Investing Simple Logo
Menu
Get 1 Free Stock Worth Up To $200 From Robinhood!
Sign up with Robinhood, deposit any amount and get 1 Free Stock. It takes less than 3 minutes to sign up and claim your Free Stock Bonus.
Earn 5.00% APY with M1 High-Yield Savings Account
M1 Plus members can earn 5.00% APY on their deposits with no minimum balance required.
Webull free stock promotion
Get Up To 5 Free Stocks From Webull
Open a new Webull brokerage account today and deposit any amount of money to receive 5 free stocks. Webull offers commission free stock, ETF, option and crypto trading.
Written by Cari Scribner on May 1, 2023
Category: 
FTC Disclosure

What Happens If Robinhood Goes Out Of Business?

Key Points

  • Robinhood has SIPC insurance for up to $500,000 worth of securities and $250,000 worth of cash for investors.
  • Robinhood's cash management products have FDIC insurance through their partner banks.
  • It is unlikely for Robinhood to go out of business, and if it were to happen, a larger brokerage platform would most likely acquire them and take over customer accounts.
  • Crypto held with Robinhood is not covered by federal insurance, but the company has a separate third-party commercial insurance policy against crypto theft.

Robinhood is a highly popular financial app among younger investors today.

With a few taps on your phone, you can invest in stocks, cryptos, and even options through the Robinhood app. The company also recently launched their retirement account option for investors that features a 1% match.

However, some investors are concerned about whether or not Robinhood is safe. Despite the company being around for over ten years, some investors worry that Robinhood may not be as established as a longer standing company such as Vanguard or Fidelity.

So, what would happen if Robinhood went out of business? What would happen to your portfolio and funds in the platform? Let's dive in.

Best Free Stock Promotions

BrokeragePromotionLink
Robinhood Logo1 Free Fractional Share Worth $5 To $200, 18 Companies To Choose FromDownload
Webull LogoWin Up To 12 Free Stocks Worth Up To $3,000 EachDownload
M1 Finance Robo Advisor$10 Bonus (When You Deposit $100+)Download
Moomoo LogoWin Up To 5 Free Stocks Worth $3 To $2,000 EachDownload
Acorns LogoFree $10 Bonus When You Invest $5+Download

FDIC/SIPC Insurance

First of all, if you invest in stocks or ETFs with Robinhood, your assets have SIPC insurance.

You can read more about this in our full article on Robinhood SIPC/FDIC insurance here.

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. 

So, if Robinhood somehow went out of business and lost customer assets, the SIPC would step in. Your assets would be safe regardless of what happens to the brokerage. 

If you use the cash management products offered by Robinhood, these accounts also have FDIC insurance.

Robinhood itself is not actually a bank. It's cash management offering is actually made possible with their partner Sutton Bank.

If Robinhood were to go out of business, that would have no effect on your deposits which are actually held at the partner banks.

Robinhood Free Training Shortcode (#8) (#9)

Robinhood Free Training

We put together a free 30 minute video training that walks you through the entire process, step by step. This training will help you get up and running in no time at all.

GET THE GUIDE

Conclusion

First of all, it is very unlikely that Robinhood will go out of business.

While they are not profitable, they have a huge loyal base of users. Most tech companies are not profitable for many years.

What would most likely happen if Robinhood went out of business is that a larger brokerage platform would purchase or acquire them and take over the customer accounts. 

If you own stocks/ETFs with Robinhood or have idle cash in your brokerage account, these are covered by SIPC insurance.

If you use cash management products, you have coverage through the FDIC insurance of the partner banks.

Lastly, crypto held with Robinhood is not covered by any federal insurance program. That is because it is not recognized as an asset, since it is brand new. Instead, Robinhood has a separate third party commercial insurance policy in place against crypto theft.

Article written by Cari Scribner

Read more

Power Your Investing

Choosing the right product and service is essential for your investing. Here are some of the tools and services to help your portfolio grow.
Robinhood
Robinhood provides an easy-to-use free trading platform for beginner investors. Robinhood has $0 account minimums. Get a free stock when you open an account below.
Try Robinhood
M1 Finance
M1 Finance offers a free investing platform where users can build portfolios of stocks and ETFs. Users can also choose from a variety of pre-built portfolios offered for free.
Try M1 Finance
Fundrise
Passively invest in private real estate deals with as little as $10. Fundrise allows you to own residential and commercial real estate across the U.S. starting at a 1% annual fee.
Try Fundrise
Copyright © 2018 – 2023 Investing Simple LLC. All Rights Reserved.
Investing Simple is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that investment markets have inherent risks, and past performance does not assure future results. Investing Simple has advertising relationships with some of the offers listed on this website. The information on Investing Simple could be different from what you find when visiting a third-party website. All products are presented without warranty. For more information, please read our full disclaimer.
Website managed by Stallion Cognitive™
magnifiermenuchevron-downcross-circlechevron-down-circle

Get 1 Free Stock Worth Up To $200 From Robinhood!

Don't Miss This Opportunity!

Investing Simple readers can claim a free stock from Robinhood worth up to $200 when they open a brokerage account and deposit any amount.

For US Residents only. Investing Simple is affiliated with Robinhood, and we may earn a commission when you sign up for Robinhood.

18749
55 Shares
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram