from brokers, dealers, and clearing organizations(36)(36)
Receivables from users, net1,417 57 
Securities borrowed— (327)
Deposits with clearing organizations34 (61)
Current and non-current prepaid expenses26 2 
Other current and non-current assets(24)(8)
Accounts payable and accrued expenses(2)18 
Payables to users673 285 
Securities loaned(1,500)775 
Other current and non-current liabilities1 2 
Net cash provided by operating activities437 828 
Investing activities:
Purchase of property, software, and equipment(13)— 
Capitalization of internally developed software(8)(5)
Purchase of available-for-sale investments(14)— 
Proceeds from maturities of available-for-sale investments1 9 
Purchase of held-to-maturity investments— (485)
Net cash used in investing activities(34)(481)
Financing activities:
Taxes paid related to net share settlement of equity awards(3)(2)
Payments of debt issuance costs— (10)
Draws on credit facilities11 — 
Repayments on credit facilities(11)— 
Proceeds from exercise of stock options, net of repurchases3 1 
Net cash provided by (used in) financing activities— (11)
Effect of foreign exchange rate changes on cash and cash equivalents— — 
Net increase in cash, cash equivalents, segregated cash and restricted cash403 336 
Cash, cash equivalents, segregated cash and restricted cash, beginning of the period10,270 9,357 
Cash, cash equivalents, segregated cash and restricted cash, end of the period$10,673 $9,693 
Cash and cash equivalents, end of the period$6,191 $5,459 
Segregated cash, end of the period4,458 4,213 
Restricted cash (current and non-current), end of the period24 21 
Cash, cash equivalents, segregated cash and restricted cash, end of the period$10,673 $9,693 
Supplemental disclosures:
Cash paid for interest$3 $3 
Cash paid for income taxes, net of refund received$1 $— 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.


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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited)

Redeemable convertible preferred stock
Common stock(1)
Additional
paid-in
capital		Accumulated other comprehensive
income		Accumulated
deficit		Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmountSharesAmount
Balance as of December 31, 2020412,742,897 $2,180 229,031,546 $— $134 $1 $(190)$(55)
Net loss— — — — — — (3,264)(3,264)
Shares issued in connection with stock option exercise, net of repurchases— — 5,816,855 — 13 — — 13 
Issuance of common stock in connection with initial public offering, net of issuance costs— — 56,729,194 — 2,052 — — 2,052 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld— — 13,759,434 — (412)— — (412)
Conversion of preferred stock to common stock(412,742,897)(2,180)412,742,897 — 2,180 — — 2,180 
Conversion of convertible notes to common stock— — 137,305,156 — 5,218 — — 5,218 
Reclassification of warrant liability to stockholders' equity— — — — 380 — — 380 
Share-based compensation— — — — 1,272 — — 1,272 
Balance as of September 30, 2021— $— 855,385,082 $— $10,837 $1 $(3,454)$7,384 
________________
(1)The share amounts listed above combine common stock, Class A common stock and Class B common stock. In connection with the completion of our initial public offering, all previously outstanding shares of common stock were reclassified into Class A common stock and Class B common stock. Refer to Note 1 of the Annual Report on Form 10-K for the year ended December 31, 2021 for more information.

Common stockAdditional
paid-in
capital		Accumulated other comprehensive
income		Accumulated
deficit		Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmount
Balance as of December 31, 2021863,912,613 $— $11,169 $1 $(3,877)$7,293 
Net loss— — — — (392)(392)
Shares issued in connection with stock option exercise, net of repurchases1,438,358 — 4 — — 4 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld4,457,038 — (3)— — (3)
Change in other comprehensive income— — — (1)— (1)
Share-based compensation— 0— 0230 0— 0— 230 
Balance as of March 31, 2022869,808,009 $— $11,400 $— $(4,269)$7,131 

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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited)
Redeemable convertible preferred stockCommon stockAdditional
paid-in
capital		Accumulated other comprehensive income (loss)Accumulated
deficit		Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmountSharesAmount
Balance as of December 31, 2021— $— 863,912,613 $— $11,169 $1 $(3,877)$7,293 
Net loss— — — — — — (862)(862)
Shares issued in connection with stock option exercise, net of repurchases— — 2,152,493 — 6 — — 6 
Issuance of common stock in connection with Employee Stock Purchase Plan— — 1,529,727 — 13 — — 13 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld— — 17,118,956 — (9)— — (9)
Change in other comprehensive income— — — — — (2)— (2)
Share-based compensation— — — — 515 — — 515 
Balance as of September 30, 2022— $— 884,713,789 $— $11,694 $(1)$(4,739)$6,954 


Common stockAdditional
paid-in
capital		Accumulated other comprehensive lossAccumulated
deficit		Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmount
Balance as of December 31, 2022892,751,571 $— $11,861 $— $(4,905)$6,956 
Net loss— — — — (511)(511)
Shares issued in connection with stock option exercise, net of repurchases502,862 — 1 — — 1 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld6,987,089 — (2)— — (2)
Share-based compensation— — 602 — — 602 
Balance as of March 31, 2023900,241,522 $— $12,462 $— $(5,416)$7,046 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.


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ROBINHOOD MARKETS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Robinhood Markets, Inc. (“RHM” and, together with its subsidiaries, “Robinhood,” the “Company,” “we,” or “us”) was incorporated in the State of Delaware on November 22, 2013. Our most significant, wholly-owned subsidiaries are:
•Robinhood Financial LLC (“RHF”), a registered introducing broker-dealer;
•Robinhood Securities, LLC (“RHS”), a registered clearing broker-dealer;
•Robinhood Crypto, LLC (“RHC”), which provides users the ability to buy, sell, and transfer cryptocurrencies;cryptocurrencies and is responsible for the custody of user cryptocurrencies held on our platform; and
•Robinhood Money, LLC (“RHY”), which offers a pre-paid debit card (the “Robinhood Cash Card”) and a spending account that help customers invest, save, and earn rewards.
Acting as the agent of the user, we facilitate the purchase and sale of options, cryptocurrencies, and equities through our platform by routing transactions through market makers, who are responsible for trade execution. Upon execution of a trade, users are legally required to purchase options, cryptocurrencies, or equities for cash from the transaction counterparty or to sell options, cryptocurrencies, or equities for cash to the transaction counterparty, depending on the transaction. We facilitate and confirm trades only when there are binding, matched legal obligations from the user and the market maker on both sides of the trade. Our users have ownership of the securities they transact on our platform, including those that collateralize margin loans, and, as a result, such securities are not presented on our unaudited condensed consolidated balance sheets, other than user-held fractional shares which are presented gross. Our users also have ownership of the cryptocurrencies they transact on our platform (none of which are allowed to be purchased on margin and which do not serve as collateral for margin loans); however, following our adoption of Staff Accounting Bulletin 121 (“SAB 121”), and we recognize a liability to reflect our safeguarding obligation along with a corresponding asset on our balance sheet related to the cryptocurrencies we hold in custody for users (refer to Note 2 for more information on the recent adoption of SAB 121).
On August 2, 2021, we closed our initial public offering (“IPO”) of 55.0 million shares of Class A common stock. On August 31, 2021, we sold an additional 4.4 million shares of Class A common stock pursuant to the option granted to the underwriters to purchase additional shares.users.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC for interim financial reporting. The condensed consolidated financial statements are unaudited, and in management’s opinion, include all adjustments, including normal recurring adjustments and accruals necessary for a fair presentation of the results for the interim periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 20222023 or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 20212022 (“20212022 Form 10-K”).
There have been no material changes in our significant accounting policies as described in our audited consolidated financial statements included in our audited annual consolidated financial statements for the year ended December 31, 2021, other than recently adopted accounting pronouncements as described in
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Note 2.2022 Form 10-K. The unaudited condensed consolidated financial statements include the accounts of RHM and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.
Certain prior-period amounts have been reclassified to conform to the current period’s presentation. The impact of these reclassifications is immaterial to the presentation of the unaudited condensed
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consolidated financial statements.statements and had no impact on previously reported total assets, total liabilities and net loss.
During the three months ended March 31, 2023, we reorganized our management reporting structure from a single entity-level reporting unit into four reporting units. As a result, we performed a goodwill impairment assessment immediately before and after the reorganization. This quantitative assessment did not result in impairment, considering the fair value of each reporting unit significantly exceeded the corresponding carrying amount of net assets. We continue to operate and report financial information in one operating segment.
Use of Estimates
InThe preparation of unaudited condensed consolidated financial statements in accordance with GAAP requires management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosures, onin the unaudited condensed consolidated financial statements.statements and accompanying notes. We base our estimates on current and historical experience, and other assumptions we believe to be reasonable under the circumstances. Assumptions and estimates used in preparing our unaudited condensed consolidated financial statements include, but are not limited to, those related to revenue recognition and share-based compensation, the determination of allowances for credit losses, the capitalization and estimated useful life of internally developed software, investment valuation, valuation of user cryptocurrencies safeguarding obligation and the corresponding asset, contingent liabilities,investment valuation, capitalization of internally developed software, useful lives of property, software, and equipment, thevaluation and useful lives of intangible assets, incremental borrowing rate used to determine the present valuecalculate operating lease right-of-use assets and related liabilities, impairment of lease payments, the valuation and recognition of share-based compensation, the valuation of the convertible notes and warrant liability, the valuation and estimated useful lives of acquired intangiblelong-lived assets, uncertain tax positions, income taxes, accrued liabilities, and the recognition and measurement of current and deferred income tax assets andcontingent liabilities. Actual results could differ from these estimates and could have a material adverse effect on our operating results.
ConcentrationConcentrations of Revenue and Credit Risk
Concentrations of Revenue
We derived transaction-based revenues from individual market makers in excess of 10% of total revenues, as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
202120222021202220222023
Market maker:Market maker:Market maker:
Citadel Securities, LLCCitadel Securities, LLC23 %12 %21 %17 %Citadel Securities, LLC22 %13 %
Entities affiliated with Susquehanna International Group, LLP(1)
Entities affiliated with Susquehanna International Group, LLP(1)
13 %6 %11 %9 %
Entities affiliated with Susquehanna International Group, LLP(1)
12 %5 %
Entities affiliated with Wolverine Holdings, L.P.(2)
Entities affiliated with Wolverine Holdings, L.P.(2)
13 %6 %10 %8 %
Entities affiliated with Wolverine Holdings, L.P.(2)
10 %5 %
Tai Mo Shan Limited(3)
8 %2 %17 %4 %
All others individually less than 10%All others individually less than 10%16 %30 %19 %25 %All others individually less than 10%28 %22 %
Total as percentage of total revenue:Total as percentage of total revenue:73 %56 %78 %63 %Total as percentage of total revenue:72 %45 %
________________
(1)Consists of Global Execution Brokers, LP and G1X Execution Services, LLC
(2)Consists of Wolverine Execution Services, LLC and Wolverine Securities, LLC
(3)Member of Jump Trading Group

Concentrations of Credit Risk
We are engaged in various trading and brokerage activities in which the counterparties primarily include broker-dealers, banks, and other financial institutions. In the event our counterparties do not fulfill their obligations, we may be exposed to risk. The risk of default depends on the creditworthiness of the counterparty. Default of a counterparty in equities and options trades, which are facilitated through
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clearinghouses, would generally be spread among the clearinghouse's members rather than falling entirely on us. It is our policy to review, as necessary, the credit standing of each counterparty.
CryptocurrenciesIn March 2023, certain U.S. banks failed and were taken over by the U.S. Federal Deposit Insurance Corporation (“FDIC”). Our exposure to impacted U.S. banks is immaterial as of March 31, 2023. However, we have taken steps to help ensure that the loss of all or a significant portion of any uninsured amount would not have an adverse effect on our ability to pay our operational expenses or make other payments.
Investments
We act as an agentinvest in marketable debt securities and determine the cryptocurrency transactions that users initiate on our platform (i.e., in their RHC accounts).classification at the time of purchase.
Available-for-sale investments are recorded at fair value. We have determinedelected the fair value option for our available-for-sale investments as we believe carrying these investments at fair value and taking changes in fair value through earnings best reflects their underlying economics. Fair value adjustments are an agent, for accounting purposes, because we do not control the cryptocurrency before delivery to the user, we are not primarily responsible for the delivery of cryptocurrency to our users, we are not exposed to risks arising from fluctuations of the market price of cryptocurrency before delivery to the user,presented in other expense (income), net and we do not set the prices charged to users. After purchasing cryptocurrencyinterest earned on the platform, usersdebt securities as net interest revenues in our unaudited condensed consolidated statements of operations.
Held-to-maturity investments are securities that we have both the legal ownersability and positive intent to hold until maturity and are recorded at amortized cost. Interest income is calculated using the effective interest method, adjusted for deferred fees or costs, premium, or discount existing at the date of cryptocurrency held under custody by us and users have all the rights and benefitspurchase. Interest earned is included in interest revenues, net in our unaudited condensed consolidated statements of ownership, including the rights to appreciation and depreciation of the cryptocurrency.operations. We evaluate held-to-maturity investment for credit losses on a quarterly basis. We do not allow users to purchase cryptocurrency on margin and cryptocurrency does not serve as collateralexpect credit losses for margin loans. We hold cryptocurrency in custody for users in one or more omnibus cryptocurrency wallets; we do not utilize third-party custodians. We hold cryptographic key information and maintain internal record keeping for the cryptocurrencies we hold in custody for users, and we are obligated to secure such assets from loss or theft. Based on the terms of our user agreement and applicable law, we believe the cryptocurrency we hold in custody for users of our platform should be respected as users’ property (and should not be available to satisfy the claims of our general creditors) in the event we were to enter bankruptcy. For additional information relating to platform bankruptcy generally, see Item 2, Part II of this Quarterly Report on Form 10-Q, “Risk Factors—Risks Related to Cryptocurrency Products and Services—Cryptocurrency laws, regulations, and accounting standards are often difficult to interpret and are rapidly evolving in waysheld-to-maturity investments that are difficult to predict. Changes in these lawsobligations of states and regulations, or our failure to comply with them, could negatively impact cryptocurrency trading on our platform.”
Securities Borrowingpolitical subdivisions and Lending
securities issued by U.S. government sponsored agencies. We operate amonitor remaining securities lending program under which shares that users have pledged to us to collateralize their margin borrowing are lent by us to third parties (“Margin Securities Lending”)type and a securities lending program under which we borrow fully-paid shares from participating users and lend them to third parties (“Fully-Paid Securities Lending”). We also occasionally borrow securities from third partiesstandard credit rating. There was no reserve for operational purposes, and we occasionally lend to third parties securities that we hold for our own account (suchcredit losses as our holdings to support fractional share operations).

When we lend securities to third parties, the borrower provides cash as collateral. We earn interest revenue on cash collateral deposited by borrowers, and we can also earn additional revenue for lending certain securities based on demand for those securities. For our Fully-Paid Securities Lending, portions of such revenues are paid to participating users, and those payments are recorded as interest expense. For the three and nine months ended September 30, 2022, interest revenue earned and interest expenses incurred related to the Fully-Paid Securities Lending program were not material.

When we borrow securities from users participating in the Fully-Paid Securities Lending program (or from third parties), we provide cash as collateral and we record a receivable representing our right to the return of that collateral. Commencing in the quarter ended September 30, 2022, the amount of that receivable is presented in "securities borrowed" on our consolidated balance sheets. Prior period amounts (which were not material) have been reclassified to conform to the current presentation. In the case of our Fully-Paid Securities Lending program, the cash collateral is held by a third-party bank in a deposit account pledged to the user, which we administer as the user’s agent. Users are not entitled to interest on such account, and any interest earned is for our benefit.

Our authorization from users to lend shares that collateralize their margin borrowing is found in our margin account agreement, our borrowing of fully-paid shares from users is conducted under the terms of our Fully-Paid Securities Lending program to which users consent when they enroll in that program, and substantially all of our securities lending and borrowing transactions with third parties are conducted
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under the terms of an industry-standard master securities loan agreement (“MSLA”), which has an open contractual term and may be terminated upon notice by either party. We have also entered into fixed-term securities lending agreements with two financial institution counterparties (the “Fixed-Term Securities Lending Agreements”). One of these agreements has a contractual term of 30 days per lending transaction with a daily minimum commitment of $25 million and the other has a contractual term of 21 days per lending transaction with a daily minimum commitment of $35 million. Under these two agreements we lend to the counterparties (for a fixed term) securities that collateralize users’ margin borrowing, and we obtain cash collateral from the counterparties that we use to provide liquidity support for our margin lending to users.
Each of the MSLAs and Fixed-Term Securities Lending Agreements establishes a master netting arrangement between the lender and the borrower. A master netting arrangement is an agreement between two counterparties that creates a right of set-off for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy. In connection with our securities borrowing and lending activities, however, our policy is to recognize all amounts that are subject to master netting arrangements on a gross basis in our consolidated balance sheets even though some of those amounts may be eligible for offset (i.e., to be presented on a net basis) under GAAP. Refer to Note 9 for more information and the gross presentation in tabular format.
Variable Interest Entities
We evaluate our ownership, contractual and other interests in entities to determine if we have a variable interest in an entity. These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical and prospective information, among other factors. If we determine that an entity for which we hold a contractual or ownership interest in is a variable interest entity (“VIE”) and that we are the primary beneficiary, we consolidate such entity in the consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (1) has the power to make decisions that most significantly affect the economic performance of the VIE; and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Periodically, we determine whether any changes in the interest or relationship with the entity impacts the determination of whether we are still the primary beneficiary. If we are not deemed to be the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP.
Non-Marketable Equity Securities
Investments in equity securities without readily determinable fair values are initially recorded at cost and are subsequently adjusted to fair value for impairments and price changes from observable transactions in the same or a similar security from the same issuer. Non-marketable equity securities were not material for the periods presented and were included in other non-current assets on the unaudited condensed consolidated balance sheets.
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NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
In March 2022, the staff of the SEC issued SAB 121, which provides guidanceThere are no recently adopted accounting pronouncements that are material to entities that have obligations to safeguard crypto-assets held in custody on behalf of their platform users. SAB 121 states that the entity should recognize a liability representing its obligation to safeguard such crypto-assets accompanied by a corresponding asset on its balance sheet representing the platform users’ crypto-assets held in custody measured at fair value initially and at each subsequent reporting period. SAB 121 also states that accompanying disclosures should be considered regarding the entity’s obligation to safeguard crypto-assets for platform users. We adopted SAB 121 as part of the financial statements covering the interim period ended June 30, 2022, with retrospective applicationus as of the beginning of fiscal year 2022. As a result of (and solely by virtue of) our adoption of SAB 121, we recognized an asset captioned “Asset related to user cryptocurrencies safeguarding obligation” and a liability captioned “User cryptocurrencies safeguarding obligation” on our unaudited condensed consolidated balance sheets. As of September 30, 2022, the carrying value of each was $9.4 billion. We also added disclosures to Note 1 - Description of business and summary of significant accounting policies and Note 7 - Investments and fair value measurement.March 31, 2023.
Recently Issued Accounting Pronouncements Not Yet Adopted
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This guidance requires contract assets and contract liabilities from contracts with customersThere are no new accounting pronouncements that we have not yet adopted that are acquired in a business combinationmaterial to be recognized and measuredus as if the acquirer had originated the original contract. The guidance is effective for fiscal years beginning after December 15, 2022 on a prospective basis, including interim periods within those fiscal years. Early adoption is permitted. As of September 30, 2022, the planned adoption of this guidance is not expected to have any impact on our financial statements.
NOTE 3: BUSINESS COMBINATIONS
Pending Acquisition of Ziglu
On April 16, 2022, we entered into a definitive stock purchase agreement to acquire all outstanding equity of Ziglu Limited (“Ziglu”), a U.K.-based electronic money institution and crypto-asset firm that allows customers to buy and sell eligible cryptocurrencies, earn yield via its ‘Boost’ products, pay using a debit card, and move and spend money without fees. On August 15, 2022, the stock purchase agreement was amended, resulting in a purchase price reduction. Under the amendment, the aggregate purchase consideration to be paid by us is approximately $73 million. This purchase price remains subject to customary adjustments as set forth in the agreement, including a deduction to account for any pre-closing advances we make to Ziglu for working capital purposes in accordance with the terms of the agreement. To date, we have funded advances of $12 million in the aggregate which Ziglu may use for working and regulatory capital needs until close, and will either i) be treated a direct deduction to the purchase price at close, ii) becomes convertible into Ziglu equity upon a next round of financing, IPO, sale or dissolution of Ziglu, or iii) becomes convertible at our option beginning July 16,March 31, 2023. Purchase consideration will be payable primarily in cash with the remainder to be paid in stock (with the number of shares determined at closing). The transaction is subject to regulatory approval and other customary closing conditions. Based on communications with regulators to date, we believe the transaction will close, if at all, no sooner than the first quarter of 2023.
Advances made to Ziglu were accounted for as non-marketable equity securities under the fair value alternative, considering the securities lack a readily determinable fair value. We are exposed to Ziglu’s economic risks and rewards through the funded advances, which represent variable interests. The
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carrying value reflects our maximum exposure to loss. Ziglu is a variable interest entity as it lacks sufficient equity to finance its activities without future subordinated financial support. However, as we lack the power to direct the activities that most significantly impact Ziglu’s economic performance, we are not the primary beneficiary of Ziglu and it is not consolidated.
NOTE 4:3: REVENUES
Disaggregation of Revenues
The following table presents our revenue disaggregated by revenue source:
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions)(in millions)2021202220212022(in millions)20222023
Transaction-based revenues:Transaction-based revenues:Transaction-based revenues:
OptionsOptions$164$124$527$364Options$127$133
CryptocurrenciesCryptocurrencies5151372163Cryptocurrencies5438
EquitiesEquities503123596Equities3627
OtherOther2245Other19
Total transaction-based revenuesTotal transaction-based revenues2672081,138628Total transaction-based revenues218207
Net interest revenues:Net interest revenues:Net interest revenues:
Interest on corporate cash and investmentsInterest on corporate cash and investments168
Margin interestMargin interest344893122Margin interest3553
Interest on segregated cash and cash equivalents and depositsInterest on segregated cash and cash equivalents and deposits145
Securities lending, netSecurities lending, net332910776Securities lending, net2426
Interest on investments and corporate cash—29140
Interest on segregated cash and cash equivalents and deposits120327
Cash sweepCash sweep18310Cash sweep—22
Interest expenses related to credit facilitiesInterest expenses related to credit facilities(6)(6)(14)(18)Interest expenses related to credit facilities(6)(6)
Total net interest revenuesTotal net interest revenues63128193257Total net interest revenues55208
Other revenuesOther revenues352512193Other revenues2626
Total net revenuesTotal net revenues$365$361$1,452$978Total net revenues$299$441
For our fully-paid securities lending program under which we borrow fully-paid shares from participating users and lend them to third parties (“Fully-Paid Securities Lending”), we earn revenue for lending certain securities based on demand for those securities and portions of such revenues are paid to participating users, and those payments are recorded as interest expense. For the three months ended March 31, 2023, such interest revenue earned was $10 million and such interest expenses paid to participating users was $2 million. As the program was launched in the second quarter of 2022, no such interest revenue earned or expenses incurred for the three months ended March 31, 2022.
Contract Balances
Contract receivables are recognized when we have an unconditional right to invoice and receive payment under a contract and are derecognized when cash is received. Transaction-based revenue receivables due from market makers are reported in receivables from brokers, dealers, and clearing organizations while other revenue receivables related to proxy revenues due from our relationship with a third-party investor communications companyissuers are reported in other current assets on the unaudited condensed consolidated balance sheets.
Contract liabilities, which consist of unearned subscription revenue, are recognized when users remit cash payments in advance of the time we satisfy our performance obligations and are recorded as other current liabilities on the unaudited condensed consolidated balance sheets.
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The table below sets forth contract receivables and liabilities for the period indicated:
(in millions)(in millions)Contract ReceivablesContract Liabilities(in millions)Contract ReceivablesContract Liabilities
Beginning of period, January 1, 2022$83 $3 
End of period, September 30, 202273 3 
Beginning of period, January 1, 2023Beginning of period, January 1, 2023$60 $3 
End of period, March 31, 2023End of period, March 31, 202385 3 
Changes during the periodChanges during the period$(10)$— Changes during the period$25 $— 
The difference between the opening and ending balances of our contract receivables primarily results from lower transaction-based revenue driven by the market environment which had a negative impact on the number of traders and notional trading volumeincreased revenues and timing differences between our performance and counterparties’ payments. We recognized all revenue from amounts included in the opening contract liability balances in the ninethree months ended September 30, 2022.March 31, 2023.
NOTE 5: RESTRUCTURING ACTIVITIES
April 2022 Restructuring
On April 26, 2022, we announced a reduction in force (the “April 2022 Restructuring”) as part of our efforts to improve efficiency and operating costs, increase our velocity, and ensure that we are responsive to the changing needs of our customers. The April 2022 Restructuring involved approximately 330 employees, representing approximately 9% of our full-time employees at that time.
We allowed affected employees’ share-based awards to continue vesting over a transitional period (generally two months during which they remained employed but were not expected to provide active service), which were generally accounted for as a modification allowing a portion of the awards to vest that otherwise would have been forfeited. However, as a result of the reversal of share-based compensation expense that had been previously recognized (under the accelerated attribution method, generally), the April 2022 Restructuring resulted in a net reduction to share-based compensation of $24 million, which was recognized in the second quarter of 2022 (refer to Note 11 for more information).
In addition, we recognized $17 million of cash restructuring and related charges in the second quarter of 2022, which primarily consisted of employee-related wages, benefits, and severance expense. As of September 30, 2022, all of the restructuring charges relating to the April 2022 Restructuring had been paid in full.
August 2022 Restructuring
On August 2, 2022, we announced an additional reduction in force involving approximately 780 employees, representing approximately 23% of our full-time employees at the time, the planned closure of two offices, and related matters (the “August 2022 Restructuring”). These actions were part of a Company reorganization into a general manager (“GM”) structure under which GMs have assumed broad responsibility for our individual businesses. As we continued to execute the August 2022 Restructuring, our lower headcount led us to evaluate our real estate portfolio. On September 30, 2022, we decided to partially or completely close five additional offices as part of the August 2022 Restructuring, four of which were not occupied.
In connection with the office closures describe above, we determined the carrying amount of the right-of-use assets and associated leasehold improvements exceeded their respective fair value, resulting in impairments of $32 million and $15 million. We utilized a probability-weighted approach and market estimates from a third-party real estate brokerage firm to project sublease income cash flows, net of brokerage commissions, for each of the office spaces and applied a market rate of return on similar assets as a discount factor to determine fair value. We attributed the impairments on a relative carrying value basis between the right-of-use assets and leasehold improvements. In addition, we accelerated
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depreciation of $9 million related to other fixed assets. The impairments were recognized in general and administrative expense on our unaudited condensed consolidated statements of operations.
Similar to the April 2022 Restructuring, we allowed affected employees’ share-based awards to continue vesting over a transitional period allowing a portion of the awards to vest that otherwise would have been forfeited. However, as a result of the reversal of share-based compensation expense that had been previously recognized (under the accelerated attribution method, generally), the August 2022 Restructuring resulted in a net reduction to share-based compensation of $53 million, which was recognized in the third quarter of 2022 (refer to Note 11 for more information).
In addition, we recognized $34 million of cash restructuring and related charges primarily related to employee-related wages, benefits, and severance expense. As of September 30, 2022, $21 million of the restructuring charges relating to the August 2022 Restructuring remained unpaid and were included in accounts payable and accrued liabilities on our unaudited condensed consolidated balance sheets, substantially all of which are expected to be paid in the fourth quarter of 2022.
NOTE 6:4: ALLOWANCE FOR CREDIT LOSSES
The following table summarizesSubstantially all of the allowance for credit losses which substantially all relate to unsecured balances of receivables from users due to “FraudulentFraudulent Deposit Transactions”Transactions and losses on margin lending. Fraudulent Deposit Transactions are fraudulent, unlawful or otherwise inappropriate customer behavior, such asoccur when customersusers initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount. The following table summarizes the allowance for credit losses:
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions)(in millions)2021202220212022(in millions)20222023
Beginning balanceBeginning balance$35 $18 $34 $40 Beginning balance$40 $18 
Provision for credit lossesProvision for credit losses26 9 62 28 Provision for credit losses8 9 
Write-offsWrite-offs(23)(9)(58)(50)Write-offs(28)(7)
Ending balanceEnding balance$38 $18 $38 $18 Ending balance$20 $20 
NOTE 7:5: INVESTMENTS AND FAIR VALUE MEASUREMENT
Investments
We invest in marketable debt securitiesAvailable-for-sale
At December 31, 2022 and March 31, 2023, our available-for-sale investments which are classified as available-for-sale. We elected the fair value option on our available-for-sale debt securities and carry them at fair value with adjustments to fair value presentedincluded in other expense (income), netcurrent assets on our unaudited condensed consolidated statements of operations. Investments on ourthe unaudited condensed consolidated balance sheet consistedsheets were $10 million and $1 million, with no significant unrealized gains or losses. Refer to Fair Value of the following:
December 31, 2021
(in millions)Amortized CostUnrealized GainsUnrealized LossesFair Value
Debt securities:
Asset-backed securities$5 $— $— $5 
Commercial paper14 — — 14 
Corporate bonds7 — — 7
Government bonds1 — — 1
Total investments$27 $— $— $27 
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September 30, 2022
(in millions)Amortized CostUnrealized GainsUnrealized LossesFair Value
Debt securities:
Asset-backed securities$4 $— $— $4 
Commercial paper16 — — 16 
Corporate bonds6 — — 6 
Government bonds6 — — 6 
Total investments$32 $— $— $32 
All of our debt securities as below for further details. As of December 31, 20212022 and September 30, 2022March 31, 2023, all of our available-for-sale investments had a stated contractual maturity or redemption date within one year.
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Held-to-maturity
We had no held-to-maturity investments as of December 31, 2022. The following table summarizes our held-to-maturity investments as of March 31, 2023:
March 31, 2023
(in millions)Amortized CostAllowance for Credit LossesUnrealized GainsUnrealized LossesFair Value
Debt securities:
Corporate debt securities$250 $— $— $(1)$249 
U.S. Treasury securities112 — — — 112 
Commercial paper49 — — — 49 
Certificates of deposit47 — — — 47 
U.S. government agency securities27 — — — 27 
Total held-to-maturity investments$485 $— $— $(1)$484 
There were no sales of held-to-maturity investments for the three months ended March 31, 2023.
The table below presents the amortized cost and fair value of held-to-maturity investments by contractual maturity and the maximum maturity per security is two years:
March 31, 2023
(in millions)Within 1 Year1 to 2 YearsTotal
Amortized cost
Debt securities:
Corporate debt securities$80 $170 $250 
U.S. Treasury securities91 21 112 
Commercial paper49 — 49 
Certificates of deposit47 — 47 
U.S. government agency securities23 4 27 
Total held-to-maturity investments$290 $195 $485 
Fair value
Debt securities:
Corporate debt securities$80 $169 $249 
U.S. Treasury securities91 21 112 
Commercial paper49 — 49 
Certificates of deposit47 — 47 
U.S. government agency securities23 4 27 
Total held-to-maturity investments$290 $194 $484 
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Fair Value of Financial Instruments
Financial assets and liabilities measured at fair value on a recurring basis were presented on our unaudited condensed consolidated balance sheets as follows:
December 31, 2021December 31, 2022
(in millions)(in millions)Level 1Level 2Level 3Total(in millions)Level 1Level 2Level 3Total
AssetsAssetsAssets
Cash equivalents:Cash equivalents:Cash equivalents:
Money market fundsMoney market funds$4,004 $— $— $4,004 Money market funds$735 $— $— $735 
Investments:
Asset-backed securities— 5 — 5 
Other current assets:Other current assets:
Available-for-sale investments:Available-for-sale investments:
Commercial paperCommercial paper— 14 — 14 Commercial paper— 5 — 5 
Government bondsGovernment bonds3 — — 3 
Corporate bondsCorporate bonds— 7 — 7 Corporate bonds— 2 — 2 
Government bonds1 — 1 
Equity securities - securities ownedEquity securities - securities owned8 — — 8 
Asset related to user cryptocurrencies safeguarding obligationAsset related to user cryptocurrencies safeguarding obligation— 8,431 — 8,431 
User-held fractional sharesUser-held fractional shares1,834 — — 1,834 User-held fractional shares997 — — 997 
Other current assets:
Equity securities - securities owned14 — — 14 
Total financial assetsTotal financial assets$5,853 $26 $— $5,879 Total financial assets$1,743 $8,438 $— $10,181 
LiabilitiesLiabilitiesLiabilities
User cryptocurrencies safeguarding obligationUser cryptocurrencies safeguarding obligation$— $8,431 $— $8,431 
Fractional share repurchase obligationsFractional share repurchase obligations$1,834 $— $— $1,834 Fractional share repurchase obligations997 — — 997 
Total financial liabilitiesTotal financial liabilities$1,834 $— $— $1,834 Total financial liabilities$997 $8,431 $— $9,428 
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September 30, 2022March 31, 2023
(in millions)(in millions)Level 1Level 2Level 3Total(in millions)Level 1Level 2Level 3Total
AssetsAssetsAssets
Cash equivalents:Cash equivalents:Cash equivalents:
Money market fundsMoney market funds$629 $— $— $629 Money market funds$45 $— $— $45 
Commercial paperCommercial paper— 2 — 2 
Corporate debt securitiesCorporate debt securities— 2 — 2 
Investments:
Asset-backed securities— 4 — 4 
Commercial paper— 16 — 16 
Other current assets:Other current assets:
Equity securities - securities ownedEquity securities - securities owned9 — — 9 
Available-for-sale investments:Available-for-sale investments:
Corporate bondsCorporate bonds— 6 — 6 Corporate bonds— 1 — 1 
Government bonds6 — — 6 
Asset related to user cryptocurrencies safeguarding obligationAsset related to user cryptocurrencies safeguarding obligation— 9,361 — 9,361 Asset related to user cryptocurrencies safeguarding obligation— 11,489 — 11,489 
User-held fractional sharesUser-held fractional shares1,029 — — 1,029 User-held fractional shares1,217 — — 1,217 
Other current assets:
Equity securities - securities owned7 — — 7 
Total financial assetsTotal financial assets$1,671 $9,387 $— $11,058 Total financial assets$1,271 $11,494 $— $12,765 
LiabilitiesLiabilitiesLiabilities
User cryptocurrencies safeguarding obligationUser cryptocurrencies safeguarding obligation$— $9,361 $— $9,361 User cryptocurrencies safeguarding obligation$— $11,489 $— $11,489 
Fractional shares repurchase obligations1,029 — — 1,029 
Fractional share repurchase obligationsFractional share repurchase obligations1,217 — — 1,217 
Total financial liabilitiesTotal financial liabilities$1,029 $9,361 $— $10,390 Total financial liabilities$1,217 $11,489 $— $12,706 
The fair value for certain financial instruments that are not required to be measured or reported at fair value was presented on our unaudited condensed consolidated balance sheets as follows:
March 31, 2023
(in millions)Level 1Level 2Level 3Total
Assets
Held-to-maturity investments:
Corporate debt securities$— $249 $— $249 
U.S. Treasury securities112 — — 112 
Commercial Paper— 49 — 49 
Certificates of deposit— 47 — 47 
U.S. government agency securities— 27 — 27 
Total financial assets$112 $372 $— $484 
The fair values used for held-to-maturity investments are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems. Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided.
During the ninethree months ended September 30, 2022,March 31, 2023, we did not have any transfers in or out of Level 3 assets or liabilities.
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Safeguarded user cryptocurrencies
Safeguarded user cryptocurrencies were as follows:
(in millions)September 30, 2022
Ethereum (ETH)$2,783 
Bitcoin (BTC)2,759 
Dogecoin (DOGE)2,603 
Other1,216 
Total user cryptocurrencies safeguarding obligation and corresponding asset$9,361 
December 31,March 31,
(in millions)20222023
Bitcoin (BTC)$2,327 $3,887 
Ethereum (ETH)2,341 3,292 
Dogecoin (DOGE)2,802 3,017 
Other961 1,293 
Total user cryptocurrencies safeguarding obligation and corresponding asset$8,431 $11,489 
The fair value of the user cryptocurrencies safeguarding obligation and the corresponding asset were determined based on observed market pricing representing the last price executed for trades of each cryptocurrency as of September 30, 2022.
Convertible NotesDecember 31, 2022 and Warrant Liability
In February 2021, we issued two tranches of convertible notes (the “convertible notes”) and granted to each purchaser of the Tranche I convertible notes a warrant to purchase equity securities (the “warrant liability”). We elected the fair value option for both tranches of the convertible notes as we believe it best reflects their underlying economics. Under the fair value option, the convertible notes were initially measured at their issuance date estimated fair value and subsequently remeasured at their estimated fair value at the end of each reporting period. We elected to present the component related to accrued interest in the change in fair value of convertible notes and warrant liability. Upon the closing of our IPO,
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all of our outstanding convertible notes and warrants were reclassified from liability to equity and the fair value was no longer required to be remeasured.
For the three and nine months ended September 30, 2021, due to changes in fair value, we recorded expense of $28 million and $1.9 billion for the convertible notes, none of which was attributable to the change in the instrument-specific credit risk, and income of $2 million and $127 million for the warrant liability in our unaudited condensed consolidated statements of operations.
The following table sets forth a summary of the changes in the estimated fair value of our convertible notes and warrant liability:
(in millions)Convertible notesWarrant liability
Beginning of period, January 1, 2021$— $— 
Issued during the period3,299 253 
Change in fair value1,919 127 
Reclassifications to equity(5,218)(380)
End of period, September 30, 2021$— $— 
March 31, 2023.
NOTE 8:6: INCOME TAXES
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions, except percentages)(in millions, except percentages)2021202220212022(in millions, except percentages)20222023
Loss before income taxesLoss before income taxes$(1,367)$(174)$(3,265)$(859)Loss before income taxes$(391)$(509)
Provision for (benefit from) income taxes(50)1 (1)3 
Provision for income taxesProvision for income taxes1 2 
Effective tax rateEffective tax rate3.7 %(0.8)%— %(0.4)%Effective tax rate(0.3)%(0.5)%
Our tax provision for interim periods is determined using an estimated annual effective tax rate (“ETR”), adjusted for discrete items arising in the period. In each quarter, we update our estimated annual ETR and make a year-to-date calculation of the provision.
For the three and nine months ended September 30, 2021, the ETR differs from the U.S. federal statutory rate primarily due to the recognition of tax benefits from share-based compensation upon the IPO offset by the change in valuation allowance on our remaining U.S. federalMarch 31, 2022 and state deferred tax assets. For the nine months ended September 30, 2021, the ETR differs from the U.S. federal statutory rate primarily due to the partial release of our valuation allowance resulting from the recognition of net deferred tax liabilities with the Say Technologies acquisition, and the change in valuation allowance on our remaining U.S. federal and state deferred tax assets partially offset by our current state taxes payable. The acquired net deferred tax liabilities primarily consisted of the allocation of the purchase consideration to non-deductible identifiable intangible assets related to developed technology, customer relationship and trade names.
For the three and nine months ended September 30, 2022,March 31, 2023 the ETR was lower than the U.S. federal statutory rate primarily due to the full valuation allowance on our U.S. federal and state deferred tax assets offset by our current state taxes payable.
The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence during the ninethree months ended September 30, 2022,March 31, 2023, we believe it is more likely than not that the tax benefits of the remaining U.S. net deferred tax assets may not be realized.
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Utilization of the net operating loss and credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and tax credits before utilization.
NOTE 9:7: SECURITIES BORROWING AND LENDING
When we lend securities to third parties we receive cash as collateral for the securities loaned. In the table below, the cash collateral we hold related to loaned securities is presented in “securities loaned” and the fair value of securities lent is presented in “security collateral pledged.” Similarly, when we borrow securities from third parties or fully-paid securities from users, we provide cash collateral. In the table below, the amount of that cash collateral is presented in “securities borrowed” and the fair value of the securities received is presented in “security collateral received.”
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Our securities lending transactions are subject to enforceable master netting arrangements with other broker-dealers; however, we do not net securities borrowing and lending transactions. Therefore, activity related to securities borrowing and lending activities are presented gross in our unaudited condensed consolidated balance sheets (refer to Note 1 for more information).sheets.
The following tables set forth certain balances related to our securities borrowing and lending activities as of December 31, 20212022 and September 30, 2022:March 31, 2023:
December 31,September 30,December 31,March 31,
(in millions)(in millions)20212022(in millions)20222023
AssetsAssetsSecurities borrowedAssetsSecurities borrowed
Gross amount of securities borrowedGross amount of securities borrowed$— $139 Gross amount of securities borrowed$517 $844 
Gross amount offset on the consolidated balance sheetsGross amount offset on the consolidated balance sheets— — Gross amount offset on the consolidated balance sheets— — 
Amounts of assets presented on the consolidated balance sheetsAmounts of assets presented on the consolidated balance sheets— 139 Amounts of assets presented on the consolidated balance sheets517 844 
Gross amount of securities borrowed not offset on the consolidated balance sheets:Gross amount of securities borrowed not offset on the consolidated balance sheets:Gross amount of securities borrowed not offset on the consolidated balance sheets:
Securities borrowedSecurities borrowed— 139 Securities borrowed517 844 
Security collateral receivedSecurity collateral received— (135)Security collateral received(509)(846)
Net amountNet amount$— $4 Net amount$8 $(2)
LiabilitiesLiabilitiesSecurities loanedLiabilitiesSecurities loaned
Gross amount of securities loanedGross amount of securities loaned$3,651 $1,423 Gross amount of securities loaned$1,834 $2,609 
Gross amount of securities loaned offset on the consolidated balance sheetsGross amount of securities loaned offset on the consolidated balance sheets— — Gross amount of securities loaned offset on the consolidated balance sheets— — 
Amounts of liabilities presented on the consolidated balance sheetsAmounts of liabilities presented on the consolidated balance sheets3,651 1,423 Amounts of liabilities presented on the consolidated balance sheets1,834 2,609 
Gross amount of securities loaned not offset on the consolidated balance sheets:Gross amount of securities loaned not offset on the consolidated balance sheets:Gross amount of securities loaned not offset on the consolidated balance sheets:
Securities loanedSecurities loaned3,651 1,423 Securities loaned1,834 2,609 
Security collateral pledgedSecurity collateral pledged(3,427)(1,288)Security collateral pledged(1,629)(2,368)
Net amountNet amount$224 $135 Net amount$205 $241 

As described in Note 1, weWe obtain securities on terms that permit us to pledge and/or transfer securities to others. As of December 31, 20212022 and September 30, 2022,March 31, 2023, we were permitted to re-pledge securities with a fair value of $9.21$4.36 billion and $5.45 billionfor both periods under margin account agreements with users, and securities with a fair value of $0.3$18.4 million and $0.1$1.0 million that we had borrowed under MSLAsmaster securities loan agreements (“MSLAs”) with third parties. Under the Fully-Paid Securities Lending program, as of September 30, 2022,March 31, 2023, we were
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permitted to re-pledge securities with a fair value of $3.58$6.34 billion including securities with a fair value of $134.4$845.0 million that we had borrowed from users.
As of December 31, 20212022 and September 30, 2022,March 31, 2023, we had re-pledged securities with a fair value of $3.43$1.63 billion and $1.29$2.37 billion, in each case under MSLAs and Fixed-Term Securities Lending Agreementsfixed-term securities lending agreements with third parties. In addition, as of December 31, 20212022 and September 30, 2022,March 31, 2023, we had re-pledged $220.1$231.2 million and $250.8$430.7 million of the permitted amounts under the Margin Securities Lending program with clearing organizations to meet deposit requirements.

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NOTE 10:8: FINANCING ACTIVITIES AND OFF-BALANCE SHEET RISK
Revolving Credit Facilities
October 2019 Credit Facility
In October 2019, we entered into a $200.0$200 million committed and unsecured revolving line of credit with a syndicate of banks maturing in October 2023 (the “October 2019 Credit Facility”). In October 2020, we amended theThe October 2019 Credit Facility and,was subsequently amended to, among other things, increasedincrease the aggregate committed and unsecured revolving line of credit amount to $600.0$625 million with a maturity date of October 29, 2024. In 2024 and change the applicable interest rates. Refer to Note 12 - Financing Activities and Off-Balance Sheet Risk, of the 2022 Form 10-K for more information.
April 2021, we further increased2023 Credit Agreement
On March 24, 2023, RHS, our wholly-owned subsidiary, entered into the Second Amended and Restated Credit Agreement (the “April 2023 Credit Agreement”) among RHS, as borrower, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, amending and restating the $2.275 billion 364-day senior secured revolving credit facility entered into in April 2022 (Refer to Note 12 - Financing Activities and Off-Balance Sheet Risk, of the 2022 Form 10-K for more information).
The April 2023 Credit Agreement provides for a 364-day senior secured revolving credit facility with a total commitment of $2.175 billion. Under circumstances described in the April 2023 Credit Agreement, the aggregate credit amount availablecommitments may be increased by up to $1.0875 billion, for a total commitment under the October 2019April 2023 Credit Facility to $625.0 million. LoansAgreement of $3.2625 billion. Borrowings under the October 2019 Credit Facility bear interest, at our option, at a per annum rate of either (a) the Eurodollar Rate plus 1.00% or (b) the Alternative Base Rate. The Eurodollar Rate is equal to the Eurodollar Base Rate, which is derived from London Interbank Offered Rate (“LIBOR”), multiplied by the Statutory Reserve Rate (as defined in the agreement) at the applicable time. The Alternative Base Rate is the greatest of (i) the prime rate then in effect, (ii) the Federal Reserve Bank of New York rate then in effect plus 0.50% and (iii) the Eurodollar Rate at such time for a one month interest period plus 1.00%. If LIBOR is unavailable or if we and the administrative agent elect, the Eurodollar Rate will be replaced by a rate calculated with reference to the Secured Overnight Financing Rate (as defined in the agreement) as set forth in the October 2019 Credit Facility agreement or an alternate benchmark rate selected by us and the administrative agent. There were no outstanding borrowings under the October 2019 Credit Facility at December 31, 2021 and September 30, 2022. We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.10% on any unused amount of the October 2019 Credit Facility quarterly in arrears.
In April 2021, we entered into a $2.18 billion committed and secured revolving line of credit subject to certain borrowing base limitations, with a maturity date of April 15, 2022 (the “April 2021 Credit Facility”). Borrowings from the April 2021 Credit Facilityfacility must be specified to be Tranche A, Tranche B, Tranche C or a combination thereof. Tranche A loans are secured by users’ securities purchased on margin and are used primarily to finance margin loans. Tranche B loans are secured by the right to the return from National Securities Clearing Corporation (“NSCC”) of NSCC margin deposits and cash and property in a designated collateral account and used for the purpose of satisfying NSCC deposit requirements. Tranche C loans are secured by the right to the return of eligible funds from any reserve account of the borrower and cash and property in a designated collateral account and used for the purpose of satisfying reserve requirements under Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”"Exchange Act"). Interest for this line
Borrowings under the April 2023 Credit Agreement will bear interest at a rate per annum equal to the greatest of credit is determined at(i) Daily Simple Secured Overnight Financing Rate ("SOFR") plus 0.10%, (ii) the time aFederal Funds Effective Rate (as defined in the April 2023 Credit Agreement) and (iii) the Overnight Bank Funding Rate (as defined in the April 2023 Credit Agreement), in each case, as of the day the loan is initiated, and theplus an applicable interestmargin rate. The applicable margin rate is calculated as a per annum rate equal to 1.25% for Tranche A loans and 2.50% for Tranche B and Tranche C loans, plus the Short-Term Funding Rateloans. Undrawn commitments will accrue commitment fees at the applicable time. The Short-Term Funding Rate isa rate per annum equal to the greatest of (i) the Eurodollar Rate for0.50%.
The April 2023 Credit Agreement requires RHS to maintain a one month interest periodminimum consolidated tangible net worth and a minimum excess net capital, and subjects RHS to a specified limit on such day, which equalsminimum net capital to the Eurodollar Base Rate that is derived from LIBOR, multiplied by the Statutory Reserve Rate at the applicable time, (ii) the Federal Funds Effective Rate (as defined in the agreement) and (iii) the Overnight Bank Funding Rate (as defined in the agreement) in effect on such day. There were no outstanding borrowings underaggregate debit items. In addition, the April 20212023 Credit Facility at December 31, 2021.
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We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.50% on any unused amount of the April 2021 Credit Facility quarterly in arrears.
In April 2022, we entered into a $2.28 billion committedAgreement contains certain customary affirmative and secured revolving line of credit (the “April 2022 Credit Facility”) with a maturity date of April 10, 2023, amending and restating the April 2021 Credit Facility. Under circumstances described in the agreement for the April 2022 Credit Facility, the aggregate commitments may be increased by up to $1.14 billion, for a total commitment under the agreement of $3.65 billion. The April 2022 Credit Facility terms are the same as the April 2021 Credit Facility in all material aspects except for the Short-Term Funding Rate is equal to the greatest of (i) Daily Simple SOFR (as defined in the agreement) plus 0.10%, (ii) the Federal Funds Effective Rate (as defined in the agreement) and (iii) the Overnight Bank Funding Rate (as defined in the agreement), in each case, in effect on such day. There were no outstanding borrowings under the April 2022 Credit Facility at September 30, 2022.
The October 2019 Credit Facility and April 2022 Credit Facility contain customarynegative covenants, including limitations with respect to debt, liens, fundamental changes, asset sales, restricted payments, investments and transactions with affiliates, subject to certain exceptions. Amounts due under the April 2023 Credit Agreement may be accelerated upon an “event of default,” as defined in the April 2023 Credit Agreement, such as failure to pay amounts owed thereunder when due, breach of a covenant, material inaccuracy of a representation, or occurrence of bankruptcy or insolvency, subject in some cases to cure periods.
As of December 31, 2022 and March 31, 2023, there were no borrowings outstanding under our revolving credit facilities.
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We were in compliance with all covenants, as applicable, under theseour revolving credit facilities as of December 31, 20212022 and September 30, 2022, as applicable.March 31, 2023.

Off-Balance Sheet Risk
In the normal course of business, we engage in activities involving settlement and financing of securities transactions. User securities transactions are recorded on a settlement date basis, which is generally two business days after the trade date for equities and one business day after the trade date for options. These activities may expose us to off-balance sheet risk in the event that the other party to the transaction is unable to fulfill its contractual obligations. In such events, we may be required to purchase financial instruments at prevailing market prices in order to fulfill our obligations.
NOTE 11:9: COMMON STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
Preferred Stock
As of September 30, 2022,March 31, 2023, no terms of the preferred stock had beenwere designated, and no shares of preferred stock were outstanding, and we had no present plan to issue any shares of preferred stock.outstanding.
Common Stock
We have three authorized classes of common stock: Class A, Class B, and Class C. Holders of our Class A common stock are entitled to one vote per share on all matters to be voted upon by our stockholders, holders of our Class B common stock are entitled to 10 votes per share on all matters to be voted upon by our stockholders and, except as otherwise required by applicable law, holders of our Class C common stock are not entitled to vote on any matter to be voted upon by our stockholders. The holders of our Class A common stock and Class B common stock vote together as a single class, unless otherwise required by our CharterAmended and Restated Certificate of Incorporation (our "Charter") or applicable law.
The convertible notes issued in February 2021 (see Note 7 for further information) were converted into 137.3 million shares of Class A common stock at a conversion price of $26.60 per share upon completion of our IPO.
Warrants
As of September 30, 2022,March 31, 2023, warrants outstanding consisted of warrants to purchase 14.3 million shares of Class A common stock with a strike price of $26.60 per share for a maximum purchase amount of $380 million.share. The warrants expire on February 12, 2031 and can be exercised inwith cash or for net shares
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at the holder’s option. In aggregate, the maximum purchase amount of all warrants is $380 million. As of September 30, 2022,March 31, 2023, the warrants have not been exercised and are included as a component of additional paid in capital on the unaudited condensed consolidated balance sheets.
Equity Incentive Plans
Amended and Restated 2013 Stock Plan and 2020 Equity Incentive Plan
Our Amended and Restated 2013 Stock Plan, as amended (the “2013 Plan”), and our 2020 Equity Incentive Plan, as amended (the “2020 Plan”), provided for share-based awards to eligible participants, granted as incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), restricted stock units ("RSUs"), stock appreciation rights (“SARs”) or restricted stock awards (“RSAs”). Our 2013 Plan was terminated in connection with adoption of our 2020 Plan, and our 2020 Plan was terminated in connection with the adoption of our 2021 Omnibus Incentive Plan (defined below)(the "2021 Plan") but any awards outstanding under our 2013 Plan and 2020 Plan remain in effect in accordance with their terms. Any shares that were or otherwise would become available for grant under the 2013 Plan or 2020 Plan will be available for grant under the 2021 Plan. No new awards may be granted under our 2013 Plan or 2020 Plan.
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2021 Omnibus Incentive Plan
Our 2021 Omnibus Incentive Plan (the “2021 Plan”) became effective on July 27, 2021, and provides for the grant of share-based awards (such as options, including ISOs and NSOs, SARs, RSAs, RSUs, performance units, and other equity-based awards) and cash-based awards.
As of September 30, 2022,March 31, 2023, an aggregate of 360405 million shares had been authorized for issuance under the 2013 Plan, 2020 Plan, and 2021 Plan, of which 90106 million shares had been issued under the plans, 146101 million shares were reserved for issuance upon the exercise or settlement of outstanding equity awards under the plans, and 123198 million shares remained available for new grants under the 2021 Plan.
Stock Option Activity
A summary of stock option activity for the nine months ended September 30, 2022 is as follows:
Number of SharesWeighted-Average Exercise PriceWeighted- Average Remaining Life
Total Intrinsic Value
(in millions)
Balance at December 31, 202114,527,468$2.20 5.37$226 
Granted during the period4,463,248 14.15 
Exercised during the period(2,272,363)2.22 
Cancelled and forfeited during the period(812,778)12.90 
Balance at September 30, 202215,905,575 $5.01 4.93$96 
Options vested and expected to vest at September 30, 202215,905,575$5.01 4.93$96 
Options exercisable at September 30, 202211,916,639$2.05 4.58$96 
Time-Based RSUs
We grant RSUs that vest upon the satisfaction of a time-based service condition (“Time-Based RSUs”). The following table summarizes the activity related to our Time-Based RSUs for the ninethree months ended September 30, 2022:March 31, 2023, which is the period we grant our company-wide annual refresh grants:
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Number of RSUsWeighted- average grant date fair valueNumber of RSUsWeighted- average grant date fair value
Unvested at December 31, 202149,428,070 $31.78 
Unvested at December 31, 2022Unvested at December 31, 202256,116,782 $18.55 
GrantedGranted59,499,760 11.70 Granted19,251,484 9.72 
VestedVested(17,524,831)23.37 Vested(7,078,184)15.53 
ForfeitedForfeited(19,475,105)25.88 Forfeited(4,700,651)17.24 
Unvested at September 30, 202271,927,894 $18.81 
Unvested at March 31, 2023Unvested at March 31, 202363,589,431 $17.33 
Market-Based RSUs
In 2019 and 2021, we granted to our founders RSUs under which vesting is conditioned upon both the achievement of share price targets and the continued employment by each recipient over defined service periods (“Market-Based RSUs”).
In February 2023, we cancelled the 2021 Market-Based RSUs of 35.5 million unvested shares (the “2021 Founders Award Cancellation”). We recognized $485 million share-based compensation (“SBC”) expense related to the cancellation during the three months ended March 31, 2023, which was included in the general and administrative expense in our unaudited condensed statement of operations. No further expense associated with these awards were recognized after the cancellation. No other payments, replacement equity awards or benefits were granted in connection with the cancellation.
The following table summarizes the activity related to our Market-Based RSUs for the ninethree months ended September 30, 2022:March 31, 2023:
Eligible to Vest(1)
Not Eligible to Vest(2)
Total Number of RSUsWeighted- average grant date fair value
Unvested at December 31, 20211,267,918 57,650,926 58,918,844 $23.50 
Granted— — — 
Vested(345,796)— (345,796)2.34 
Forfeited— — — 
Unvested at September 30, 2022922,122 57,650,926 58,573,048 $23.63 
Eligible to Vest(1)
Not Eligible to Vest(2)
Total Number of RSUsWeighted- average grant date fair value
Unvested at December 31, 2022806,858 57,650,926 58,457,784 $23.67 
Granted— — — 
Vested(115,266)— (115,266)2.34 
Cancelled— (35,520,000)(35,520,000)22.68 
Unvested at March 31, 2023691,592 22,130,926 22,822,518 $25.32 
________________
(1)Represents RSUs that became eligible to vest upon achievement of share price targets and vest upon satisfaction of time-based service requirements.
(2)Represents RSUs that have not yet become eligible to vest because share price targets have not yet been achieved.
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Share-Based Compensation
The following table presents share-based compensationSBC on our unaudited condensed consolidated statements of operations for the periods indicated:
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions)(in millions)2021202220212022(in millions)20222023
Brokerage and transactionBrokerage and transaction$6 $2 $6 $4 Brokerage and transaction$1 $2 
Technology and developmentTechnology and development503 25 505 166 Technology and development82 54 
OperationsOperations16 — 16 5 Operations4 2 
MarketingMarketing41 — 41 3 Marketing5 1 
General and administrativeGeneral and administrative678 83 686 316 General and administrative128 539 
Total(1)Total(1)$1,244 $110 $1,254 $494 Total(1)$220 $598 
________________
The following table presents share-based compensation by award type for the periods indicated:
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Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202220212022
Time-Based RSUs$881 $27 $889 $235 
Market-Based RSUs360 79 360 245 
Employee Share Purchase Plan (“ESPP”)2 2 2 9 
Options1 2 3 5 
Total$1,244 $110 $1,254 $494 
The April 2022 Restructuring and the August 2022 Restructuring resulted in net reductions of $24 million and $53 million in share-based compensation expense, recognized in) For the three months ended June 30,March 31, 2023 and 2022, SBC expense primarily consisted of $528 million and September 30, 2022, respectively. Both reductions were substantially all$84 million related to Market-Based RSUs and $67 million and $130 million related to Time-Based RSUs. The net reductions were primarily recognized in technology and development expense, $16 million and $22 million, and general and administrative expense, $6 million and $28 million.
We capitalized share-based compensationSBC expense related to internally developed software of $4 million and $21$10 million during the three and nine months ended September 30, 2022. The corresponding amount during the threeMarch 31, 2023 and nine months ended September 30, 2021 was $20 million in both periods.March 31, 2022, respectively.
As of September 30, 2022,March 31, 2023, there was $1.40.7 billion of unrecognized share-based compensationSBC expense that is expected to be recognized over a weighted-average period of 2.11.3 years. Scheduled vesting for awards outstanding as of September 30, 2022, is as follows:
(in millions, except for number of shares)
Number of Shares(1)
Expense
Remainder of 20228,513,485 $194 
202328,262,503 577 
202420,943,065 378 
202514,571,511 253 
20264,565,337 48 
Total76,855,901 $1,450 
________________
(1) Excludes future ESPP shares and Market-Based RSUs for which the share price target has not been met as we cannot forecast the vesting of these shares.
The above schedule describes awards actually outstanding on September 30, 2022, without any adjustments for potential subsequent forfeitures, which are recognized as they occur, or subsequent equity grants.
NOTE 12:10: NET LOSS PER SHARE
We present net loss per share using the two-class method required for multiple classes of common stock. The rights, including the liquidation and dividend rights, of the holders of Class A common stock and Class B common stock are identical, except with respect to voting. As the liquidation and dividend rights are identical for Class A common stock and Class B common stock, the undistributed earnings are allocated on a proportionate basis and the resulting loss per share will, therefore, be the same for both Class A common stock and Class B common stock on an individual or combined basis.
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The following table presents the calculation of basic and diluted loss per share:
(in millions, except share and per share data)(in millions, except share and per share data)Three Months Ended
September 30,		Nine Months Ended
September 30,		(in millions, except share and per share data)Three Months Ended
March 31,
202120222021202220222023
Net lossNet loss$(1,317)$(175)$(3,264)$(862)Net loss$(392)$(511)
Less: allocation of earnings to participating securities— — — — 
Net loss attributable to common stockholdersNet loss attributable to common stockholders$(1,317)$(175)$(3,264)$(862)Net loss attributable to common stockholders$(392)$(511)
Weighted-average common shares outstanding - basicWeighted-average common shares outstanding - basic638,168,188 882,356,575 368,518,894 875,055,571 Weighted-average common shares outstanding - basic867,769,168 896,924,695 
Dilutive effect of stock options and unvested sharesDilutive effect of stock options and unvested shares— — — — Dilutive effect of stock options and unvested shares— — 
Weighted-average common shares used to compute diluted loss per shareWeighted-average common shares used to compute diluted loss per share638,168,188 882,356,575 368,518,894 875,055,571 Weighted-average common shares used to compute diluted loss per share867,769,168 896,924,695 
Net loss per share attributable to common stockholders:Net loss per share attributable to common stockholders:Net loss per share attributable to common stockholders:
BasicBasic$(2.06)$(0.20)$(8.85)$(0.99)Basic$(0.45)$(0.57)
DilutedDiluted$(2.06)$(0.20)$(8.85)$(0.99)Diluted$(0.45)$(0.57)
The following potential common shares were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive or issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:
Three Months Ended
September 30,		Nine Months Ended
September 30,		 Three Months Ended
March 31,
202120222021202220222023
RSUs112,492,359 130,510,263 112,492,359 130,510,263 
Time-Based RSUsTime-Based RSUs77,721,705 63,632,646 
Market-Based RSUsMarket-Based RSUs58,803,580 22,822,518 
Stock optionsStock options15,447,206 15,905,575 15,447,206 15,905,575 Stock options17,486,667 14,540,171 
Early-exercised stock optionsEarly-exercised stock options65,435 — 65,435 — Early-exercised stock options7,362 — 
WarrantsWarrants14,278,034 14,278,034 14,278,034 14,278,034 Warrants14,278,034 14,278,034 
ESPP sharesESPP shares93,738 824,292 93,738 824,292 ESPP shares634,603 1,070,783 
Total anti-dilutive securitiesTotal anti-dilutive securities142,376,772 161,518,164 142,376,772 161,518,164 Total anti-dilutive securities168,931,951 116,344,152 
NOTE 13:11: RELATED PARTY TRANSACTIONS
Related party transactions may include any transaction between entities under common control or with a related party. We have defined related parties as members of the Boardboard of Directors,directors, executive officers, principal owners of our outstanding stock and any immediate family members of each such related party, as well as any other person or entity with significant influence over our management or operations and any other affiliates.
In February 2021,For the three months ended March 31, 2023, we issued two tranches of convertible notes and granted to each purchaser of the Tranche I convertible notes a warrant to purchase equity securities (see Note 7 for further information). Two of the Tranche I investors weredid not have any material related parties prior to the completion of our IPO.party transactions.
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NOTE 14:12: LEASES
Our operating leases are comprised of office facilities, with the most significant leases relating to our corporate headquarters in Menlo Park, CA and our office in New York City. Our leases have remaining terms of 1 to 11 years, and many leases include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement.City, NY. We do not have any finance leases. See Note 5 for further information relating to impacts on leases due to the August 2022 Restructuring.
During the second quarter of 2022, we executed an agreement to assign one of our operating leases to a third-party assignee who assumed all of our obligations, liabilities, covenants, and conditions under the assigned lease. As a result of this agreement, we derecognized the related right-of-use assets of $23 million and lease liability of $22 million and recognized an immaterial amount of loss.
The components of lease expense were as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2021202220212022
Fixed operating lease costs$7 $9 $16 $27 
Variable operating lease costs1 2 4 5 
Short-term lease costs1 — 1 — 
Total lease costs$9 $11 $21 $32 
Fixed operating lease costs primarily consist of monthly base rent amounts due. Variable operating lease expenses are primarily related to payments made to our landlords for common area maintenance, property taxes, insurance, and other operating expenses.
Other information related to our operating leases was as follows:
December 31,September 30,
20212022
Weighted-average remaining lease term7.29 years7.45 years
Weighted-average discount rate6.27 %6.41 %
Cash flows related to leases were as follows:
Nine Months Ended
September 30,
(in millions)20212022
Operating cash flows:
Payments for operating lease liabilities$— $18 
Supplemental cash flow data:
Lease liabilities arising from obtaining right-of-use assets$97 $32 
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Future minimum lease payments under non-cancellable operating leases (with initial lease terms in excess of one year) as of September 30, 2022 areLease assets and liabilities recognized on our unaudited condensed consolidated balance sheets were as follows:
(in millions)
Remainder of 2022$8 
202333 
202431 
202530 
202622 
Thereafter85 
Total undiscounted lease payments209 
Less: imputed interest(44)
Less: lease incentives(5)
Total lease liabilities$160 
December 31,March 31,
(in millions)Classification20222023
Lease right-of-use assets:
Operating lease assetsOther non-current assets$92 $87 
Lease liabilities:
Current operating lease liabilitiesOther current liabilities21 23 
Non-current operating lease liabilitiesOther non-current liabilities127 120 
Total lease liabilities$148 $143 
Cash flows related to leases were as follows:
Three Months Ended
March 31,
(in millions)20222023
Operating cash flows:
Payments for operating lease liabilities$3 $7 
Supplemental cash flow data:
Lease liabilities arising from obtaining right-of-use assets$32 $— 
NOTE 15:13: COMMITMENTS & CONTINGENCIES
We are subject to contingencies arising in the ordinary course of our business, including contingencies related to legal, regulatory, non-income tax and other matters. We record an accrual for loss contingencies at management’s best estimate when we determine that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate is a range and no amount within that range is considered a better estimate than any other amount, an accrual is recorded based on the bottom amount of the range. If a loss is not probable, or a probable loss cannot be reasonably estimated, no accrual is recorded. Amounts accrued for contingencies in the aggregate were $85 million as of December 31, 20212022 and $82$88 million as of September 30, 2022.March 31, 2023. In our opinion, an adequate accrual had been made as of September 30, 2022each such date to provide for the probable losses of which we are aware and for which we can reasonably estimate an amount.
Legal and Regulatory Matters
The securities industry is highly regulated and many aspects of our business involve substantial risk of liability. In past years, there has been an increasing incidence ofincrease in litigation and regulatory investigations involving the brokerage industry, includingand cryptocurrency industries. Litigation has included and may in the future include class action suits that generally seek substantial damages. Damages may include,and, in some cases, punitive damages. Compliance and trading problems that are reported to federalFederal and state regulators, exchanges, or other SROs by dissatisfied users are investigated by suchinvestigate issues related to regulatory bodies, and, if pursued by such regulatory bodies or such users,compliance that may rise to the level of arbitration or disciplinaryresult in enforcement action. We are also subject to periodic regulatory audits and inspections.inspections that have in the past and could in the future lead to enforcement investigations or actions.
We have been named as a defendant in lawsuits and from time to time we have been threatened with, or named as a defendant in arbitrations and administrative proceedings. The outcomes of these matters are inherently uncertain and some may result in adverse judgments or awards, including penalties, injunctions, or other relief, and we may also determine to settle a matter because of the uncertainty and risks of litigation.
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With respect to matters discussed below, we believe, based on current knowledge, that any losses (in excess of amounts accrued, if applicable) as of September 30, 2022March 31, 2023 that are reasonably possible and can be reasonably estimated will not, in the aggregate, have a material adverse effect on our business, financial position, operating results, or cash flows. However, for many of the matters disclosed below, particularly those in early stages, we cannot reasonably estimate the reasonably possible loss (or range of loss), if any. In addition, the ultimate outcome of legal proceedings involves judgments and inherent uncertainties and cannot be predicted with certainty. Any judgment entered against us, or any adverse settlement, could materially and adversely impact our business, financial condition, operating results, and
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cash flows. We might also incur substantial legal fees, which are expensed as incurred, in defending against legal and regulatory claims.
Described below are certain pending matters in which there is at least a reasonable possibility that a material loss could be incurred. We intend to continue to defend these matters vigorously.
Best Execution, Payment for Order Flow, and Sources of Revenue MattersCivil Litigation
Beginning in December 2020, multiple putative securities fraud class action lawsuits were filed against RHM, RHF, and RHS. Five cases were consolidated in the United States District Court for the Northern District of California. An amended consolidated complaint was filed in May 2021, alleging violations of Section 10(b) of the Exchange Act and various state law causes of action based on claims that we violated the duty of best execution and misled putative class members by publishing misleading statements and omissions in customer communications relating to the execution of trades and revenue sources (including PFOF). Plaintiffs seek damages, restitution, disgorgement, and other relief. In February 2022, the court granted Robinhood’s motion to dismiss the amended consolidated complaint without prejudice. In March 2022, plaintiffs filed a second consolidated amended complaint, alleging only violations of Section 10(b) of the Exchange Act, which Robinhood moved to dismiss. In October 2022, the court granted Robinhood’s motion in part and denied it in part. In November 2022, Robinhood filed a motion for judgment on the pleadings, which the court denied in January 2023.
March 2020 Outages
A consolidated putative class action lawsuit relating to the service outages on our stock trading platform on March 2-3, 2020 and March 9, 2020 (the “March(“March 2020 Outages”) is pending in the United States District Court for the Northern District of California. The lawsuit generally alleges that putative class members were unable to execute trades during the March 2020 Outages because our platform was inadequately designed to handle customer demand and we failed to implement appropriate backup systems. The lawsuit includes, among other things, claims for breach of contract, negligence, gross negligence, breach of fiduciary duty, unjust enrichment and violations of certain California consumer protection statutes. The lawsuit generally seeks damages, restitution, and/or disgorgement, as well as declaratory and injunctive relief. In May 2022, the parties notified the court that they had reached an agreement in principle resolving this action. The settlement agreement is subject to court approval.has been preliminarily approved by the court.
In addition, in September 2021, approximately 400 jointly-represented customers initiated an arbitration of individual claims against us arising out of the March 2020 Outages and other alleged system outages. Robinhood is contesting the claims, and a hearing has been scheduledThe parties have reached an agreement to begin in January 2023.resolve this matter.
Options Trading and Related Customer Communications and DisplaysState Regulatory Matters
Certain state regulatory authorities are conductinghave conducted investigations regarding RHF’s options trading and related customer communications and displays, options and optionsmargin trading approval process.process, the March 2020 Outages, and customer support prior to June 2020. RHF is cooperatingreached settlements with several state regulators including the regulators’ requests. FINRAAlabama Securities Commission, the California Department of Financial Protection and Innovation, the Colorado Division of Securities, the Delaware Department of Justice - Investor Protection Unit, the New Jersey Bureau of Securities, the South Dakota Division of Insurance,
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and the Texas State Securities Board, under which we have agreed to pay a monetary penalty of $200,000 per state. RHF anticipates additional potential state settlements as part of a multi-state settlement related to these issues totaling up to approximately $10 million. The Financial Industry Regulatory Authority (“FINRA”) previously conducted an investigation and reached a settlement with RHF regarding the same options tradingmany of these issues.
RHS Trade Reporting, Large Options Position Reporting, and ACATS ProcessingBrokerage Enforcement Matters
In June 2021, RHF resolved with FINRA, on a no admit, no deny basis, certain investigations and examinations. As previously disclosed, that resolution did not address all the matters FINRA is investigating. In April 2022, FINRA Enforcement staff requested additional informationare conducting investigations related to, among other things, RHS’s reporting of fractional share trades, as applicable, to a Trade Reporting Facility, (“TRF”), the Over-the-Counter Reporting Facility, (“ORF”), the Order Audit Trail System, (“OATS”), and the Consolidated Audit Trail (“CAT”);Trail; RHS’s reporting of accounts holding significant options positions to the Large Option Position Report (“LOPR”) system; and processing of certain requests for transfers of assets from Robinhood through the Automated Customer Account Transfer Service (“ACATS”System; responses to Electronic Blue Sheets requests from FINRA; the delays in notification from third parties and process failures within our brokerage systems and operations in connection with the handling of a 1-for-25 reverse stock split transaction of Cosmo Health, Inc, in December 2022 (the “Q4 2022 Processing Error”), an automated industry system; RHF’s compliance with FINRA registration requirements for account asset transfers. RHS ismember personnel; marketing involving social media influencers and affiliates; collaring the prices of certain trade orders; and RHS’ compliance with best execution obligations. We are cooperating with these investigations.
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In October 2021, RHS has received requests from the SEC Division of Enforcement regarding its compliance with Regulation SHO, and previously received similar requests from FINRA examinations staff. During the second quarter of 2022, RHS received additional requests from the SEC for information related to, among other things, RHS’s compliance with Regulation SHO’s trade reporting and other requirements in connection with securities lending, and fractional share trading.trading, and the Q4 2022 Processing Error, and previously received similar requests from FINRA examinations staff. RHS and RHF have also received requests from the SEC Division of Enforcement and FINRA Enforcement staff related to the Firms’ compliance with recordkeeping requirements, including requests regarding off-channel communications. We are cooperating with this investigation.
RHC Anti-Money Laundering, Cybersecurity, and Other Issues
In July 2020, the New York State Department of Financial Services (“NYDFS”) issued a report of its examination of RHC citing a number of “matters requiring attention” focused primarily on anti-money laundering and cybersecurity-related issues. The matter was subsequently referred to the NYDFS’s Consumer Protection and Financial Enforcement Division for investigation. In March 2021, the NYDFS informed RHC of alleged violations of applicable (i) anti-money laundering and New York Banking Law requirements, including the failure to maintain and certify a compliant anti-money laundering program, (ii) notification provisions under RHC’s Supervisory Agreement with the NYDFS, and (iii) cybersecurity and virtual currency requirements, including deficiencies in our policies and procedures regarding risk assessment, lack of an adequate incident response and business continuity plan, and deficiencies in our application development security. RHC and the NYDFS settled with respect to these allegations in connection with which, among other things, RHC paid a monetary penalty of $30 million and has engaged an independent compliance consultant.investigations.

Additionally, in April 2021,Robinhood Crypto Matters
RHC has received subpoenas from the California Attorney General’s Office issued an investigative subpoena to RHC, seeking documents and answers to interrogatoriesinformation about, among other things, RHC’s trading platform, business and operations, applicationcustody of California’s commodities regulations to RHC,customer assets, customer disclosures, and other matters.coin listings. RHC is cooperating with this investigation.

Account Takeovers, Anti-Money Laundering, and Cybersecurity Matters
In November 2020, FINRA Enforcement commenced an investigation into RHF concerningand the SEC Division of Enforcement are investigating account takeovers or(i.e., circumstances under which an unauthorized actor successfully logs into a customer account,account), as well as anti-money laundering compliance and cybersecurity issues. Since February 2021, RHF has received requests for documents and information from theThe SEC’s Division of Enforcement in connection with its investigation into account takeovers and, more recently, suspicious activity report filings andis also investigating issues related to compliance with the Electronic Funds Transfer Act. Additionally, state regulators, including the New York Attorney General’s Office, have opened inquiries into RHM, RHF, and RHC related to account takeovers. We are cooperating with these investigations and inquiries.investigations.
In January 2021, Siddharth Mehta filed a putative class action in California state court against RHF and RHS, purportedly on behalf of approximately 2,000 Robinhood customers whose accounts were allegedly accessed by unauthorized users. RHF and RHS removed this action to the United States District Court for the Northern District of California. Plaintiff generally alleges that RHF and RHS breached commitments made and duties owed to customers to safeguard customer data and assets and seekseeks monetary damages and injunctive relief. In April 2022, the parties reached a settlement in principle to resolve this matter. The settlement agreement has been preliminarily approved by the court.
Massachusetts Securities Division Matter
In December 2020, the Enforcement Section of the Massachusetts Securities Division (“MSD”) filed an administrative complaint against RHF, which stems from an investigation initiated by the MSD in July 2020. The complaint alleged three counts of Massachusetts securities law violations regarding alleged unethical and dishonest conduct or practices, failure to supervise, and failure to act in accordance with the Massachusetts fiduciary duty standard, which became effective on March 6, 2020 and had an
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effective enforcement date beginning September 1, 2020. Among other things, the MSD alleged that our product features and marketing strategies, outages, and options trading approval process constitute
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violations of Massachusetts securities laws. MSD subsequently filed an amended complaint that seeks, among other things, injunctive relief (a permanent cease and desist order), censure, restitution, disgorgement, appointment of an independent consultant, an administrative fine, and revocation of RHF's license to operate in Massachusetts. If RHF were to lose its license to operate in Massachusetts, we would not be able to acquire any new customers in Massachusetts, and we expect that our current customers in Massachusetts would be unable to continue utilizing any of the services or products offered on our platform (other than closing their positions) and that we may be forced to transfer such customers’ accounts to other broker-dealers. Additionally, revocation of RHF’s Massachusetts license could trigger similar disqualification or proceedings to restrict or condition RHF’s registration by other state regulators. A revocation of RHF’s license to operate in Massachusetts would result in RHF and RHS being subject to statutory disqualification by FINRA and the SEC, which would then result in RHF needing to obtain relief from FINRA subject to SEC review in order to remain a FINRA member and RHS possibly needing relief from FINRA or other SROs.
In April 2021, RHF filed a complaint and motion for preliminary injunction and declaratory relief in Massachusetts state court seeking to enjoin the MSD administrative proceeding and challenging the legality of the Massachusetts fiduciary duty standard. In September 2021, the parties filed cross-motions for partial judgment on the pleadings. In March 2022, the court ruled in favor of RHF, declaring that the Massachusetts fiduciary duty regulation was unlawful. The MSD has filed a notice of appeal.is appealing the ruling and it is scheduled to be heard by the Massachusetts Supreme Judicial Court in May 2023. A hearing on the two remaining counts alleged by the MSD in its amended administrative complaint is expected to begin in early 2023.has been continued pending resolution of the appeal.
Text Message Litigation
In August 2021, Cooper Moore filed a putative class action against RHF alleging that RHF initiated or assisted in the transmission of commercial electronic text messages to Washington State residents without their consent in violation of Washington state law. The complaint seeks statutory and treble damages, injunctive relief, and attorneys’ fees and costs. The case is currently pending in the U.S. District Court for the Western District of Washington. RHF filed a motion to dismiss the complaint. In February 2022, Moore and Andrew Gillette filed an amended complaint, which RHF again moved to dismiss. In August 2022, the court denied RHF’s motion to dismiss.
Early 2021 Trading Restrictions Matters

Beginning on January 28, 2021, due to increased deposit requirements imposed on RHS by the NSCC in response to unprecedented market volatility, particularly in certain securities, RHS temporarily restricted or limited its customers’ purchase of certain securities, including GameStop Corp. and AMC Entertainment Holdings, Inc., on our platform (the “Early 2021 Trading Restrictions”).
A number of individual and putative class actions related to the Early 2021 Trading Restrictions were filed against RHM, RHF, and RHS, among others, in various federal and state courts. In April 2021, the Judicial Panel on Multidistrict Litigation entered an order centralizing the federal cases identified in a motion to transfer and coordinate or consolidate the actions filed in connection with the Early 2021 Trading Restrictions in the United States District Court for the Southern District of Florida (the “MDL”).Florida. The court subsequently divided plaintiffs’ claims against Robinhood into three tranches: federal antitrust claims, federal securities law claims, and state law claims. In July 2021, plaintiffs filed consolidated complaints seeking monetary damages in connection with the federal antitrust and state law tranches. The federal antitrust complaint asserted one violation of Section 1 of the Sherman Act; the state law complaint asserted negligence and breach of fiduciary duty claims. In August 2021, we moved to dismiss both of these complaints.
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In September 2021, plaintiffs filed an amended complaint asserting state law claims of negligence, breach of fiduciary duty, tortious interference with contract and business relationship, civil conspiracy, and breaches of the covenant of good faith and fair dealing and implied duty of care. In January 2022, the
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court dismissed the state law complaint with prejudice. Plaintiffs have appealed the court’s order to the United States Court of Appeals for the Eleventh Circuit.
In November 2021, the court dismissed the federal antitrust complaint without prejudice. In January 2022, plaintiffs filed an amended complaint in connection with the federal antitrust tranche and Robinhood moved to dismiss the amended complaint. In May 2022, the court dismissed the federal antitrust complaint with prejudice. Plaintiffs have appealed the court’s order to the United States Court of Appeals for the Eleventh Circuit.
In November 2021, plaintiffs for the federal securities tranche filed a complaint alleging violations of Sections 9(a) and 10(b) of the Exchange Act. In January 2022, we moved to dismiss the federal securities law complaint. In August 2022, the court granted in part and denied in part Robinhood’s motion to dismiss.
RHM, RHF, RHS, and our Co-Founder and CEO, Vladimir Tenev, among others, have received requests for information, and in some cases, subpoenas and requests for testimony, related to investigations and examinations of the Early 2021 Trading Restrictions from the United States Attorney’s Office for the Northern District of California (“USAO”), the U.S. Department of Justice ("DOJ”), Antitrust Division, the SEC’s Division of Enforcement, FINRA, the New York Attorney General’s Office, other state attorneys general offices, and a number of state securities regulators. Also, a related search warrant was executed by the USAO to obtain Mr. Tenev’sTenev's cell phone. There have been several inquiries based on specific customer complaints. We have also received requests from the SEC’s Division of Examinations andSEC Division of Enforcement and FINRA related to employee trading in certain securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp. and AMC Entertainment Holdings, Inc., during the week of January 25, 2021. These matters include requests related to whether any employee trading in these securities may have occurred after the decision to impose the Early 2021 Trading Restrictions and before the public announcement of the Early 2021 Trading Restrictions on January 28, 2021. We are cooperating with these investigations and examinations. The SEC’s Division of Examinations concluded their examinations related to the Early 2021 Trading Restrictions. In February 2022, SEC staff notified us of their findings to which we responded in April 2022.investigations. FINRA Enforcement has also requested information about policies, procedures, and supervision related to employee trading generally.
Registration Requirements for Member Personnel
In July 2021, RHF receivedJanuary 2023, approximately 4,700 jointly represented customers filed a FINRA investigative request seeking documents and information related to its compliancestatement of claim with FINRA registration requirements for member personnel, including related to initiate arbitration of individual claims against RHF and RHS arising out of the FINRA non-registration status of Mr. Tenev and Co-Founder and Chief Creative Officer Mr. Bhatt. Robinhood is cooperating with the investigation.Early 2021 Trading Restrictions.
IPO Litigation
In December 2021, Philip Golubowski filed a putative class action in the U.S. District Court for the Northern District of California against RHM, the officers and directors who signed Robinhood’s IPOinitial public offering (“IPO”) offering documents, and Robinhood’s IPO underwriters. Plaintiff’s claims are based on alleged false or misleading statements in Robinhood’s IPO offering documents allegedly in violation of Sections 11 and 12(a) of the Securities Act of 1933, as amended (the “Securities Act”). Plaintiff seeks compensatory damages, rescission of shareholders’ share purchases, and an award for attorneys’ fees and costs. In February 2022, certain alleged Robinhood stockholders submitted applications seeking appointment by the court to be the lead plaintiff to represent the putative class in this matter, and in March 2022, the court appointed lead plaintiffs. In June 2022, plaintiffs filed an amended complaint. In August 2022, Robinhood filed a motion to dismiss the complaint. In February 2023, the court granted Robinhood’s motion without prejudice. In March 2023, plaintiffs filed a second amended complaint.
In January 2022, Robert Zito filed a complaint derivatively on behalf of Robinhood against Robinhood’s directors at the time of its IPO in the U.S. District Court for the District of Delaware. Plaintiff
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alleges breach of fiduciary duties, waste of corporate assets, unjust enrichment, and violations of Section 10(b) of the Exchange Act. Plaintiff’s claims are based on allegations of false or misleading statements in
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Robinhood’s IPO offering documents, and plaintiff seeks an award of damages and restitution to the Company, injunctive relief, and an award for attorney’s fees and costs. In March 2022, the district court entered a stay of this litigation pending resolution of Robinhood’s motion to dismiss in the Golubowski securities action discussed above.
In August 2022, a shareholder sent a letter to the RHM Boardboard of Directorsdirectors demanding, among other things, that the Boardboard of Directorsdirectors pursue causes of action on behalf of the Company related to allegations of misconduct in connection with the Early 2021 Trading Restrictions, Robinhood’s IPO offering documents, and the data security incident we experienced in November 2021 when an unauthorized third-party socially engineered a customer support employee by phone and obtained access to certain customer support systems (the “November 2021 Data Security Incident.Incident”). The Board has formed a Demand Review Committee that is reviewing the demand.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section presents management’s perspective on our financial condition and results of operations, including performance metrics that management uses to assess company performance. The following discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this Quarterly Report, on Form 10-Q (“Quarterly Report”), and should be read in conjunction with our interim unaudited condensed consolidated financial statements and notes elsewhere in this Quarterly Report and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 20212022 Form 10-K. It is also intended to provide you with information that will assist you in understanding our consolidated financial statements, the changes in key items in those consolidated financial statements from year to year, and the primary factors that accounted for those changes. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which might not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”
Data as of and for the three and nine months ended September 30, 2021March 31, 2022 and 20222023 has been derived from our unaudited condensed consolidated financial statements appearing at the beginning of this Quarterly Report. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period.
We refer to our “users” and our “customers” interchangeably throughout this Quarterly Report to refer to individuals who hold accounts on our platform. The definition of “customer” under Exchange Act Rule 15c3-3 means any person from whom or on whose behalf a broker or dealer has received or acquired or holds funds or securities
Glossary Terms
•Automated Customer Account Transfer Service (“ACATS”): A system that automates and standardizes procedures for the transfer of assets in a customer account from one brokerage firm and/or bank to another.
•Churned Account: An account is considered “Churned” if it was ever a New Funded Account whose account balance (measured as the fair value of that person. However, because we do not earn considerationassets in the account less any amount due from users (other than Robinhood Gold Subscribersthe user and excluding certain Company-initiated Credits) drops to or below zero for at least 45 consecutive calendar days. Negative balances typically result from Fraudulent Deposit Transactions (as defined below) and unauthorized debit card users), usersuse, and less often, from margin loans.
•Company-initiated Credits: Company-initiated Credits are not “customers” as defined in ASC 606, Revenue from Contractsamounts that are deposited into a Robinhood Account by the Company with Customers. Accordingly, our users do not meetno action taken by the definitionuser. Examples of “customer”Company-initiated Credits excluded for purposes of the accounting rules. See “—Revenue Recognition” in Note 1 to our audited consolidated financial statements included in our 2021 Form 10-K.identifying Churned Accounts and Resurrected Accounts are price correction credits, related interest adjustments, and fee adjustments.

•Daily Average Revenue Trades (“DARTs”): We define DARTs for any asset class as the total number of revenue generating trades for such asset class executed during a given period divided by the number of trading days for such asset class in that period.
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•Fraudulent Deposit Transactions: Occur when users initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount.
•Margin Book: We define Margin Book as our period-end aggregate outstanding margin loan balances receivable (i.e., the period-end total amount we are owed by customers on loans made for the purchase of securities, supported by a pledge of assets in their margin-enabled brokerage accounts).
•New Funded Account: We define a New Funded Account as a Robinhood Account into which the user makes an initial deposit, money transfer or asset transfer, of any amount during the relevant period.
•Notional Trading Volume: We define Notional Trading Volume for any specified asset class as the aggregate dollar value (purchase price or sale price as applicable) of trades executed in that asset class over a specified period of time.
•Options Contracts Traded: We define Options Contracts Traded as the total number of options contracts bought or sold over a specified period of time. Each contract generally entitles the holder to trade 100 shares of the underlying stock.
•Resurrected Account: An account is considered “Resurrected” in a stated period if it was a Churned Account as of the end of the immediately preceding period and its balance (excluding certain Company-initiated Credits) rises above zero.
•Robinhood Account: We define a Robinhood Account as a unique log-in that provides the account user access to any and all of the Robinhood products offered on our platform.
Key Performance Metrics
•Net Cumulative Funded Accounts (“NCFA”):We define Net Cumulative Funded Accounts as New Funded Accounts less Churned Accounts plus Resurrected Accounts.
•Monthly Active Users (“MAU”): We define MAUs as the number of unique Robinhood Accounts who meet one of the following criteria at any point during a specified calendar month: a) executes a debit card transaction, b) transitions between two different screens on a mobile device while logged into their Robinhood Account or c) loads a page in a web browser while logged into their Robinhood Account. A user need not satisfy these conditions on a recurring monthly basis or have a funded account to be included in MAU. MAU figures in this Quarterly Report reflect MAU for the last month of the relevant period presented. We utilize MAU to measure how many customers interact with our products and services during a given month. MAU does not measure the frequency or duration of the interaction, but we consider it a useful indicator for engagement. Additionally, MAUs are positively correlated with, but are not indicative of, the performance of revenue and other key performance indicators.
•Assets Under Custody (“AUC”): We define AUC as the sum of the fair value of all equities, options, cryptocurrency and cash held by users in their accounts, net of receivables from users, as of a stated date or period end on a trade date basis. Net Deposits and net market gains (losses) drive the change in AUC in any given period.
•Net Deposits: We define Net Deposits as all cash deposits and asset transfers received from customers, net of reversals, customer cash withdrawals, and other assets transferred out of our platform (assets transferred in or out include debit card transactions, ACATS transfers, and custodial crypto wallet transfers) for a stated period.
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•Growth Rate and Annualized Growth Rate with respect to Net Deposits: When used with respect to Net Deposits, "growth rate" and "annualized growth rate" provide information about Net Deposits relative to total AUC. "Growth rate" is calculated as aggregate Net Deposits over a specified 12 month period, divided by AUC for the fiscal quarter that immediately precedes such 12 month period. "Annualized growth rate" is calculated as Net Deposits for a specified quarter multiplied by 4 and divided by AUC for the immediately preceding quarter.
•Average Revenue Per User (“ARPU”): We define ARPU as total revenue for a given period divided by the average of Net Cumulative Funded Accounts on the last day of that period and the last day of the immediately preceding period.
Overview
Robinhood was founded on the belief that everyone should be welcome to participate in our financial system. We are creating a modern financial services platform for everyone, regardless of their wealth, income, or background.
Our mission is to democratize finance for all. We use mobile phone technology to provide access to the financial system in a way that is simple and convenient for our customers. We believe investing should be familiar and welcoming, with a simple design and an intuitive interface, so that customers are empowered to achieve their goals. We started with a revolutionary, bold brand and design andin the Robinhood app nowwhich makes investing approachable for millions. We pioneered commission-free stock trading with no account minimums, which the rest of the industry emulated, and we have continuedcontinue to build relationships with our customers by introducing new products that further expand access to the financial system. Through these efforts, we believe we have made investing culturally relevant and understandable, and that our platform is enabling our customers to become long-term investors and take greater control of their finances.
Financial Results and Performance
With respect to the three months ended September 30, 2022,March 31, 2023, as compared to the three months ended September 30, 2021:March 31, 2022:
•we generated total net revenues of $361$441 million compared to $365$299 million, for a year-over-year decreaseincrease of 1%;47%.
•we incurred a net loss of $175$511 million, which includedor -$0.57 per share, compared to net loss of $392 million, or -$0.45 per share;
•operating expenses were $950 million compared to $690 million, for a year-over-year increase of 38%;
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◦SBC expense totaled $110598 million, of share-based compensation expense,which $485 million related to the 2021 Founders Award Cancellation, compared to $1.32 billion, which included $1.24 billion of share-based compensation expense as a result of our IPO in July 2021,$220 million, for a year-over-year improvementincrease of $1.14 billion;172%;
•our Adjusted EBITDA (non-GAAP) was positive $47115 million compared to negative $84143 million, for year-over-year improvementincrease of $131$258 million;
•we had Net Cumulative Funded AccountsNCFA of 22.923.1 million compared to 22.422.8 million, for year-over-year growth of 2%1%;
•we had Monthly Active Users (MAU)MAU of 12.211.8 million compared to 18.915.9 million, for a year-over-year decrease of 35%26%, as our customers navigatedcontinued to navigate the volatile market environment;
•we had Assets Under Custody (AUC)AUC of $64.6$78.4 billion compared to $95.4$93.1 billion, for a year-over-year decrease of 32%16%, primarily due to decreasing asset values inbetween the current market environment;periods;
•Net Deposits were $4.4 billion, which translates to an annualized growth rate of 29%, compared to $5.7 billion, which translates to an annualized growth rate of 23%. Over the past twelve months, Net Deposits were $17.1 billion, which translates to a growth rate of 18% relative to AUC at March 31, 2023;
•we had Average Revenues Per User (ARPU)ARPU of $63$77 compared to $65,$53, for a year-over-year decreaseincrease of 3%45%. The decrease was primarily related to lower transaction-based revenue driven by the current market environment, which had a negative impact on the number of traders and notional trading volumes in all asset classes.
For definitions of “Net Cumulative Funded Accounts,” “MAU,” “AUC,” and “ARPU” please see “—Key Performance Metrics” below. Adjusted EBITDA is a non-GAAP financial measure. For more information about Adjusted EBITDA, including the definition and limitations of such measure, and a reconciliation of net income (loss) to Adjusted EBITDA, please see “—Non-GAAP Financial Measures” below.
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Recent Developments
Pending Acquisition of Ziglu2021 Founders Award Cancellation
On April 16, 2022,In February 2023, we entered into a definitive agreement to acquire all outstanding equity of Ziglu, a U.K.-based electronic money institution and crypto-asset firm that allows customers to buy and sell eligible cryptocurrencies, earn yield via its ‘Boost’ products, pay using a debit card, and move and spend money without fees. See Note 3cancelled the 2021 Market-Based RSUs granted to our unaudited consolidated financial statements in this Quarterly Report for further information.

Restructurings

In 2020 and the first halffounders of 2021, we went through a period of hyper growth accelerated by several factors including pandemic lockdowns, low interest rates, and fiscal stimulus. From the beginning of 2020 to the end of 2021, we grew net funded accounts from 5.135.5 million to 22.7unvested shares. We recognized $485 million and revenue from $278 million in 2019 to $1.8 billion in 2021. To meet customer and market demands, we grew our headcount from 700 at the end of 2019 to nearly 3,900 at the end of the first quarter of 2022. This rapid headcount growth led to some duplicate roles and job functions with more layers and complexity than were optimal. As a result, we have undertaken two restructurings, detailed below, and significantly reduced our hiring plans for 2022.
April 2022 Restructuring. On April 26, 2022, we announced a reduction in force involving approximately 330 employees, representing approximately 9% of our full-time employees at the time.
August 2022 Restructuring. On August 2, 2022 we announced an additional reduction in force involving approximately 780 employees, representing approximately 23% of our full-time employees at the time, the planned closure of two offices, and related matters. These actions were part of a Company reorganization into a GM structure under which GMs have started to assume broad responsibility for our individual businesses. As we continued to execute the August 2022 Restructuring, our lower headcount led us to evaluate our real estate portfolio. On September 30, 2022, we decided to partially or completely close five additional offices as part of the August 2022 Restructuring, four of which were not occupied.
See Note 5 and Note 11 to our unaudited consolidated financial statements in this Quarterly Report for further information relating to these restructurings.

COVID-19 Update
In the fourth quarter of 2021, we elected to become a “Remote First” company and we fully implemented this program in April 2022. Under this approach, a large segment of our employees has no assigned location or regular in-office requirement, some teams need to live within a commutable distance to an office location for regulatory and business reasons, and a small segment of our workforce still needs to come into the office. All employees currently have access to our offices throughout the country. Starting in July 2022, we no longer require proof of vaccination or a negative test for entry into our offices. We continue to monitor developmentsSBC expense related to the pandemic, such ascancellation during the severitythree months ended March 31, 2023. No further expense associated with these awards will be recognized after the cancellation. No other payments, replacement equity awards or benefits were granted in connection with the cancellation. The 2021 Founders Award Cancellation will lower our operating expenses by up to $50 million per quarter starting in the second quarter of 2023.
2023 Banking Events
In March 2023, certain U.S. banks failed and transmission ratewere taken over by the FDIC. As of the virus and its variants,March 31, 2023, our exposure to impacted U.S. banks is immaterial, and we may adjusthave taken steps to help ensure that the loss of all or a significant portion of any uninsured amount would not have an adverse effect on our workplace strategy as necessary.

ability to pay our operational expenses or make other payments.

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Key Performance Metrics
In addition to the measures presented in our unaudited condensed consolidated financial statements, we use the following key performance metrics to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions:
Three Months Ended
September 30,
20212022
Net Cumulative Funded Accounts(1) (in millions)
22.4 22.9 
Monthly Active Users (MAU)(2) (in millions)
18.9 12.2 
Assets Under Custody (AUC)(3) (in billions)
$95.4 $64.6 
Average Revenues Per User (ARPU)(4)
$65 $63 
Three Months Ended
March 31,
20222023
NCFA(1) (in millions)
22.8 23.1 
MAU (in millions)
15.9 11.8 
AUC(2) (in billions)
$93.1 $78.4 
Net Deposits (in billions)
$5.7 $4.4 
ARPU (in dollars)
$53 $77 
________________
(1)A Robinhood account is designed to provide a user with access to any and all ofThe following table describes the products offered on our platform. We define “Net Cumulative Funded Accounts” as New Funded Accounts less Churned Accounts plus Resurrected Accounts (each as defined below). A “New Funded Account” is a Robinhood account into which the account user makes an initial deposit or money or asset transfer, of any amount, during the relevant period. An account is considered “Churned” if it was ever a New Funded Account and its balance (measured as the fair value of assets in the account less any amount due from the user and excluding certain Company-initiated credits) drops to or below zero for at least 45 consecutive calendar days. Negative balances typically result from Fraudulent Deposit Transactions (as defined in Note 6 to our unaudited condensed consolidated financial statements in this Quarterly Report for further information) and, less often, from margin loans. An account is considered “Resurrected” in a stated period if it was a Churned Account as of the end of the immediately preceding period and its balance (excluding certain Company-initiated credits) rises above zero. Examples of credits excluded for purposes of identifying Churned Accounts and Resurrected Accounts are price correction credits, related interest adjustments, and fee adjustments.annual changes within NCFA:

Three Months Ended
 September 30,
(in millions)20212022
Beginning Net Cumulative Funded Accounts22.5 22.9 
New funded accounts0.7 0.3 
Resurrected accounts0.1 0.1 
Churned accounts(0.9)(0.4)
Ending Net Cumulative Funded Accounts22.4 22.9 

Three Months Ended
 March 31,
(in millions)20222023
Beginning NCFA22.7 23.0 
New funded accounts0.5 0.3 
Resurrected accounts0.1 0.1 
Churned accounts(0.5)(0.3)
Ending NCFA22.8 23.1 
(2)We define MAU as the number of Monthly Active Users during a specified calendar month. A “Monthly Active User” is a unique user who makes a debit card transaction, or who transitions between two different screens on a mobile device or loads a page in a web browser while logged into their account, at any point during the relevant month. A user need not satisfy these conditions on a recurring monthly basis or have a Funded Account to be included in MAU. Figures in the table reflect MAU for the last month of each period presented. We utilize MAU to measure how many customers interact with our products and services during a given month. MAU does not measure the frequency or duration of the interaction, but we consider it a useful indicator for engagement. Additionally, MAUs are positively correlated with, but are not indicative of, the performance of revenue and other key performance indicators.
(3)We define AUC as the sum of the fair value of all equities, options, cryptocurrency and cash held by users in their accounts, net of receivables from users, as of a stated date or period end on a trade date basis. The following table sets out the components of AUC by type of asset:
Three Months Ended
March 31,
(in billions)20222023
Equities$68.5 $55.3 
Cryptocurrencies19.7 11.5 
Options1.1 0.4 
Cash held by users9.2 14.2 
Receivables from users(5.4)(3.0)
AUC$93.1 $78.4 
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Three Months Ended
September 30,
(in billions)20212022
Equities$69.2 $50.7 
Options1.4 0.4 
Cryptocurrencies22.2 9.4 
Cash held by users8.8 8.1 
Receivables from users(6.2)(4.0)
Assets Under Custody (AUC)$95.4 $64.6 
Net Deposits and net market gains drive the change in AUC in any given period. We define “Net Deposits” as all cash deposits and asset transfers received from customers, net of reversals, customer cash withdrawals, and other assets transferred out of our platform (assets transferred in or out include debit card transactions, ACATS transfers, and custodial crypto wallet transfers) for a stated period. The following table describes the changes within Assets Under Custody:
Three Months Ended
September 30,
(in billions)20212022
Beginning AUC$102.0 $64.2 
Net Deposits2.2 2.7 
Net market losses(8.8)(2.3)
Ending AUC$95.4 $64.6 
(4)AUC:We define ARPU as total revenue for a given period divided by the average of Net Cumulative Funded Accounts on the last day of that period and the last day of the immediately preceding period. Figures presented above represent annualized ARPU for each three-month period presented.
Three Months Ended
March 31,
(in billions)20222023
Beginning AUC$98.0 $62.2 
Net Deposits5.7 4.4 
Net market gains (losses)(10.6)11.8 
Ending AUC$93.1 $78.4 

Non-GAAP Financial Measures
Adjusted EBITDA
We collect and analyze operating and financial data to evaluate the health of our business, allocate our resources and assess our performance. In addition to total net revenues, net income (loss), and other
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results under GAAP, we utilize non-GAAP calculations of adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”). Adjusted EBITDA is defined as net income (loss), excluding (i) interest expenses related to credit facilities, (ii) provision for (benefit from) income taxes, (iii) depreciation and amortization, (iv) share-based compensation,SBC, (v) change in fair value of convertible notes and warrant liability, (vi) significant legal and tax settlements and reserves, and (vii) other significant gains, losses, and expenses (such as impairments, restructuring charges, and business acquisition- or disposition-related expenses) that we believe are not indicative of our ongoing results. This non-GAAP financial information is presented for supplemental informational purposes only, should not be considered a substitute for or superior to financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies.

The above items are excluded from our Adjusted EBITDA measure because these items are non-cash in nature, or because the amount and timing of these items are unpredictable, are not driven by core results of operations, and render comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as providing a useful measure for period-to-period comparisons of our business performance. Moreover, Adjusted EBITDA is a key measurement used by our management internally to make operating decisions, including those related to operating expenses, evaluate performance, and perform strategic planning and annual budgeting.
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The following table presents a reconciliation of net income (loss),loss, which is the most directly comparable GAAP measure, to Adjusted EBITDA:
Three Months Ended
 September 30,		Nine Months Ended
September 30,
(in millions)2021202220212022
Net loss$(1,317)$(175)$(3,264)$(862)
Add:
Interest expenses related to credit facilities6 6 14 18 
Provision for (benefit from) income taxes(50)1 (1)3 
Depreciation and amortization8 15 17 44 
EBITDA (non-GAAP)(1,353)(153)(3,234)(797)
Share-based compensation(1)
1,244 110 1,254 494 
Change in fair value of convertible notes and warrant liability25 — 2,045 — 
Restructuring charges(2)
— 90 — 107 
Significant legal and tax settlements and reserves— — 55 20 
Adjusted EBITDA (non-GAAP)$(84)$47 $120 $(176)
________________
(1) In 2022, share-based compensation benefited from restructuring-related net reversals of previously recognized expense as follows (see Note 5 to our unaudited condensed consolidated financial statements in this Quarterly Report for further information):
•$53 million for the three months ended September 30, 2022 in connection with the August 2022 Restructuring;
•$77 million for the nine months ended September 30, 2022 in connection both with the April 2022 Restructuring and August 2022 Restructuring.
(2) In 2022, restructuring charges includes (see Note 5 to our unaudited condensed consolidated financial statements in this Quarterly Report for further information):
•$90 million for the three months ended September 30, 2022, related to the August 2022 Restructuring, consisting of $47 million of impairments and $9 million of accelerated depreciation, in each case relating to office closures, and $34 million of cash charges for employee-related wages, benefits and severance; and
•$107 million for the nine months ended September 30, 2022 related to both the April 2022 Restructuring and August 2022 Restructuring and consisting of $47 million of impairments and $9 million of accelerated depreciation, in each case relating to office closures, and $51 million of cash charges for employee-related wages, benefits and severance.
Three Months Ended
March 31,
(in millions)20222023
Net loss$(392)$(511)
Add:
Interest expenses related to credit facilities6 6 
Provision for income taxes1 2 
Depreciation and amortization12 20 
EBITDA (non-GAAP)(373)(483)
2021 Founders Award Cancellation— 485 
SBC excluding 2021 Founders Award Cancellation220 113 
Significant legal and tax settlements and reserves10 — 
Adjusted EBITDA (non-GAAP)$(143)$115 



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Results of Operations
The following table summarizes our unaudited condensed consolidated statements of operations data:
(in millions)(in millions)Three Months Ended
September 30,		Nine Months Ended
September 30,		(in millions)Three Months Ended
March 31,
202120222021202220222023
Revenues:Revenues:Revenues:
Transaction-based revenuesTransaction-based revenues$267 $208 $1,138 $628 Transaction-based revenues$218 $207 
Net interest revenuesNet interest revenues63 128 193 257 Net interest revenues55 208 
Other revenuesOther revenues35 25 121 93 Other revenues26 26 
Total net revenuesTotal net revenues365 361 1,452 978 Total net revenues299 441 
Operating expenses:(1)
Operating expenses:(1)
Operating expenses:(1)
Brokerage and transactionBrokerage and transaction44 33 123 94 Brokerage and transaction31 36 
Technology and developmentTechnology and development679 185 952 695 Technology and development268 199 
OperationsOperations108 64 276 241 Operations91 42 
MarketingMarketing87 19 283 77 Marketing32 26 
General and administrativeGeneral and administrative790 234 1,039 728 General and administrative268 647 
Total operating expensesTotal operating expenses1,708 535 2,673 1,835 Total operating expenses690 950 
Change in fair value of convertible notes and warrant liability25 — 2,045 — 
Other expense (income), net(1)— (1)2 
Loss before income taxesLoss before income taxes(1,367)(174)(3,265)(859)Loss before income taxes(391)(509)
Provision for (benefit from) income taxes(50)1 (1)3 
Provision for income taxesProvision for income taxes1 2 
Net lossNet loss$(1,317)$(175)$(3,264)$(862)Net loss$(392)$(511)
_______________
(1)Includes share-based compensationSBC expense as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions)(in millions)2021202220212022(in millions)20222023
Brokerage and transactionBrokerage and transaction$6 $2 $6 $4 Brokerage and transaction$1 $2 
Technology and developmentTechnology and development50325 505 166 Technology and development82 54 
OperationsOperations16 — 16 5 Operations4 2 
MarketingMarketing41 — 41 3 Marketing5 1 
General and administrativeGeneral and administrative678 83 686 316 General and administrative128 539 
Total share-based compensation expense$1,244 $110 $1,254 $494 
Total SBC expenseTotal SBC expense$220 $598 

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Comparison of the Three and Nine Months Ended September 30, 2021March 31, 2022 and 20222023
Revenues

Revenues
Transaction-Based Revenues

Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions, except for percentages)(in millions, except for percentages)20212022% Change20212022% Change(in millions, except for percentages)20222023% Change
Transaction-based revenuesTransaction-based revenuesTransaction-based revenues
OptionsOptions$164$124(24)%$527$364(31)%Options$127$1335 %
CryptocurrenciesCryptocurrencies5151— %372163(56)%Cryptocurrencies5438(30)%
EquitiesEquities5031(38)%23596(59)%Equities3627(25)%
OtherOther22— %4525 %Other19800 %
Total transaction-based revenuesTotal transaction-based revenues$267$208(22)%$1,138$628(45)%Total transaction-based revenues$218$207(5)%
Transaction-based revenues as a % of total net revenues:Transaction-based revenues as a % of total net revenues:Transaction-based revenues as a % of total net revenues:
OptionsOptions45%34%36%37%Options42%30%
CryptocurrenciesCryptocurrencies14%14%26%17%Cryptocurrencies18%9%
EquitiesEquities14%8%16%10%Equities12%6%
OtherOther1%1%—%1%Other—%2%
Total transaction-based revenuesTotal transaction-based revenues74%57%78%65%Total transaction-based revenues72%47%
Transaction-based revenues decreased by $59$11 million and $510 million for the three and nine months ended September 30, 2022, compared to the same periods in the prior year. The decreases were primarily driven by the market environment, which had a negative impact on the number of traders and notional trading volumes inacross all asset classes. We define "notional trading volume" for any specified asset class as the aggregate dollar value (purchase price or sale price as applicable) of trades executedclasses, and a decrease in that asset class over a specified period of time. We define “daily average revenue trades” for any asset class as the total number of revenue generating trades for such asset class executed during a given period divided byNotional Trading Volumes across cryptocurrencies and equities, partially offset an increase in Options Contracts Traded.
Options Contracts Traded was up 15%, while options DARTs decreased from 0.7 million to 0.6 million and the number of trading days for such asset class in that period.users placing option trades decreased 26%. Additionally, we experienced lower option rebate rates due to reduced market volatility and the mix of ticker symbols traded as different ticker symbols pay different rebate rates.
While cryptocurrencies revenue benefitedCrypto DARTs decreased from a higher rebate rate from crypto market makers (initial increase was effective in late December 2021 and a further increase was effective in May 2022), this benefit was offset by lower trading volumes. Our daily average revenue trades for cryptocurrencies decreased for the three and nine months ended September 30, 2022, from 0.50.3 million to 0.3 million and from 1.5 million to 0.3 million, compared to the same periods in the prior year.0.2 million. Additionally, the number of users placing cryptocurrency trades decreased 58%38% and 64% while the average notional volumeNotional Trading Volume traded per trader decreased 25%. The decrease was down 35% and 42%partially offset by a higher rebate rate from crypto market makers (increase was effective in May 2022).
Our daily average revenue trades for optionsEquities DARTs decreased for the three and nine months ended September 30, 2022, from 0.7 million to 0.5 million and from 0.9 million to 0.6 million, compared to the same periods in the prior year. Additionally, the number of users placing option trades decreased 36% and 42% while the average number of contracts traded per trader went up 32% and 31%.
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Our daily average revenue trades for equities decreased for the three and nine months ended September 30, 2022, from 2.2 million to 1.5 million and from 3.41.8 million to 1.6 million, compared to the same periods in the prior year. Additionally, themillion. The number of users placing equity trades decreased 34%20% and 48% while the average notional volume tradedNotional Trading Volume per trader increased 9% and decreased 2%3%. Additionally, we experienced lower equity rebate rates due to reduced spreads in securities pricing.

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Net Interest Revenues
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions, except for percentages)(in millions, except for percentages)20212022% Change20212022% Change(in millions, except for percentages)20222023% Change
Net interest revenues:Net interest revenues:Net interest revenues:
Interest on corporate cash and investmentsInterest on corporate cash and investments$1 $68 NM
Margin interestMargin interest$34 $48 41%$93 $122 31%Margin interest35 53 51%
Interest on segregated cash and cash equivalents and depositsInterest on segregated cash and cash equivalents and deposits1 45 NM
Securities lending, netSecurities lending, net33 29 (12)%107 76 (29)%Securities lending, net24 26 8%
Interest on investments and corporate cash— 29 NM1 40 NM
Interest on segregated cash and cash equivalents and deposits1 20 NM3 27 800%
Cash sweepCash sweep1 8 NM3 10 233%Cash sweep— 22 NM
Interest expenses related to credit facilitiesInterest expenses related to credit facilities(6)(6)—%(14)(18)29%Interest expenses related to credit facilities(6)(6)—%
Total net interest revenuesTotal net interest revenues$63 $128 103%$193 $257 33%Total net interest revenues$55 $208 278%
Net interest revenues as a % of total net revenues:Net interest revenues as a % of total net revenues:Net interest revenues as a % of total net revenues:
Margin interestMargin interest10 %13 %6 %12 %Margin interest12 %12 %
Securities lending, netSecurities lending, net9 %8 %7 %8 %Securities lending, net8 %6 %
Interest on investments and corporate cash— %8 %— %4 %
Interest on corporate cash and investmentsInterest on corporate cash and investments— %15 %
Interest on segregated cash and cash equivalents and depositsInterest on segregated cash and cash equivalents and deposits— %6 %1 %3 %Interest on segregated cash and cash equivalents and deposits— %10 %
Cash sweepCash sweep— %2 %— %1 %Cash sweep— %5 %
Interest expenses related to credit facilitiesInterest expenses related to credit facilities(2)%(2)%(1)%(2)%Interest expenses related to credit facilities(2)%(1)%
Total net interest revenuesTotal net interest revenues17 %35 %13 %26 %Total net interest revenues18 %47 %

Net interest revenues increased by $153 million primarily due to $67 million higher interest revenues earned from corporate cash and investments, $44 million from segregated cash and cash equivalents and deposits, $22 million from cash sweep, and $18 million from margin interest. These increases were primarily driven by the higher short term interest rate environment due to the rise in the federal funds rate, which is an input to our floating margin rate calculation and impacts the interest rate we receive on investable assets. Net interest revenues from margin interest also increased due to the higher interest rate while our Margin Book balance declined year-over-year. Segregated cash and cash equivalents and deposits as well as cash sweep balances increased year-over-year, which also contributed to the higher net interest revenues.
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The following table summarizes interest-earningsinterest-earning assets, the revenue or expense generated by these assets, and their respective annualized yields (computed based on average balance over the quarter):
(in millions, except for annualized yield)
Margin Book(1)
Cash and deposits(2)
Cash Sweep
(off-balance sheet)(3)
Total interest-earning assetsSecurities lending, netInterest
expenses
related to credit facilities
Net interest revenue
Three Months Ended September 30, 2022
September 30, 2022$4,085 $9,374 $2,969 $16,428 
June 30, 20224,142 9,717 2,408 16,267 
Average(4)
4,114 9,546 2,689 16,348 
Revenue/expense48 49 8 105 $29 $(6)$128 
Annualized yield(5)
4.67%2.05%1.19%2.57%3.13 %
Three Months Ended June 30, 2022
June 30, 2022$4,142 $9,717 $2,408 $16,267 
March 31, 20225,292 10,983 2,275 18,550 
Average(4)
4,717 10,350 2,342 17,409 
Revenue/expense39 16 2 57 $23 $(6)$74 
Annualized yield(5)
3.31%0.62%0.34%1.31%1.70 %
Three Months Ended September 30, 2021
September 30, 2021$6,063$10,950$2,103$19,116
June 30, 20215,42210,7242,32818,474
Average(4)
5,74310,8372,21618,795
Revenue/expense341 1 36$33 $(6)$63 
Annualized yield(5)
2.37 %0.04 %0.18 %0.77 %1.34 %
Nine Months Ended September 30, 2022
September 30, 2022$4,085$9,374$2,969$16,428
December 31, 20216,46710,6002,09519,162
Average(4)
5,2769,9872,53217,795
Revenue/expense12267 10 199$76 $(18)$257 
Annualized yield(5)
3.08 %0.89 %0.53 %1.49 %1.93 %
Nine Months Ended September 30, 2021
September 30, 2021$6,063$10,950$2,103$19,116
December 31, 20203,3516,5441,82711,722
Average(4)
4,7078,7471,96515,419
Revenue/expense934 3 100$107 $(14)$193 
Annualized yield(5)
2.63 %0.06 %0.20 %0.86 %1.67 %
(in millions, except for annualized yield)
Margin Book(1)
Cash and deposits(2)
Cash sweep
(off-balance sheet)(3)
Total interest-earning assetsSecurities lending, netInterest
expenses
related to credit facilities
Net interest revenue
Three Months Ended March 31, 2023
March 31, 2023$3,117 $10,405 $8,881 $22,403 
December 31, 20223,089 9,530 5,837 18,456 
Average(4)
3,103 9,968 7,359 20,430 
Revenue/(expense)53 113 22 188 $26 $(6)$208 
Annual yield(5)
6.83%4.53%1.20%3.68%4.07 %
Three Months Ended December 31, 2022
December 31, 2022$3,089 $9,530 $5,837 $18,456 
September 30, 20224,085 9,374 2,969 16,428 
Average(4)
3,587 9,452 4,403 17,442 
Revenue/(expense)55 93 12 160 $13 $(6)$167 
Annual yield(5)
6.13%3.94%1.09%3.67%3.83 %
Three Months Ended March 31, 2022
March 31, 2022$5,292 $10,983 $2,275 $18,550 
December 31, 20216,467 10,600 2,095 19,162 
Average(4)
5,879 10,792 2,185 18,856 
Revenue/(expense)35 2 — 37 $24 $(6)$55 
Annual yield(5)
2.38%0.07%—%0.78%1.17 %
__________
(1) “Margin Book”Book is the aggregate outstanding margin loan balances receivable.
(2) Includes cash and cash equivalents, cash and cash equivalents segregated under federal and other regulations, deposits with clearing organizations and investments.
(3) “Cash Sweep” means the total amount of participating users’ uninvested brokerage cash that has been automatically “swept” or moved from their brokerage accounts into deposits for their benefit at a network of program banks. ThisCash sweep is an off-balance-sheet amount. Robinhood earns a net interest spread on Cash Sweep balances based on the interest rate offered by the partner banks less the interest rate given to users as stated in our program terms.
(4) Average balance rows present a simple average of the ending balances as of each of the indicated dates for the relevant period.
(5) AnnualizedAnnual yield is calculated by annualizing the revenue/expense for the given period then dividing by the applicable average asset balance.


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Net interest revenues increased by $65 million and increased by $64 million for the three and nine months ended September 30, 2022, compared to the same periods in the prior year, primarily driven by higher interest revenues earned from investments and corporate cash, margin borrowings and segregated cash and securities, partially offset by lower interest revenues earned through securities lending activities.
Increased net interest revenues were driven by the higher interest rate environment due to the rise in the federal funds rate, which is an input to our floating margin rate calculation and impacts the interest rate we receive on investable assets. Net interest revenues earned from investments and corporate cash increased by $29 million and $39 million for the three and nine months ended September 30, 2022, compared to the same periods in the prior year. Interest revenues earned from margin lending increased by $14 million and $29 million for the three and nine months ended September 30, 2022. The first $1,000 in margin borrowed by each Gold user is not charged interest. During the quarter ended September 30, 2022 we made margin borrowing available to qualifying non-Gold users as well. Net interest revenues earned from segregated cash and cash equivalents and deposits also increased by $19 million and $24 million for the three and nine months ended September 30, 2022. These increases were partially offset by the $4 million and $31 million decrease in net interest revenues earned from securities lending transactions for the three and nine months ended September 30, 2022 due to lower demand in hard-to-borrow securities.
Other Revenues
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions, except for percentages)(in millions, except for percentages)20212022% Change20212022% Change(in millions, except for percentages)20222023% Change
Other revenuesOther revenues$35 $25 (29)%$121 $93 (23)%Other revenues$26 $26 — %
Other revenues as a % of total net revenuesOther revenues as a % of total net revenues10%7%8%10%Other revenues as a % of total net revenues9%6%
Other revenues decreased by $10 millionremained flat and $28 million, for the three and nine months ended September 30, 2022, compared to the same periods in the prior year, substantially all driven by the decreases relating to fees charged to users for facilitating the transferprimarily consisted of their account to another broker-dealer and subscription revenues as a result of a decrease in paid subscribers togenerated from Robinhood Gold, from 1.4 million to 1.1 million.our monthly subscription service.
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Operating Expenses
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions, except for percentages)(in millions, except for percentages)20212022% Change20212022% Change(in millions, except for percentages)20222023% Change
Operating expenses:Operating expenses:Operating expenses:
Brokerage and transactionBrokerage and transaction$44$33(25)%$123$94(24)%Brokerage and transaction$31$3616 %
Technology and developmentTechnology and development679185(73)%952695(27)%Technology and development268199(26)%
OperationsOperations10864(41)%276241(13)%Operations9142(54)%
MarketingMarketing8719(78)%28377(73)%Marketing3226(19)%
General and administrativeGeneral and administrative790234(70)%1,039728(30)%General and administrative268647141 %
Total operating expensesTotal operating expenses$1,708$535$2,673$1,835(31)%Total operating expenses$690$95038 %
Percent of net revenues:Percent of net revenues:Percent of net revenues:
Brokerage and transactionBrokerage and transaction12 %9 %8 %10 %Brokerage and transaction10 %8 %
Technology and developmentTechnology and development186 %51 %66 %71 %Technology and development90 %45 %
OperationsOperations30 %18 %19 %25 %Operations30 %10 %
MarketingMarketing24 %5 %19 %8 %Marketing11 %6 %
General and administrativeGeneral and administrative216 %65 %72 %74 %General and administrative90 %147 %
Total operating expensesTotal operating expenses468 %148 %184 %188 %Total operating expenses231 %216 %
Brokerage and Transaction
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions)(in millions)20212022% Change20212022% Change(in millions)20222023% Change
Broker-dealer transaction expensesBroker-dealer transaction expenses$12$8(33)%$41 $22(46)%Broker-dealer transaction expenses$9 $9—%
Market data expensesMarket data expenses107(30)%25 21(16)%Market data expenses7 6(14)%
Employee compensation, benefits, and overhead, excluding share-based compensation4650%11 1645%
Cash management transaction expenses33—%8 7(13)%
Share-based compensation62(67)%6 4(33)%
Employee compensation, benefits, and overhead, excluding SBCEmployee compensation, benefits, and overhead, excluding SBC5 620%
SBCSBC1 2100%
OtherOther97(22)%32 24(25)%Other9 1344%
TotalTotal$44$33(25)%$123$94(24)%Total$31$3616%
Brokerage and transaction costs decreasedincreased by $11$5 million and $29 million, for the three and nine months ended September 30, 2022, compared to the same periods in the prior year, primarily due to decreases in broker-dealer transaction expenses of $4 million and $19 million, driven by lower trading volume and a reduction of certain of these expenses effective in June 2021. In addition, for the nine months ended September 30, 2022, bank charges includedincreases in other brokerage and transaction costs decreasedof $4 million, mainly driven by $9 million as a resultexpenses associated with certain new products and features launched during the fourth quarter of more favorable pricing from our banking counterparties.2022.
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Technology and Development
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions)(in millions)20212022% Change20212022% Change(in millions)20222023% Change
Employee compensation, benefits, and overhead, excluding share-based compensation$77$9118 %$198$29851 %
Share-based compensation50325(95)%505166(67)%
Employee compensation, benefits, and overhead, excluding SBCEmployee compensation, benefits, and overhead, excluding SBC$104$79(24)%
SBCSBC8254(34)%
Cloud infrastructure servicesCloud infrastructure services78$36(54)%203140(31)%Cloud infrastructure services5632(43)%
Software and toolsSoftware and tools172865 %407690 %Software and tools212938 %
OtherOther4525 %615150 %Other55— %
TotalTotal$679$185(73)%$952$695(27)%Total$268$199(26)%
Technology and development costs decreased by $494$69 million and $257 million for the three and nine months ended September 30, 2022, compared to the same periods in the prior year, primarily due to decreases in share-based compensationSBC expense of $47828 million and $339other employee compensation, benefits, and overhead of $25 million, driven by declined average headcount as higher share-based compensation expenses were recognized as a resultpart of our IPO in July 2021. The April 2022 Restructuringefforts to improve efficiency and August 2022 Restructuring resulted in net reductions of $16 million and $22 million in share-based compensation expense in the three months ended June 30, 2022 and September 30, 2022, respectively.operating costs. Additionally, we experienced decreases in cloud infrastructure services of $42 million and $63$24 million primarily due to cost optimization efforts focusing on improvements in utilization of cloud infrastructure.
These decreases were offset by increasesan $8 million increase in software and tools primarily driven by amortization of employee compensation, benefits,internally developed software and overhead of $14 million and $100 million as our engineering and data science average headcount increased, compared to the same periods in the prior year, to continue to support our platform and develop new products. These expenses also included $6 million and $12 million in other employee compensation expense for restructuring related separation expenses, recognized in the three months ended June 30, 2022 and September 30, 2022, respectively. Finally, we incurred an increase of $11 million and $36 million in costs for other software services utilized in delivering our products.
Operations
Three Months Ended
September 30,		Nine Months Ended
September 30,		Three Months Ended
March 31,
(in millions)(in millions)20212022% Change20212022% Change(in millions)20222023% Change
Employee compensation, benefits, and overhead, excluding share-based compensation$32$3819%$84$12346%
Employee compensation, benefits, and overhead, excluding SBCEmployee compensation, benefits, and overhead, excluding SBC$43$21(51)%
Provision for credit losses and fraudProvision for credit losses and fraud1111—%
Customer experienceCustomer experience2813(54)%69701%Customer experience305(83)%
Provision for credit losses and fraud309(70)%8832(64)%
Share-based compensation16—(100)%165(69)%
SBCSBC42(50)%
OtherOther24100%1911(42)%Other33—%
TotalTotal$108$64(41)%$276$241(13)%Total$91$42(54)%
Operations costs decreased by $44$49 million and $35 million for the three and nine months ended September 30, 2022, compared to the same periods in the prior year, primarily due to decreases in our provision for credit losses and fraud lossesexpenses associated with customer experience of $21$25 million and $56 million as a result of decreased user transactions and our strengthened process to identify high risk users and prevent Fraudulent Deposit
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Transactions. Additionally, we experienced a decrease in costs related to third-party customer support vendors of $15 million for the three months ended September 30, 2022 as we consolidated our third-party customer support centers due to the overall decreasedecreases in user transactions.
Furthermore, we experienced an $8 million decrease for the nine months ended September 30, 2022 in In addition, other operations expense primarily related to costs associated with account verification as the growth of our user base in recent periods have slowed compared to the accelerated growth we experienced in the first nine months of 2021. For example, our new funded accounts decreased by 57% from 0.7 million for the quarter ended September 30, 2021 to 0.3 million for the quarter ended September 30, 2022. Finally, we experienced a decrease in share-based compensation expense of $16 million and $11 million for the three and nine months ended September 30, 2022 as higher share-based compensation expenses were recognized as a result of our IPO in July 2021.
These decreases were offset by increases in employee compensation, benefits, and overhead decreased $22 million, driven by declined average headcount as part of our efforts to improve efficiency and operating costs.

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Marketing
Three Months Ended
March 31,
(in millions)20222023% Change
Digital marketing$6 $7 17 %
Brand marketing1 6 500 %
Employee compensation, benefits, and overhead, excluding SBC9 5 (44)%
Marketing incentives4 1 (75)%
SBC5 1 (80)%
Other7 6 (14)%
Total$32$26(19)%
Marketing costs decreased by $6 million primarily due to severance expenses related to August 2022 restructuringdecreases in SBC expense and $39other employee compensation, benefits, and overhead of $4 million as our dedicated customer support professionalseach, driven by declined average headcount increasedas part of our efforts to continue to strengthen our customer support. These expenses included $3 millionimprove efficiency and $9 million in other employee compensation expense for restructuring related separation expenses, recognized in the three months ended June 30, 2022 and September 30, 2022, respectively.

Marketing
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)20212022% Change20212022% Change
Employee compensation, benefits, and overhead, excluding share-based compensation$11$6(45)%$27 $25 (7)%
Digital marketing84(50)%41 15 (63)%
Creative services8 4(50)%18 11 (39)%
Marketing incentives72(71)%114 9 (92)%
Share-based compensation41 —(100)%41 3 (93)%
Brand marketing61(83)%24 3 (88)%
Other62(67)%18 11 (39)%
Total$87$19(78)%$283$77(73)%
Marketing costs decreased by $68 million and $206 million for the three and nine months ended September 30, 2022, compared to the same periods in the prior year,operating costs. In addition, primarily due to decreases in marketing incentives ofdecreased $5 million and $1053 million substantially all of which was due to lower costs associated with the Robinhood Referral Program, included in marketing incentives, which was in line with the slow growth in our user base in recent periods. These decreases were partially offset by an increase in brand marketing of $5 million, primarily due to higher expenses spent on brand advertising campaigns.
General and Administrative
Three Months Ended
March 31,
(in millions)20222023% Change
SBC related to 2021 Founders Award Cancellation$— $485 NM
SBC excluding 2021 Founders Award Cancellation128 54 (58)%
Employee compensation, benefits, and overhead, excluding SBC64 54 (16)%
Legal expenses27 32 19 %
Settlements and penalties12 8 (33)%
Other professional fees16 7 (56)%
Other21 7 (67)%
Total$268 $647 141 %
General and administrative costs increased by $379 million primarily due to the 2021 Founders Award Cancellation of $485 million. The expense recognized relatedincrease was partially offset by a decrease in other SBC of $74 million and other employee compensation, benefits, and overhead of $10 million, driven by declined average headcount as part of our efforts to improve efficiency and operating costs. Additionally, other general and administrative expenses decreased by $14 million, primarily due to lower business insurance expenses.
Provision for Income Taxes
Three Months Ended
March 31,
(in millions)20222023% Change
Provision for income taxes$1 2 100 %
Provision for income taxes increased by $1 million for the three months ended March 31, 2023, compared to the Robinhood Referral Program is comprisedthree months ended March 31, 2022, primarily due to the growth of the fair value of awards earned inbusiness, the current period, changes in estimate of unclaimed awards earned in the current and prior periods, fair value adjustments of shares held to support the program, and reversals related to awards that expire unclaimed. The fair value adjustments of shares held to support the program were
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immaterial fornon-deductible the periods presented. The following table summarizes the Robinhood Referral Program liability activity for the periods indicated:
September 30,
(in millions)20212022
Beginning balance, January 1$1$—
Fair value of current period awards12012
Changes in estimate of unclaimed awards for current and prior periods——
Reversals related to unclaimed, expired awards(9)(4)
Claimed awards(111)(8)
Ending balance, September 30$1$—
Additionally, digital marketing decreased by $4 million2021 Founders Award Cancellation, and $26 million, and brand marketing decreased by $5 million and $21 million for the three and nine months ended September 30, 2022, respectively. During the nine months of 2021, we invested significantly in marketing costs to raise brand awareness, which was reduced as our brand became more well established.
General and Administrative
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)20212022% Change20212022% Change
Share-based compensation$678 $83 (88)%$686 $316 (54)%
Employee compensation, benefits, and overhead, excluding share-based compensation58 62 7 %136 190 40 %
Legal expenses20 17 (15)%73 61 (16)%
Other professional fees1610(38)%41 43 5 %
Business insurance91011 %14 31 121 %
Settlements and penalties— 1 NM63 24 (62)%
Impairment—47NM— 47 NM
Other94(56)%26 16 (38)%
Total$790$234(70)%$1,039 $728 (30)%
General and administrative costs decreased by $556 million and $311 million for the three and nine months ended September 30, 2022, compared to the same periods in the prior year, primarily due to decreases in share-based compensation of $595 million and $370 million as higher share-based compensation expenses were recognized as a result of our IPO in July 2021, including $79 million related to executive compensation arrangements (see Note 11 to our unaudited condensed consolidated financial statements in this Quarterly Report for further information). The April 2022 Restructuring and August 2022 Restructuring resulted in net reductions of $6 million and $28 million in share-based compensation expense in the three months ended June 30, 2022 and September 30, 2022, respectively. We also experienced a decrease of $39 million in costs associated with legal settlements for the nine months ended September 30, 2022. Refer to Note 15of our unaudited condensed consolidated financial statements in this Quarterly Report for further information.
These decreases were partially offset by impairments of $47 million related to the August 2022 Restructuring. For the nine months ended September 30, 2022, employee compensation, benefits, and overhead also increased by $54 million, as our general and administrative personnel average headcount increase to continue to support our business. This expense included $7 million and $8 million of restructuring related separation expense recognized in the three months ended June 30, 2022 and
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September 30, 2022, respectively. Finally, business insurance increased by $17 million for the nine months ended September 30, 2022, which was primarily attributable to additional costs of being a public company.
Change in Fair Value of Convertible Notes and Warrant Liability

Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)20212022% Change20212022% Change
Change in fair value of convertible notes and warrant liability$25 $— NM$2,045 $— NM
Change in fair value of convertible notes and warrant liability was due to the mark-to-market adjustment of the convertible notes and warrants we issued in February 2021. Upon completion of our IPO, the aggregate outstanding principal and accrued interest of the convertible notes converted into Class A common stock and the warrants became equity-classified, which resulted in the warrant liability being reclassified to additional paid-in capital. There will be no additional mark-to-market adjustments related to the convertible notes or warrant liability. See Note 7 to our unaudited condensed consolidated financial statements in this Quarterly Report for further information.
Provision for (Benefit from) Income Taxes
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)20212022% Change20212022% Change
Provision for (benefit from) income taxes$(50)1 (102)%$(1)$3 (400)%
Provision for income taxes increased by $51 million for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, primarily due to the recognition of tax benefits from share-based compensation upon IPO recorded in the third quarter of 2021, and from the change in valuation allowance on our remaining U.S. federal and state deferred tax assets andoffset by our current state taxes payable.
Provision for income taxes increased by $4 million, for the nine months ended September 30, 2022, compared to the same periods in the prior year, primarily due to the income tax benefit recognized from the partial release of our valuation allowance resulting from the recognition of net deferred tax liabilities in connection with the Say Technologies acquisition in the third quarter of 2021, and from the change in valuation allowance on our remaining U.S. federal and state deferred tax assets and by our current state taxes payable.
Liquidity and Capital Resources
SourceSources and Uses of Funds
We expect to useOur principal sources of liquidity are cash flows generated from operations, and our available cash, cash equivalents, and investments, includingliquid investments. Other sources of future funds may include potential future borrowingsborrowing capacity under our revolving lines of credit and potential issuance of new debt or equity,equity. Our liquidity needs are primarily to support and invest in our core business, including investing in new ways to serve our customers, potentially seeking strategic acquisitions to leverage existing capabilities and further build our business, the potential purchase of most or all of the remaining Robinhood shares purchased by Emergent Fidelity Technologies, and for general capital needs (including capital requirements imposed by regulators and SROs and cash deposit and collateral requirements under the rules of the Depository Trust Company (“DTC”), NSCC,the National Securities Clearing Corporation (“NSCC”), and the Options Clearing Corporation (“OCC”)). Based on our current level of operations, we believe our available cash,
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available lines of credit, and cash provided by operationsliquidity will be adequate to meet our current liquidity needs for the next 12 months.
Cash, Cash Equivalents, and InvestmentsLiquid Assets
Our cash and cash equivalents and investments were $6.3$6.34 billion and $6.2$5.46 billion as of December 31, 20212022 and September 30, 2022.March 31, 2023. Our liquid investment portfolio comprises highly liquidcomprised of available-for-sale securities including asset-backed securities, commercial paper, corporate bonds,were $10 million and government bonds.
Revolving Lines$1 million as of Credit
AsDecember 31, 2022 and March 31, 2023. Held-to-maturity investments that are maturing in one year can also be a source of September 30, 2022, we had a totalliquidity, which were $290 million as of $2.91 billion in committed revolving lines of credit. March 31, 2023. SSeeee Note 105 - Investments and Fair Value Measurement, to our unaudited condensed consolidated financial statements in this Quarterly Report for further information.
LeaseRevolving Lines of Credit
As of March 31, 2023, we had a total of $2.81 billion in committed revolving lines of credit. See Note 8 - Financing Activities and Purchase Off-Balance Sheet Risk, to our unaudited condensed consolidated financial statements in this Quarterly Report for further information.
Commitments
The following table summarizes our short- and long-term material cash requirements as of September 30, 2022:March 31, 2023:
Payments Due by PeriodPayments Due by Period
(in millions)(in millions)TotalRemainder of 20222023-20242025-2026Thereafter(in millions)TotalRemainder of 20232024-20252026-2027Thereafter
Operating lease commitmentsOperating lease commitments$209 $8 $64 $52 $85 Operating lease commitments$183 $24 $55 $36 $68 
Non-cancelable purchase commitments(1)
1,101 120 524 456 1 
Purchase commitments(1)
Purchase commitments(1)
1,044 298 502 244 — 
TotalTotal$1,310 $128 $588 $508 $86 Total$1,227 $322 $557 $280 $68 
(1)Non-cancelable purchasePurchase commitments are determined based on the non-cancelable quantities or termination amounts to which wecontracts that are contractually obligated.enforceable and legally binding and that specify all significant terms. They are primarily commitments for cloud infrastructure and data services and business insurance and tenant improvements.insurance.
In addition to lease and purchase commitments, we have two committed financing agreements: one with a contractual term of 30 days and a daily minimum commitment of $25 million and another with a contractual term of 21 days with a daily minimum commitment of $35 million. See "Securities Borrowing and Lending" in Note 1 to our unaudited condensed consolidated financial statements in this Quarterly Report for further information.
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Cash Flows
The following table summarizes our cash flow activities:
Nine Months Ended
 September 30,		Three Months Ended
 March 31,
(in millions)(in millions)20212022(in millions)20222023
Cash provided by (used in):Cash provided by (used in):Cash provided by (used in):
Operating activitiesOperating activities$(610)$(1,033)Operating activities$437 $828 
Investing activitiesInvesting activities(180)(71)Investing activities(34)(481)
Financing activitiesFinancing activities5,210 — Financing activities— (11)
Cash used inprovided by operating activities increased $391 million. The increase consisted of net loss adjusted for certain non-cash items including change in fair value of convertible notes and warrant liability, share-based compensation expense, impairment of long-lived assets, depreciation and amortization, and provision for credit losses, as well as the effect of changes in operating assets and liabilities. Net operating assets and liabilities at any specific point in time are subject to many variables, including variability in user activity, the timing of cash receipts and payments, and vendor payment terms.
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For the nine months ended September 30, 2022, cash used inCash provided by operating activities resulting from net loss adjusted for certain non-cash items increased by $273 million. This was $1,033 million, primarily due to ahigher net loss offset by higher SBC expense during three months ended March 31, 2023 as a result of $862 million, adjusted for the add back of non-cash expenses of $621 million, consisting primarily of share-based compensation expense of $494 million, impairment of long-lived assets of $47 million, depreciation and amortization of $44 million, and provision for credit losses of $28 million. Additionally, there was a cash outflow due to2021 Founders Award Cancellation. Cash provided by operating activities resulting from changes in operating assets and liabilities of $792 million,increased $118 million. The increase was primarily due to a decrease of $2.2 billion in securities loaned and a decrease in payables to users of $1.1 billion driven by a decrease in customer cash held on balance sheet, offset by a decrease in receivables from users, net of $2.6$1.36 billion, drivenpartially offset by a decrease in margin borrowing from users.of $2.28 billion for securities loaned.
For the nine months ended September 30, 2021, cashCash used in operatinginvesting activities increased $447 million compared to the prior period. The change was $610 million, primarily due to a net loss of $3.3 billion, adjusted for the add back of non-cash expenses of $3.4 billion consisting primarily of changes in fair value of convertible notes and warrant liability of $2.0 billion, share-based compensation expense of $1.3 billion, provision for credit losses of $62 million, and depreciation and amortization of $17 million. Additionally, there was a cash inflow due to changes in operating assets and liabilities of $723 million, primarily due to an increase in payables to users of $914 million driven by an increase in customer cash held in line with the growth in our user base and an increase in securities loaned of $1.2 billion, offset by an increase in receivables from users, net of $2.8 billion, driven by an increase in margin receivables due to the growth in our user base and a decrease in our margin interest rate.
For the nine months ended September 30, 2022, cash used in investing activities was $71of $485 million which primarily consisted of $27 million used for the purchase of investments, $25 million infrom purchases of property, software, and equipment, and $22held-to-maturity investments, partially offset by an increase of $8 million in capitalization of internally developed software. For the nine months ended September 30, 2021, cash used in investing activities was $180 million, which primarily consisted of $119 million used for business acquisitions, $46 million in purchases of property, software, and equipment and $13 million in capitalization of internally developed software.
For the nine months ended September 30, 2021, cash provided by investing activities related to proceeds from maturities of available-for-sale investments.
Cash used in financing activities increased $11 million compared to the prior period which was $5.2 billion, which primarily consisted of the proceeds fromdriven by payments for debt issuance of convertible notes and warrants of $3.6 billion and $2.1 billioncosts incurred to renew our revolving credit facility in proceeds from our IPO offset by $412 million in taxes paid for net share settlement of equity awards upon our IPO.2023.
Regulatory Capital Requirements
Our broker-dealer subsidiaries (RHF and RHS) are subject to the SEC Uniform Net Capital Rule, administered by the SEC and FINRA, which requires the maintenance of minimum net capital, as defined. Net capital and the related net capital requirements may fluctuate on a daily basis. RHS and RHF compute net capital under the alternative method as permitted by the SEC Uniform Net Capital Rule.
The table below summarizes the net capital, capital requirements, and excess net capital of RHS and RHF:
September 30, 2022March 31, 2023
(in millions)(in millions)Net CapitalRequired Net CapitalNet Capital in Excess of Required Net Capital(in millions)Net CapitalRequired Net CapitalNet Capital in Excess of Required Net Capital
RHSRHS$2,993 $83 $2,910 RHS$2,555 $67 $2,488 
RHFRHF$221 $0.25 $221 RHF$209 $0.25 $209 
As of September 30, 2022,March 31, 2023, our broker-dealer subsidiaries were in compliance with their respective regulatory capital requirements.
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Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, revenues and the disclosureexpenses, and related disclosures of contingent assets and liabilities onin our unaudited condensed consolidated financial statements.statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We basealso have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. Although we believe that our estimates, on historical experienceassumptions, and otherjudgments are reasonable, they are based upon information presently available. Actual results might differ significantly from these estimates under different assumptions, we believe to be reasonable under the circumstances, which together form the basis for making judgments, about the carrying values of assets and liabilities. We regularly assess these estimates; however, actual amounts could differ from those estimates.or conditions.
There have been no material changes to our critical accounting policies and estimates during the ninethree months ended September 30, 2022,March 31, 2023, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” in our 20212022 Form 10-K.
Recent Accounting Pronouncements
See Item 1 of Part I, “Unaudited Financial Statements — Note 2 —- Recent Accounting Pronouncements.”
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk generally represents the risk of loss that may result from the potential change in the value of a financial instrument as a result of fluctuations in interest rates and market prices. Information relating to quantitative and qualitative disclosures about these market risks is described below.
Interest Rate Risk
Our exposure to changes in interest rates primarily relates to interest earned on our cash and cash equivalents, cash and cash equivalents segregated under federal and other regulations, deposits with clearing organizations, restricted cash, investments in debt securities and margin loans. We use a net interest sensitivity analysis to evaluate the effect that changes in interest rates might have on total net revenues. The results of the analysis based on our financial position as of September 30, 2022,March 31, 2023, indicate that a hypothetical 100 basis point increase or decrease in interest rates would have had a positively correlated impact of approximately 10%11% on total net revenues. In the future, we may enter into interest rate floors to further manage interest rate risk.
Our investment policy and strategy are focused on the preservation of capital and supporting our liquidity requirements. During the three months ended March 31, 2023, we invested $485 million in highly-rated debt securities that were considered held-to-maturity investments with average duration in the portfolio less than a year and the maximum maturity of two years. To provide a meaningful assessment of the interest rate risk associated with our investment portfolio, we performed a sensitivity analysis to determine the impact a change in interest rates would have on the value of the investment portfolio assuming a 100 basis point parallel shift in the yield curve. Based on investment positions as of March 31, 2023, a hypothetical 100 basis point increase in interest rates across all maturities would not be significant. Any losses would only be realized if we sold the investments prior to maturity.
We also have exposure to changechanges in interest rates related to our variable-rate credit facilities. See Note 108 - Financing Activities and Off-Balance Sheet Risk, to our unaudited condensed consolidated financial statements in this Quarterly Report for further information. However, as there were no
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outstanding borrowings under our credit facilities as of September 30, 2022,March 31, 2023, we had limited financial exposure associated with changes in interest rates as of such date.
Our measurement of interest rate risk involves assumptions that are inherently uncertain and, as a result, our analysis might not precisely estimate the actual impact of changes in interest rates on net interest revenues. Actual results may differ from simulated results due to balance growth or decline and the timing, magnitude, and frequency of interest rate changes, as well as changes in market conditions and management strategies, including changes in asset and liability mix.
Market-Related Credit Risk
We are indirectly exposed to equity securities risk in connection with securities collateralizing margin receivables, as well as risk related to our securities lending activities. We manage risk on margin and securities-based lending by requiring customers to maintain collateral in compliance with internal and, as
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applicable, regulatory guidelines. We monitor required margin levels daily and require our customers to deposit additional collateral, or to reduce positions, when necessary. We continuously monitor customer accounts to detect excessive concentration, large orders or positions, and other activities that indicate increased risk to us. We manage risks associated with our securities lending activities by requiring credit approvals for counterparties, by monitoring the market value of securities loaned and collateral values for securities borrowed on a daily basis, by requiring additional cash as collateral for securities loaned or return of collateral for securities borrowed when necessary, and by participating in a risk-sharing program offered through the OCC.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2022March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II
ITEM 1. LEGAL PROCEEDINGS
See Item 1 of Part I, “Unaudited Financial Statements—Statements — Note 15—13 - Commitments and Contingencies—& Contingencies.”
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ITEM 1A. RISK FACTORS
A description of the risks and uncertainties associated with our business is set forth below. You should carefully consider the risks and uncertainties described below, as well as the other information included in this Quarterly Report, including our unaudited condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our business, financial condition, results of operations, and prospects could be materially and adversely affected by any of these risks or uncertainties. In that case, the trading price of our Class A common stock could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we currently see as immaterial might also adversely affect our business. Some statements in this Quarterly Report, including statements in the following risk factors, constitute forward-looking statements. Please refer to “Cautionary Note Regarding Forward-Looking Statements.”

Summary of Risk Factors
Our business is subject to a number of risks and uncertainties including those described at length in the Risk Factors section below. We consider the following to be our most material risks:
•We have a limited operating history, which makes it difficult to evaluate our business and prospects and increases the risks associatedmight not grow in line with an investment in our Class A common stock.historical rates.
•We have grown rapidly in recent years and we have limited operating experience at our current scale. If we are unablescale, which subjects us to managea number of uncertainties, risks, and difficulties that could adversely affect our business effectively, including the size of our workforce, our financial performance might suffer and our brand and company culture could be harmed.
•We might not grow in line with historical rates.business.
•Our results of operations and other operating metrics fluctuate from quarter to quarter, which makes these metrics difficult to predict.
•We have incurred operating losses in the past and might not be profitable in the future.
•Because a majority of our revenue is transaction-based (including PFOF), factorsFactors that affect transaction-based revenue—revenue — such as reduced spreads in securities pricing, reduced levels of trading activity generally, changes in our business relationships with market makers, and any new regulation of, or any bans on, PFOF and similar practices—practices — might result in reduced profitability, increased compliance costs, and negative publicity.
•We are directly and indirectly exposed to fluctuations in interest rates, and rapidly changing interest rate environments could reduce our net interest revenues and otherwise result in reduced profitability.
•As registered broker-dealers, we are subject to “best execution” requirements under SEC guidelines and FINRA rules. We could be penalized if we fail to comply with these requirements and these requirements might be modified in the future in a way that could harm our business.
•We might need additional capital to provide liquidity and support business growth and objectives, and this capital might not be available to us on reasonable terms, if at all, might result in stockholder dilution, or might be delayed or prohibited by applicable regulations.
•Unfavorable media coverage and other events that harm our brand and reputation could adversely affect our revenue and the size, engagement, and loyalty of our customer base.
•Our business has been and might continue to be harmed by changes in business, economic, or political conditions that impact global financial markets, or by a systemic market event.
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•Our future success depends on the continuing efforts of our key employees and our ability to attract and retain senior management and other highly skilled personnel.
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•Our business is subject to extensive, complex and changing laws and regulations, and related regulatory proceedings and investigations. Changes in these laws and regulations, or our failure to comply with these laws and regulations, could harm our business.
•We have been subject to regulatory investigations, actions, and settlements and we expect to continue to be subject to such proceedings in the future, which could cause us to incur substantial costs or require us to change our business practices in a materially adverse manner.
•We are involved in numerous litigation matters that are expensive and time consuming, and, if resolved adversely, could expose us to significant liability and reputational harm.
•We operate in highly competitive markets, and many of our competitors have greater resources than we do and may have products and services that are more appealing than ours to our current or potential customers.
•If we fail to retain existing customers or attract new customers, or if our customers decrease their use of our products and services, our revenue will decline.
•If we fail to provide and monetize new and innovative products and services that are adopted by customers, our business may become less competitive and our revenue might decline.
•Our products and services rely on software and systems that are highly technical and have been, and may in the future be, subject to interruption, instability, and instabilityother potential flaws due to software errors, design defects, and other processing, operational, and technological failures, whether internal or external.
•We rely on third parties to perform some key functions, and their failure to perform those functions could adversely affect our business, financial condition and results of operations.
•Our business could be materially and adversely affected by a cybersecurity breach or other attack involving our computer systems or data or those of our customers or third-party service providers.
•If we do not maintain the net capital levels required by regulators, our broker-dealer business may be restricted and we may be fined or subject to other disciplinary or corrective actions.
•Our compliance and risk management policies and procedures as a regulated financial services company might not be fully effective in identifying or mitigating compliance and risk exposure in all market environments or against all types of risk.
•The prices of most cryptocurrencies are extremely volatile. Fluctuations in the price of various cryptocurrencies might cause uncertainty in the market and could negatively impact trading volumes of cryptocurrencies, which would adversely affect the success of our business, financial condition and results of operations.
•Our support for Crypto Transfers, Robinhood Wallet, transfers,Robinhood Connect, the Robinhood Cash Card (each as defined below), spending accounts, and debit cardother payments services increases the risk that our platform could be exploited to facilitate illegal payments, potentially resulting in enforcement actions, fines,loss of customer assets, customer disputes, and civil liability.other liabilities, which could harm our reputation and adversely impact trading volumes and transaction-based revenues.
•Substantial future issuances andor sales of shares of our Class A common stock in the public market could result in significant dilution to our stockholders and such issuances or sales, or the perception that they may occur, could cause the trading price of our Class A common stock to fall.
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•The multi-class structure of our common stock has the effect of concentrating voting power with our founders, which limits your ability to influence the outcome of matters submitted to our stockholders for approval. In addition, the Founders’ Voting Agreement (as defined below) and any future issuances of our Class C common stock could prolong the duration of our founders’ voting control.

Risks Related to Our Business
We might not grow in line with historical rates.
We have grown rapidly over the last few years. In particular, from March 2020 through June 2021, we experienced a limited operating history, which makes it difficult to evaluatesignificant increase in revenue, MAU, AUC, and Net Cumulative Funded Accounts. For example, for fiscal years 2019, 2020, and 2021, our revenue was $278 million, $958 million and $1,815 million, respectively, representing annual growth of 245% in 2020 and 89% in 2021. Similarly, at year-end 2019, 2020, and 2021 we had Net Cumulative Funded Accounts of 5.1 million, 12.5 million, and 22.7 million, respectively, representing annual growth of 143% in 2020 and 82% in 2021.

However, the circumstances that accelerated the growth of our business and prospects and increasesover the risks associated with an investment in our Class A common stock.
We began operations in 2013, publicly launched our first product in 2015, and have since continued to introduce new products and services to our platform. As a result, our business model has not been fully proven and we have limited financial data that can be used to evaluate our current business and future prospects, which subjects us to a number of uncertainties,last few years, including our ability to plan for, model, and manage future growth and risks. Our historical revenue growth should not be considered indicative of our future performance. For example, most of our operating history coincided with an extended period of general macroeconomic growth in the United States,U.S., particularly in the U.S. equity markets, as well as growth in the financial services and technology industries in which we operate. Prioroperate, did not continue in 2022 and might not return in the future. For example, for fiscal year 2022, our revenue was $1,358 million, representing an annual decline of 25%, and we had Net Cumulative Funded Accounts of 23 million, representing an annual growth of only 1%. You should not rely on our revenue or key business metrics for any previous quarterly or annual period as any indication of our revenue, revenue growth, key business metrics or key business metrics growth in future periods.

We might continue to 2022,experience declines in the growth of our business (or negative growth) as a result of a number of factors, including slowing demand for our platform, insufficient growth in the number of customers that utilize our platform, declines in the level of usage of our platform by existing customers, macroeconomic factors, increasing competition, a decrease in the growth of our overall market, or our failure to continue to capitalize on growth opportunities, including as a result of our inability to scale to meet such growth and economic conditions that have, in some instances, and could continue to reduce financial activity and the maturation of our business, among others. Any failure to successfully address these risks and challenges as we therefore had not experienced any prolongedencounter them, will negatively affect our growth. If our revenue growth rate continues to decline, investors’ perceptions of our business and the trading price of our Class A common stock could be adversely affected.

We have limited operating experience at our current scale, which subjects us to a number of uncertainties, risks, and difficulties that could adversely affect our business.
We have expanded our operations rapidly, including continuing to introduce new products and services in our platform, and have limited operating experience at our current scale, which makes it difficult to evaluate our current business and future prospects, and subjects us to a number of uncertainties, including our ability to plan for, model, and manage potential future growth and risks. For example, in 2020 and the first half of 2021, we went through a period of hyper growth accelerated by several factors including pandemic lockdowns, low interest rates, and fiscal stimulus. However, as a result of the general downturn or slowdown in macroeconomic or industry growth or any significant prolonged downturn ineconomic conditions and the U.S. equity markets both of which we have encountered in 2022, we announced two restructurings in April 2022 (the “April 2022 Restructuring”) and weAugust of 2022 (the “August 2022 Restructuring”) that impacted approximately 1,100 employees and scaled back hiring plans.

Such efforts to control costs have in the past resulted, and might not be able to respond effectively to any such downturn or slowdown in the future such ascontinue to result in reduced productivity and deteriorating workforce morale, which can cause our business initiatives to suffer. However, if the current environment marked by higher interest ratesmarket conditions improve, we also face a risk that renewed business growth could strain our existing resources, or that we are not able to effectively scale up in response, and rising inflation continues or worsens. we could experience ongoing operating difficulties in managing our business across numerous jurisdictions, including difficulties in hiring, training, and managing a dispersed employee base.

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We have also encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing and heavily regulated industries, including challenges associated with achieving market acceptance of our products and services, attracting and retaining customers, and complying with laws and regulations (particularly those that are subject to evolving interpretations and application), as well as increased competition and the complexities of managing expenses as we expand our business. We might fail to adequately address these and other challenges we may face, and our business willmight be adversely affected if we do not manage these risks successfully. In addition, we might not achieve sufficient revenue to maintain positive cash flows from operations or profitability in any given period, or at all.

We have grown rapidly in recent years and we have limited operating experience at our current scale. If we are unable to manage our business effectively, including the size of our workforce, our financial performance might suffer and our brand and company culture could be harmed.
We have expanded our operations rapidly and have limited operating experience at our current size and scale. Between December 31, 2019 and December 31, 2021, our employee headcount increased from approximately 700 to approximately 3,800, and as of March 31, 2022, we had approximately 3,900 employees. In April 2022, we announced the April 2022 Restructuring involving approximately 330 employees, representing approximately 9% of our full-time employees at that time, and as of June 30, 2022 we had approximately 3,400 employees. In August 2022, we announced the August 2022 Restructuring involving approximately 780 employees, representing approximately 23% of our full-time employees at that time and reducing our headcount to approximately 2,600 employees. We also scaled back hiring plans for the remainder of 2022 and as of September 30, 2022, we had approximately 2,400 employees. We face a risk that our efforts to control costs could result in reduced productivity and deteriorating workforce morale, which could cause our business initiatives to suffer.

If current market conditions improve, we face a risk that renewed business growth could strain our existing resources, and we could experience ongoing operating difficulties in managing our business across numerous jurisdictions, including difficulties in hiring, training, and managing a dispersed employee base.
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Our business growth strategy contemplates significant expenditures for marketing, acquisitions, expansion into new countries and markets, enhancements to our current offerings and development of new products and services, and these efforts might not be successful. In addition, our business is highly dependent on our technology platform, and we also rely on certain third-party service providers and computer systems. Any failure to maintain or upgrade our technology or network infrastructure effectively to support our growth, particularly if our customer base grows and we experience any corresponding surges in trading volume, or any interruption in the third-party services or deterioration in the quality of their service or performance, could result in unanticipated system disruptions, partial or full platform outages or other performance problems which have in the past and might in the future result in degraded service, costly litigation, regulatory and U.S. Congressional inquiries, examinations and investigations, customer dissatisfaction, arbitration and complaints and reputational harm and might have an adverse effect on our business. For example, we experienced (i) the March 2020 Outages and (ii) partial service outages and degraded service on our cryptocurrency platform from time to time in mid-April and early May 2021 caused by a surging demand for cryptocurrency trading (the “April-May 2021 Disruptions”). In addition, our customer service team, from time to time experiences backlogs responding to customer support requests. These backlogs havecompounded when we have experienced any market outages, provider network disruptions, or platform outages or errors, including, for example, in connection with the March 2020 Outages and the April-May 2021 Disruptions, and may compound in the future as a result of such events. Further, any growth must be accomplished in a manner that is consistent with regulatory requirements that apply to our business. If we do not adapt to meet these evolving challenges and requirements, or if our management team does not effectively scale with such growth, we might experience erosion to our brand, the quality of our products and services might suffer, we might face regulatory obstacles, including adverse enforcement actions, other regulatory restrictions or limitations, or failure to obtain regulatory approvals required for certain types of growth, and our company culture might be harmed. We might also experience difficulties in providing adequate customer support to our customer base. Failure to improve, maintain or increase customer support now or in the future could inhibit our growth.

Because we have limited experience operating our business at its current scale, it is difficult to evaluate our current business and future prospects, including our ability to plan for and model potential future growth. Our limited operating experience at this scale, combined with the rapidly evolving nature of the market for our products and services, substantial uncertainty concerning how these markets might develop, the complex regulatory regimes applicable to different aspects of our business, and other factors beyond our control, reduces our ability to accurately forecast quarterly or annual results and to predict the risks and challenges we might encounter.

We might not grow in line with historical rates.
We have grown rapidly over the last few years. In particular, from March 2020 through June 2021, we experienced a significant increase in revenue, MAU, AUC, and Net Cumulative Funded Accounts. For example, for full years 2019, 2020, and 2021, our revenue was $278 million, $959 million, and $1,815 million, respectively, representing annual growth of 245% in 2020 and 89% in 2021. Similarly, at year-end 2019, 2020, and 2021 we had Net Cumulative Funded Accounts of 5.1 million, 12.5 million, and 22.7 million, respectively, representing annual growth of 143% in 2020 and 81% in 2021. The circumstances that accelerated the growth of our business over the last few years have not continued, and might not return in the future, and we have seen our growth rates in revenue, MAU, AUC, and Net Cumulative Funded Accounts decline during the current fiscal year. You should not rely on our revenue or key business metrics for any previous quarterly or annual period as any indication of our revenue, revenue growth, key business metrics or key business metrics growth in future periods.

For example, during the first half of 2021 we experienced high trading volume and account sign-ups as well as high market volatility, particularly in certain market sectors, but those growth factors were
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largely absent during the second half of 2021. Sequentially from the first half of 2021 compared to the second half of 2021, revenue declined by 33% and Net Cumulative Funded Accounts remained roughly flat. For the first half of 2022, total net revenues decreased by 15% sequentially, while Net Cumulative Funded Accounts remained roughly flat, in each case compared to the second half of 2021.

In the future, we might also experience declines in our revenue growth rate (or negative growth) as a result of a number of factors, including slowing demand for our platform, insufficient growth in the number of customers that utilize our platform, macroeconomic factors, increasing competition, a decrease in the growth of our overall market, or our failure to continue to capitalize on growth opportunities, including as a result of our inability to scale to meet such growth and economic conditions that could reduce financial activity and the maturation of our business, among others. For instance, the current market environment has been marked by higher interest rates and rising inflation, which has negatively impacted Net Cumulative Funded Accounts and MAU and will likely continue to do so if such environment persists or worsens. Any failure to successfully address these risks and challenges as we encounter them, will negatively affect our growth. If our revenue growth rate declines, investors’ perceptions of our business and the trading price of our Class A common stock could be adversely affected.

Our results of operations and other operating metrics fluctuate from quarter to quarter, which makes these metrics difficult to predict.
Our results of operations are heavily reliant on the level of trading activity on our platform and net deposits. In the past, our results of operations and other operating metrics have fluctuated from quarter to quarter, including due to movements and trends in the underlying markets, changes in general economic conditions, interest in investing, and fluctuations in trading levels generally, each of which is outside our control and will continue to be outside of our control. As a result, period-to-period comparisons of our results of operations might not be meaningful, and our past results of operations should not be relied on as indicators of future performance. Further, we are subject to additional risks and uncertainties that are frequently encountered by companies in rapidly evolving markets. Our financial condition and results of operations in any given quarter can be influenced by numerous factors, including the occurrence of any of the risks described elsewhere in this Risk Factors section, many of which we are unable to predict or are outside of our control. Factors contributing to quarterly fluctuations could include, among others:

•our ability to retain and engage existing customers and attract new customers;
•the timing and success of new product and service introductions by us or our competitors, or other changes in the competitive landscape of our market;
•volatility in the market generally or the occurrence of so-called “meme” trading in equities, options, or cryptocurrencies, which can cause our trading volumes to fluctuate;
•the occurrence of so-called “meme” trading in equities, options, or cryptocurrencies;
•fluctuations in interest rates;
•increases in marketing, sales, compensation (for example, due to increased headcount)hiring competition for highly skilled personnel), cloud infrastructure, and other operating expenses that we might incur to grow and expand our operations and to remain competitive;
•the timing and amount of non-cash expenses, such as share-based compensationSBC and asset impairment;
•the success of our expansion into new markets;
•trading volume and the prevailing trading prices for cryptocurrencies, which can be highly volatile;
•changes in the public’s perception, adoption, and use of cryptocurrencies and other asset classes;
•any inability of customers to place trades, due to system disruptions, outages, or trading restrictions;
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•any events that damage customer confidence in Robinhood, such as breaches of security or privacy;
•the impacts of the ongoing COVID-19 pandemic,public health threats (including pandemics such as COVID-19), unemployment, and inflation; and
•changes in tax laws or judicial or regulatory interpretations of tax laws, which are recorded in the period such laws are enacted or interpretations are issued, and might significantly affect the effective tax rate of that period.

Any of the factors above or listed elsewhere in this Risk Factors section, or the cumulative effect of some of those factors, could result in significant fluctuations in our results of operations.

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We have incurred operating losses in the past and might not be profitable in the future.
We incurred operating losses each year from our inception in 2013 through 2019, including net losses of $6 million, $58 million, and $107 million for years 2017, 2018, and 2019, respectively. Although we generated positive net income for 2020, we returned to a net loss position for 2021 and 2022 as our operating expenses increased substantially. WeWhile we have taken significant actions in 2022publicly stated our expectation to reduce our cost structure, and we generatedget much closer to positive Adjusted EBITDAGAAP net income in the third quarterback half of 2022, but2023, we might not be able to increase our revenue and/or further reduce our operating expenses by sufficient amounts to become profitable again on a GAAP basis. If we are unable to generate adequate revenue to offset our operating expenses, we will continue to incur operating losses, which could be significant, and we might not be able to achieve profitabilitybasis in the future.
Because a majority of our revenue is transaction-based (including PFOF), factorsFactors that affect transaction-based revenue—revenue — such as reduced spreads in securities pricing, reduced levels of trading activity generally, changes in our business relationships with market makers, and any new regulation of, or any bans on, PFOF and similar practices—practices — might result in reduced profitability, increased compliance costs, and negative publicity.
A majoritylarge portion of our revenue is transaction-based, in that we receive consideration in exchange for routing our users’ equity, option, and cryptocurrency trade orders to market makers for execution. With respect to equities and options trading, such fees are known as payment for order flow, or “PFOF.” With respect to cryptocurrency trading, we receive “Transaction Rebates.” Our transaction-based revenue is sensitive to and dependent on trading volumes and therefore tends to decline during periods in which we experience decreased levels of trading generally. Computer-generated buy/sell programs and other technological advances and regulatory changes in the marketplace might continue to tighten spreads on transactions, which could also lead to a decrease in our PFOF earned from market makers. In addition, the regulatory landscape involving cryptocurrencies is subject to change and is experiencing rapid evolution, and future regulatory actions or policies, including for instance, the assertion of jurisdiction by domestic and foreign regulators and governments over cryptocurrency and cryptocurrency markets, could reduce demand for cryptocurrency trading and might materially decrease our revenue derived from Transaction Rebates in absolute terms and as a proportion of our total revenues.

Risks Related to our Business Relationships with Market Makers

Our PFOF and Transaction Rebate arrangements with market makers are a matter of practice and business understanding and not documented under binding contracts. If any of these market makers were unwilling to continue to receive orders from us or to pay us for those orders (including, for example, as a result of unusually high volatility), we might have little to no recourse and, if there are no other market makers that are willing to receive such orders from us or to pay us for such orders, or if we are unable to find replacement market makers in a timely manner, our transaction-based revenue would be negatively impacted. This risk is particularly heightened for cryptocurrencies because fewer market makers are currently able to execute cryptocurrency trades. Furthermore, if market makers decide to alter our fee structure, our transaction-based revenue could significantly decrease.

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Risks Related to Regulation of PFOF

PFOF practices have drawn heightened scrutiny from the U.S. Congress, the SEC, state regulators, and other regulatory and legislative authorities. For example, in November 2018, the SEC amended its rules relating to broker-dealer disclosure of order handling and routing to require that, among other things, such public disclosures must now describe additional detail regarding terms of PFOF arrangements and profit-sharing relationships that may influence a broker-dealer’s routing decision, including information about average rebates the broker received from, and fees the broker paid to, market makers. As previously disclosed, in December 2020, we settled an SEC investigation into our best execution and PFOF practices and are defending putative class actions in federal district courts relating to the same factual allegations. Additionally, our PFOF practices were the subject of a line of critical questioning during a February 18, 2021 U.S. Congressional hearing related to the Early 2021 Trading Restrictions (defined above).Restrictions. We also face athe risk that the SEC, other regulatory authorities, or legislative bodies might adopt additional regulation or legislation relating to PFOF practices as a result of such heightened scrutiny or otherwise, including regulation that could substantially limit or ban such practices, or pursue additional inquiries or investigations relating to PFOF practices.otherwise. For example, a bill to directinstance, in December 2022, the SEC proposed four separate equity market structure rules (the “December 2022 Rule Proposals”) related to study and consider banning or limiting PFOF(i) best execution; (ii) order competition, including requiring certain retail equity orders to be exposed in the form of exchange rebates or payments from market centers to broker dealers, conflicts of interest based on PFOF arrangements, and the impact of PFOF on the quality ofauctions before being internalized; (iii) order execution passed outdisclosure; and (iv) order tick size and fee caps. Although these proposed rules related to market structure design do not ban PFOF, they introduce new requirements
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around “conflicted transactions,” and if adopted as proposed, they would have the House Financial Services Committee in July 2021. In an August 2021 interview, Gary Gensler, Chairindirect effect of making PFOF more difficult or impossible to earn and condensing the SEC, commented that a full ban of PFOF was “on the table.” Also in a June 2022 keynote address to an investor conference (the “June 2022 Keynote”), Chair Gensler indicated that he had instructed the staff of the SEC to make rulemaking recommendations to the SEC regarding a variety of market issues and practices, including minimum pricing increments, the National Best Bid and Offer, disclosure of order execution quality, best execution, PFOF, exchange rebates and related access fees, and order-by-order competition (including the possibility of requiring that orders be routed into an open auction system).revenues we could theoretically earn. Any new or heightened PFOF regulation, including the December 2022 Rule Proposals if adopted as proposed, could result in increased compliance costs and otherwise materially decrease our transaction-based revenue, might also make it more difficult for us to expand our platform in certain jurisdictions, and could require us to make significant changes to our revenue model, which changes might not be successful. Because some of our competitors either do not engage in PFOF or derive a lower percentage of their revenues from PFOF than we do, any such heightened regulation or a ban of PFOF could have an outsized impact on our results of operations. Even if the SEC does not enact an outright ban of PFOF, new regulations related to market structure design could potentially have the indirect effect of making PFOF more difficult to earn. Furthermore, depending on the nature of any new requirements, heightened regulation could also increase our risk of potential regulatory violations and civil litigation, which could result in fines or other penalties, as well as negative publicity.

Risks Related to Negative Publicity Associated with PFOF or our Market Makers

Additionally, any negative publicity surrounding PFOF or Transaction Rebate practices generally, or our implementation of these practices, could harm our brand and reputation. For example, as a result of the Early 2021 Trading Restrictions, we faced allegations that our decision to temporarily prevent our customers from purchasing specified securities was influenced by our relationship with certain market makers. Furthermore, as registered broker-dealers, market makers must comply with rules and regulations that are generally intended to prohibit them from taking advantage of information they obtain while executing orders (e.g., through the prohibition on “front running”). Market makers also have a duty to seek "best execution" of customers’ equity and option orders we send to them. If the market makers we use to execute our customer’s equity and option trades were to violate such rules and regulations and use this data for their own benefit in violation of applicable rules and regulations, it could result in negative publicity for us by association. Developments in any proposals related to the regulation of PFOF or market structure design have generated and might themselvescontinue to generate negative publicity associated with PFOF. For example, the intra-day trading price of our Class A common stock fell as much as 5.3% on December 14, 2022, the day the December 2022 Rule Proposals were announced.

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Additionally, if our customers or potential customers believe that they might get better execution quality (including better price improvement) directly from stock exchanges or from our competitors that have different execution arrangements, or if our customers perceive our PFOF practices to create a conflict of interest between us and them, or if they begin to disfavor the specific market markers with which we do business due to any negative media attention, they might come to have an adverse view of our business model and might decide to limit or cease the use of our platform. Some customers might prefer to invest through our competitors that do not engage in PFOF or Transaction Rebate practices or engage in them differently than do we. Any such loss of customer engagement as a result of any negative publicity associated with PFOF or Transaction Rebate practices could adversely affect our business, financial condition, and results of operations.

We are directly and indirectly exposed to fluctuations in interest rates, and rapidly changing interest rate environments could reduce our net interest revenues and otherwise result in reduced profitability.

A large portion of our revenue comes from interest income earned from our corporate cash and investment portfolio, our securities lending activities, cash sweep, and from interest-rate sensitive assets, including receivables from users’ margin-borrowing and other assets underlying the customer balances we hold on our balance sheets as customer accounts. Interest rates are the key driver of our net interest income and are subject to many factors beyond our control. As interest rates increased starting in 2022, interest income has contributed an increasing share of our total net revenues. Reductions in interest rates and a return to a low interest rate environment would negatively impact our net income and adversely impact our customers’ returns on their cash deposits. For an estimate of how a hypothetical 100 basis point increase or decrease in interest rates could affect our total net revenues, see “Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk” elsewhere in this report. Changes to the
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level or mix of interest earning balances could also negatively impact our net income if customers react to the rising interest rate environment by moving cash that would have otherwise been spent on services or products with higher revenue potential for Robinhood into Robinhood accounts that offer customers high interest rates.

Higher interest rates also lead to higher payment obligations by our customers to us and to their creditors under mortgage, credit card, and other consumer and merchant loans, which might reduce our customers’ ability to satisfy their obligations to us, including failing to pay for securities purchased, deliver securities sold, or meet margin calls, and therefore lead to increased delinquencies, charge-offs, and allowances for loan and interest receivables, which could have an adverse effect on our net income. Fluctuations in interest rates could adversely impact our customers’ general spending levels and ability and willingness to invest through our platform.
As registered broker-dealers, we are subject to “best execution” requirements under SEC guidelines and FINRA rules. We could be penalized if we fail to comply with these requirements and these requirements might be modified in the future in a way that could harm our business.
As registered broker-dealers, we are subject to “best execution” requirements under SEC guidelines and FINRA rules, which requires us to obtain the best reasonably available terms for customer orders, as described in Part I, Item 1 “Business” of our 2021 Form 10-K.orders. As previously disclosed, in December 2019 and 2020, we settled an SEC investigation and FINRA disciplinary action, respectively, that related to our best execution practices. We face a risk of additional investigations or penalties in the future related to our best execution practices.

We also might be adversely affected in the future by regulatory changes related to our obligations with regard to best execution. In particular, receipt of PFOF practices and best execution requirements have drawn heightened scrutiny from the U.S. Congress, the SEC, and other regulatory and legislative authorities, who have at times alleged that PFOF arrangements, like those we have with our market makers, can result in harm to customer execution quality. In his September 2021 testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs, Gary Gensler, ChairFor instance, one of the SEC, described a number of on-going projects he had instructed SEC staffDecember 2022 Rule Proposals relates to pursue related to market structure, including review of PFOF, best execution inand proposes to enhance the contextexisting regulatory framework concerning the duty of the National Best Bid and Offer system, and cryptocurrency asset markets and trading platforms. Chair Gensler made similar comments in his October 2021 testimony before the U.S. House Committee on Financial Services, including noting that the National Best Bid and Offer system might benefit from modernization and might no longer necessarily be an appropriate baseline from which to measure price improvement in the context of assessing best execution (togetherby, among other things, requiring additional policies and procedures for broker-dealers engaging in certain conflicted transactions with his September 2021 testimony, the “Gensler Market Structure Testimony”). And in his June 2022 Keynote, Chair Gensler indicated he has instructed SEC staff to make rulemaking recommendations on these topics.retail customers. There is a risk that these bodies might adopt additional regulation relating to PFOF practices and best execution requirements as a result of such heightened scrutiny or otherwise. Any such regulationregulations could have a material adverse impact on our business and one of our primary sourcesources of revenue.

We might need additional capital to provide liquidity and support business growth and objectives, and this capital might not be available to us on reasonable terms, if at all, might result in stockholder dilution, or might be delayed or prohibited by applicable regulations.

Maintaining adequate liquidity is crucial to our securities brokerage and our money services business operations, including key functions such as transaction settlement, custody requirements, and margin lending. The SEC FINRA, and various state regulatorsFINRA also have stringent rules with respect to the maintenance of specific levels of net capital by securities broker-dealers. We meet our liquidity needs primarily from working capital and cash generated by customer activity, as well as from external debt and equity financing. As of September 30, 2022, on a consolidated basis we had $6.2 billion in cash and cash equivalents and $2.91 billion available under our existing credit facilities. Despite these resources, increases in the number of customers, and fluctuations in customer cash or deposit balances, as well as
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market conditions or changes in regulatory treatment of customer deposits, could affect our ability to meet our liquidity needs.

In addition, our clearing and carrying broker-dealer is subject to cash deposit and collateral requirements under the rules of the clearinghouses in which it participates (including the DTC, NSCC, and the OCC), which requirements fluctuate significantly from time to time based upon the nature and volume of customers’ trading activity and volatility in the market or individual securities. If we fail to meet any such deposit requirements, our ability to settle trades through the clearinghouse may be suspended or we might be forced to restrict trading in certain stocks in order to limit clearinghouse deposit requirements.
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For example, from January 28 to February 5, 2021, due to increased deposit requirements imposed on our clearing and carrying broker-dealer by NSCC in response to unprecedented market volatility, particularly in certain securities, we implemented the Early 2021 Trading Restrictions. This resulted in negative media attention, customer dissatisfaction, reputational harm, litigation, and regulatory and U.S. Congressional inquiries and investigations, as well as capital raising by us in order to lift the trading restrictions while remaining in compliance with our net capital and deposit requirements. We face a risk that similar events could occur in the future and, if we are unable to satisfy our deposit requirements, the clearinghouse may cease to act for us and may liquidate our unsettled clearing portfolio.

A reduction in our liquidity position could reduce our customers’ confidence in us, which could result in the withdrawal of customer assets and loss of customers, or could cause us to fail to satisfy broker-dealer or other regulatory capital guidelines, which may result in immediate suspension of securities activities, regulatory prohibitions against certain business practices, increased regulatory inquiries and reporting requirements, increased costs, fines, penalties or other sanctions, including suspension or expulsion by the SEC, FINRA or other Self-Regulatory Organizations (“SROs”)SROs or state regulators, and could ultimately lead to the liquidation of our broker-dealers or other regulated entities. Factors which might adversely affect our liquidity positions include temporary liquidity demands due to timing differences between brokerage transaction settlements and the availability of segregated cash balances, timing differences between cryptocurrency transaction settlements between us and our cryptocurrency market makers and between us and our cryptocurrency customers, fluctuations in cash held in customer accounts, a significant increase in our margin lending activities, increased regulatory capital requirements, changes in regulatory guidance or interpretations, other regulatory changes, or a loss of market or customer confidence resulting in unanticipated and/or excessive withdrawals or redemptions, or a suspension of redemptions or withdrawals of customer assets.

We might also need additional capital to continue to support our business and any future growth and to respond to competitive challenges, including the need to promote our products and services, develop new products and services, enhance our existing products, services and operating infrastructure, acquire and invest in complementary businesses and technologies, and to fund payments on our obligations at the parent company level, such as any debt obligations we might incur. To meet liquidity needs at the parent level, we might need to rely on dividends, distributions and other payments from our subsidiaries. Regulatory and other legal restrictions might limit our ability to transfer funds to or from some subsidiaries. For example, under FINRA rules applicable to RHS, a dividend of over 10% of a member firm’s excess net capital must not be paid without FINRA’s prior written approval.

When available cash is not sufficient, we might seek to engage in equity or debt financings to secure additional funds. However, such additional funding might not be available on terms attractive to us, or at all, and our inability to obtain additional funding when needed could have an adverse effect on our business, financial condition, and results of operations. If we issue equity or convertible debt securities, our stockholders could suffer significant dilution, and the new shares could have rights, preferences and privileges superior to those of our current stockholders. Any debt financing could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which might make it more difficult for us to obtain additional capital and to pursue future business opportunities.

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As a result of a cease-and-desist order issued by the SEC on December 17, 2020 and our related settlement in connection with the SEC’s investigation of our best execution and receipt of PFOF, practices, we are currently an “ineligible issuer,” as the term is defined under Rule 405 of the Securities Act, and we will remain an ineligible issuer until December 17, 2023. As long as we are an ineligible issuer, we will generally be prevented from using free writing prospectuses and recorded roadshows in securities offerings, and we will not qualify as a “well-known seasoned issuer” (“WKSI”) (which status we otherwise would have achieved by August 2022). We will therefore be unable to take advantage of benefits associated with WKSI status, such as the ability to file universal shelf registration statements on Form S-3 that are automatically effective. These restrictions could impair our ability to raise additional capital quickly in response to changing requirements and market conditions.

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Unfavorable media coverage and other events that harm our brand and reputation could adversely affect our revenue and the size, engagement, and loyalty of our customer base.

Our brand and our reputation are two of our most important assets. Our ability to attract, build trust with, engage, and retain existing and new customers might be adversely affected by events that harm our brand and reputation, such as public complaints and unfavorable media coverage about us, our platform, and our customers, even if factually incorrect or based on isolated incidents.

We receive a high volume of media coverage, which has increased as our company has grown and has included, and might continue to include, negative coverage regarding our products and services and the risk of our customers’ misuse or misunderstanding of our products and services, inappropriate or otherwise unauthorized behavior by our customers and litigation or regulatory activity. In addition, given our public profile, any unanticipated system disruptions, outages, technical or security-related incidents, or other performance problems relating to our platform, such as the March 2020 Outages, and the April-May 2021 Disruptions (as defined below), or the November 2021 Data Security Incident are likely to receive extensive media attention. Furthermore, any negative experiences our customers have in connection with their use of our products and services, including as a result of any such performance problems, could diminish customer confidence in us and our products and services, which could result in unfavorable media coverage or publicity. For example, we received customer complaints and significant media attention as a result of the Early 2021 Trading Restrictions.

Damage to our brand and reputation could also be caused by:
•cybersecurity attacks, privacy or data security breaches, or other security incidents, payment disruptions or other incidents that impact the reliability of our platform;
•actual or alleged illegal, negligent, reckless, fraudulent or otherwise inappropriate behavior by our management team, our other employees or contractors, our customers or third-party service providers as well as complaints or negative publicity about such individuals;
•the April 2022 and August 2022 Restructuringsfuture restructurings or any similar such reductions or activities in the future;
•any repeat imposition of temporary trading restrictions (similar to our Early 2021 Trading Restrictions), or any outright failure to meet our deposit requirements;
•litigation involving, or regulatory actions or investigations into, our platform or our business;
•any failures to comply with legal, tax and regulatory requirements;
•any perceived or actual weakness in our financial strength or liquidity;
•any regulatory action that results in changes to, or prohibits us from offering, certain features or services;
•changes to our policies, features or services that customers or others perceive as overly restrictive, unclear, inconsistent with our values or mission, or not clearly articulated;
•a failure to operate our business in a way that is consistent with our values and mission;
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•inadequate or unsatisfactory customer support experiences. For example, prior to October 2021, we did not offer general customer support by telephone for all use cases;experiences;
•negative responses by customers or regulators to our business model or to particular features or services;
•a failure to adapt to new or changing customer preferences;
•a prolonged weakness in popular equities or cryptocurrencies specifically or in U.S. equity and cryptocurrency markets generally, or a sustained downturn in the U.S. economy; and
•any of the foregoing with respect to our competitors, to the extent the resulting negative perception affects the public’s perception of us or our industry as a whole.

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These and other events could negatively impact the willingness of our existing customers, and potential new customers, to do business with us, which could adversely affect our trading volumes and number of funded accounts, as well as our ability to recruit and retain personnel, any of which could have an adverse effect on our business, financial condition, and results of operations, as well as the trading price of our Class A common stock. For instance, on November 8, 2022 (the day that FTX Trading Ltd. (“FTX”), a major international cryptocurrency exchange, halted all non-fiat customer withdrawals from its platform), the intra-day trading price of our Class A common stock fell as much as 18%. And in December 2022, shortly after FTX filed for bankruptcy on November 11, 2022, and following the bankruptcies of several other major cryptocurrency trading venues and lending platforms earlier in 2022, including Three Arrows Capital, Ltd., Voyager Digital Holdings, Inc., and Celsius Network LLC (“Celsius”) (collectively, the “2022 Crypto Bankruptcies”), we received an investigative subpoena from the SEC regarding, among other topics, RHC’s cryptocurrency listings, custody of cryptocurrencies, and platform operations.

We could incur substantial losses from our cash and investment accounts if one or more of the financial institutions that we use fails or is taken over by the FDIC.

We maintain cash and investment accounts, as well as restricted cash as certificates of deposits for facility leases and other contractual obligations, at multiple financial institutions in amounts that are significantly in excess of the limits insured by the FDIC. In spring 2023, certain U.S. banks failed and were taken over by the FDIC (the “2023 Banking Events”). If any of the financial institutions where we hold significant deposits were to fail or be taken over by the FDIC, our ability to access such accounts has in the past and could be in the future temporarily or permanently limited, which could adversely affect our business. In particular, while we have taken steps to help ensure that the loss of all or a significant portion of any uninsured amount would not have an adverse effect on our ability to pay our operational expenses or make other payments, the failure of a financial institution where we hold significant deposits has in the past and may in the future require us to move funds to another bank, which could cause a temporary delay in making payments to our vendors and employees, or under other contractual arrangements, and cause other operational inconveniences. Additionally, any losses or delay in access to funds as a result of such events could have a material adverse effect on our ability to meet contractual obligations, earnings, financial condition, cash flows, and stock price.

Our business has been and might continue to be harmed by changes in business, economic, or political conditions that impact global financial markets, or by a systemic market event.

As we are a financial services company, our business, results of operations, and reputation are directly and indirectly affected by elements beyond our control, such as economic and political conditions including unemployment rates, inflation, and tax and interest rates, geopolitical conflicts, such as the Russian invasion of Ukraine, financial market volatility (such as we experienced during the COVID-19 pandemic), significant increases in the volatility or trading volume of particular securities or cryptocurrencies (such as we experienced during the meme stock events of early 2021 and the Dogecoin surge of mid-2021), broad trends in business and finance, actual events or concerns involving liquidity, defaults, or non-performance by third-party financial institutions or transactional counterparties (such as the 2023 Banking Events), changes in volume of securities or cryptocurrencies trading generally changes in the markets in which such transactions occur (such as the bear markets that developed for equities and crypto in the second quarter of 2022 and continue to persist)persist (the “2022 Bear Markets”)), changes in the markets in which such transactions occur (such as following the 2022 Crypto Bankruptcies), and changes in how such transactions are processed. These elements can arise suddenly and the full impact of such conditions could have an adverse effect on our business results or remain uncertain indefinitely. Because a large percentage of our customers are first time investors, we might be disproportionately affected by declines in investor confidence caused by adverse economic conditions. In the second quarter of 2022, our daily average revenue trades for options and equities declined by 17% and 13%, while daily average revenue trades for cryptocurrencies increased by 12%, respectively, from the prior quarter. In the third quarter of 2022, our daily average revenue trades for options remained relatively flat, while daily average revenue trades for equities and cryptocurrencies deceased by 6% and 23%, as compared to the second quarter of 2022. A prolonged market weakness, such as a slowdown causing reduced trading volume in securities, derivatives, or cryptocurrency markets, has resulted, and could result in the future in reduced revenues and adversely affect our business, financial condition, and results of operations. Significant downturns in such markets or in general economicFor example, as a result of the 2022 Bear Markets, for fiscal year 2022, our daily revenue trades for options, equities, and political conditions could also cause individualscrypto declined by 33%, 49%, and 75%, compared to be reluctant to make their own investment decisions and thus decrease the demand for our products and services and could also result in our customers reducing their engagement with our platform.fiscal year 2021. Conversely, significant upturns in such
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markets or conditions might cause individuals to be less proactive in seeking ways to improve the returns on their trading or investment decisions and, thus, decrease the demand for our products and services.

Additionally, concerns regarding the U.S. and/or international financial systems, such as in connection with the 2023 Banking Events, could result in less favorable commercial financing terms available to us, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on our access to credit and liquidity sources.

Any of these changes could cause our future performance to be uncertain or unpredictable, and could have an adverse effect on our business results.and results of operations.

The long-termfuture impact of the COVID-19 pandemic or the emergence of any similar public health threats on our business, financial condition, and results of operations is uncertain.

Following the March 2020 onset of the COVID-19 pandemic, we saw substantial growth in our user base, retention, engagement, and trading activity metrics, and over the course of the pandemic we saw periodic all-time highs achieved by the equity markets generally. During this period, market volatility, stay-
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at-homestay-at-home orders, and increased interest in investing and personal finance, coupled with low interest rates and a positive market environment, especially in the U.S. equity and cryptocurrency markets, helped foster an environment that encouraged an unprecedented number of first-time retail investors to become our users and begin trading on our platform.

However, we have seen the growth of our user base in recent periods slow compared to the accelerated growth we experienced in 2020 and the first half of 2021. For example, the pace of growth in new funded accounts slowed considerably in the second half of 2021 (compared to the first half of 2021) and remained roughly flat in the first nine months of 2022. Additionally, to the extent that government stimulus measures enacted in response to the pandemic contributed to an increase in customer engagement, that benefit might not have continued as those stimulus measures have expired. For example, we saw MAU decline from 21.3 million in June 2021 to 12.2 million in September 2022. Further, if the financial markets continue to experience a downturn, we might have difficulty retaining customers, particularly first-time retail investors, who might elect not to continue to invest in the financial markets by trading on our platform or at all due to any number of factors: as a result of a prolonged downturn, a lack of access to additional stimulus funds, the ability to resume pre-COVID-19 activities, rising inflation, or otherwise. To the extent that customer preferences revert to pre-COVID-19 behaviors or the financial markets experience reduced volatility or prolonged decline, our trading volumes and transaction-based revenues could continue to decline.

In response to the COVID-19 pandemic and the related stay-at-home orders, travel restrictions, and quarantine requirements implemented by the state and federal governments, in March 2020 we temporarily closed our physical offices and shifted to a remote working model. Although we gradually started allowing employees to return to the office in mid-2021, we did not require it and in the fourth quarter of 2021 we elected to become a “Remote First” company. Under this approach, which we fully implemented in April 2022, a large segment of our employees has no assigned location or regular in-office requirement, some teams need to live within a commutable distance to an office location for regulatory and business reasons, and a small segment of our workforce is required to come into the office. All employees currently have access to our offices throughout the country. Starting in July 2022, we no longer require proof of vaccination or a negative test for entry into our offices. We continue to monitor developments related to the pandemic, such as the severity and transmission rate of the virus and its variants, and we may adjust our workplace strategy as necessary.

The COVID-19 pandemic and the various measures instituted by governments and businesses to mitigate its spread, including travel restrictions, stay-at-home orders and quarantine restrictions, could still adversely impact our customers, employees and business partners, and continue to disrupt our operations, including as the pandemic and related supply-chain disruptions contribute to a general slowdown in the global economy. The COVID-19 pandemic has also resulted, in part, in inefficiencies and delays in our business, operational challenges, additional costs related to business continuity initiatives as our workforce continues to work remotely, and increased vulnerability to cybersecurity attacks or other privacy or data security incidents.

As the COVID-19 pandemic began to subside in the second half of 2021 and the related circumstances that accelerated the growth of our business did not continue, we saw the growth of our user base in recent periods slow compared to the accelerated growth we experienced in 2020 and the first half of 2021. The extent of the continuing impact of any COVID-19 resurgence or emergence of similar public health threats on our business, financial condition and results of operations will depend largely on future developments, including the duration of the pandemic,any COVID--19 resurgence or similar public health threat and actions taken to contain COVID-19 or address itstheir impact, our ability to adapt to the Remote First model, thetheir impact on capital and financial markets, and thetheir related impact on the financial circumstances of our customers, all of which are highly uncertain and difficult to predict. The future of

Our flexible remote working model subjects us to heightened operational risks.

We have a flexible remote work andpolicy, under which a large segment of our physicalemployees are not required to come into the office build-out strategy have been challenged by the COVID-19 pandemic, whichon a daily basis. Allowing our employees to work remotely subjects us to heightened operational risks. For example, technologies in our employees’ homes might adversely affect successful cross-functional collaboration, product development velocity, andnot be as robust or effective as in our company culture. In particular, our new Remote First workforce model increases risk of culture driftoffices and could lead to lower operational effectiveness. Even afterproductivity and/or increased vulnerability to cybersecurity attacks or other privacy or data security incidents. There is no guarantee that the COVID-19 outbreakdata security and privacy safeguards we have put in place will be completely effective or that we will not encounter risks associated with employees accessing company data and systems remotely. We also face challenges due to the need to operate with a dispersed and remote workforce, as well as increased costs related to business continuity initiatives.
Having a flexible remote working model has subsided, wealso made and might continue to experience adverse impactsmake it more difficult for us to preserve our corporate culture of innovation and our employees might have decreased opportunities to collaborate in meaningful ways. Further, we cannot guarantee that having a large portion of our workforce continuing to work remotely will not have a negative impact on employee morale or productivity. Any failure to overcome the challenges presented by our flexible remote work policy could harm our future success, including our ability to retain and recruit personnel, innovate and operate effectively, maintain product development velocity, and execute on our business as a result of the global economic impact, including the availability of credit, adverse impacts on our liquidity, and any recession that has occurred or might occur in the future. A sustained or prolonged COVID-19 pandemic or a resurgence could exacerbate the factors described above and intensify the impact on our business.

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Our future success depends on the continuing efforts of our key employees and our ability to attract and retain senior management and other highly skilled personnel.

Our future success depends, in part, on our ability to continue to identify, attract, develop, integrate and retain qualified and highly skilled personnel. In particular, our Co-Founder and CEO, Vladimir Tenev, and our Co-Founder and Chief Creative Officer, Baiju Bhatt, have been critical to the development and execution of our business, vision, and strategic direction. In addition, we have heavily relied, and expect we will continue to heavily rely, on the services and performance of our senior management team, which provides leadership, contributes to the core areas of our business and helps us to efficiently execute our business. Although we have entered into employment offer letters with some of our key personnel, these agreements have no specific duration and are terminable by either party at-will.at-will and our senior management team has experienced recent changes. We do not maintain key person life insurance policies on any of our employees.

We also might not be successful in attracting, integrating or retaining qualified personnel to fulfill our current or future needs. In particular, there iscontinues to be particularly high competition in the San Francisco Bay Area for software engineers, computer scientists and other technical personnel. In the fourth quarter of 2021, we experienced higher rates of employee attrition as well as recruiting challenges in the post-IPO context. We might continue to experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Given our heavy emphasis on share-based compensation,SBC, the continuing declines in our stock price (which make previously-granted share-based compensationSBC less valuable) are exacerbatinghave exacerbated the difficulty of recruiting, retaining, and motivating highly skilled personnel. Attrition and workforce reductions (such as the April 2022have and August 2022 Restructurings) couldmight continue to adversely affect our reputation among job seekers, demoralize our remaining employees, and result in a loss of institutional know-how, reduced productivity, slower customer service response, reduced effectiveness of internal compliance and risk-mitigation programs, and cancellations of or delays in completing new product developments and other strategic projects. For example, in the periods immediately following the April 2022 Restructuring and August 2022 Restructuring, we experienced higher rates of voluntary employee attrition, as well as declines in reported employee job satisfaction. We might continue to experience difficulty in hiring and retaining highly skilled employees with appropriate qualifications.

We believe that a critical component of our efforts to attract and retain employees has been our corporate culture.culture of innovation. We have invested substantial time and resources in building our team. As we continue to grow our business and expand internationally, we will face new challenges to maintain our corporate culture of innovation among morea larger number of geographically dispersed and Remote Firstremote employees. Failure to preserve our company culture could harm our ability to retain and recruit personnel.

If we are unable to attract, integrate, retain, or retaineffectively replace our key employees and qualified and highly skilled personnel, our ability to effectively focus on and pursue our corporate objectives will decline, and our business and future growth prospects could be harmed.

Future acquisitions of, or investments in, other companies, products, technologies or specialized employees could require significant management attention, disrupt our business, dilute stockholder value, and adversely affect our results of operations.

As part of our business strategy, we have made and might continue to make acquisitions of, or investments in, specialized employees or other compatible companies, products, or technologies. We also have entered into and might continue to enter into relationships with other businesses in order to expand our products and services. Negotiating these transactions can be time-consuming, difficult, and expensive and our ability to close these transactions might be subject to third-party approvals, such as governmental and other regulatory approvals, which are beyond our control.control, and may take longer than expected to be obtained, if at all.

For example, in April 2022 we signed a definitive agreement to acquire Ziglu Limited (“Ziglu”), a U.K.-based electronic money institution and crypto-asset firm,.firm. However, as a result of prolonged regulatory uncertainty, after careful consideration, we notified Ziglu enables its U.K.-based customers to buy and sell eleven cryptocurrencies, earn yield via its ‘Boost’ products, pay usingof the termination of the agreement in February 2023. In connection with the termination of the agreement, we took a debit card, and move and spend money, even abroad, without fees. We expect its team and technology will help us accelerate our international expansion, both$12 million impairment charge, in the U.K. and across Europe, however, our ability to close this transaction
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is subjectaddition to regulatory approval, as well assuffering losses from legal fees and other customary closing conditions. Based on communications with regulatorsexpenses. Additionally, because we had expected Ziglu’s team and technology to date, we believehelp accelerate our international expansion, the transaction will close, if at all, no sooner than the first quarter of 2023. Any further delay in completing, or any termination of the Ziglu acquisition could significantly delay any European expansion,deal has delayed our plans to expand our operations in Europe, particularly with respect to cryptocurrency trading.

In general, our efforts to grow through acquisitions are subject to the risks that we might be unable to find suitable acquisition or investment candidates or to complete acquisitions on favorable terms or in a timely manner, if at all. Moreover, these kinds of acquisitions or investments can result in unforeseen operating difficulties and expenditures, including disrupting our ongoing operations, diverting management from their primary responsibilities, subjecting us to additional liabilities, increasing our expenses, and adversely impacting our business, financial condition and results of operations. If we acquire businesses or technologies, including our pending acquisition of Ziglu, we might not be able to integrate the acquired personnel, operations, and technologies successfully, or effectively manage the combined business following the acquisition. Moreover, the anticipated benefits of any acquisition or investment might not be realized and we might be exposed to unknown liabilities.

In connection with these types of transactions, we might issue additional equity securities that would dilute our stockholders, use cash that we might need in the future to operate our business, incur debt on terms unfavorable to us or that we are unable to repay, incur large charges or substantial liabilities, encounter difficulties integrating diverse business cultures, and become subject to adverse tax consequences, substantial depreciation, or deferred compensation charges.

We intend to expand into international markets, which will expose us to significant new risks, and our international expansion efforts might not succeed.

We currently do notonly offer services to the public outside the United States. However, weStates through our web3 self-custodial crypto wallet (the “Robinhood Wallet”), which is available in over 150 countries and offered through our Cayman Islands subsidiary, Robinhood Non-Custodial Ltd. (“RHNC”) We also currently have corporate subsidiaries, offices, and some employees or contractors, in each of India, the U.K., and the Netherlands (and, in the case of the U.K., our subsidiary Robinhood U.K. Ltd is authorized and regulated by the U.K. Financial Conduct Authority). We also expect that our pending acquisition of Ziglu, which is subject to receipt of required regulatory approval, if completed, will help us accelerate our international expansion, both in the U.K. and across Europe. Any further delay in completing, or any termination of, the Ziglu acquisition could significantly delay any European expansion, particularly with respect to cryptocurrency trading. Based on communications with regulators to date, we believe the transaction will close, if at all, no sooner than the first quarter of 2023.

We intend to expand our operations to other countries outside of the United States, including and beyondhave publicly stated that we set a goal to offer brokerage services in the pending U.K. acquisition described above.by the end of 2023. International expansion will require significant resources and management attention and will subject us to regulatory, economic, operational, and political risks in addition to those we already face in the United States. There are significant risks and costs inherent in establishing and doing business in international markets, including:

•difficulty establishing and managing international entities, offices, and/or operations and the increased operations, travel, infrastructure, and legal and compliance costs associated with operations, entities, and/or people in different countries or regions;
•the need to understand, interpret and comply with local laws, regulations and customs in multiple jurisdictions, including laws and regulations governing cryptocurrency-related, broker-dealer, money transmitter, or regulated entity practices, some of which might require permissions, registrations, authorizations, licenses or consents, or might be different from, or conflict with, those of other jurisdictions or foreign cybersecurity, data privacy or labor and employment laws;
•the additional complexities of any merger or acquisition activity internationally, which would be new for us and could subject us to additional regulatory scrutiny or approvals;
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•the need to adapt, localize, and position our products for specific countries (also known as “product-market fit”);
•increased exposure to foreign fraud vectors;
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•increased competition from local providers of similar products and services;
•challenges of obtaining, maintaining, protecting, defending and enforcing intellectual property rights abroad, including the challenge of extending or obtaining third-party intellectual property rights to use various technologies in new countries;
•the need to offer customer support and other aspects of our offering (including websites, articles, blog posts, and customer support documentation) in various languages or locations;
•compliance with anti-bribery and anti-corruption laws, such as the Foreign Corrupt Practices Act (the “FCPA”) and equivalent anti-money laundering and sanctions rules and requirements, and with anti-bribery and anti-corruption requirements in local markets, by us, our employees, and our business partners;
•the need to recruit and manage staff in new countries and regions to support international operations, and comply with employment law, payroll, and benefits requirements in multiple countries;
•the need to enter into new business partnerships with third-party service providers in order to provide products and services in the local market, or to meet regulatory obligations;
•varying levels of internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs and differences in technology service delivery in different countries;
•fluctuations in currency exchange rates and the requirements of currency control regulations, which might restrict or prohibit conversion of other currencies into U.S. dollars;
•double taxation of our international earnings and potentially adverse tax consequences due to requirements of or changes in the income and other tax laws of the United States or the international jurisdictions in which we operate; and
•political or social change or unrest or economic instability in a specific country or region in which we operate.

We have limited experience with international legal and regulatory environments and market practices, and we might not be able to penetrate or successfully operate in the markets we choose to enter. In addition, we might incur significant expenses as a result of our international expansion, and we might not be successful, which could lead to substantial losses.

We are exposed to funding transaction losses due to reversals or insufficient funds.

Some of our products and services are paid for by electronic transfer from customers’ bank accounts which exposes us to risks associated with reversals and insufficient funds. Unwinding of funds transfers due to reversals, and insufficient funds could arise from fraud, misuse, unintentional use, settlement delay, or other activities. Also, criminals are using increasingly sophisticated methods to engage in illegal activities, such as counterfeiting and fraud. If we are unable to collect and retain such amounts from the customer, or if the customer refuses or is unable, due to bankruptcy or other reasons, to reimburse us, we bear the loss for the amount of the chargeback, refund, or return.
While we have policies and procedures designed to manage and mitigate these risks, we cannot be certain that such processes will be effective. Our failure to limit returns, including as a result of fraudulent transactions, could lead payment networks or our banking partners to require us to increase reserves, impose penalties on us, charge additional or higher fees, or terminate their relationships with us. These risks may be amplified as we continue to expand our operations internationally and increase our exposure to foreign fraud vectors.
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Risks Related to Regulation and Litigation

Our business is subject to extensive, complex and changing laws and regulations, and related regulatory proceedings and investigations. Changes in these laws and regulations, or our failure to comply with these laws and regulations, could harm our business.

We are subject to a wide variety of local, state, federal, and international laws, regulations, licensing schemes, and industry standards in the United States and in other countries in which we operate. These laws, regulations, and standards govern numerous areas that are important to our business, and include, or might in the future include, those relating to all aspects of the securities industry, money transmission, foreign exchange, payments services (such as payment processing and settlement services), cryptocurrency, trading in shares and fractional shares, fraud detection, consumer protection, anti-money laundering, escheatment, sanctions regimes and export controls, data privacy, data protection, and data security.

The substantial costs and uncertainties related to complying with these regulations continue to increase, and our introduction of new products or services, expansion of our business into new jurisdictions or subindustries, acquisitions of other businesses that operate in similar regulated spaces, or other actions that we may take might subject us to additional laws, regulations, or other government or regulatory scrutiny. Regulations are intended to ensure the integrity of financial markets, to maintain appropriate capitalization of broker-dealers and other financial services companies, and to protect customers and their assets. These regulations could limit our business activities through capital, customer protection, and market conduct requirements, as well as restrictions on the activities that we are authorized to conduct.

We operate in a highly regulated industry and, despite our efforts to comply with applicable legal requirements, like all companies in our industry, we must adapt to frequent changes in laws and regulations, and face complexity in interpreting and applying evolving laws and regulations to our business, heightened scrutiny of the conduct of financial services firms and increasing penalties for violations of applicable laws and regulations. We might fail to establish and enforce procedures that comply with applicable legal requirements and regulations. We might be adversely affected by new laws or regulations, changes in the interpretation of existing laws or regulations, or more rigorous enforcement. We also might be adversely affected by other regulatory changes related to our obligations with regard to suitability of financial products, supervision, sales practices, application of fiduciary or best interest standards (including the interpretation of what constitutes an “investment recommendation” for the purposes of the SEC’s “Regulation Best Interest” and state securities laws), and best execution in the context of our business and market structure, any of which could limit our business, increase our costs and damage our reputation.

Broker-Dealer Regulation

As broker-dealers, our subsidiaries RHF and RHS are subject to extensive regulation by federal state and non-U.S.state regulators and SROs, and are subject to laws and regulations covering all aspects of the securities industry. Federal state and non-U.S.state regulators and SROs, including the SEC and FINRA, can among other things investigate, censure or fine us, issue cease-and-desist orders or otherwise restrict our operations, require changes to our business practices, products or services, limit our acquisition activities or suspend or expel a broker-dealer or any of its officers or employees. Similarly, state attorneys general and other state regulators, including state securities and financial services regulators, can bring legal actions on behalf of the citizens of their states to assure compliance with state laws. In addition, criminal authorities such as state attorneys general or the U.S. Department of JusticeDOJ may institute civil or criminal proceedings against us for violating applicable laws, rules, or regulations.

Money-Transmitter Regulation
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Money-Transmitter Regulation

As money transmitters, certain of our subsidiaries RHC and RHY are subject to regulation, primarily at the state level. We are also subject to regulation by the Consumer Financial Protection Bureau (the “CFPB”(“CFPB”). We have obtained or are in the process of obtaining licenses to operate as a money transmitter (or as another type of regulated financial services institution, as applicable) in the United States and in the states where this is required. As a licensed money transmitter, we are subject to obligations and restrictions with respect to the investmentmovement of customer funds, reporting requirements, bonding requirements, and inspection by state regulatory agencies concerning those aspects of our business considered money transmission. Evaluation of our compliance efforts, as well as the questions of whether and to what extent our products and services are considered money transmission, are matters of regulatory interpretation and could change over time. There are substantial costs and potential product and operational changes involved in maintaining and renewing these licenses, certifications, and approvals, and we could be subject to fines, other enforcement actions, and litigation if we are found to violate any of these requirements. There can be no assurance that we will be able to (or decide to) continue to apply for or obtain any such licenses, renewals, certifications, and approvals in any jurisdictions. In certain markets, we might rely on local banks or other partners to process payments and conduct foreign currency exchange transactions in local currency, and local regulators might use their authority over such local partners to prohibit, restrict, or limit us from doing business. The need to obtain or maintain these licenses, certifications, or other regulatory approvals could impose substantial additional costs, delay or preclude planned transactions, product launches or improvements, require significant and costly operational changes, impose restrictions, limitations, or additional requirements on our business, products, and services, or prevent us from providing our products or services in a given market.

We have been subject to regulatory investigations, actions, and settlements and we expect to continue to be subject to such proceedings in the future, which could cause us to incur substantial costs or require us to change our business practices in a materially adverse manner.

From time to time, we have been subject, and, given the highly regulated nature of the industries in which we operate, we expect that we will be subject in the future, to a number of legal and regulatory examinations and investigations arising out of our business practices and operations, conducted by the SEC or FINRA, other federal agencies such as the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”),OFAC, and state regulatory agencies, such as the MSD, the California Attorney General’s Office, and the NYDFS,New York State Department of Financial Services (“NYDFS”), among other authorities. These examinations and investigations have in some instances in the past and might in the future lead to lawsuits, arbitration claims, and enforcement proceedings, as well as other actions and claims, that result in injunctions, fines, penalties, and monetary settlements. For example:

•In December 2020, we settled an SEC investigation under which we paid a $65 million civil penalty and agreed to engage an independent compliance consultant.
•In June 2021, we resolved multiple matters with FINRA (including investigations into systems outages, our options product offering, and margin-related communications with customers), resulting in censure, fines and restitution of $70 million, and engagement of an independent consultant.
•In connection with the Early 2021 Trading Restrictions, we and our employees, including our co-founder and CEO, Vladimir Tenev, have received requests for information, and in some cases, subpoenas and requests for testimony from the USAO, (as defined below), the U.S. Department of Justice,DOJ, Antitrust Division, the SEC staff, FINRA, the New York Attorney General’s Office, other state attorneys general offices, and a number of state securities regulators. Also, a related search warrant was executed by the USAO to obtain Mr. Tenev’s cell phone. We have also received inquiries from the SEC’s Division of Examinations and Division of Enforcement and FINRA related to employee trading during the week of January 25, 2021 in some of the securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp. and AMC Entertainment Holdings, Inc., and specifically as to whether any employee trading in these
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securities occurred after the decision to impose the Early 2021 Trading Restrictions and before the public announcement of the Early 2021 Trading
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Restrictions on January 28, 2021. We are cooperating with these investigations and examinations.
•In August 2022, we settled an NYDFS investigation under which we paid a monetary penalty of $30 million and engaged an independent compliance consultant.
•In March and April 2023, we reached settlements with several state regulators, including the Alabama Securities Commission, the California Department of Financial Protection and Innovation, the Colorado Division of Securities, the Delaware Department of Justice - Investor Protection Unit, the New Jersey Bureau of Securities, the South Dakota Division of Insurance, and the Texas State Securities Board regarding investigations related to RHF’s options trading and related customer communications and displays, options and margin trading approval process, the March 2020 Outages, and customer support issues prior to June 2020, under which we have agreed to pay a monetary penalty of $200,000 per state. We anticipate potential additional state settlements as part of a multi-state settlement related to these issues totaling up to approximately $10 million.

These and other proceedings, some of which are described in Note 1513 - Commitments & Contingencies, to our unaudited condensed consolidated financial statements in this Quarterly Report, have in the past and might in the future relate to broker-dealer and financial services rules and regulations, including our trading and supervisory policies and procedures, our clearing practices, our trade reporting, our public communications, our compliance with FINRA registration requirements, anti-money laundering and other financial crimes regulations, cybersecurity matters, and our business continuity plans, among other topics. These sorts of proceedings, inquiries, examinations, investigations, and other regulatory matters might subject us to fines, penalties, and monetary settlements, harm our reputation and brand, require substantial management attention, result in additional compliance requirements, result in certain of our subsidiaries losing their regulatory licenses or ability to conduct business in some jurisdictions (which could, among other things, result in statutory disqualification by FINRA and the SEC), increase regulatory scrutiny of our business, restrict our operations or require us to change our business practices, require changes to our products and services, require changes in personnel or management, delay planned product or service launches or development, limit our ability to acquire other complementary businesses and technologies, or lead to the suspension or expulsion of our broker-dealer or other regulated subsidiaries or their officers or employees.

In connection with litigation settlements, we have in the past and might in the future be required to make expenditures to enhance our compliance activities. For example, the independent consultant we engaged in connection with the June 2021 FINRA multi-matterAugust 2022 NYDFS settlement, delivered its initial report in December 2021. While we believe we have made significant improvements to address FINRA’s original allegations, theengaged an independent consultant recommended additionalto perform a comprehensive evaluation of our compliance program and remediation efforts with respect to identified deficiencies and violations. The independent consultant’s evaluation is still ongoing, and may result in a recommendation to implement enhancements in certain areas identified in the settlement.Implementing these recommendations has requiredsettlement, which could require significant effort and expense.expense to implement.

Additionally, our broker-dealer subsidiariesRHS, RHF, RHC, and RHY are registered in the United States but are not currently licensed, authorized, or registered in any other jurisdiction. Underjurisdiction (and in some cases are not licensed in every state). With the exception of Robinhood Wallet, which is offered through RHNC, under the terms of our customer agreements, we currently offer services only to U.S. citizens and permanent residents with a legal address within the United States or Puerto Rico, and our application includes features designed to block access to our services from certain countries.unauthorized jurisdictions. However, to the extent a customer accesses our application or services from outside the United States,of jurisdictions where we have obtained required governmental licenses and authorization, we face a risk of becoming subject to regulations in that local jurisdiction. A regulator’s conclusion that we are servicing customers in its jurisdiction without being appropriately licensed, registered, or authorized could result in fines or other enforcement actions.

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Recent statements by lawmakers, regulators and other public officials have signaled an increased focus on new or additional regulations that could impact our business and require us to make significant changes to our business model and practices.

Various lawmakers, regulators and other public officials have recently made statements about our business and that of other broker-dealers and signaled an increased focus on new or additional laws or regulations that, if acted upon, could impact our business. Over three days in the spring of 2021, the Committee on Financial Services of the U.S. House of Representatives held hearings on the January 2021 market volatility and disruptions surrounding GameStop and other “meme” stocks at which various members of Congress expressed concerns about various market practices, including PFOF and options trading. In his testimony, Chair Gensler indicated that he had instructed the staff of the SEC to study, and in some cases make rulemaking recommendations to the SEC regarding, a variety of market issues and practices, including PFOF, so-called gamification, and whether broker-dealers are adequately disclosing
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their policies and procedures around potential trading restrictions; whether margin requirements and other payment requirements are sufficient; and whether broker-dealers have appropriate tools to manage their liquidity and risk. Chair Gensler also discussed the use of mobile app features such as rewards, bonuses, push notifications and other prompts. Chair Gensler suggested that such prompts could promote behavior that is not in the interest of the customer, such as excessive trading. Chair Gensler also advised that he had directed the SEC staff to consider whether expanded enforcement mechanisms are necessary. On August 27, 2021,In December 2022, the SEC issuedproposed the December 2022 Rule Proposals, which relate to (i) best execution, (ii) order competition, (iii) order execution disclosure, and (iv) order tick size and fee caps. After issuing a request for information and public comment on matters related to the use of digital engagement practices by broker-dealers and investment advisers including behavioral prompts, differential marketing, game-like features, and other design elements or features designed to engage with retail investors on digital platforms (e.g., websites, portals, and applications), as well as related analytical and technological tools and methods. In anin August 2021, interview, Chair Gensler commented that a full ban on PFOF was “on the table.” Chair Gensler also described a number of on-going projects he had instructed SEC staff to pursue related to market structure in the Gensler Market Structure Testimony. Also in October 2021, the SEC staff released its report on the equity and options market structure conditions surrounding the Early 2021 Trading Restrictions, which concluded in part that the episode may "present an opportunity to reflect" on market structure issues such as digital engagement practices, PFOF, dark pool trading, and other structures that affect Robinhood’s operations. In June 2022, the majority staff of the House Financial Services Committee released a report on the market events surrounding the Early 2021 Trading Restrictions, which alleged that “Robinhood exhibited troubling business practices, inadequate risk management, and a culture that prioritized growth above stability” and concluded in part that Congress should adopt legislation requiring the SEC and FINRA to study how market rules and supervision should evolve to address social media driven market activity. Also in his June 2022 Keynote, Chair Gensler indicated that he had instructed the staff of the SEC to make rulemaking recommendations to the SEC regarding a variety of market issues and practices, including minimum pricing increments, the National Best Bid and Offer, disclosure of order execution quality, best execution, PFOF, exchange rebates and related access fees, and order-by-order competition (including the possibility of requiring that orders be routed into an open auction system). The springfall 2022 regulatory agenda published by the SEC also indicated that the SEC would consider proposing rules on that topic by April 2023, specifically the use of predictive data analytics, differential marketing, and behavioral prompts. In his April 2023 testimony before the U.S. House of Representatives Committee on Financial Services, Chair Gensler stated that he had asked the SEC staff to make recommendations for rule proposals addressing conflicts that can arise from the use of predictive analytics, in October 2022particular conflicts that may arise to modernize equity market structure, including possible new rules on PFOF, best execution (amendments to Rule 605), market concentration, the disclosure of best execution statistics, and certain other practices.extent advisors or brokers are optimizing their own interests as well as others.

In addition, on March 18, 2021,in 2022, FINRA issued a regulatory notice reminding memberrequesting comment on complex products and options including “whether the current regulatory framework…is appropriately tailored to address current concerns raised by complex products and options.” If FINRA amends its rules to impose additional requirements on firms of their obligations with respect to maintaining margin requirements,determining customer order handling,eligibility and/or suitability to trade options, such rule changes could result in fewer Robinhood customers being approved to trade options which could negatively impact our options trading volumes and effectively managing liquidity, with a particular focus on best execution practices and the need for member firms to make “meaningful disclosures” to inform customers of a firm’s order handling procedures during extreme market conditions. Further, at a public conference on May 19, 2021, FINRA indicated an intention to solicit public feedback, such as through notices or surveys, regarding so-called gamification in order to determine whether to adopt additional guidance or additional rules in that regard. Also, on June 23, 2021, FINRA issued a regulatory notice reminding member firms of the requirement that customer order flow be directed to markets providing the “most beneficial terms for their customers” and indicated that member firms may not negotiate the terms of order routing arrangements in a manner that reduces price improvement opportunities that would otherwise be available to those customers in the absence of PFOF. The impact that this notice might have on the ability of market participants to enter into PFOF arrangements, if any, has not been determined.associated revenues.

InAlso, in September 2021, FINRA announced that it is reviewing firms’ use of social media marketing, including social media influencers, which is a marketing channel that we actively utilize. In February 2022, FINRA opened an investigation into our use of social media marketing. Any limits that FINRA might impose on our use of this marketing channel could make it more difficult for us to attract new customers, resulting in slower growth.

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On March 8, 2022, FINRA issued a regulatory notice requesting comment on complex products and options including, among other things, "whether the current regulatory framework, which was adopted at a time when the majority of individuals accessed financial products through financial professionals, rather than through self-directed platforms, is appropriately tailored to address current concerns raised by complex products and options.” If FINRA amends its rules to impose additional requirements on firms with respect to determining customer eligibility and/or suitability to trade options, such rule changes could result in fewer Robinhood customers being approved to trade options which could negatively impact our options trading volumes and associated revenues.

To the extent that the SEC, FINRA, or other regulatory authorities or legislative bodies adopt additional regulations or legislation in respect of any of these areas or relating to any other aspect of our business, we could face a heightened risk of potential regulatory violations and could be required to make significant changes to our business model and practices, which changes might not be successful. Any of these outcomes could have an adverse effect on our business, financial condition and results of operations.

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We are involved in numerous litigation matters that are expensive and time consuming, and, if resolved adversely, could expose us to significant liability and reputational harm.

In addition to regulatory proceedings, we are also involved in numerous other litigation matters, including putative class action lawsuits, and we anticipate that we will continue to be a target for litigation in the future. Potential litigation matters include commercial litigation matters, insurance matters, privacy and cybersecurity disputes, intellectual property disputes, contract disputes, consumer protection matters, and employment matters. This risk might be more pronounced during market downturns, during which the volume of legal claims and amount of damages sought in litigation and regulatory proceedings against financial services companies have historically increased.

For more information about the legal proceedings in which we are currently involved, see Note 15 to our unaudited condensed consolidated financial statements in this Quarterly Report.

Litigation matters brought against us have in the past and might in the future require substantial management attention and might result in settlements, awards, injunctions, fines, penalties, and other adverse results. A substantial judgment, settlement, fine, penalty, or injunctive relief could be material to our results of operations or cash flows for a particular period, or could cause us significant reputational harm.

For more information about the legal proceedings in which we are currently involved, see Note 13 - Commitments & Contingencies, to our unaudited condensed consolidated financial statements in this Quarterly Report.

We are subject to governmental laws and requirements regarding anti-corruption, anti-bribery, economic and trade sanctions, anti-money laundering, and counter-terror financing that could impair our ability to compete in international markets or subject us to criminal or civil liability if we violate them.

We are required to comply with U.S. economic and trade sanctions administered by OFACthe U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) and we have processes in place to facilitate compliance with the OFAC regulations. As part of our customer onboarding process, in accordance with the Customer Identification Program rules under Section 326 of the USA PATRIOT ACT of 2001,Patriot Act, we screen all potential customers against OFAC watchlists and continue to screen all customers, vendors and employees daily against OFAC watchlists. Although our application includes features designed to block access to our services from sanctioned countries, if our services are accessed from a sanctioned country in violation of trade and economic sanctions, we could be subject to enforcement actions.

We are subject to the FCPA, U.S. domestic bribery laws, and other U.S. and foreign anti-corruption laws. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees and their third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in
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the public sector. These laws also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. The failure to comply with any such laws could subject us to criminal or civil liability, cause us significant reputational harm, and have an adverse effect on our business, financial condition, and results of operations.

We are also subject to various anti-money laundering and counter-terrorist financing laws and regulations that prohibit, among other things, our involvement in transferring the proceeds of criminal activities. In the United States, most of our services are subject to anti-money laundering laws and regulations, including the Bank Secrecy Act, as amended, (“BSA”), and similar laws and regulations. The BSA is the primary U.S. anti-money laundering law and has been amended to include certain provisions of Title III of the USA PATRIOT ACT of 2001 to detect, deter, and disrupt terrorist financing networks. Regulators in the United States continue to increase their scrutiny of compliance with these obligations. For example, in July 2020, theAugust 2022, we settled an NYDFS issued a report of its examinationinvestigation of our cryptocurrency business citing a number of “matters requiring attention” focusedrelated primarily onto anti-money laundering and cybersecurity-related issues, under which we expect will result inpaid a significant monetary penalty of $30 million and a requirement that we engage a monitor.engaged an independent compliance consultant.

Although our operations are currently concentrated in the United States (with the limited exception of our U.K.Dutch, Indian, and DutchU.K. subsidiaries, which have U.K.-locally-based employees and/or contractors, and Netherlands-based employees and contractors, but currently have no customers),our
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Cayman Islands subsidiary, through which we offer Robinhood Wallet internationally) we intend to expand internationally and we will become subject to additional non-U.S. laws, rules, regulations, and other requirements regarding economic and trade sanctions, anti-money laundering, and counter-terror financing. In order to comply with applicable laws, we will need to further revise or expand our compliance program, including the procedures we use to verify the identity of our customers and to monitor transactions on our system, including payments to persons outside of the United States. The need to comply with multiple sets of laws, rules, regulations, and other requirements could substantially increase our compliance costs, impair our ability to compete in international markets, and subject us to risk of criminal or civil liability for violations.

Risks Related to Attracting, Retaining, and Engaging Customers

We operate in highly competitive markets, and many of our competitors have greater resources than we do and may have products and services that are more appealing than ours to our current or potential customers.

The markets in which we compete are evolving and highly competitive, with multiple participants competing for the same customers. Our current and potential future competition principally comes from incumbent brokerages, established financial technology companies, venture-backed financial technology firms, banks, cryptocurrency exchanges, asset management firms, financial institutions, and technology platforms. The majority of our competitors have longer operating histories and greater capital resources than we have and offer a wider range of products and services. Some of our competitors, particularly new and emerging technology companies, are not subject to the same regulatory requirements or scrutiny to which we are subject, which could allow them to innovate more quickly or take more risks, placing us at a competitive disadvantage. The impact of competitors with superior name recognition, greater market acceptance, larger customer bases, or stronger capital positions could adversely affect our results of operations and customer acquisition and retention. Our competitors might also be able to respond more quickly to new or changing opportunities and demands and withstand changing market conditions better than we can, especially larger competitors that might benefit from more diversified product and customer bases. For example, some of our competitors have quickly adopted, or are seeking to adopt, some of our key offerings and services, including commission-free trading, fractional share trading, and no account minimums, since their introduction on our platform in order to compete with us. In addition, competitors might conduct extensive promotional activities, offer better terms or offer differentiating products and services that could attract our current and prospective customers and potentially result in intensified competition within our markets. We continue to experience aggressive price competition in our markets
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and we might not be able to match the marketing efforts or prices of our competitors. In addition, our competitors might choose to forgo PFOF, which could create downward pressure on PFOF and make it more difficult for us to maintain our PFOF arrangements, which are a significant source of our revenue. We might also be subject to increased competition as our competitors enter into business combinations or partnerships, or established companies in other market segments expand to become competitive with our business.

Our ability to compete successfully in the financial services and cryptocurrency markets depends on a number of factors, including, among other things:

•maintaining competitive pricing;
•providing easy-to-use, innovative, and attractive products and services that are adopted by customers;
•retaining customers (such as by providing effective customer support and avoiding outages, security breaches, and trading restrictions);
•recruiting and retaining highly skilled personnel and senior management;
•maintaining and improving our reputation and the market perception of our brand and overall value;
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•maintaining our relationships with our counterparties; and
•adjusting to a dynamic regulatory environment.

Our competitive position within our markets could be adversely affected if we are unable to adequately address these factors.

If we fail to retain existing customers or attract new customers, or if our customers decrease their use of our products and services, our revenue will decline.

We have experienced significant customer growth over the past severalin recent years (and in 2020 and 2021 in particular), including a significant fraction of new customers, often more than 50%, who have told us that Robinhood is their first brokerage account. We have historically relied significantly on our customers joining organically or through the Robinhood Referral Program, which accounted for over 80% of the customers that joined our platform in each of 2020, 2021, and 2021.2022. Our continued business and revenue growth depends on our efforts to attract new customers, retain existing customers, and increase the amount that our customers use our products and services (including premium services, such as Robinhood Gold). It is particularly important that we retain and engage our most active brokerage customers, who account for a disproportionately large percentage of our brokerage trading volumes. Any erosion of this active customer base would have a disproportionately large negative impact on our revenues, which could cause the trading price of our Class A common stock to decline significantly. Our efforts to attract and retain customers might fail due to a number of factors, including our customers losing confidence in us or preferring a competitor’s offerings. Additional factors that could lead to a decline in our number of customers or their usage of our products and services or that could prevent us from increasing our number of customers include:

•a decline in our brand and reputation;
•increased pricing for our products and services;
•ineffective marketing efforts or a reduction in marketing activity;
•certain of our customers, due to being new and inexperienced, might be less loyal to our product or less likely to maintain historical trading patterns and interest in investing;
•a broad decline in the equity or other financial markets, which could result in many of these investors feeling discouraged and exiting the markets altogether;altogether (such as the 2022 Bear Markets);
•rising inflation resulting in less disposable income for our customers to invest;
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•our customers experiencing difficulties using the Robinhood app as intended, due to any number of reasons such as design errors, service outages, or trading restrictions imposed by us;
•our customers experiencing security or data breaches, account intrusions, or other unauthorized access;
•our failure to provide adequate customer service;
•customer resistance to and non-acceptance of cryptocurrencies; and
•customer dissatisfaction with the limited number of cryptocurrencies available on our platform.

Our customers may choose to cease using our platform, products, and services at any time, and may choose to transfer their accounts to another broker-dealer. For example, during the first quarter of 2021 many customers became upset by our imposition of the Early 2021 Trading Restrictions and we saw an increase in customers choosing to transfer their accounts to other broker-dealers. The total value of outbound ACATS, an automated industry system for account asset transfers, was $4.2 billion in the first quarter of 2021, involving 5.2% of AUC from approximately 206,000 accounts, as compared to outbound ACATS transfers of $0.5 billion, involving 1.2% of AUC from approximately 24,000 accounts during each quarter of 2020 on average.

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If we fail to provide and monetize new and innovative products and services that are adopted by customers, our business may become less competitive and our revenue might decline.

Our ability to attract, engage, and retain our customers and to increase our revenue depends heavily on our ability to evolve our existing products and services and to create and monetize new products and services that are adopted by customers. Rapid and significant technological changes continue to confront the financial services industry, including developments in the methods in which securities are traded and developments in cryptocurrencies. To keep pace or to innovate we have introduced and might continue to introduce significant changes to our existing products and services or acquire or introduce new and unproven products and services, including using technologies with which we have little or no prior development or operating experience. Our efforts have been and might continue to be inhibited by industry-wide standards, legal restrictions, incompatible customer expectations, demands, and preferences, or third-party intellectual property rights. Our efforts to innovate have been and might continue to also be delayed or blocked by new or enhanced regulatory scrutiny or technical complications. Incorporating new technologies into our products and services has required and might continue to require substantial expenditures and take considerable time, and we might not be successful in realizing a return on these development efforts in a timely manner or at all. It might be difficult to monetize products in a manner consistent with our brand’s focus on low prices. If we fail to innovate and deliver products and services with market fit and differentiation, or fail to do so quickly enough as compared to our competitors, we might fail to attract and retain customers and maintain customer engagement, causing our revenue to decline.
Risks Related to Our Platform, Systems, and Technology

Our products and services rely on software and systems that are highly technical and have been, and may in the future be, subject to interruption, instability, and instabilityother potential flaws due to software errors, design defects, and other processing, operational, and technological failures, whether internal or external.

We rely on technology, including the internet and mobile services, to conduct much of our business activity and allow our customers to conduct financial transactions on our platform. Our systems and operations, including our Cloud-basedcloud-based operations and disaster recovery operations, as well as those of the third parties on which we rely to conduct certain key functions, are vulnerable to disruptions from natural disasters, power and service outages, interruptions or losses, computer and telecommunications failures, software bugs, cybersecurity attacks, computer viruses, malware, distributed denial of service attacks, spam attacks, phishing or other social engineering, ransomware, security breaches, credential stuffing, technological failure, human error, terrorism, improper operation, unauthorized entry, data loss, intentional bad actions, and other similar events and we have experienced such disruptions in the past.
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Further, we have in the past and might in the future be particularly vulnerable to any such internal technology failures because we rely heavily on our own self-clearing platform, proprietary order routing system, data platform, and other back-end infrastructure for our operations, and any such failures could have an adverse effect on our reputation, business, financial condition, and results of operations. For example, the Q4 2022 Processing Error, allowed customers, for a limited time, to execute trades selling more shares than they held in December 2018, we experiencedtheir accounts. This caused a failuretemporary short position in that ticker symbol which Robinhood covered out of our order routing technology caused by code being inadvertently pushed tocorporate cash within the production environment that led to option trades being incorrectly routed,same trading day, resulting in estimated out-of-pocket losses to usa loss of approximately $1 million.$57 million.

Our products and internal systems also rely on software that is highly technical and complex (including software developed or maintained internally and/or by third parties and also including machine learning models) in order to collect, store, retrieve, transmit, manage and otherwise process immense amounts of data. The software on which we rely might contain errors, bugs, vulnerabilities, design defects, or technical limitations that might compromise our ability to meet our objectives. Some such problems are inherently difficult to detect and some such problems might only be discovered after code has been released for external or internal use. From time to time mediaMedia outlets have in the past and might in the future learn
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of our plans for features (including for example, Crypto Wallets (defined below) in the third quarter of 2021) by examining hidden but unprotected images and code in publicly available beta versions of our app, resulting in unwanted publicity prior to our intended announcement dates. For example, this occurred in September 2021 prior to our launch announcement for our crypto transfers feature (“Crypto Transfers”) and in December 2021 prior to our launch announcement for our Crypto Gifts feature. Such problems might also lead to negative customer experiences (including the communication of inaccurate information to customers), compromised ability of our products to perform in a manner consistent with customer expectations, delayed product introductions, compromised ability to protect data and intellectual property, or an inability to provide some or all of our services.

While we have made, and continue to make, significant investments designed to correct software errors and design defects and to enhance the reliability and scalability of our platform and operations, the risk of software and system failures and design defects is always present, we do not have fully redundant systems, and we might fail to maintain, expand, and upgrade our systems and infrastructure to meet future requirements and mitigate future risks on a timely basis. It might become increasingly difficult to maintain and improve the availability of our platform, especially as our platform and product offerings become more complex and our customer base grows. For example, the customer waitlist to use our Crypto Wallets feature grew to more than one million users in less than a month. There might be risks related to the technology and operation of Crypto Wallets that we have not yet identified or cannot foresee, and any failure or interruption of the Crypto Wallets feature on our platform could adversely affect our relationships with customers that use this feature. We might also encounter technical issues in connection with changes and upgrades to the underlying networks of supported cryptocurrencies. Any number of technical changes, software upgrades, soft or hard forks, cybersecurity incidents, or other changes to the underlying blockchain networks might occur from time to time, causing incompatibility, technical issues, disruptions or security weaknesses to our platform. If we are unable to identify, troubleshoot, and resolve any such issues successfully, we might no longer be able to support such cryptocurrency, our customers’ assets might be frozen or lost, the security of our hot or cold wallets might be compromised, and our platform and technical infrastructure might be affected.

In addition, surges in trading volume on our platform have in the past and might in the future cause our systems to operate at diminished speed or even fail, temporarily or for a more prolonged period of time, which would affect our ability to process transactions and potentially result in some customers’ orders being executed at prices they did not anticipate, executed incorrectly, or not executed at all. For example, we experienced (i) the March 2020 Outages, which resulted in some of our customers being unable to buy and sell securities and other financial products on our platform for a period of time. Similarly, the April-Maytime, and (ii) partial service outages and degraded service on our cryptocurrency platform from time to time in mid-April and early May 2021 Disruptionscaused by a surging demand for cryptocurrency trading (the “April-May 2021 Disruptions”), which resulted in some of our customers being unable to buy and sell cryptocurrencies for a period of time. Our platform has otherwise in the past and might in the future experience outages. The March 2020 Outages resulted in putative class action lawsuits, arbitrations, and regulatory examinations and investigations. We provided remediation to many of our customers impacted by the March 2020 Outages through cash payments, resulting in out-of-pocket losses to us of approximately $3.6 million. See Note 15
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to our unaudited condensed consolidated financial statements in this Quarterly Report. Disruptions to, destruction of, improper access to, breach of, instability of, or failure to effectively maintain our information technology systems (including our data processing systems, self-clearing platform, and order routing system) that allow our customers to use our products and services, and any associated degradations or interruptions of service could result in damage to our reputation, loss of customers, loss of revenue, regulatory or governmental investigations, civil litigation, and liability for damages. In addition, our customer service team from time to time experiences backlogs responding to customer support requests. These backlogs have compounded when we have experienced any market outages, provider network disruptions, or platform outages or errors, including, for example, in connection with the March 2020 Outages and the April-May 2021 Disruptions, and may compound in the future as a result of such events. Frequent or persistent interruptions, or perceptions of such interruptions whether true or not, in our products and services could cause customers to believe that our products and services are unreliable, leading them to switch to our competitors or to otherwise avoid our products and services. Additionally, our insurance policies might be insufficient to cover a claim made against us by any such customers affected by any disruptions, outages, or other performance or infrastructure problems.

Our success depends in part upon continued distribution through app stores and effective operation with mobile operating systems, networks, technologies, products, hardware and standards that we do not control.

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A substantial majority of our customers’ activity on our platform occurs on mobile devices. We are dependent on the interoperability of our app with popular mobile operating systems, networks, technologies, products, hardware, and standards that we do not control, such as the Android and iOS operating systems. Any changes, bugs or technical issues in such systems, new generations of mobile devices or new versions of operating systems, or changes in our relationships with mobile operating system providers, device manufacturers or mobile carriers, or in their terms of service or policies that degrade the functionality of our app, reduce or eliminate our ability to distribute applications, give preferential treatment to competitive products, limit our ability to target or measure the effectiveness of applications, or impose fees or other charges related to our delivery of our application could adversely affect customer usage of the Robinhood app. For example, from time to time we have experienced delays in our ability to launch products or update features on our platform as a result of prolonged app store review processes. Further, we are subject to the standard policies and terms of service of these operating systems, as well as policies and terms of service of the various application stores that make our application and experiences available to our developers, creators and customers. These policies and terms of service govern the availability, promotion, distribution, content and operation generally of applications and experiences on such operating systems and stores. Each provider of these operating systems and stores has broad discretion to change and interpret its terms of service and policies with respect to our platform and those changes might be unfavorable to us and our customers’ use of our platform. If we were to violate, or an operating system provider or application store believes that we have violated, its terms of service or policies, that operating system provider or application store could limit or discontinue our access to its operating system or store. Any limitation or discontinuation of our access to any third-party platform or application store could adversely affect our business, financial condition or results of operations.

Additionally, in order to deliver a high-quality mobile experience for our customers, it is important that our products and services work well with a range of mobile technologies, products, systems, networks, hardware and standards that we do not control. We need to continuously modify, enhance, and improve our products and services to keep pace with changes in internet-related hardware, mobile operating systems and other software, communication, browser, and database technologies. We might not be successful in developing products that operate effectively with these technologies, products, systems, networks or standards or in bringing them to market quickly or cost-effectively in response to market demands. In the event that it is more difficult for our customers to access and use our app, or if our customers choose not to access or use our app on their mobile devices or use mobile products that do not offer access to our app, our customer growth and engagement could be adversely affected and our revenues might decline.

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We rely on third parties to perform some key functions, and their failure to perform those functions could adversely affect our business, financial condition and results of operations.

We rely on certain third-party computer systems or third-party service providers, including several cloud technology providers such as Amazon Web Services (on which we primarily rely to deliver our services to customers on our platform), internet service providers, payment services providers, market and third-party data providers, regulatory services providers, clearing systems, market makers, exchange systems, banking systems, payment gateways that link us to the payment card and bank clearing networks to process transactions, co-location facilities, communications facilities, and other third-party facilities to run our platform, facilitate trades by our customers, provide the technology we use to manage some of our cryptocurrency custody, transfer, and settlement operations, and support or carry out some regulatory obligations. In addition, external content providers provide us with financial information, market news, charts, option and stock quotes, cryptocurrency quotes, research reports, and other fundamental data that we provide to our customers. These providers are susceptible to processing, operational, technological and security vulnerabilities, including security breaches, which might impact our business, and our ability to monitor our third-party service providers’ data security is limited. In addition, these third-party service providers might rely on subcontractors to provide services to us that face similar risks.

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We face a risk that our third-party service providers might be unable or unwilling to continue to provide these services to meet our current needs in an efficient, cost-effective manner or to expand their services to meet our needs in the future. Any failures by our third-party service providers that result in an interruption in service, unauthorized access, misuse, loss or destruction of data or other similar occurrences could interrupt our business, cause us to incur losses, result in decreased customer satisfaction and increase customer attrition, subject us to customer complaints, significant fines, litigation, disputes, claims, regulatory investigations or other inquiries and harm our reputation. Regulators might also hold us responsible for the failures of our providers.

To the extent the operation of our systems relies on our third-party service providers, through either a connection to, or an integration with, third parties’ systems, the risk of cybersecurity attacks and loss, corruption, or unauthorized access to or publication of our information or the confidential information and personal data of customers and employees might increase. Third-party risks might include insufficient security measures, data location uncertainty, and the possibility of data storage in inappropriate jurisdictions where laws or security measures might be inadequate. Our ability to monitor, and our resources to optimize integration with, third-party service providers’ data security practices are also limited. These third-party risks might be exacerbated as our resources are spread across multiple public cloud services providers. Although we generally have agreements relating to cybersecurity and data privacy in place with our third-party service providers, such agreements might not prevent the accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of, or modification of data (including personal data) and/or might not enable us to obtain adequate (or any) reimbursement from our third-party service providers in the event we should suffer any such incidents. Due to applicable laws and regulations or contractual obligations, we could be held responsible for any information security failure or cybersecurity attack attributed to our vendors as they relate to the information we share with them. A vulnerability in a third-party service provider’s software or systems, a failure of our third-party service providers’ safeguards, policies or procedures, or a breach of a third-party service provider’s software or systems could result in the compromise of the confidentiality, integrity, or availability of our systems or the data housed in our third-party solutions.
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Risks Related to Cybersecurity and Data Privacy

Our business could be materially and adversely affected by a cybersecurity breach or other attack involving our computer systems or data or those of our customers or third-party service providers.

Our systems and those of our customers and third-party service providers have been and might in the future be vulnerable to cybersecurity issues. We, like other financial technology organizations, routinely are subject to cybersecurity threats and our technologies, systems, and networks have been and might in the future be subject to attempted cybersecurity attacks. Such issues are increasing in frequency and evolving in nature, including employee theft or misuse, denial-of-service attacks, and sophisticated nation-state and nation-state-supported actors engaging in attacks. The operation of our platform involves the use, collection, storage, sharing, disclosure, transfer, and other processing of customer information, including personal data. Security breaches and other security incidents could expose us to a risk of loss or exposure of this information, which could result in potential liability, investigations, regulatory fines, penalties for violation of applicable laws or regulations, litigation, and remediation costs, as well as reputational harm. As the breadth and complexity of the technologies we use and the software and platforms we develop continue to grow, the potential risk of security breaches and cybersecurity attacks increases. For instance, in December 2021, a vulnerability was discovered in Apache Software Foundation’s Log4j internet software, which is broadly used (including by us and some of our service providers) in a variety of consumer and enterprise services, websites, applications, and operational technology products. In general, the vulnerability could have allowed malicious attackers to execute code remotely on any exposed computer, which could have enabled the attackers to then steal data, install malware, or take control of the device. We have updated the software to patch the vulnerability and to date we are not aware of any related malicious activity affecting us or our users. Similarly in March 2022 a security breach occurred at Okta, an identity authentication provider that we utilize across our employee base. In general, an attacker with forged or compromised Okta service provider credentials could potentially have accessed several of our sensitive internal systems. Okta reports it has now corrected the issue and working with Okta we have confirmed that such third-party vulnerability was not exploited to gain access to our systems. We have also implemented additional controls to protect against compromised service provider credentials.

Cybersecurity attacks and other malicious internet-based activity continue to increase and financial technology platform providers have been and expect to continue to be targeted. In light of media attention, we might be a particularly attractive target of attacks seeking to access customer data or assets. For example, from January 1, 2020 to October 16, 2020, approximately 2,000 Robinhood customer accounts were allegedly accessed by unauthorized users. We believe these incidents resulted from compromised passwords off of our platform, rather than any failure of our security or systems. Nonetheless, we experienced negative publicity in connection with these events and might in the future experience similar adverse effects relating to real or perceived security incidents, whether or not related to the security of our platform or systems. We have also received customer complaints and been subject to litigation and regulatory inquiries, examinations, enforcement actions, and investigations by various state and federal regulatory bodies, including the SEC, FINRA, and certain state regulators, including the NYDFS and the New York Attorney General, related to these events. The increasing sophistication and resources of cyber criminals and other non-state threat actors and increased actions by nation-state actors make it difficult to keep up with new threats and could result in a breach of security. Additionally, there is an increased risk that we might experience cybersecurity-related incidents as a result of any of our employees, service providers, or other third partiesthird-parties working remotely on less secure systems and environments. While we take significant efforts to protect our systems and data, including establishing internal processes and implementing technological measures designed to provide multiple layers of security, and contract with third-party service providers to take similar steps, our safety and security measures (and those of our third-party service providers) might be insufficient to prevent damage to, or interruption or breach of, our information systems, data (including personal data), and operations. For example, in November 2021 we experienced a data security incident when an unauthorized third party
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socially engineered a customer support employee by phone and obtained access to certain customer support systems (the “Novemberthe November 2021 Data Security Incident”).Incident. Based on our investigation and that of a third-party security firm, we believe that the unauthorized party obtained names or email addresses for millions of people, phone numbers for several thousand people, additional personal information for a few hundred people, and extensive account details for about ten people, though we believe no Social Security numbers, bank account numbers, or credit or debit card numbers were exposed and that there has been no financial loss to any customers as a result of the incident.

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Furthermore, to the extent the operation of our systems relies on our third-party service providers, through either a connection to, or an integration with, third parties’ systems, the risk of cybersecurity attacks and loss, corruption, or unauthorized access to or publication of our information or the confidential information and personal data of customers and employees might increase. Third-party risks might include insufficient security measures, data location uncertainty, and the possibility of data storage in inappropriate jurisdictions where laws or security measures might be inadequate. Our ability to monitor, and our resources to optimize integration with, third-party service providers’ data security practices are also limited. These third-party risks might be exacerbated as our resources are spread across multiple public cloud service providers. Although we generally have agreements relating to cybersecurity and data privacy in place with our third-party service providers, such agreements might not prevent the accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of, or modification of data (including personal data) and/or might not enable us to obtain adequate (or any) reimbursement from our third-party service providers in the event we should suffer any such incidents. Due to applicable laws and regulations or contractual obligations, we could be held responsible for any information security failure or cybersecurity attack attributed to our vendors as they relate to the information we share with them. A vulnerability in a third-party service provider’s software or systems, a failure of our third-party service providers’ safeguards, policies or procedures, or a breach of a third-party service provider’s software or systems could result in the compromise of the confidentiality, integrity, or availability of our systems or the data housed in our third-party solutions.

For example, in January 2023, unauthorized posts were made on our social media accounts, which were all removed within minutes. Based on a preliminary investigation, we believe the source of the incident was a compromise at a third-party vendor. In addition, in March 2022 a security breach occurred at Okta, an identity authentication provider that we utilize across our employee base. In general, an attacker with forged or compromised Okta service provider credentials could potentially have accessed several of our sensitive internal systems. Okta reports it has now corrected the issue and working with Okta, we have confirmed that such third-party vulnerability was not exploited to gain access to our systems.

A core aspect of our business is the reliability and security of our platform. Any unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of data, including personal data, cybersecurity breach or other security incident that we, our customers or our third-party service providers experience or the perception that one has occurred or might occur, could harm our reputation, reduce the demand for our products and services and disrupt normal business operations. In addition, it might require us to expend significant financial and operational resources in response to a security breach, including repairing system damage, increasing security protection costs by deploying additional personnel and modifying or enhancing our protection technologies, investigating, remediating, or correcting the breach and any security vulnerabilities, defending against and resolving legal and regulatory claims, and preventing future security breaches and incidents, all of which could expose us to uninsured liability, increase our risk of regulatory scrutiny, expose us to legal liabilities, including litigation, regulatory enforcement, indemnity obligations, or damages for contract breach, divert resources and the attention of our management and key personnel away from our business operations, and cause us to incur significant costs, any of which could materially adversely affect our business, financial condition, and results of operations. Moreover, our efforts to improve security and protect data from compromise might identify previously undiscovered security breaches. There could be public announcements regarding any security incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors perceive these announcements to be negative, it could have an adverse effect on the trading price of our Class A common stock.

We are subject to stringent laws, rules, regulations, policies, industry standards and contractual obligations regarding data privacy and security and might become subject to additional related laws and regulations in jurisdictions into which we expand. Many of these laws and regulations are
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subject to change and reinterpretation and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or other harm to our business.

We are subject to a variety of federal, state, local, and non-U.S. laws, directives, rules, policies, industry standards and regulations, as well as contractual obligations, relating to privacy and the collection, protection, use, retention, security, disclosure, transfer and other processing of personal data and other data, including the Gramm-Leach-Bliley Act of 1999, Section 5(c) of the Federal Trade Commission Act and state laws such as the California Consumer Privacy Act. We will also face particular privacy, data security and data protection risks if we continue to expand into the U.K. and the EUEuropean Union and other jurisdictions in connection with the General Data Protection Regulation and other data protection regulations. The regulatory framework for data privacy and security worldwide is continuously evolving and developing and, as a result, interpretation and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. New laws, amendments to or reinterpretations of existing laws, regulations, standards and other obligations might require us to incur additional costs and restrict our business operations, and might require us to change how we use, collect, store, transfer or otherwise process certain types of personal data, to implement new processes to comply with those laws and our customers’ exercise of their rights thereunder, and could greatly increase the cost of providing our offerings, require significant changes to our operations, or even prevent us from providing some offerings in jurisdictions in which we currently operate and in which we might operate in the future or incur potential liability in an effort to comply with certain legislation. There is a risk of enforcement actions in response to rules and regulations promulgated under the authority of federal agencies and state attorneys general and legislatures and consumer protection agencies. For instance, we have in the past (as
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discussed in Note 1513 - Commitments & Contingencies to our unaudited condensed consolidated financial statements in this Quarterly Report) and mightmay in the future be subject to investigations and examinations by the NYDFS regarding, among other things, our cybersecurity practices. In addition, if we fail to follow these security standards, even if no customer information is compromised, we might incur significant fines or experience a significant increase in costs. Following the November 2021 Data Security Incident, we have received requests for information from FINRA examination staff, the SEC Division of Enforcement, and other regulatory authorities regarding, among other things, the adequacy of our information security measures.

Any failure or perceived failure by us or our third-party service providers to comply with our posted privacy policies or with any applicable federal, state or similar foreign laws, rules, regulations, industry standards, policies, certifications or orders relating to data privacy and security, or any compromise of security that results in the theft, unauthorized access, acquisition, use, disclosure, or misappropriation of personal data or other customer data, could result in significant awards, fines, civil and/or criminal penalties or judgments, proceedings or litigation by governmental agencies or customers, including class action privacy litigation in certain jurisdictions and negative publicity and reputational harm, one or all of which could have an adverse effect on our reputation, business, financial condition and results of operations.

Risks Related to Our Brokerage Products and Services

If we do not maintain the net capital levels required by regulators, our broker-dealer business may be restricted and we may be fined or subject to other disciplinary or corrective actions.

The SEC, FINRA, and various state regulators have stringent rules with respect to the maintenance of specific levels of net capital by securities broker-dealers. For example, our broker-dealer subsidiaries are each subject to the SEC Uniform Net Capital Rule, which specifies minimum capital requirements intended to ensure the general financial soundness and liquidity of broker-dealers, and our clearing and carrying broker-dealer subsidiary is subject to Rule 15c3-3 under the Exchange Act, which requires broker-dealers to maintain liquidity reserves. Our failure to maintain the required net capital levels could result in immediate suspension of securities activities, suspension or expulsion by the SEC or FINRA, restrictions
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on our ability to expand our existing business or to commence new businesses, and could ultimately lead to the liquidation of our broker-dealer entities and winding down of our broker-dealer business. If such net capital rules are changed or expanded, if there is an unusually large charge against net capital, or if we make changes in our business operations that increase our capital requirements, operations that require an intensive use of capital could be limited. A large operating loss or charge against net capital could have adverse effects on our ability to maintain or expand our business.

Our compliance and risk management policies and procedures as a regulated financial services company might not be fully effective in identifying or mitigating compliance and risk exposure in all market environments or against all types of risk.

As a financial services company, our business exposes us to a number of heightened risks. We have devoted significant resources to develop our compliance and risk management policies and procedures and will continue to do so, but our efforts might be insufficient. Our limited operating history,experience at our current scale, evolving business,business; and unpredictable periods of rapid growth make it difficult to predict all of the risks and challenges we might encounter and therefore increase the risk that our policies and procedures to identify, monitor and manage compliance risks might not be fully effective in mitigating our exposure in all market environments or against all types of risk. Further, some controls are manual and are subject to inherent limitations and errors in oversight, which could cause our compliance and other risk management strategies to be ineffective. Other compliance and risk management methods depend upon the evaluation of information regarding markets, customers, catastrophe occurrences, or other matters that are publicly available or otherwise accessible to us, which might not always be accurate, complete, up-to-date, or properly evaluated. Insurance and other traditional risk-shifting tools might be held by or available to us in
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order to manage some exposures, but they are subject to terms such as deductibles, coinsurance, limits, and policy exclusions, as well as risk of counterparty denial of coverage, default, or insolvency. Any failure to maintain effective compliance and other risk management strategies could have an adverse effect on our business, financial condition, and results of operations.

We are also exposed to heightened regulatory risk because our business is subject to extensive regulation and oversight in a variety of areas, and such regulations are subject to revision, supplementation, or evolving interpretations and application, and it can be difficult to predict how they might be applied to our business, particularly as we introduce new products and services and expand into new jurisdictions. For example, when we launched our fractional shares program in late 2019, based on our understandingDecember 2022, RHF and RHS received investigative requests from the SEC Division of the reporting requirements we did not report proprietary fractional trades to FINRA’s Trade Reporting Facility. Since then, FINRA has informed us that such trades should be reported. As a result, we began reporting fractional shares in January 2021,Enforcement regarding their record keeping and we continue to work with FINRA to complete back reporting, which might result in fines or penaltiespreservation practices, including use of personal devices for failing to do so at the time of the trades.brokerage communications.

We are subject to potential losses as a result of our clearing and execution activities.

We provide clearing and execution services for our securities brokerage business. Clearing and execution services include the confirmation, receipt, settlement and delivery functions involved in securities transactions. Clearing brokers also assume direct responsibility for the possession or control of customer securities and other assets, the clearing of customer securities transactions and lending money to customers on margin. Self-clearing securities firms are subject to substantially more regulatory control and examination than introducing brokers that rely on others to perform clearing functions. Errors in performing clearing functions, including clerical and other errors related to the handling of funds and securities on behalf of customers, could lead to (i) civil penalties, as well as losses and liability as a result of related lawsuits brought by customers and others and any out-of-pocket costs associated with remediating customers for losses, and (ii) the risk of fines or other actions by regulators. For example, the Q4 2022 Processing Error resulted in a $57 million loss and we have received requests for information from FINRA staff related to this matter.

Our clearing operations also require a commitment of our capital and, despite safeguards implemented by our software,through both manual and automated controls, involve risks of losses due to the potential failure of our customers to perform their obligations under these transactions and margin loans. If our
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customers default on their obligations, including failing to pay for securities purchased, deliver securities sold, or meet margin calls, we remain financially liable for such obligations, and although these obligations are collateralized, we are subject to market risk in the liquidation of customer collateral to satisfy those obligations. While we have established systems and processes designed to manage risks related to our clearing and execution services, we face a risk that such systems and processes might be inadequate. Any liability arising from clearing and margin operations could have an adverse effect on our business, financial condition and results of operations.

In addition, as a clearing member firm of securities and derivatives clearinghouses in the United States, we are also exposed to clearing member credit risk. Securities and derivatives clearinghouses require member firms to deposit cash, stock and/or government securities for margin requirements and for clearing funds. If a clearing member defaults in its obligations to the clearinghouse in an amount larger than its own margin and clearing fund deposits, the shortfall is absorbed pro rata from the deposits of the other clearing members. Many clearinghouses of which we are members also have the authority to assess their members for additional funds if the clearing fund is depleted. A large clearing member default could result in a substantial cost to us if we are required to pay such assessments. Furthermore, in the event that a significant amount of our customers’ open trades fail to settle, we might be exposed to potential loss of the capital we committed to meet our deposit requirements.
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Our exposure to credit risk with customers, market makers, and other counterparties could result in losses.

We extend margin credit and leverage to customers, which are collateralized by customer cash and securities. We also borrow and lend securities in connection with our broker-dealer business. By permitting customers to purchase securities on margin, we are subject to risks inherent in extending credit, especially during periods of rapidly declining markets (including rapid declines in the trading price of individual securities) in which the value of the collateral held by us could fall below the amount of a customer’s indebtedness. We also lend, and to a lesser degree, borrow securities in connection with our broker-dealer business. In addition, in accordance with regulatory guidelines, we hold cash as collateral when we lend securities, and likewise, we collateralize our borrowings of securities by depositing cash or securities with lenders. Sharp changes in market values of substantial amounts of securities in a short period of time and the failure by parties to the lending or borrowing transactions to honor their commitments could result in substantial losses. Such changes could also adversely impact our capital because our clearing operations require a commitment of our capital and, despite safeguards implemented by our software, involve risks of losses due to the potential failure of our customers to perform their obligations under these transactions and margin loans.

We are also exposed to credit risk in our dealings with the market makers to which we route cryptocurrency orders. Unlike equities and option trades, cryptocurrency trades do not settle through any central clearinghouses but rather are conducted under bilateral agreements between us and each crypto market maker. (The risk of the market maker's default therefore falls upon us rather than being distributed among a clearinghouse's members.) The terms of these bilateral agreements vary but spot transactions are generally aggregated and settled on a net basis once per business day (with the crypto deliveries occurring first and the net cash moving within 24 hours thereafter) and payment obligations are generally unsecured during the interval between delivery and payment. It is not uncommon for us to have an intra-day outstanding net receivable of $100 million that we are owed by any one cryptocurrency market maker. Similarly, we routinely have unsecured PFOF receivables from equities and options market makers. Any payment default by a market maker could have adverse effects on our financial condition and results of operations.

We have policies and procedures designed to manage credit risk, but we face a risk that such policies and procedures might not be fully effective.

Providing investment recommendations could subject us to investigations, penalties, and liability for customer losses if we fail to comply with applicable regulatory standards, and providing
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investment education tools could subject us to additional risks if such tools are construed to be investment advice or recommendations.

We launched (other than in Massachusetts) a recommended portfolio feature for customers who have not yet placed any trades as described further in Part I, Item I “Business” of our 2021 Form 10-K.

Risks associated with providing investment recommendations include those arising from how we disclose and address possible conflicts of interest, inadequate due diligence, inadequate disclosure, and human error. New regulations, such as the SEC’s Regulation Best Interest and certain state broker-dealer regulations, impose heightened conduct standards and requirements on recommendations to retail investors. In addition, various states are considering potential regulations or have already adopted certain regulations that could impose additional standards of conduct or other obligations on us to the extent we provide investment advice or recommendations to our customers.

We also provide customers with a variety of educational materials, investment tools, and financial news and information, (includingsuch as our “Robinhood Snacks” newslettersnewsletter (which is now offered by Sherwood Media, LLC (“Sherwood Media”), our new media subsidiary dedicated to providing news and information about the markets, economics, business, technology, and the culture of money), the suite of other editorial offerings that we expect Sherwood Media to launch throughout this year, and the Robinhood Investment Index).Index. Additionally, Robinhood Gold members have access to stock research reports prepared by our third-party collaborator, Morningstar, Inc. Based on current law and regulations, we believe these services
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do not constitute investment advice or investment recommendations. If the law were to change or if a court or regulator were to interpret current law and regulations in a novel manner, we face a risk that these services could come to be considered as investment advice.

If services that we do not consider to be recommendations (such as educational materials, and our editorial offerings, including Robinhood Snacks) are construed as constituting investment advice or recommendations, we have been and could be in the future subject to investigations by regulatory agencies. For example, in December 2020, the Enforcement Section of MSD filed a complaint against us alleging that a fiduciary conduct standard applies to us under Massachusetts securities law by claiming that our product features and marketing strategies amount to investment recommendations. See Note 1513 - Commitments & Contingencies, to our unaudited condensed consolidated financial statements in this Quarterly Report for more information. Changes in law or changes in interpretations of existing law might also require us to modify the nature of these services or discontinue them altogether, one or more of which could have an adverse effect on our ability to attract and retain customers. SEC staff members have also suggested that digital engagement practices could be considered recommendations in some circumstances and the springfall 2022 regulatory agenda published by the SEC also indicated that the SEC would consider proposing rules in October 2022April 2023 for broker-dealers and investment advisers, specifically related to the use of predictive data analytics, differential marketing, and behavioral prompts.

To the extent our investment education tools, news and information, or digital engagement practices are determined to constitute investment advice or recommendations and to the extent those recommendations fail to satisfy regulatory requirements, or we fail to know our customers, or improperly advise our customers, or if risks associated with advisory services otherwise materialize, we could be found liable for losses suffered by such customers, or could be subject to regulatory fines, penalties, and other actions such as business limitations, any of which could harm our reputation and business.

Risks Related to Cryptocurrency Products and Services

The loss, destruction or unauthorized use or access of a private key required to access any of the cryptocurrencies we hold on behalf of customers could result in irreversible loss of such cryptocurrencies. If we are unable to access the private keys or if we experience a hack or other data loss relating to the cryptocurrencies we hold on behalf of customers, our customers might be unable to trade their cryptocurrency, our reputation and business could be harmed, and we might be liable for losses in excess of our ability to pay.

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As our business continues to grow and we expand our cryptocurrency product and service offerings, so do the risks associated with failing to safeguard and manage cryptocurrencies we hold on behalf of our customers.customers increase. Our success and the success of our offerings requires significant public confidence in our ability to properly manage customers’ balances and handle large transaction volumes and amounts of customer funds. Any failure by us to maintain the necessary controls or to manage the cryptocurrencies we hold on behalf of our customers and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, significant financial losses, lead customers to discontinue or reduce their use of our services, and result in significant penalties and fines and additional restrictions.

We hold all settled cryptocurrencies in custody on behalf of customers in two types of wallets: (i) hot wallets, which are managed online, and (ii) cold wallets, which are managed entirely offline on a computer stored in one or more secure data facilities.and require physical access controls. We do not utilize third-party custodians for settled cryptocurrencies, but we do utilize technology from a third-party provider to manage some of our cryptocurrency, custody, transfer, and settlement operations. In general, the overwhelming majority of cryptocurrency coins on our platform are held in cold storage, though some coins are held in hot wallets to support day-to-day operations. Under blockchain protocol, in order to access or transfer cryptocurrency stored in a wallet, we need to use a private key. We maintain backup copies of our private keys in multiple separate locations and we have several layers of cybersecurity defense in place to protect our omnibus wallets. However, to the extent any private keys are lost, destroyed, unable to be accessed by us, or otherwise compromised and all of their backups are lost,
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we will be unable to access the assets held in the related hot or cold wallet. Further, we cannot provide assurance that any or all of our wallets will not be hacked or compromised such that cryptocurrencies are sent to one or more private addresses that we do not control, which could result in the loss of some or all of the cryptocurrencies that we hold in custody on behalf of customers. Any such losses could be significant, and we might not be able to obtain insurance coverage for some or all of those losses. Cryptocurrencies and blockchain technologies have been, and might in the future be, subject to security breaches, hacking, or other malicious activities. For example, in August 2021, hackers were able to momentarily take over the Bitcoin SV (“BSV”) network, allowing them to spend coins they did not have and prevent transactions from completing. Any loss of private keys relating to, or hack or other compromise of, the hot wallets or cold wallets we use to store our customers’ cryptocurrencies could result in total loss of customers’ cryptocurrencies (because customers’ cryptocurrency balances and cryptocurrency investments are not protected by the Securities Investor Protection Corporation (the “SIPC”)) or adversely affect our customers’ ability to sell their assets, and could result in our being required to reimburse customers for some or all of their losses, subjecting us to significant financial losses. Our insurance coverage for such events is limited and might not cover the extent of loss nor the nature of such loss, in which case we might be liable for the full amount of losses suffered, which could be greater than all of our remaining assets. The total value of cryptocurrencies under our control on behalf of customers is significantly greater than the total value of insurance coverage that would compensate us in the event of theft or other loss of such assets. Additionally, any such security compromises or any business continuity issues affecting our cryptocurrency market makers might affect the ability or willingness of our customers to trade or hold cryptocurrencies on our platform, might result in litigation and regulatory enforcement actions, and could harm customer trust in us and our products generally.

The prices of most cryptocurrencies are extremely volatile. Fluctuations in the price of various cryptocurrencies might cause uncertainty in the market and could negatively impact trading volumes of cryptocurrencies, which would adversely affect the success of our business, financial condition and results of operations.

The prices of most cryptocurrencies are based in part on market adoption and future expectations, which might or might not be realized. As a result, the prices of cryptocurrencies are highly speculative. The prices of cryptocurrencies have been subject to dramatic fluctuations (including as a result of the challenging environment for the whole crypto ecosystem in mid-2022)2022 Bear Markets), which have impacted, and will continue to impact, our trading volumes and operating results and might adversely impact our growth strategy and business. Several factors could affect a cryptocurrency’s price, including, but not limited to:

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•Global cryptocurrency supply, including various alternative currencies which exist, and global cryptocurrency demand, which can be influenced by the growth or decline of retail merchants’ and commercial businesses’ acceptance of cryptocurrencies as payment for goods and services, the security of online cryptocurrency exchanges and digital wallets that hold cryptocurrencies, the perception that the use and holding of digital currencies is safe and secure, and regulatory restrictions on their use.
•Changes in the software, software requirements or hardware requirements underlying a blockchain network, such as a fork. Forks have occurred and are likely to occur again in the future and could result in a sustained decline in the market price of cryptocurrencies.
•Changes in the rights, obligations, incentives, or rewards for the various participants in a blockchain network.
•The maintenance and development of the software protocol of cryptocurrencies.
•Cryptocurrency exchanges’ deposit and withdrawal policies and practices, liquidity on such exchanges and interruptions in service from or failures of such exchanges. For example, in connection with the 2022 Crypto Bankruptcies, the prices of coins such as Bitcoin, Ethereum, and Solana significantly decreased.
•Regulatory measures, if any, that affect the use and value of cryptocurrencies.
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•Competition for and among various cryptocurrencies that exist and market preferences and expectations with respect to adoption of individual currencies.
•Actual or perceived manipulation of the markets for cryptocurrencies.
•Actual or perceived connections between cryptocurrencies (and related activities such as mining) and adverse environmental effects or illegal activities.
•Social media posts and other public communications by high-profile individuals relating to specific cryptocurrencies, or listing or other business decisions by cryptocurrency companies relating to specific cryptocurrencies.
•Expectations with respect to the rate of inflation in the economy, monetary policies of governments, trade restrictions, and currency devaluations and revaluations.

While we have observed a positive trend in the total market capitalization of cryptocurrency assets over the long term, driven by increased adoption of cryptocurrency trading by both retail and institutional investors as well as continued growth of various non-investing use cases, historical trends are not indicative of future adoption, and it is possible that the rate of adoption of cryptocurrencies might slow or decline, which would negatively impact our business, financial condition, and results of operations.

While we currently support 17several cryptocurrencies for trading, market interest in particular cryptocurrencies can also be volatile and there are many cryptocurrencies in the market that we do not support. For example we support trading in Dogecoin and we benefited from a surge in interest for Dogecoin during the second quarter of 2021. For the first, second, and third quarters of 2021, transaction-based revenue attributable to transactions in Dogecoin generated approximately 7%, 32%, and 8% of our total net revenues, respectively. Our business could be adversely affected, and growth in our net revenue earned from cryptocurrency transactions could slow or decline, if the markets for the cryptocurrencies we support deteriorate or if demand moves to other cryptocurrencies not supported by our platform. From time to time, we also cease support of trading certain cryptocurrencies, or consider whether to cease support of certain cryptocurrencies. Ceasing support of a cryptocurrency with substantial market interest (or if our consideration to cease supporting such cryptocurrency becomes known) has in the past exposed and may expose us to negative attention and our business could be adversely affected. For example, we experienced an influx of customer complaints related to our decision to cease support of BSV in January 2023.

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Volatility in the values of cryptocurrencies caused by the factors described above or other factors might impact our regulatory net worth requirements as well as the demand for our services and therefore have an adverse effect on our business, financial condition and results of operations.

Any particular cryptocurrency’s status as a “security” is subject to a high degree of uncertainty and if we have not properly characterized one or more cryptocurrencies, we might be subject to regulatory scrutiny, investigations, fines, and other penalties.

We currently facilitate customer trades for certain cryptocurrencies that we have analyzed under applicable internal policies and procedures and that we believe are not securities under U.S. federal and state securities laws. The legal test for determining whether any given cryptocurrency is a security is a highly complex, fact-driven analysis that evolves over time, and the outcome is difficult to predict. The SEC staff has indicated that the determination of whether or not a cryptocurrency is a security depends on the characteristics and use of that particular asset. The SEC generally does not provide advance guidance or confirmation on the status of any particular cryptocurrency as a security. Occasionally though the SEC and its staff have taken positions that certain cryptocurrencies are securities“securities” – often in the context of enforcement actions – and we do not currently support any cryptocurrencies for which the SEC or its staff has taken such a position. Prior public statements by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin or Ethereum are securities (in their current forms). Bitcoin and Ethereum are the only specific cryptocurrencies as to which senior officials at the SEC have publicly expressed such a view. Moreover, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court, cannot be generalized to any other cryptocurrency and might evolve. Similarly, although the SEC’s Strategic Hub for Innovation and Financial Technology published a framework for analyzing whether any given cryptocurrency is a security in April 2019, this framework is also not a rule, regulation, or statement
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of the SEC and is not binding on the SEC. With respect to all other cryptocurrencies, there is currently no certainty under the applicable legal test that such assets are not securities, and regulators have expressed concerns about cryptocurrency platforms adding multiple new coins, some of which the regulators question might be unregistered securities. In September 2022, Chair Gensler stated in a speech that he believes a vast majority of the nearly 10,000 tokens in the crypto market are securities and reiterated this statement in his September 2022 testimony before the United StatesU.S. Senate Committee on Banking, Housing, and Urban Affairs.Affairs and April 2023 testimony before the U.S. House of Representatives Committee on Financial Services. Although our policies and procedures are intended to enable us to make risk-based assessments regarding the likelihood that a particular cryptocurrency could be deemed a security under applicable laws, including federal securities laws, our assessments are not definitive legal determinations as to whether a particular digital asset is a security under such laws. Accordingly, regardless of our conclusions, we could be subject to legal or regulatory action in the event the SEC or a court were to determine that a cryptocurrency supported by our platform is a “security” under U.S. law. In July 2022, the SEC filed an insider trading case against, among others, an employee of one of our competitors in which the complaint alleged that certain cryptocurrencies (none of which we currently support) were securities under the Securities Act and the Exchange Act. TheIn February 2023, the SEC entered into a settlement agreement with cryptocurrency exchange Payward Ventures, Inc. and Payward Trading Ltd. (doing business as and hearinafter, “Kraken”) for failing to register its “staking-as-a-service” program as a securities offering in violation of Section 5 of the Securities Act. Pursuant to the settlement agreement, Kraken agreed to cease operations of its staking program in the U.S. and pay the SEC $30 million in fines. Additionally, in March 2023, Coinbase Global, Inc. and Coinbase, Inc. (collectively, “Coinbase”) disclosed that it had received a “Wells Notice” from the SEC staff stating that the staff had advised Coinbase that it made a “preliminary determination” to recommend that the SEC file an enforcement action against Coinbase alleging violations of the federal securities laws, including the Exchange Act and the Securities Act. Coinbase believes these potential enforcement actions would relate to aspects of its spot market, staking service, and its self-custodial crypto wallet, and that the potential civil action may seek injunctive relief, disgorgement, and civil penalties. While we do not currently offer crypto staking services or spot markets, we do offer the Robinhood Wallet, which is a self-custodial crypto wallet, and the status of thisthese matters or any other action, settlement, or any related investigation by regulators, might provide additional guidance on the legal status of cryptocurrencies as securities more generally, which might significantly affect the actual or perceived regulatory status and value of cryptocurrencies we currently support or might support in the future. From time to time, we have received,
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and might in the future receive SEC inquiries regarding specific cryptocurrency listingscryptocurrencies supported on our platform and added features.features and since December 2022, following the 2022 Crypto Bankruptcies, we have received investigative subpoenas from the SEC regarding, among other topics, RHC’s supported cryptocurrencies, custody of cryptocurrencies, and platform operations.

To the extent that the SEC or a court determines that any cryptocurrencies supported by our platform are securities, that determination could prevent us from continuing to facilitate trading of those cryptocurrencies (including delisting fromceasing support for such cryptocurrencies on our platform). It could also result in regulatory enforcement penalties and financial losses in the event that we have liability to our customers and need to compensate them for any losses or damages. We could be subject to judicial or administrative sanctions for failing to offer or sell the cryptocurrency in compliance with securities registration requirements, or for acting as a securities broker or dealer without appropriate registration. Such an action could result in injunctions and cease and desist orders, as well as civil monetary penalties, fines, and disgorgement, criminal liability, and reputational harm. Customers that traded such supported cryptocurrency through our platform and suffered trading losses might also seek to rescind transactions that we facilitated on the basis that they were conducted in violation of applicable law, which could subject us to significant liability and losses. We might also be required to cease facilitating transactions in the supported cryptocurrency, which could negatively impact our business, operating results, and financial condition. A determination by the SEC or a court that a cryptocurrency supported by our platform constitutes a security could also result in our determination that it is advisable to remove other cryptocurrencies from our platform that have similar characteristics to the cryptocurrency that was determined to be a security. Further, if Bitcoin, Ethereum, or any other supported cryptocurrency is deemed to be a security, it might have adverse consequences for such supported cryptocurrency. For instance, all transactions in such supported cryptocurrency would have to be registered with the SEC or other foreign authority, or conducted in accordance with an exemption from registration, which could severely limit its liquidity, usability, and transactability. Moreover, the networks on which such supported cryptocurrencies are used might be required to be regulated as securities intermediaries, and subject to applicable rules, which could effectively render the network impracticable for its existing purposes. Further,In particular, Chair Gensler noted in his April 2023 testimony that “Given that most crypto tokens are securities, it follows that many crypto intermediaries are transacting in securities and have to register with the SEC” and that crypto investors should benefit from compliance with the securities laws. In April 2023, the SEC also reopened the comment period and provided supplemental information on proposed amendments to the definition of “exchange” under Exchange Act Rule 3b-16, including reiterating the applicability of existing rules to platforms that trade crypto asset securities. Additionally, any determination that Bitcoin or Ethereum is a security could draw negative publicity and cause a decline in the general acceptance of cryptocurrencies. Also, it would make it more difficult for Bitcoin or Ethereum, as applicable, to be traded, cleared, and custodied as compared to other cryptocurrencies that are not considered to be securities. In addition, our growth might be adversely affected if we are not able to expand our platform to include additional cryptocurrencies that the SEC has determined to be securities or that we believe are likely to be determined to be securities.

93We continue to analyze the cryptocurrencies supported on our platform under our internal policies and procedures (collectively, our “Crypto Listing Framework”) on a periodic basis to ensure that they continue to meet our requirements for continued support on our platform which include, among other factors, that we continue to believe they are not securities under U.S. federal and state securities laws. We may make the determination to cease support for a cryptocurrency for any one or a variety of factors based on a totality of the circumstances under our Crypto Listing Framework. However, a determination by the SEC or a court that a cryptocurrency supported by our platform constitutes a security could also result in our determination that it is advisable to remove that and other cryptocurrencies from our platform that have similar characteristics to the cryptocurrency that was determined to be a security. If we proactively remove certain cryptocurrencies from our platform because they share similarities with cryptocurrencies that the SEC or a court has determined constitute securities, or otherwise do not meet our Crypto Listing Framework, it could negatively impact customer sentiment and our business, operating results, and financial condition, especially to the extent that our competitors continue to support such cryptocurrency on their platforms.
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Cryptocurrency laws, regulations, and accounting standards are often difficult to interpret and are rapidly evolving in ways that are difficult to predict. Changes in these laws and regulations, or our failure to comply with them, could negatively impact cryptocurrency trading on our platform.

We provide users with the ability to buy, hold, and sell certain cryptocurrencies.
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Domestic and foreign regulators and governments are increasingly focused on the regulation of cryptocurrencies. In the United States, cryptocurrencies are regulated by both federal and state authorities, depending on the context of their usage. Cryptocurrency market disruptions and resulting governmental interventions are unpredictable, and might make cryptocurrencies, or certain cryptocurrency business activities, illegal altogether. As regulation of cryptocurrencies continues to evolve, there is a substantial risk of inconsistent regulatory guidance among federal and state agencies and among state governments which, along with potential accounting and tax issues or other requirements relating to cryptocurrencies, could impede the growth of our cryptocurrency operations. Additionally, regulation in response to the climate impact of cryptocurrency mining could negatively impact cryptocurrency trading on our platform.

The cryptocurrency accounting rules and regulations that we must comply with are complex and subject to interpretation by the FASB,Financial Accounting Standards Board (“FASB”), the SEC, and various bodies formed to promulgate and interpret accounting principles. A change in these rules and regulations or interpretations could have a significant effect on our reported financial results and financial position, and could even affect the reporting of transactions completed before the announcement or effectiveness of a change. Further, there are a limited number of precedents for the financial accounting treatment of cryptocurrency assets (including related issues of valuation and revenue recognition), and no official guidance has been provided by the FASB or the SEC. Accordingly, there remains significant uncertainty as to the appropriate accounting for cryptocurrency asset transactions, cryptocurrency assets, and related revenues. Uncertainties in or changes in regulatory or financial accounting standards could result in the need to change our accounting methods and/or restate our financial statements, and could impair our ability to provide timely and accurate financial information, which could adversely affect our financial statements, and result in a loss of investor confidence.

In addition, future regulatory actions or policies, including, for instance, the assertion of jurisdiction by domestic and foreign regulators and governments over cryptocurrency and cryptocurrency markets could limit or restrict cryptocurrency usage, custody, or trading, or the ability to convert cryptocurrencies to fiat currencies. For example, Chair Gensler remarked several times in August 2021, September 2021, October 2021 and April 2022 Chair Gensler remarked on the need for further regulatory oversight of crypto trading and crypto lending platforms. Additionally in February 2023, the SEC issued a new rule proposal (the “February 2023 Custody Rule Proposal”) related to the custody of client assets by registered investment advisers, which, if adopted as proposed, would expand the existing custody rules to apply to a broad range of assets, including cryptocurrencies, and would require that any client assets be maintained by a qualified custodian. In connection with the announcement of the February 2023 Custody Rule Proposal, Chair Gensler noted that “Based upon how crypto platforms generally operate, investment advisers cannot rely on them as qualified custodians.” If the February 2023 Custody Rule Proposal is adopted as proposed, and we are not deemed to be a “qualified custodian,” we may be required to cease our custodial crypto offerings under certain circumstances, which would have a material adverse impact on our business and one of our primary sources of revenue. Some lawmakers and regulators have also raised questions about Transaction Rebates from cryptocurrency trading. Transaction Rebates from cryptocurrency trading have historically, and might continue, to comprise a significant percentage of our total net revenues. Any future regulatory actions or policies could reduce the demand for cryptocurrency trading and might materially decrease our revenue derived from Transaction Rebates in absolute terms and as a proportion of our total revenues.

Recently,In March 2022, the SEC staff issued SAB 121 requiring crypto platforms to recognize a liability and a corresponding asset equal to the fair value of the crypto-assets the entity safeguards on behalf of users. Such accounting treatment enhances the information received by investors regarding potential liabilities upon theft or loss of crypto-assets. But such treatment has also caused some users to question how safeguarded crypto-assets would be treated in a platform bankruptcy. We implemented SAB 121 for the quarter ended June 30, 2022, with retrospective application to the beginning of 2022. As a result of (and solely by virtue of) our implementation of SAB 121, the cryptocurrency we custody for users now appears on our balance sheet as an asset. Nonetheless, basedIn January 2023, the Bankruptcy Court for the Southern District of New York issued a ruling in In re Celsius Network LLC, that certain crypto assets held by Celsius customer accounts were the property of Celsius’s estate and that the holders of such accounts are unsecured creditors. However, unlike the terms of our user agreement, the terms of Celsius’s user agreement
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unambiguously provided that the rights to cryptocurrency held, including ownership rights, belonged to Celsius. Based on the terms of our user agreement, the structure of our crypto offerings, and applicable law, we believe that the cryptocurrency we hold in custody for users of our platform should be respected as users’ property (and should notbe available to satisfy the claims of our general creditors) in the event we were to enter bankruptcy. To our knowledge, however, no court has reached a final determination on the issues that would be presented in such a case. Although we are well-capitalized, (with more than $6.2 billion in corporate cash and cash equivalents as of September 30, 2022), to the extent users are concerned that crypto-assets might not be secure in a platform bankruptcy generally,
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their willingness to hold crypto in custodial accounts and their general interest in trading cryptocurrencies might decline.

Furthermore, the recently enacted Infrastructure Investment and Jobs Act significantly changes the tax reporting requirements applicable to brokers and holders of cryptocurrency and digital assets. New U.S. reporting requirements will applythat were to be effective for information returns filed in 2024 regarding transactions occurring in calendar year 2023.2023 have been delayed until final regulations are issued by the Treasury Department. The implementation of these requirements, and any further legislative changes or related guidance from the Internal Revenue Service, might significantly impact our tax reporting and withholding processes and result in increased compliance costs. Failure to comply with these new information reporting and withholding requirements might subject us to significant tax liabilities and penalties. Similarly, the Organization for Economic Cooperation and Development has proposedpublished final guidance on a new “crypto-asset reporting framework” and amendments to the existing rules for reporting crypto assets under the global “common reporting standard” that might apply to our international operations. These new rules might give rise to potential liabilities or disclosure requirements, and implementation of these requirements might significantly impact our operations and result in increased costs.

Our launch of the Crypto Wallets feature, which allows customers to depositTransfers, Robinhood Wallet, and withdraw cryptocurrencies to and from our platform,Robinhood Connect features, could result in loss of customer assets, customer disputes, and other liabilities, which could harm our reputation and adversely impact trading volumes and transaction-based revenues.

We recently began to allow customers to deposit and withdraw cryptocurrencies to and from our platform. User testing of this crypto wallet transferplatform through our Crypto Transfers feature (“Crypto Wallets”) had been ramping up sincein the fourth quarter of 2021 and enrollment openedstates in April 2022which RHC operates (other than in Hawaii, Nevada, and New York, where our regulatory applications areapplication is still pending). Crypto Wallets transfersTransfers are processed using Robinhood’s general custodial walletsinfrastructure in which we hold some cryptocurrencies on behalf of customers; when transactions are completed, coins are allocated to and from individuals’ accounts in our customer records. Additionally, as of April 27, 2023, customers have access to a fiat-to-crypto on-ramp tool that developers can embed directly into their decentralized applications (“Robinhood Connect”), allowing their customers to use their RHC accounts to buy and transfer crypto, and fund their self-custody wallets.

Crypto Wallets transfersTransfers initiated by users are subject to a heightened risk of user error. Under blockchain protocol, recording a transfer of cryptocurrency on the blockchain involves both the private key of the sending wallet and the unique public key of the receiving wallet. Such keys are strings of alphanumeric characters. In order for a customer to receive cryptocurrency on our platform, the customer will need to arrange for the owner of an external source wallet to “sign” a transaction with the private key of that external wallet, directing a transfer of the cryptocurrency to our receiving Robinhoodcustodial wallet by inputting the public key (which we will provide to the customer) of our Robinhoodcustodial wallet. Similarly, in order to withdraw cryptocurrency from our platform, the customer will need to provide us with the public key of the external wallet to which the cryptocurrency is to be transferred, and we will “sign” the transaction using the private key of our Robinhood wallet. Some crypto networks might require additional information to be provided in connection with any transfer of cryptocurrency to or from our platform. A number of errors could occur in the process of depositing or withdrawing cryptocurrencies to or from our platform, such as typos, mistakes, or the failure to include information required by the blockchain network. For instance, a user might include typos when entering our custodial wallet’s public key or the desired recipient’s public key when depositing to and withdrawing from our platform, respectively. Alternatively, a user could mistakenly transfer cryptocurrencies to a wallet address that he or she does not own or control, or for which the user has lost the private key. In addition, each wallet address is compatible only with the underlying blockchain network on which it is created. For instance, a Bitcoin wallet address can be used to send and receive Bitcoin only. If any Ethereum, Dogecoin, or other cryptocurrency is sent to a Bitcoin wallet address, for example, or if
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any of the other foregoing errors occur, such cryptocurrencies could be permanently and irretrievably lost with no means of recovery.

As of March 1, 2023, customers have access to Robinhood Wallet, our self-custody, web3 wallet. With Robinhood Wallet, customers have sole access and control over their cryptocurrencies on the Polygon and Ethereum networks and personally hold and maintain their private keys. Although we do not custody cryptocurrencies held in a customer’s Robinhood Wallet and do not have access to customers’ private keys, customers who lose their private keys, and thus access to their Robinhood Wallet accounts, may react negatively. Although our account agreementagreements for Crypto Transfers and Robinhood Wallet disclaims responsibility for losses caused by customer errors, such incidents could result in customer disputes, damage to our brand and reputation, legal claims against us, and financial liabilities.

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Additionally, allowing customers to deposit and withdraw cryptocurrencies to and from our platform increases the risk that our platform might be exploited to facilitate illegal activity such as fraud, gambling, money laundering, tax evasion, and scams. Crypto Wallets transfers willTransfers, Robinhood Wallet, and Robinhood Connect also expose us to heightened risks related to potential violations of trade sanctions, including OFAC regulations, and anti-money laundering and counter-terrorist financing laws, which among other things impose strict liability for transacting with prohibited persons. We engage blockchain analytics vendors to help determine whether the external wallets involved in our transfersCrypto Transfers are controlled by persons on prohibited lists or involved in fraudulent or illegal activity. However, fraudulent and illegal transactions and prohibited status could be difficult or impossible for us and our vendors to detect in some circumstances. The use of our platform for illegal or improper purposes could subject us to claims, individual and class action lawsuits, and government and regulatory investigations, prosecutions, enforcement actions, inquiries, or requests that could result in significant liabilities and reputational harm for us and could cause cryptocurrency trading volumes and transaction-based revenues to decline.
A temporary or permanent blockchain “fork” could adversely affect our business.

Most blockchain protocols, including Bitcoin and Ethereum, are open source. Any user can download the software, modify it and then propose that users and miners of Bitcoin, Ethereum or other blockchain protocols adopt the modification. When a modification is introduced and a substantial majority of miners consent to the modification, the change is implemented and the Bitcoin, Ethereum or other blockchain protocol networks, as applicable, remain uninterrupted.uninterrupted, although such modifications might cause certain cryptocurrencies to fail our Crypto Listing Framework. However, if less than a substantial majority of users and miners consent to the proposed modification, and the modification is not compatible with the software prior to its modification, the consequence would be what is known as a “fork” (i.e., “split”) of impacted blockchain protocol network and respective blockchain with one prong running the pre-modified software and the other running the modified software. The effect of such a fork would be the existence of two versions of the Bitcoin, Ethereum or other blockchain protocol network, as applicable, running simultaneously, but with each split network’s cryptocurrency lacking interchangeability.

Both Bitcoin and Ethereum protocols have been subject to “forks” recently that resulted in the creation of new networks, including, among others, Bitcoin Cash, Bitcoin SV,BSV, Bitcoin Diamond, Bitcoin Gold, Ethereum Classic, and Ethereum Proof-of-Work. Some of these forks have caused fragmentation among platforms as to the correct naming convention for forked cryptocurrencies. Due to the lack of a central registry or rulemaking body in the cryptocurrency market, no single entity has the ability to dictate the nomenclature of forked cryptocurrencies, causing disagreements and a lack of uniformity among platforms on the nomenclature of forked cryptocurrencies, and which results in further confusion to customers as to the nature of cryptocurrencies they hold on platforms. In addition, several of these forks were contentious and as a result, participants in certain communities might harbor ill will towards other communities. As a result, certain community members might take actions that adversely impact the use, adoption and price of Bitcoin, Ethereum or any of their forked alternatives.

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Furthermore, forks can lead to disruptions of networks and our information technology systems, cybersecurity attacks, replay attacks, or security weaknesses, any of which can further lead to temporary or even permanent loss of customer cryptocurrencies. For instance, when the Ethereum and Ethereum Classic networks split in July 2016, replay attacks, in which transactions from one network were rebroadcast on the other network to achieve “double-spending,” plagued platforms that traded Ethereum through at least October 2016, resulting in significant losses to some cryptocurrency platforms. Another possible result of a fork is an inherent decrease in the level of security due to the splitting of some mining power across networks, making it easier for a malicious actor to exceed 50% of the mining power of that network. Such disruption and loss could cause our company to be exposed to liability, even in circumstances where we have no intention of supporting a cryptocurrency compromised by a fork.

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Moreover, we might not wish to or be able to support a cryptocurrency resulting from the fork of a network which might cause our customers to lose confidence in us or reduce their engagement on our platform. In assessing whether we will support a cryptocurrency resulting from the fork of a network, among our top priorities is to safeguard our customer’s assets, and we spend extensive time designing, building, testing, reviewing and auditing our systems to check whether the cryptocurrencies we support remain safe and secure. There are several considerations that we consider as part of a general cryptocurrency approval policyour Crypto Listing Framework (including security or infrastructure concerns that might arise with the integration of any new cryptocurrency into the technical infrastructure that allows us to secure customer cryptocurrencies and to transact securely in corresponding blockchains), which might operate to limit our ability to support forks. Further, we generally do not support a forked cryptocurrency that does not have support from a majority of the affiliated third-party miner and developer community. To the extent that we decide not to support, or to cease support of, certain forked cryptocurrencies, it could negatively impact customer sentiment and our business, operating results, and financial condition, especially to the extent that our competitors continue to support such forked cryptocurrencies on their platforms. For example, in January 2023, after conducting a periodic analysis under our Crypto Listing Framework, we announced our decision to cease support of BSV, and provided notice to customers that they had until January 25, 2023 to buy, sell, hold, or transfer BSV, after which we sold all remaining BSV for market value, which was then credited to the customer accounts. We saw an increase in customer complaints related to our decision to cease support of BSV.

Whether we are obligated to provide services for a new and previously unsupported cryptocurrency is a question of contract, as recognized in recent published rulings of the California appellate courts and federal district courts. The user agreement each customer enters into in order to trade cryptocurrencies on our platform clearly indicates that we have the sole discretion to determine whether we will support a forked network and the approach to such forked cryptocurrencies and that we may temporarily suspend trading for a cryptocurrency whose network is undergoing a fork without advanced notice to the customer. Regardless of the foregoing, we might in the future be subject to claims by customers arguing that they are entitled to receive certain forked cryptocurrencies by virtue of cryptocurrencies that they hold with us. If any customers succeed on a claim that they are entitled to receive the benefits of a forked cryptocurrency that we do not or are unable to support, we might be required to pay significant damages, fines or other fees to compensate customers for their losses.

Any inability to maintain adequate relationships with third-party banks, market makers, and liquidity providers with respect to, and any inability to settle customer trades related to, our cryptocurrency offerings would disrupt our ability to offer cryptocurrency trading to customers.

We rely on third-party banks, market makers, and liquidity providers to provide cryptocurrency products and services to our customers. The cryptocurrency market operates 24 hours a day, seven days a week. The cryptocurrency market does not have a centralized clearinghouse, and the transactions in cryptocurrencies on our platform rely on direct settlements between us and our customers and direct settlements between us and our market makers or liquidity providers after customer trades are executed. Accordingly, we rely on third-party banks to facilitate cash settlements with customers’ brokerage accounts and we rely on the ability of market makers and liquidity providers to complete cryptocurrency settlements with us to obtain cryptocurrency for customer accounts. In addition, we must maintain cash
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assets in our bank accounts sufficient to meet the working capital needs of our business, which includes deploying available working capital to facilitate cash settlements with our customers, market makers, and liquidity providers (as well as maintaining the minimum capital required by regulators). If we, third-party banks, market makers, or liquidity providers have operational failures and cannot perform and facilitate our routine cash and cryptocurrency settlement transactions, we will be unable to support normal trading operations on our cryptocurrency trading platform and these disruptions could have an adverse impact on our business, financial condition and results of operations. Similarly, if we fail to maintain cash assets in our bank accounts sufficient to meet the working capital needs of our business and necessary to complete routine cash settlements related to customer trading activity, such failure could impair our ability to support normal trading operations on our cryptocurrency platform, which could cause cryptocurrency trading volumes and transaction-based revenues to decline significantly.

We might also be harmed by the loss of any of our banking partners and market makers. As a result of the many regulations applicable to cryptocurrencies or the risks of cryptocurrencies generally, many financial institutions have decided, and other financial institutions might in the future decide, not to provide bank accounts (or access to bank accounts), payments services, or other financial services to companies providing cryptocurrency products, including us. If we or our market makers cannot maintain sufficient
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relationships with the banks that provide these services, if banking regulators restrict or prohibit banking of cryptocurrency businesses, or if these banks impose significant operational restrictions, or if these banks were to fail or be taken over by the FDIC, such as occurred in the 2023 Banking Events, it could be difficult for us to find alternative business partners for our cryptocurrency offerings, which would disrupt our business and could cause cryptocurrency trading volumes and transaction-based revenues to decline significantly.

We might also be harmed by the loss of any of our liquidity partners. Unlike our customers’ orders for other cryptocurrencies, which are currently fulfilled by market makers, our customers’ orders for USD coin (“USDC”) -, a stablecoin backed by dollar denominated assets held by the issuer in segregated accounts with U.S. regulated financial institutions, - are fulfilled directly from Circle Internet Financial, LLC (“Circle”), the original issuer and main liquidity provider of USDC. If in the future we decide to offer other stablecoins, which are crypto assetscryptocurrencies designed to minimize price volatility, we may also work directly with other liquidity partners to fulfill those orders. If we cannot maintain sufficient relationships with Circle or any other liquidity providers, it could be difficult for us to find alternative liquidity partners for our stablecoin offerings, which would disrupt our business and could cause cryptocurrency trading volumes and transaction-based revenues to decline significantly.

From time to time, we might encounter technical issues in connection with changes and upgrades to the underlying networks of supported cryptocurrencies, which could cause revenues to decline and expose us to potential liability for customer losses.

Any number of technical changes, software upgrades, soft or hard forks, cybersecurity incidents or other changes to the underlying blockchain networks might occur from time to time, causing incompatibility, technical issues, disruptions or security weaknesses to our platform. If we are unable to identify, troubleshoot and resolve any such issues successfully, we might no longer be able to support such cryptocurrency, our customers’ assets might be frozen or lost, the security of our hot or cold wallets might be compromised and our platform and technical infrastructure might be affected, all of which could cause trading volumes and transaction-based revenue to decline and expose us to potential liability for customer losses.
Risks Related to RHY’sOur Robinhood Cash Card and Spending Account Products and Services

The RHY spending account and Robinhood Cash Card and spending account subject us to risks related to bank partnerships and FDIC and other regulatory obligations.
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We offer spending accounts at RHY (in connection with a partnership with a national bank)J.P. Morgan Chase Bank, N.A.), and we have also partnered, on a non-exclusive basis, with Sutton Bank (“Sutton”), an Ohio-chartered bank, pursuant to a license from Mastercard International Incorporated, to offer the Robinhood Cash Card through RHY.Card. Under the terms of our program agreement with Sutton, Robinhood Cash Card accounts for our users are opened and maintained by Sutton. We act as the service provider to, among other things, facilitate communication between our users and Sutton for which we receive compensation from Sutton. Our partner banks are members of the Federal Deposit Insurance Corporation (“FDIC”).FDIC.
We believe our record keeping for our users’ funds held in Robinhood Cash Card accounts at Sutton and held in spending accounts at our other partner bank complies with all applicable requirements for each participating user’s deposits to be eligible for FDIC insurance coverage, up to the applicable maximum deposit insurance amount. However, if the FDIC were to disagree, the FDIC might not recognize users’ claims as covered by deposit insurance in the event of bank failure and bank receivership proceedings under the Federal Deposit Insurance Act. If the FDIC were to determine that our users’ RHY funds held at our partner banks are not covered by deposit insurance, participating users might decide to withdraw their funds, which could adversely affect our brand and our business. Due to the fact that we are deemed a service-provider to our partner banks, we are subject to audit standards for third-party vendors in accordance with bank regulatory guidance and examinations by federal bank regulatory authorities and the CFPB.
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As a result of the stored value spending account program and the Robinhood Cash Card, RHY iswe are subject to federal and state consumer protection laws and regulations, including the Electronic Fund Transfer Act and Regulation E as implemented by the CFPB. Violations of any of these requirements could result in the assessment of significant actual damages or statutory damages or penalties (including treble damages in some instances) and plaintiffs’ attorneys’ fees.
Use of our payments services for illegal activities or improper purposes could harm our business.business.
The highly automated nature of, and liquidity offered by, our payments services make us and our customers a target for illegal or improper uses, including scams and fraud directed at our stored value account and Robinhood Cash Card customers, money laundering, terrorist financing, sanctions evasion, illegal online gambling, fraudulent sales of goods or services, illegal telemarketing activities, illegal sales of prescription medications or controlled substances, piracy of software, movies, music, and other copyrighted or trademarked goods (in particular, digital goods), bank fraud, child pornography, human trafficking, prohibited sales of alcoholic beverages or tobacco products, securities fraud, pyramid or ponzi schemes, or the facilitation of other illegal or improper activity. Moreover, certain activity that is legal in one jurisdiction might be illegal in another jurisdiction, and a customer might be found responsible for intentionally or inadvertently importing or exporting illegal goods, resulting in liability for us. Owners of intellectual property rights or government authorities might seek to bring legal action against providers of payments solutions, including RHY, that are peripherally involved in the sale of infringing or allegedly infringing items. While we invest in measures intended to prevent and detect illegal activities on our payments platform, these measures require continuous improvement and might not be effective in detecting and preventing illegal activity or improper uses.

Any illegal or improper uses of our payments platform by our users might subject us to claims, individual and class action lawsuits, and government and regulatory requests, inquiries, or investigations that could result in liability, restrict our operations, require us to change our business practices, harm our reputation, increase our costs, and negatively impact our business. For example, government enforcement or regulatory authorities could seek to impose additional restrictions or liability on us arising from the use of our payments platform for illegal or improper activity, and our failure to detect or prevent such use. Illegitimate transactions can also prevent us from satisfying our contractual obligations to our third-party partners, which might cause us to be in breach of our obligations.

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Risks Related to Our Intellectual Property

Any failure to obtain, maintain, protect, defend or enforce our intellectual property rights could adversely affect our business.

Our success and ability to compete depend in part upon our ability to obtain, maintain, protect, defend and enforce our intellectual property rights and technology. The steps we take to protect our intellectual property rights might not be sufficient to effectively prevent third parties from infringing, misappropriating, diluting, or otherwise violating our intellectual property rights or to prevent unauthorized disclosure or unauthorized use of our trade secrets or other confidential information. We make business decisions about when to seek patent protection for a particular technology, obtain trademark or copyright protection and when to rely upon trade secret protection, and the approach we select might ultimately prove to be inadequate. We will not be able to protect our intellectual property rights, however, if we do not detect unauthorized use of our intellectual property rights. We also might fail to maintain or be unable to obtain adequate protections for some of our intellectual property rights in the United States and some non-U.S. countries, and our intellectual property rights might not receive the same degree of protection in non-U.S. countries as they would in the United States because of the differences in non-U.S. patent, trademark, copyright, and other laws concerning intellectual property and proprietary rights. In addition, if we do not adequately protect our rights in our trademarks from infringement and unauthorized use, any goodwill that we have developed in those trademarks could be lost or impaired, which could harm our brand and our business. Our trademarks might also be opposed, contested, circumvented or found to be unenforceable,
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weak or invalid, and we might not be able to prevent third parties from infringing or otherwise violating them or using similar marks in a manner that causes confusion or dilutes the value or strength of our brand.

In addition to registered intellectual property rights, we rely on non-registered proprietary information and technology, such as trade secrets, confidential information and know-how. We attempt to protect our intellectual property, technology, and confidential information by requiring our employees, contractors, consultants, corporate collaborators, advisors and other third parties who develop intellectual property on our behalf to enter into confidentiality and invention assignment agreements, and third parties we share information with to enter into nondisclosure and confidentiality agreements. However, we might not have any such agreements in place with some of the parties who have developed intellectual property on our behalf and/or with some of the parties that have or might have had access to our confidential information, know-how, and trade secrets. Even where these agreements are in place, they might be insufficient or breached, or might not effectively prevent unauthorized access to or unauthorized use, disclosure, misappropriation, or reverse engineering of our confidential information, intellectual property, or technology. Moreover, these agreements might not provide an adequate remedy for breaches or in the event of unauthorized use or disclosure of our confidential information or technology, or infringement of our intellectual property. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us, and our competitive position could be materially and adversely harmed.

The loss of trade secret protection could make it easier for third parties to compete with our products and services by copying functionality. Additionally, individuals not subject to invention assignment agreements might make adverse ownership claims to our current and future intellectual property, and, to the extent that our employees, independent contractors, or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes might arise as to the rights in related or resulting know-how and inventions.

In addition, we might need to expend significant resources to apply for, maintain, enforce and monitor our intellectual property rights and such efforts might be ineffective and could result in substantial costs and diversion of resources. An adverse outcome in any such litigation or proceedings might expose us to
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a loss of our competitive position, significant liabilities, and damage to our brand, or require us to seek licenses that might not be available on commercially acceptable terms, if at all.

We have been, and might in the future be, subject to claims that we violated third-party intellectual property rights, which, even where meritless, can be costly to defend and could materially adversely affect our business, results of operations, and financial condition.

Our success depends, in part, on our ability to develop and commercialize our products and services without infringing, misappropriating or otherwise violating the intellectual property rights of third parties. However, we might not be aware that our products or services are infringing, misappropriating or otherwise violating third-party intellectual property rights and such third parties might bring claims alleging such infringement, misappropriation or violation. As we face increasing competition and become increasingly high profile, the possibility of receiving a larger number of intellectual property claims against us grows. In addition, various “non-practicing entities,” and other intellectual property rights holders have in the past and might in the future attempt to assert intellectual property claims against us or seek to monetize the intellectual property rights they own to extract value through licensing or other settlements.

Our use of third-party software and other intellectual property rights might be subject to claims of infringement or misappropriation. The vendors who provide us with technology that we incorporate in our product offerings also could become subject to various infringement claims.

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From time to time, our competitors or other third parties might claim, and have in the past claimed, that we are infringing upon, misappropriating or otherwise violating their intellectual property rights. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition, results of operations, cash flows or prospects. Any claims or litigation, even those without merit and regardless of the outcome, could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial costs or damages, obtain a license, which might not be available on commercially reasonable terms or at all, pay significant ongoing royalty payments, settlements or licensing fees, satisfy indemnification obligations, prevent us from offering our products or services or using certain technologies, force us to implement expensive and time-consuming work-arounds or re-designs, distract management from our business or impose other unfavorable terms.

We expect that the occurrence of infringement claims is likely to grow as the market for financial services grows and as we introduce new and updated products and services, and the outcome of any allegation is often uncertain. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources. Even if intellectual property claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and require significant expenditures.

Some of our products and services contain open source software, which could pose particular risks to our proprietary software, products, and services in a manner that could harm our business.

We use open source software in our products and services (as well as in some of our internally developed systems) and we anticipate using open source software in the future. Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and we might be subject to such terms. The terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. We could face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which
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could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our proprietary software source code freely available, purchase a costly license, or cease offering the implicated products or services unless and until we can re-engineer them to avoid infringement,offer a different solution, which might be a costly and time-consuming process. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous.can be ambiguous, vague, or subject to various interpretations, especially given the absence of controlling case law in the U.S. or other courts. Any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of license terms could harm our business and could help third parties, including our competitors, develop products and services that are similar to or better than ours.

Risks Related to Finance, Accounting and Tax Matters

Covenants in our credit agreements could restrict our operations and if we do not effectively manage our business to comply with these covenants, our financial condition could be adversely impacted.

We have entered into two credit agreements and might enter into additional agreements for other borrowing in the future. These agreements contain various restrictive covenants, including, among other
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things, minimum liquidity and tangible net worth requirements, restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to our stockholders, or enter into certain types of related person transactions. These agreements also contain financial covenants, including obligations to maintain certain capitalization amounts and other financial ratios. These restrictions might restrict our current and future operations, including our ability to incur debt to increase our liquidity position.

Our ability to meet these restrictive covenants can be impacted by events beyond our control that could cause us to be unable to comply. The credit agreements provide that our breach or failure to satisfy some of these covenants constitutes an event of default. Upon the occurrence of an event of default, our lenders could elect to declare all amounts outstanding under our debt agreements to be immediately due and payable. In addition, our lenders might have the right to proceed against the assets we provided as collateral pursuant to the agreements. If the debt under the credit agreements were to be accelerated, and if we did not have sufficient cash on hand or be able to sell sufficient collateral to repay it, it would have an immediate adverse effect on our business, financial condition and results of operations.

Our insurance coverage might be inadequate or expensive.

We use a combination of third-party insurance and self-insurance mechanisms, including a wholly owned captive insurance subsidiary. We are subject to claims in the ordinary course of business. These claims can involve substantial amounts of money and involve significant defense costs. It is not possible to prevent or detect all activities giving rise to claims and the precautions we take might not be effective in all cases. We maintain voluntary and required insurance coverage, including, among others, general liability, property, director and officer, excess-SIPC, business interruption, cyber and data breach, crime and fidelity bond insurance. Our insurance coverage is expensive and maintaining or expanding our insurance coverage might have an adverse effect on our results of operations and financial condition.

Our insurance coverage is subject to terms such as deductibles, coinsurance, limits and policy exclusions, as well as risk of counterparty denial of coverage, default or insolvency, and might be insufficient to protect us against all losses and costs stemming from processing, operational, and technological failures. For example, we offer a guarantee to our customers to fully reimburse direct losses that occur due to unauthorized activity that is not the fault of the customer, and any such losses we incur
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in satisfaction of this guarantee might not be fully or even partially covered by insurance. Furthermore, continued insurance coverage might not be available to us in the future on economically reasonable terms, or at all. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have an adverse effect on our business, financial condition, and results of operations.

Changes in U.S. and foreign tax laws and policies could adversely impact our tax liabilities.

We are subject to complex and evolving U.S. and foreign tax laws and regulations, which might in the future make changes to corporate income tax rates, the treatment of foreign earnings, or other income tax laws that could affect our future income tax provision and reduce our earnings while increasing the complexity, burden and cost of tax compliance.

Our determination of our tax liability is subject to review by applicable tax authorities. Any adverse outcome of such a review could cause our tax liabilities to increase. The determination of our tax liabilities requires significant judgment and, in the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is complex and uncertain. In addition, our future effective tax rates could be favorably or unfavorably affected by changes in tax rates, changes in the valuation of our deferred tax assets or liabilities, the effectiveness of our tax planning strategies or changes in tax laws or their interpretation. Such changes could have an adverse effect on our financial condition.
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Our corporate structure and associated transfer pricing policies also contemplate future growth in international markets, and consider the functions, risks, and assets of various entities involved in intercompany transactions. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing intercompany transactions pursuant to our intercompany arrangements or disagree with our determinations as to the income and expenses attributable to specific jurisdictions.jurisdictions

Although we believe our estimates are reasonable, as a result of these and other factors, the ultimate amount of our tax obligations owed might differ from the amounts recorded in our unaudited condensed consolidated financial statements and any such difference could harm our results of operations in future periods in which we change our estimates of our tax obligations or in which the ultimate tax outcome is determined.

In addition, from time to time, proposals are introduced in the U.S. Congress and state andlegislatures, as well as by foreign legislaturesgovernments, to impose new taxes on a broad range of financial transactions, including transactions that occur on our platform, such as the buying and selling of stocks, derivative transactions, and cryptocurrencies. If enacted, such financial transaction taxes could increase the cost to customers of investing or trading on our platform and reduce or adversely affect U.S. market conditions and liquidity, general levels of interest in investing, and the volume of trades and other transactions from which we derive transaction-based revenues. Any financial transaction tax implemented in any jurisdiction in which we operate could materially and adversely affect our business, financial condition, or results of operations, and as a retail brokerage we could be impacted to a greater degree than other market participants.

We also are subject to non-income taxes, such as payroll, sales, use, value-added, net worth, and property taxes in the United States and various foreign jurisdictions. Specifically, we might be subject to ''digital service taxes'' or new allocations of tax as a result of increasing efforts by certain jurisdictions to tax cross border activities that might not have been subject to tax under existing international tax principles. Companies such as ours could be adversely impacted by such taxes. Tax authorities might disagree with certain positions we have taken or might take in the future. As a result, we could be subject to additional tax liabilities.

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Our ability to use our net operating losses to offset future taxable income could be subject to certain limitations.

As of December 31, 2021,2022, we have net operating loss carryforwards (“NOLs”) available to reduce future taxable income. However, under Sections 382 and 383 of the United States Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” (as defined by the Code) may be subject to limitations on its ability to utilize its pre-change NOLs and other tax attributes such as research tax credits to offset future taxable income. If it is determined that we have in the past experienced an ownership change, or if we undergo one or more ownership changes as a result of future transactions in our stock, then our ability to utilize NOLs and other pre-change tax attributes could be limited by Sections 382 and 383 of the Code, and similar state provisions. Future changes in our stock ownership, many of which are outside of our control, could result in an ownership change under Section 382 or 383 of the Code. Furthermore, our ability to utilize NOLs of any companies that we acquire in the future may be subject to limitations. For these reasons, we might not be able to utilize our NOLs, even if we maintain profitability.

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Our tax information reporting obligations are subject to change.

Although we believe we are compliant with the tax reporting and withholding requirements with respect to our customers’ transactions in the jurisdictions in which we operate, various U.S., state or foreign tax authorities might significantly change applicable tax reporting requirements or disagree with the exact application of new or existing requirements. If the taxing authorities determine that we are not in compliance with our tax reporting or withholding requirements with respect to customer asset transactions, we may be exposed to additional withholding obligations, which could increase our compliance costs and result in penalties.

We track certain operational metrics, which are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics could harm our reputation, adversely affect our stock price, and result in litigation.

We track certain operational metrics using internal company data gathered on an analytics platform that we developed and operate, including metrics such as MAU, AUC and Net Cumulative Funded Accounts, as well as cohorts of our customers, which have not been validated by any independent third party and which might differ from estimates or similar metrics published by other parties due to differences in sources, methodologies, or the assumptions on which we rely. Our internal systems and tools are subject to a number of limitations and our methodologies for tracking these metrics have changed in the past and might change further over time, which could result in unexpected changes to our metrics or otherwise cause the comparability of such metrics from period to period to suffer, including the metrics we publicly disclose. For example, prior to our becoming self-clearing in November 2018, we relied on a third-party provider for our clearing operations, and used data collected by that third party to compute certain metrics, such as Net Cumulative Funded Accounts, that, since November 2018, we have calculated based on data sourced and processed internally. In addition, if the internal systems and tools we use to track these metrics undercount or overcount performance or contain algorithmic or other technical errors, the data we report might not be accurate. While these numbers are based on what we believe to be reasonable estimates of our metrics for the applicable period of measurement, there are inherent challenges in measuring how our platform is used across large populations globally. You should not place undue reliance on such operational metrics when evaluating an investment in our Class A common stock. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Metrics” for definitions of our key operational metrics.

If our operational metrics are not accurate representations of our business, or if investors do not perceive these metrics to be accurate, or if we discover material inaccuracies with respect to these figures, our reputation could be significantly harmed, the trading price of our Class A common stock could decline and we might be subject to stockholder litigation, which could be costly.

We are directly and indirectly exposed to fluctuations in interest rates.

Fluctuations in interest rates could adversely impact our customers’ general spending levels and ability and willingness to invest through our platform. Additionally, some of our products, such as our brokerage cash sweep service and margin lending programs, are affected by interest rate changes. Higher interest rates often lead to higher payment obligations by our customers to us and to their creditors under mortgage, credit card, and other consumer and merchant loans, which might reduce our customers’ ability to satisfy their obligations to us, including failing to pay for securities purchased, deliver securities sold, or meet margin calls, and therefore lead to increased delinquencies, charge-offs, and allowances for loan and interest receivables, which could have an adverse effect on our net income. Fluctuations in interest rates might also adversely impact our customers’ returns on their cash deposits.

We are also exposed to interest rate risk from our corporate cash and investment portfolio, from our securities lending activities, and from interest-rate sensitive assets, including our receivables from users’
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margin borrowing and other assets underlying the customer balances we hold on our balance sheet as customer accounts. As interest rates have increased in 2022, interest income has contributed an increasing share of our total net revenues. Reductions in interest rates and a return to a low interest rate environment would negatively impact our net income. For an estimate of how a hypothetical 100 basis point increase or decrease in interest rates could affect our total net revenues, see “Quantitative and Qualitative Disclosures about Market Risk—Interest Rate Risk” elsewhere in this report. Changes to the level or mix of interest earning balances could also negatively impact our net income if customers react to the rising interest rate environment by moving cash that would have otherwise been spent on services or products with higher revenue potential for Robinhood into Robinhood accounts that offer customers high interest rates.

If we fail to maintain effective internal control over financial reporting, as well as required disclosure controls and procedures, our ability to produce timely and accurate consolidated financial statements or comply with applicable regulations could be impaired.

The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and related rules of the SEC require, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.

Our current controls and any new controls that we develop could become inadequate because of changes in conditions in our business. In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems and controls to accommodate such changes. We have limited experience with implementing the systems and controls that are necessary to operate as a public company, as well as adopting changes in accounting principles or interpretations mandated by the relevant regulatory bodies. Additionally, if these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of our internal control over financial reporting. Moreover, our business might be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that might arise. Further, weaknesses in our disclosure controls and internal control over financial reporting could be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and could result in a restatement of our consolidated financial statements for prior periods.

Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that are required in our periodic reports filed with the SEC. As a newly public company, however, we are not required to comply fully with the SEC’s rules that implement Section 404 of the Sarbanes-Oxley Act until our second Annual Report on Form 10-K, which we expect to file in February 2023. In particular, we are not required to provide an annual management report on the effectiveness of our internal control over financial reporting and our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until such time. Ineffective disclosure controls and procedures or internal control over financial reporting could harm our business, cause investors to lose confidence in the accuracy and completeness of our reported financial and other information, and result in us becoming subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, any of which would likely have a negative effect on the trading price of our Class A common stock and have a material and adverse
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effect on our business, results of operations, financial condition and prospects. In addition, if we are unable to continue to meet these requirements, we might not be able to remain listed on the Nasdaq.
Risks Related to Our Class A Common Stock

The trading price for our Class A common stock has been and might continue to be volatile and you could lose all or part of your investment.

The trading price of our Class A common stock has been and might continue to be highly volatile and could continue to be subject to fluctuations in response to one or more of the risk factors described in this report, many of which are beyond our control. For example, on November 8, 2022 (the day that FTX halted all non-fiat customer withdrawals from its platform) the day after our October 26, 2021 quarterly earnings release, the closingintra-day trading price of our Class A common stock fell by more than 10%as much as 18%, and on December 14, 2022 (the day the December 2022 Rule Proposals were announced), the intra-day trading prices of our Class A common stock fell as much as 5.3%. These fluctuations could cause you to lose all or part of your investment in our Class A common stock since you might be unable to sell your shares at or above the price you paid. From our IPO in July 2021 through September 2022, the intra-day trading prices of our Class A common stock ranged from a low of $6.81 to a high of $85.00 per share. Additional factors that could have a significant effect on the trading price of our Class A common stock include:
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•publication of research reports about us, our competitors, or our industry, or changes in, or failure to meet, estimates made by securities analysts or ratings agencies of our financial and operating performance, or lack of research reports by industry analysts or ceasing of analyst coverage;
•announcements by us or our competitors of new offerings or platform features;
•the public’s perception of the quality and accuracy of our key metrics on our customer base and engagement;
•the public’s reaction to our media statements, other public announcements and filings with the SEC;
•rumors and market speculation involving us or other companies in our industry; and
•the extent to which retail and other individual investors (as distinguished from institutional investors), including our customers, invest in our Class A common stock, which might result in increased volatility.volatility; and
•media coverage related to certain individuals and entities identified as having owned our stock, and any speculation related to plans to dispose of their holdings; for example, media coverage related to the Emergent Shares (defined below).

In addition, in the past, following periods of volatility in the overall market and the trading price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

Further, if the market price of our Class A common stock is above the level that investors determine is reasonable for our Class A common stock, some investors might attempt to short our Class A common stock, which would create additional downward pressure on the trading price of our Class A common stock.

Substantial future issuances andor sales of shares of our Class A common stock in the public market could result in significant dilution to our stockholders and such issuances or sales, or the perception that they may occur, could cause the trading price of our Class A common stock to fall.

As of September 30, 2022,March 31, 2023, our founders and their related entities hold nearly 15%approximately 14% of our outstanding common stock (and, as described in the following risk factor, over 50% of the voting power of our outstanding capital stock). If our founders or other significant stockholders sell, or indicate an intent to sell, large amounts of stock in the public market, or the perception that these sales might occur, could cause the trading price of our Class A common stock to decline substantially.
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January 6, 2023, 55,273,469 shares of our outstanding common stock (the “Emergent Shares”) that were originally acquired by Emergent Fidelity Technologies, Ltd., a holding company which was majority owned by Samuel Benjamin Bankman-Fried, are held by the DOJ. Mr. Bankman-Fried has been indicted on criminal charges related to his involvement with FTX, and the DOJ seized the Emergent Shares in connection with his indictment. On February 8, 2023, we announced that our board of directors had authorized us to pursue purchasing most or all of the Emergent Shares and that we cannot predict when, or if, the share purchase will take place. Any substantial sale of the Emergent Shares or perception that such a sale might occur could cause the trading price of our Class A common stock to decline substantially.

Similarly, significant numbers of shares are subject to future issuance including under outstanding warrants held by pre-IPO investors, and under outstanding stock options and RSUs held by employees and other service providers, and significant numbers of additional shares are available for award grant purposes under our 2021 Plan and for issuance under our ESPP.Employee Share Purchase Plan. All of these shares will become eligible for sale in the public market upon exercise, vesting, or settlement, as
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applicable (and to the extent granted in the discretion of our board of directors, in the case of shares available for grant). Moreover, to fund the tax withholding and remittance obligations arising in connection with future vesting and settlement of RSUs, we currently intend to have most holders of such RSUs, including our founders, sell a portion of such shares into the market on the applicable settlement date, with the proceeds of such sales delivered to us for remittance to the relevant taxing authorities. These and any future issuances of shares of our capital stock, or of securities convertible into or exercisable for our capital stock could depress the market price of our Class A common stock and result in a significant dilution for stockholders.

We have authorized more capital stock in recent years to provide additional stock options and RSUs to our employees and to permit for the consummation of equity and equity-linked financings and might continue to do so in the future. Our employee headcount has increased significantly in the past few years, so the amount of dilution due to awards of equity-based compensation to our employees could be substantial. Further, any sales of our Class A common stock (including shares of Class A common stock issuable upon conversion of our Class B common stock, as stock options are exercised, or as RSUs are settled) might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales could also cause the trading price of our Class A common stock to fall and make it more difficult for you to sell shares of our Class A common stock.

Further pursuant to the equity exchange right agreements entered into between us and each of our founders in connection with our IPO, each of our founders has a right (but not an obligation) to require us to exchange, for shares of Class B common stock, any shares of Class A common stock received by them upon the vesting and settlement of pre-IPO RSUs (the “Equity Exchange Rights”). Any exercise by our founders of these Equity Exchange Rights will dilute the voting power of holders of our Class A common stock.

The multi-class structure of our common stock has the effect of concentrating voting power with our founders, which limits your ability to influence the outcome of matters submitted to our stockholders for approval. In addition, the Founders’ Voting Agreement and any future issuances of our Class C common stock could prolong the duration of our founders’ voting control.

Our Class A common stock has one vote per share, our Class B common stock has 10 votes per share and our Class C common stock has no voting rights, except as otherwise required by law. Our founders and certain of their related entities (“Founder Affiliates”) together hold all of the issued and outstanding shares of our Class B common stock. Accordingly, Mr. Tenev, who is also our CEO, President and a director, and Mr. Bhatt, who is also our Chief Creative Officer and a director, collectively with their related entities hold over 50% of the voting power of our outstanding capital stock. As a result, our founders have the ability to determine or significantly influence any action requiring the approval of our stockholders, including the election of our board of directors, the adoption of amendments to our Amended and Restated Certificate of Incorporation (our “Charter”)Charter and our Amended and Restated Bylaws (our “Bylaws”), and the approval of any merger, consolidation, sale of all or substantially all of our assets or other major corporate transaction.

In addition, our founders and certain of their related entities (“Founder Affiliates”)Affiliates have entered into a voting agreement (the “Founders’ Voting Agreement”) in which they have agreed, among other things, (i) to vote all of the shares of our common stock held by such founder or Founder Affiliate for the election of each founder to, and against the removal of each founder from, our board of directors, (ii) to vote together in the election of other directors generally, subject to deferring to the decision of the nominating and
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corporate governance committee in the event of any disagreement between the founders, (iii) effective upon a founder’s death or disability, to grant a voting proxy to the other founder with respect to shares of our common stock held by the deceased or disabled founder or over which he was entitled to vote (or direct the voting) immediately prior to his death or disability, and (iv) to grant each other rights of first offer in the event of proposed transfers that would otherwise cause Class B shares to convert into Class A shares under our Charter. The Founders’ Voting Agreement has the effect of concentrating voting power in our founders (or either one of them).

Further pursuant to the equity exchange right agreements entered into between us and each of our founders in connection with our IPO, each of our founders has a right (but not an obligation) to require us to exchange, for shares of Class B common stock, any shares of Class A common stock received by them upon the vesting and settlement of pre-IPO RSUs (the “Equity Exchange Rights”). Any exercise by our founders of these Equity Exchange Rights will dilute the voting power of holders of our Class A common stock.

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Our founders might have interests that differ from yours and might vote in a way with which you disagree and which may be adverse to your interests. Therefore, the founders’ concentrated voting control might have the effect of delaying, preventing or deterring a change in control of our Company, could deprive our stockholders of an opportunity to receive a premium for their capital stock as part of a sale of our Company, and might ultimately affect the market price of our Class A common stock. Further, the separation between voting power and economic interests could cause conflicts of interest between our founders and our other stockholders, which might result in our founders undertaking, or causing us to undertake, actions that would be desirable for our founders but would not be desirable for our other stockholders.

We have no current plans to issue shares of our Class C common stock. Because the shares of our Class C common stock have no voting rights, except as required by law, if we issue Class C common stock in the future, the voting control of our founders could be maintained for a longer period of time than would be the case if we issued Class A common stock rather than Class C common stock.

Our multi-class structure might depress the trading price of our Class A common stock.

In recent years some index providers have announced restrictions on including companies with multi-class share structures in some of their indices. For example, in July 2017, FTSE Russell announced that it plans to require new constituents of its indices to have greater than 5% of the company’s voting rights in the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with multi-class share structures to certain of its indices. Affected indices include the Russell 2000 and the S&P Composite 1500, which is comprised of S&P 500, S&P MidCap 400 and S&P SmallCap 600. Also in October 2018, MSCI (a leading stock index provider) announced its decision to reduce the weighting of equity securities “with unequal voting structures” in some of its indices. Under such announced policies, the multi-class structure of our common stock would make us ineligible for inclusion in some indices and, as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices would not invest in our Class A common stock. Such restrictive policies might depress our valuation, as compared to similar companies that are included in the indices, particularly if such policies become more widespread. Given the sustained flow of investment funds into passive strategies that seek to track indices, exclusion from popular stock indices would likely preclude investment by many of these funds and could make our Class A common stock less attractive to other investors. As a result, the market price of our Class A common stock could be adversely affected.

Certain provisions in our Charter and our Bylaws and of Delaware law as well as certain FINRA rules might prevent or delay an acquisition of Robinhood, which could decrease the trading price of our Class A common stock.

Our Charter and our Bylaws contain, and Delaware law contains, provisions that might have the effect of deterring takeovers by making such takeovers more expensive to the bidder and by encouraging prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover, such as a classified board, limitations on the ability of stockholders to take action by written consent, and the ability of our board to designate the terms of preferred stock and authorize its issuance without stockholder approval. We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal. These
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provisions are not intended to make Robinhood immune from takeovers. However, these provisions will apply even if the offer might be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of Robinhood and our stockholders. Accordingly, if our board of directors determines that a potential acquisition is not in the best interests of Robinhood and our stockholders, but certain stockholders believe that such a transaction would be beneficial to Robinhood and our stockholders, such stockholders might elect to sell their shares in Robinhood and the trading price of our Class A common stock could decrease. These and other provisions of our Charter, our Bylaws and the Delaware General Corporation Law could have the effect of delaying or deterring a change in control, which might limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock and might also affect the price that some investors are willing to pay for our Class A common stock.

In addition, a third party attempting to acquire us or a substantial position in our Class A common stock might be delayed or ultimately prevented from doing so by change in ownership or control regulations to which certain of our regulated subsidiaries are subject. For example, FINRA Rule 1017 generally provides that FINRA approval must be obtained in connection with any transaction resulting in a single person or entity owning, directly or indirectly, 25% or more of a FINRA member firm’s equity and would include a change in control of a parent company and similar approval from the U.K. Financial Conduct Authority, which regulates our U.K. authorized broker-dealer subsidiary (which does not currently do business), must be obtained in connection with any transaction resulting in a person or entity holding, directly or indirectly, 10% or more of the equity or voting power of a U.K. authorized person or the parent of a U.K. authorized person. These and any other applicable regulations relating to changes in control of us or our regulated subsidiaries could further have the effect of delaying or deterring a change in control of us.

The exclusive forum provisions of our Charter could limit our stockholders’ ability to choose the judicial forum for some types of lawsuits against us or our directors, officers, or employees.

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Our Charter provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for a number of types of actions or proceedings shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have subject matter jurisdiction, another state court sitting in the State of Delaware) (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants. Our Charter also provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action under the Securities Act. Nothing in our Charter precludes stockholders that assert claims under the Exchange Act from bringing such claims in any court, subject to applicable law.

Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to these provisions. These exclusive forum provisions might limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers, or other employees, which might discourage lawsuits against us and our directors, officers, and other employees. The enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to find the exclusive forum provisions in our Charter to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving the dispute in other jurisdictions, which could adversely affect our results of operations.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Sales of Unregistered Securities
From JulyJanuary 1, 20222023 through September 30, 2022March 31, 2023 we did not sell any shares of Class A common stock (or other equity securities of Robinhood Markets, Inc.) that were not registered under the Securities Act.

Use of IPO Proceeds

As previously disclosed, our total net proceeds from the sale of Class A common stock by us in the IPO were approximately $2.05 billion after deducting the underwriting discounts and commissions. We used a portion of the net proceeds we received in the IPO to repay borrowings made under our revolving lines of credit (which borrowing were utilized to fund tax withholdings due prior to the IPO closing as a result of RSU settlements in connection with the pricing of our IPO).

We intend to use the remaining IPO proceeds for working capital, capital expenditures, and general corporate purposes, which may include acquisitions, investments in the business to drive product expansion and other additional features to our platforms, and satisfying our general capital needs (including capital requirements imposed by regulators and SROs and cash deposit and collateral requirements under the rules of the DTC, NSCC, and OCC).

The expected use of net proceeds from the IPO represents our intentions based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of the IPO or the amounts that we will actually spend on the uses set forth above. Accordingly, our management will have broad discretion in the application of the net proceeds we received from the IPO, and investors will be relying on the judgment of our management regarding the application of our net proceeds. While we expect to use the net proceeds for purposes described above, the timing and amount of our actual expenditures will be based on many factors, including cash flows from operations, the anticipated growth of our business, and the availability and terms of alternative financing sources to fund our growth.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
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ITEM 6. EXHIBIT INDEX
The documents listed below are filed (or furnished, as noted) as exhibits to this Quarterly Report on Form 10-Q:
  Incorporated by Reference
Exhibit NumberDescriptionForm*Filing DateExhibitFiled Herewith
3.18-K2021-08-023.1
3.210-K2022-02-243.2
4.1S-1/A2021-07-194.1
4.2S-12021-07-014.2
10.1+X
31.1X
31.2X
32.1‡X
32.2‡X
101.INSiXBRL (Inline eXtensible Business Reporting Language) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documentX
101.SCHiXBRL Taxonomy Extension Schema DocumentX
101.CALiXBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFiXBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABiXBRL Taxonomy Extension Label Linkbase Document.X
101.PREiXBRL Taxonomy Extension Presentation Linkbase Document.X
104Cover Page Interactive Data File (contained in Exhibit 101)X
  Incorporated by Reference
Exhibit NumberDescriptionForm*Filing DateExhibitFiled Herewith
3.18-K2021-08-023.1
3.210-K2022-02-243.2
4.1S-1/A2021-07-194.1
4.2S-12021-07-014.2
10.1+8-K2023-02-0810.1
10.2+8-K2023-03-1510.1
10.38-K2023-03-2410.1
31.1X
31.2X
32.1‡X
32.2‡X
101.INSiXBRL (Inline eXtensible Business Reporting Language) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documentX
101.SCHiXBRL Taxonomy Extension Schema DocumentX
101.CALiXBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFiXBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABiXBRL Taxonomy Extension Label Linkbase Document.X
101.PREiXBRL Taxonomy Extension Presentation Linkbase Document.X
104Cover Page Interactive Data File (contained in Exhibit 101)X
__________________
*    File number is 001-40691 except that the S-1 (and S-1/A) file number is 333-257602.
+ Indicates a management contract or compensatory plan.
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‡    The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Robinhood Markets, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly signed this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Menlo Park, California, on November 2, 2022.May 10, 2023.
Robinhood Markets, Inc.
By:/s/ Vladimir Tenev
Name:Vladimir Tenev
Title:Co-Founder, Chief Executive Officer and President
By:/s/ Jason Warnick
Name:Jason Warnick
Title:
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)


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