Robinhood’s OpenAI, SpaceX private equity tokens face EU scrutiny

Robinhood’s stock token offerings are under regulatory scrutiny in the European Union after OpenAI warned investors that the digital brokerage’s so-called OpenAI tokens do not represent any equity stake in the company.

OpenAI’s warning prompted an inquiry by Lithuania’s central bank, which serves as Robinhood’s primary regulator in the region. 

The Bank of Lithuania is “awaiting clarifications” regarding Robinhood’s stock token offerings linked to OpenAI and SpaceX, CNBC reported on Monday, citing Giedrius Šniukas, a spokesperson for the Bank of Lithuania.

“Only after receiving and evaluating this information will we be able to assess the legality and compliance of these specific instruments,” said Šniukas.

Robinhood’s push into tokenization culminated on June 30 with the launch of a layer-2 blockchain to support its tokenized securities offerings in the European Union. The brokerage said it plans to issue more than 200 US stock and exchange-traded fund (ETF) tokens to investors in Europe.

However, the backlash centers on Robinhood’s so-called private equity tokens for companies that are not publicly traded, primarily OpenAI and SpaceX. As Cointelegraph noted, OpenAI has already clarified that these tokens do not represent equity in the company.

As Galaxy Research noted, these equity tokens are essentially “derivatives that provide indirect exposure to the underlying asset.”

Owning a piece of the growing tokenization pie

Like other brokerage firms, Robinhood is vying for a share of the rapidly expanding tokenization market, which is valued at over $24 billion, according to industry estimates. 

Although some insiders, such as Plume CEO Chris Yin, question the reported size of the market due to data tracking challenges, major institutions like BlackRock and Franklin Templeton have entered the space.

A recent report by RedStone noted that tokenization is gaining traction in private credit markets by lowering barriers to entry and improving settlement times and liquidity. The report found that private credit and US Treasury debt are currently the largest drivers of tokenization.

At the recent Tokenize This conference in New York, industry executives argued that tokenized stocks alone could represent a trillion-dollar opportunity.