Robinhood is a popular financial app.
With a few taps on your phone, you can invest in stocks, cryptos, and even options through the Robinhood app.
However, many investors wonder what would happen in the unlikely event that their brokerage firm goes out of business - potentially even going bankrupt.
So, what would happen? Let's dive in.
New to Robinhood? Be sure to watch my full tutorial below!
Despite its innovative approach to investing, Robinhood operates within the same regulatory framework as traditional brokerages.
One crucial safeguard is its membership in the Securities Investor Protection Corporation (SIPC), a federally mandated insurer for securities held by customers of American brokerages.
First of all, if you invest in stocks or ETFs with Robinhood, your assets have SIPC insurance.
In a nutshell, this covers you in the event that your broker loses your financial assets or cash.
Since Robinhood is a member of SIPC, you are covered for up to $500,000 worth of securities, including $250,000 which can cover cash.
Importantly, Robinhood has also purchased additional private insurance that provides up to $1 billion in aggregate coverage, with limits of $50 million in securities and $1.9 million in cash per customer. This significantly exceeds standard SIPC protection and offers substantial safety for larger accounts.
So, if Robinhood somehow went out of business and lost customer assets, the SIPC would step in.
It's important to understand that SIPC does not cover:
Your SIPC coverage depends on your account type. Different categories (individual, joint, IRA, Roth IRA) each qualify for separate $500,000 coverage:
For example, if you have one traditional IRA and one Roth IRA, you'd be eligible for $1 million total coverage ($500K for each account type). However, multiple accounts of the same type are combined for coverage purposes.
In addition to the brokerage platform, Robinhood offers a high yield savings account as well as a spending account with a debit card.
Robinhood itself is not actually a bank - instead, they partner with FDIC insured banks.
If Robinhood were to go out of business, that would have no impact on your deposits which are actually held at the partner banks.
Now, if those partner banks began to have solvency issues, your deposits would be protected through the FDIC.
Robinhood has enhanced its cash sweep program through a network of partner banks, offering up to $2.5 million in FDIC insurance for individual accounts and $5 million for joint accounts. However, this expanded coverage now requires a Robinhood Gold membership ($5/month), which also earns you 4% APY on uninvested cash (no cap).
The Federal Deposit Insurance Corporation (FDIC) is a government agency in the United States that provides deposit insurance to depositors.
It was created in 1933 in response to the widespread bank failures during the Great Depression.
For non-Gold members, the standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.
Crypto is a special case that requires its own explanation. Cryptocurrencies are NOT covered by SIPC protection at all. Robinhood holds customer crypto assets in "cold storage" (offline) for security.
While not SIPC-insured, Robinhood has crime insurance from Lloyd's syndicates that covers crypto holdings against theft and cybersecurity breaches. Customers actually own the cryptocurrency they purchase through Robinhood.
It's important to remember that market volatility, not just broker failure, presents the greater risk for crypto investors. If Bitcoin or other cryptocurrencies drop in value, that loss isn't covered by any insurance.
It's important to keep in mind that Robinhood is a publicly traded company which is required to provide quarterly earnings updates to shareholders.
As of 2025, Robinhood has demonstrated strong financial performance:
Part of this update is details surrounding the amount of cash they have in the bank. If they were running low, they could take numerous measures - including issuing more shares to raise more capital.
Robinhood has also made strategic acquisitions that strengthen its position, including the Bitstamp global crypto exchange in June 2025 and the pending acquisition of WonderFi (Canadian digital assets). The company has expanded to more than 30 European countries.
The company now offers several additional financial products including futures trading, prediction markets, and a Robinhood Gold Credit Card, making it a more diversified financial services platform.
In the unlikely event that their business began to falter, they would most likely be acquired by a larger brokerage firm, and your investments would transfer over.
If you're concerned about your protection levels:
If you want to learn more about Robinhood, check out our full beginner's guide about how Robinhood works here.
For official information about Robinhood's current status, you can visit the Downdetector status page or check their official X account @AskRobinhood.
