The CEOs of AMC Entertainment and Robinhood are publicly clashing over “tokenised stocks” trading on Robinhood’s blockchain. The conflict got its start when AMC CEO Adam Aron discovered that Robinhood was offering a digital token bearing the movie theatre chain’s name and tracking its stock price – all l without AMC’s permission or involvement.
Robinhood launched a product featuring third-party tokenised real-world assets, which includes synthetic tokens representing AMC and over 190 other companies. These tokens are designed to mirror the price movements of actual stocks on a blockchain, allowing traders to speculate on equity prices.
However, because these tokens are generated by a third party rather than sponsored by the actual companies, Robinhood does not need AMC’s permission to issue its tokens and buyers do not own actual shares of AMC.
AMC CEO Adam Aron used social media to cry foul, calling the practice “contemptible, outrageous, disgusting, detestable, inexcusable, and vile.” His primary arguments against Robinhood’s approach include: (1) it confuses investors; (2) token holders do not possess any voting rights in AMC; and (3) AMC’s ability to raise capital might be impacted.
Aron also issued a cease-and-desist demand and threatened to take the matter directly to the SEC.
Robinhood has refused to back down. Robinhood’s Chief Legal Officer, Dan Gallagher (a former SEC commissioner), publicly dismissed AMC’s outrage, stating that the firm is fully aware of US. securities laws and effectively dared AMC to “send the lawyers.”
Whatever the details of this particular confrontation, the clash highlights a significant debate in the markets related tokenised equities and whether the best way forward is issuer-sponsored tokens or third-party tokens.
Like a bad horror-movie series, this one could run and run and might well lead to copycat actions. The SEC of late has tended to want to give the tokenisation space some tolerance to work out its own rules. But if enough negative noise erupts around third-party tokens, it may need to step in.
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