Woofun AI reports that Robinhood CEO Vlad Tenev unveiled the company’s proprietary public chain and stock tokens at a launch event themed "The World Is Flat", revealing that the assets purchased by users are essentially debt securities issued by Robinhood Assets (Jersey) Limited rather than genuine equity stakes.

The fundamental nature of these tokens creates a stark illusion of ownership. When users purchase NVIDIA stock tokens, they are merely tracking the price fluctuations of NVIDIA’s shares without acquiring any legal rights associated with actual shareholder status. If NVIDIA were to fail operationally, token holders would have no claim to the company’s assets. This tokenization model inherently carries significant risks, as the tokens are structured as debt instruments rather than equity. For instance, if Apple’s stock price rises by 20%, the issuer promises to pay out 20% in returns.

However, if the Jersey shell company goes bankrupt, users become unsecured creditors waiting in line for liquidation proceeds. The actual Apple stocks held by the shell company might cover these claims, or the entity might be insolvent, resulting in the total loss of principal. If Apple itself declares bankruptcy, the situation worsens: holders do not own Apple stock but only a debt claim tied to its price, which becomes worthless if the underlying asset drops to zero.

This complex structural design is a direct response to the most severe crisis in Robinhood’s history: the GameStop short squeeze in January 2021. During that event, retail investors flocked to buy GameStop shares, but Robinhood closed buying channels due to a massive shortfall in margin funds caused by the U.S. T+2 settlement mechanism. The platform could not meet liquidation requirements, forcing it to restrict trading and leading Congress to summon Tenev for questioning. The brand’s credibility never fully recovered. Five years later, these token products represent Tenev’s solution: blockchain enables instant liquidation, eliminating the T+2 settlement period and the need for large margin calls. Since early 2026, Tenev has promoted this logic externally, arguing that there is no longer any reason to shut down buying buttons.

The regulatory framework governing these products is strictly defined by the SEC. In 2025, Robinhood submitted a 42-page proposal on token asset regulation to the SEC, calling for specific industry rules. In January 2026, three SEC departments jointly issued guidelines classifying token securities into two categories. The first category consists of native equity tokens, where companies directly list their own stocks on the blockchain, granting holders full shareholder rights. The second category includes derivative securities, where third parties issue tokens to simulate stock prices without any legal shareholder rights. The SEC clarified that such products can be packaged as structured notes, meaning holders bear additional counterparty risks that ordinary shareholders do not face. If the issuer goes bankrupt, all losses fall on the investors. In March 2026, the SEC and the CFTC jointly announced they would maintain this classification framework. Robinhood deliberately chose to issue the second category of derivative securities in Jersey to avoid regulatory red lines. Regulatory documents also mention security-based swap contracts, which are over-the-counter bets tied to stock prices. Federal regulations strictly limit access to these, allowing only qualified institutions and high-net-worth professional investors to participate. In contrast, debt-based structured notes have no investor threshold, allowing even a 19-year-old with $10 to participate. Robinhood chose this packaging option because it has the widest audience and the least regulatory resistance.

Geographic restrictions further highlight the strategic nature of this structure. The stock tokens are available to users in over 120 countries worldwide, but the United States, Canada, the United Kingdom, Switzerland, and the UAE are excluded. The European market operates under a different compliance framework. The classic stock tokens launched in Cannes in June 2025 comply with the EU’s MiFID II regulations and are issued by Robinhood’s European entity. These tokens are 1:1 backed by real stocks held in custody. Today, the number of underlying assets has expanded from 200 to over 2,000, with an entry fee as low as 1 euro. This demonstrates that Robinhood can fully offer compliant real stock tokens in Europe, making the Jersey debt structure a deliberate choice for other markets.

The risks are even more pronounced for private company tokens. At the Cannes event in June 2025, Robinhood distributed free tokens representing shares in private companies like Anthropic and OpenAI to European users. Shares in such companies are not available to the public, and ordinary investors have no way to purchase them legitimately. OpenAI officially issued a risk warning after seeing tokens using its name, stating that it had never approved the circulation of such assets. OpenAI co-founder Elon Musk even called these tokens fake. At that time, Robinhood CEO Tenev admitted that these tokens were not truly equity stakes but merely provided price exposure to users. Unlisted private companies like Anthropic and OpenAI do not have public trading prices, so token valuations rely on subjective estimates by institutions. There is no obligation for companies to disclose information, making risks completely uncontrollable.

Woofun AI data shows that Robinhood’s interest-bearing product offers an annual yield of 7% to U.S. users, but this comes with significant DeFi risks. Users lend their USDG stablecoins, which flow into the Morpho lending pool operated by Steakhouse Financial before being allocated to various DeFi protocols such as Ethena and Maple. The scale of deposits in the Morpho pool is around $6.6 billion, with yields fluctuating according to market lending demand. Robinhood has insured its smart contracts against theft at Lloyd’s of London, but the policy does not cover the risk of zero yields. When market lending demand declines, yields drop alongside money market rates. Users’ funds pass through multiple intermediaries including Robinhood, Steakhouse, and Morpho. If USDG loses value or borrowers default in large numbers, insurance cannot provide coverage, which is a common cause of principal losses. Tokens are stored on-chain and support staking for borrowing.

However, smart contracts cannot directly access stock prices and must rely on oracles to feed prices. If oracles provide false prices, the contracts may incorrectly liquidate users’ assets or make unauthorized loans. From 2024 to 2025, oracle price manipulation was a key method behind large-scale DeFi thefts, costing dozens of projects tens of millions of dollars.

Within the entire product ecosystem, the only genuine equity with full shareholder voting rights is Robinhood’s own stock HOOD, traded through traditional Nasdaq channels. The platform keeps the real equity for itself. The business logic is clear: Robinhood earns spreads from every token transaction; the public chain belongs to the company, allowing its new overseas businesses to continuously improve the earnings reports of the listed company without being constrained by U.S. domestic regulations. Token businesses without actual equity involve lower regulatory costs and cleaner profits. Robinhood’s public chain is built on the Arbitrum Orbit network, with ETH used to pay gas fees. No native platform tokens are issued to avoid the risks associated with token speculation. The company’s long-term plan is to create a one-stop settlement channel, enabling 7×24-hour on-chain trading of stocks, ETFs, stablecoins, commodity perpetual contracts, and future private equity. Robinhood was originally just an order distribution intermediary. If this plan succeeds, it will combine the functions of an exchange and a clearing house.

The competitive landscape includes compliant alternatives that highlight the risks of Robinhood’s approach. The new SEC chairman, Atkins, has abandoned the previous "prosecute first, regulate later" approach and is drafting an innovation regulatory sandbox exemption bill. The CLARITY Act was submitted to the Senate for review starting in June. Once enacted, the regulatory gray area in which Robinhood currently operates will continue to shrink. This strategy is well-known in the industry. Coinbase and Kraken also expanded their businesses during regulatory gaps in the early days, waiting until regulatory details were finalized and industry needs were proven before obtaining the necessary compliance qualifications. Just two days before Robinhood’s stock tokens were launched, on July 2, Ondo introduced compliant token stocks on Ethereum, issued through a SEC-registered transfer agent. The tokens are backed by sufficient real stocks held in custody, and holders enjoy on-chain voting rights across more than 250 companies. Coinbase also listed these products, allowing U.S. users to trade legally with dividends paid directly to their accounts.

Operating under a fully compliant U.S. model incurs higher costs and is subject to constant oversight by regulatory agencies, while Robinhood has already borne these compliance costs in Europe. Therefore, the Jersey debt structure is a choice made by Robinhood. In the future, either regulations will force upgrades to the products or competitors will introduce compliant real stock tokens to steal customers. Seizing the market first and waiting for regulatory improvements — this is Robinhood’s strategic approach. Today’s Jersey debt tokens are more like Robinhood’s transitional semi-finished products, designed to capture market share while navigating the complexities of evolving financial regulations.