What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-27 compared with 2022-02-24 · 567 added, 527 removed, 852 unchanged (56% of the section changed)

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Notes to the Consolidated Financial Statements

Table of Co ntents

Note 1 - Description of Business and Summary of Significant Accounting Policies

Note 2 - Recent Accounting Pronouncements

Note 3 - Business Combinations

Note 4 - Goodwill and Intangible Assets

Note 5 - Revenues

Note 6 - Restructuring Activities

Note 7 - Allowance for Credit Losses

Note 8 - Investments and Fair Value Measurement

Note 9 - Income Taxes

Note 10 - Property, Software, and Equipment, net

Note 11 - Securities Borrowing and Lending

Note 12 - Financing Activities and Off-Balance Sheet Risk

Note 13 - Common Stock and Stockholders' (Deficit) Equity

Note 14 - Net Income (Loss) per Share

Note 15 - Related Party Transactions

Note 16 - Leases

Note 17 - Commitments & Contingencies

Note 18 - Subsequent Events

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Robinhood Markets, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Robinhood Markets, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), cash flows, and mezzanine equity and stockholders’ (deficit) equity for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 27, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying report of management on internal control of financial reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

San Jose, California

February 27, 2023

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Robinhood Markets, Inc.

Opinion on the Financial Statements

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(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), cash flows, and mezzanine equity and stockholders’ (deficit) equity for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for three years in the period ended December 31, 2022 in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2023 expressed an unqualified opinion thereon.

Adoption of SAB 121

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for obligations to safeguard crypto-assets held in custody on behalf of its platform users in 2022 due to the adoption of SAB 121.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Table of Co ntents

Valuation of Market-Based Restricted Stock Units

Description of the Matter

As described in Note 12 to the consolidated financial statements, the Company granted market-based restricted stock units (“RSUs”) to its co-founders in 2021 that vest upon achievement of specified share price targets through May 25, 2029 and satisfaction of a service condition (“2021 market-based RSUs”).

The grant date fair value of the 2021 market-based RSUs was $805.5 million.

In addition, during 2021, the Company modified the market-based restricted stock units that were granted to its co-founders in 2019 (“2019 market-based RSUs”).

The 2019 market-based RSUs that vest upon achievement of specified share price targets and satisfaction of a service condition were modified to allow vesting on the same share price targets through December 31, 2025.

The modification date fair value of the modified 2019 market-based RSUs was $589.2 million, resulting in $581.1 million of incremental stock-based compensation expense due to the modification.

The market conditions are included in the determination of the estimated fair value of the market-based RSUs.

With the assistance of valuation specialists, the Company estimated the fair value of the market-based RSUs using the Monte Carlo simulation model that utilizes various assumptions, including volatility.

Auditing the valuation of the Company’s market-based RSUs is complex due to the use of the Monte Carlo simulation model and involves the use of our valuation specialists.

Also, auditing the valuation of the market-based RSUs is highly judgmental due to the significant estimation required to determine the assumptions used in the valuation model, including the volatility assumption.

How We Addressed the Matter in Our Audit

To test the fair value of the Company’s market-based RSUs, our audit procedures included, among others, assessing the appropriateness of the use of the Monte Carlo simulation model and the underlying calculations, as well as testing the assumptions used to calculate the fair value of market-based RSUs.

To test the volatility assumption, we assessed the applicability of the guideline public companies used in the determination of volatility based on the nature of their business, compared the historical volatilities of the guideline public companies used in the estimate to actual historical results, and developed an independent range of volatility.

We involved our valuation specialists to assist us with evaluating the Monte Carlo simulation model and the assumptions used in the model, as well as to perform comparative calculations.

Description of the Matter Transaction-based revenues

As discussed in Note 1 and Note 5 to the consolidated financial statements, the Company recognized transaction-based revenues of $814 million for the year ended December 31, 2022, of which $807 million is comprised of revenues earned from routing user orders to market makers when the performance obligation is satisfied, which is at the point in time when a routed order is executed by the market maker.

The Company’s transaction-based revenues from routing user orders involves a significant volume of transactions and is earned from various market makers and is sourced from multiple systems across the Company’s information technology environment.

Auditing transaction-based revenues from routing user orders was complex and involved significant audit effort to identify, test, and evaluate the Company’s relevant systems used to process and record transaction-based revenues from routing user orders.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the revenue recognition process for transaction-based revenues from routing user orders.

With the involvement of our information technology professionals, we identified and tested the relevant systems used to process and record transaction-based revenues earned from routing user orders, and tested the relevant information technology general controls over those systems.

Our audit procedures included, among others, testing on a sample basis the completeness and accuracy of the underlying data and calculations used to record transaction-based revenues from routing user orders, obtaining external confirmation of revenue recognized and transaction price from market makers, and comparing revenue recognized to cash receipts.

/s/ Ernst & Young LLP

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CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data) 2020 2021

(in millions, except share and per share data) 2021 2022

Current assets:

Cash and cash equivalents $ 6,253 $ 6,339

Cash and securities segregated under federal and other regulations 4,914,660 3,992,419

Cash segregated under federal and other regulations 3,992 2,995

Receivables from brokers, dealers, and clearing organizations 88 76

Receivables from users, net 6,639 3,218

Securities borrowed — 517

Deposits with clearing organizations 328 186

Asset related to user cryptocurrencies safeguarding obligation — 8,431

User-held fractional shares 1,834 997

Investments — 27,189

Prepaid expenses 92 86

Other current assets 57 72

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Intangible assets, net 34 25

Restricted cash 7,364 23,773

Non-current prepaid expenses 44 17

Other non-current assets 161 132

Total assets $ 19,769 $ 23,337

Liabilities, mezzanine equity and stockholders’ (deficit) equity

Liabilities and stockholders’ equity

Current liabilities:

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Securities loaned 3,651 1,834

User cryptocurrencies safeguarding obligation

Fractional shares repurchase obligation 1,834 997

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Commitments and contingencies (Note 17)

Mezzanine equity

Redeemable convertible preferred stock, $ 0.0001 par value.

414,033,220 shares authorized, 412,742,897 shares issued and outstanding with a liquidation preference of $ 2,191,086 as of December 31, 2020.

No shares authorized, issued, and outstanding as of December 31, 2021.

Stockholders’ (deficit) equity:

Preferred stock, $ 0.0001 par value.

No shares authorized, issued and outstanding as of December 31, 2020;

210,000,000 shares authorized and no shares issued and outstanding as of December 31, 2021.

Common stock, $ 0.0001 par value.

777,354,000 shares authorized, 229,031,546 shares issued and outstanding as of December 31, 2020;

no shares authorized, issued, and outstanding as of December 31, 2021.

Stockholders’ equity:

Class A common stock, $ 0.0001 par value.

No shares authorized, issued and outstanding as of December 31, 2020;

21,000,000,000 shares authorized, 735,957,367 shares issued and outstanding as of December 31, 2021;

21,000,000,000 shares authorized, 764,888,917 shares issued and outstanding as of December 31, 2022.

Class B common stock, par value $ 0.0001 .

No shares authorized, issued and outstanding as of December 31, 2020;

700,000,000 shares authorized, 127,955,246 shares issued and outstanding as of December 31, 2021;

700,000,000 shares authorized, 127,862,654 shares issued and outstanding as of December 31, 2022.

Class C common stock, par value $ 0.0001 .

No shares authorized, issued and outstanding as of December 31, 2020;

7,000,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021.

7,000,000,000 shares authorized, no shares issued and outstanding as of December 31, 2021 and 2022.

Additional paid-in capital 11,169 11,861

Accumulated other comprehensive income 473 405

Accumulated other comprehensive income (loss) 1 —

Accumulated deficit ( 3,877 ) ( 4,905 )

Total stockholders’ (deficit) equity

( 55,322 ) 7,293,092

Total liabilities, mezzanine equity and stockholders’ (deficit) equity $ 10,988,474 $ 19,769,179

Total stockholders’ equity

Total liabilities and stockholders’ equity $ 19,769 $ 23,337

See Accompanying Notes to the Consolidated Financial Statements.

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Year Ended December 31,

(in thousands, except share and per share data) 2019 2020 2021

(in millions, except share and per share data) 2020 2021 2022

Transaction-based revenues $ 720 $ 1,402 $ 814

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Other expense (income), net — ( 1 ) 16

Income (loss) before income tax ( 107,587 ) 13,830 ( 3,684,432 )

Provision for (benefit from) income taxes ( 1,018 ) 6,381 2,000

Income (loss) before income taxes 13 ( 3,685 ) ( 1,027 )

Provision for income taxes 6 2 1

Net income (loss) $ 7 $ ( 3,687 ) $ ( 1,028 )

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Year Ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Net income (loss) $ 7 $ ( 3,687 ) $ ( 1,028 )

Other comprehensive income (loss), net of tax:

Other comprehensive loss, net of tax:

Foreign currency translation — — ( 1 )

Total other comprehensive income (loss), net of tax 179 284 ( 68 )

Total other comprehensive loss, net of tax — — ( 1 )

Total comprehensive income (loss) $ 7 $ ( 3,687 ) $ ( 1,029 )

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Year Ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Operating activities:

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Depreciation and amortization 10 26 61

Impairment of long-lived assets — — 45

Provision for credit losses 59 78 36

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Receivables from users, net ( 2,772 ) ( 3,362 ) 3,386

Securities borrowed — — ( 517 )

Deposits with clearing organizations ( 103 ) ( 102 ) 142

Current and non-current prepaid expenses — ( 135 ) 33

Other current and non-current assets ( 46 ) ( 54 ) ( 26 )

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Purchase of investments — ( 27 ) ( 25 )

Sales of investments — — 42

Other — ( 3 ) ( 20 )

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Repayments on credit facilities ( 938 ) ( 1,968 ) ( 21 )

Payments of debt issuance costs — — ( 10 )

Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs 1,267 — —

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Effect of foreign exchange rate changes on cash and cash equivalents — — ( 1 )

Net increase in cash, cash equivalents, segregated cash and restricted cash 1,623,302 3,120,091 4,080,700

Net increase (decrease) in cash, cash equivalents, segregated cash and restricted cash 3,120 4,080 ( 913 )

Cash, cash equivalents, segregated cash and restricted cash, beginning of the period 3,070 6,190 10,270

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Segregated cash, end of the period 4,780 3,992 2,995

Restricted cash, end of the period 5,164 7,364 24,463

Restricted cash (current and non-current), end of the period 7 25 23

Cash, cash equivalents, segregated cash and restricted cash, end of the period $ 6,190 $ 10,270 $ 9,357

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(deficit) equity

(in thousands, except for number of shares) Shares Amount Shares Amount

(in millions, except for number of shares) Shares Amount Shares Amount

Balance as of December 31, 2019 321,626,778 $ 913 224,802,545 $ — $ 99 $ 1 $ ( 197 ) $ ( 97 )

Net loss — — — — — — ( 106,569 ) ( 106,569 )

Net income — — — — — — 7 7

Shares issued in connection with stock option exercise, net of repurchases — — 4,229,001 — 9 — — 9

Issuance of Series E convertible preferred stock, net of issuance costs 29,887,357 372,733 — — — — — —

Issuance of Series F convertible preferred stock, net of issuance costs 48,000,000 599 — — — — — —

Issuance of Series G convertible preferred stock, net of issuance costs 43,116,119 668 — — — — — —

Vesting of early-exercised stock options — — — — 1 — — 1

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CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ (DEFICIT) EQUITY

Redeemable convertible preferred stock Common stock Additional

Redeemable convertible preferred stock Common stock (1)

capital Accumulated other comprehensive

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(deficit) equity

(in thousands, except for number of shares) Shares Amount Shares Amount

(in millions, except for number of shares) Shares Amount Shares Amount

Balance as of December 31, 2020 412,742,897 $ 2,180 229,031,546 $ — $ 134 $ 1 $ ( 190 ) $ ( 55 )

Net income — — — — — — 7,449 7,449

Net loss — — — — — — ( 3,687 ) ( 3,687 )

Shares issued in connection with stock option exercise, net of repurchases — — 6,832,725 — 14 — — 14

Issuance of Series F convertible preferred stock, net of issuance costs 48,000,000 599,284 — — — — — —

Issuance of Series G convertible preferred stock, net of issuance costs 43,116,119 668,044 — — — — — —

Vesting of early-exercised stock options — — — — 527 — — 527

Change in other comprehensive income — — — — — 284 — 284

Issuance of common stock in connection with Employee Stock Purchase Plan — — 298,031 — 7 — — 7

Issuance of common stock in connection with initial public offering, net of issuance costs — — 56,729,194 — 2,052 — — 2,052

Issuance of common stock upon settlement of RSUs — — 32,133,589 — — — — —

Shares withheld related to net share settlement — — ( 11,160,525 ) — ( 422 ) — — ( 422 )

Conversion of preferred stock to common stock ( 412,742,897 ) ( 2,180 ) 412,742,897 — 2,180 — — 2,180

Conversion of convertible notes to common stock — — 137,305,156 — 5,218 — — 5,218

Reclassification of warrant liability to stockholders' equity — — — — 380 — — 380

Vesting of replacement awards issued in connection with acquisition 1 1

Share-based compensation — — — — 1,605 — — 1,605

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capital Accumulated other comprehensive

income Accumulated

income (loss) Accumulated

deficit Total stockholders’

(deficit) equity

(in thousands, except for number of shares) Shares Amount Shares Amount

(in millions, except for number of shares) Shares Amount Shares Amount

Balance as of December 31, 2021 — $ — 863,912,613 $ — $ 11,169 $ 1 $ ( 3,877 ) $ 7,293

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Issuance of common stock in connection with Employee Stock Purchase Plan — — 1,907,241 — 16 — — 16

Issuance of common stock in connection with initial public offering, net of issuance costs — — 56,729,194 6 2,052,325 — — 2,052,331

Issuance of common stock upon settlement of restricted stock units — — 32,133,589 — — — — —

Shares withheld related to net share settlement — — ( 11,160,525 ) — ( 422,076 ) — — ( 422,076 )

Conversion of preferred stock to common stock ( 412,742,897 ) ( 2,179,739 ) 412,742,897 41 2,179,698 — — 2,179,739

Conversion of convertible notes to common stock — — 137,305,156 14 5,217,583 — — 5,217,597

Reclassification of warrant liability to stockholders' equity — — — — 380,036 — — 380,036

Vesting of replacement awards issued in connection with acquisition of a business — — — — 639 — — 639

Vesting of early-exercised stock options — — — — 406 — — 406

Issuance of common stock upon settlement of restricted stock units, net of shares withheld — — 24,613,450 — ( 12 ) — — ( 12 )

Change in other comprehensive income — — — — — ( 1 ) — ( 1 )

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In connection with the completion of our initial public offering, all previously outstanding shares of common stock were reclassified into Class A common stock and Class B common stock.

See Note 1 for further information.

See Note 1 - Description of Business and Summary of Significant Accounting Policies, for further information.

See Accompanying Notes to the Consolidated Financial Statements.

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Robinhood Markets, Inc.

(“RHM”, together with its subsidiaries, “Robinhood,” the “Company,” “we,” or “us”) was incorporated in the State of Delaware on November 22, 2013.

(“RHM” and, together with its subsidiaries, “Robinhood,” the “Company,” “we,” or “us”) was incorporated in the State of Delaware on November 22, 2013.

Our most significant, wholly-owned subsidiaries are:

• RHF, a registered introducing broker-dealer;

• RHS, a registered clearing broker-dealer;

• RHC, which provides users the ability to buy and sell cryptocurrencies.

• Robinhood Financial LLC (“RHF”), a registered introducing broker-dealer;

• Robinhood Securities, LLC (“RHS”), a registered clearing broker-dealer;

• Robinhood Crypto, LLC (“RHC”), which provides users the ability to buy, sell, and transfer cryptocurrencies and is responsible for the custody of user cryptocurrencies held by users on our platform;

• Robinhood Money, LLC (“RHY”), which offers a pre-paid debit card (the “Robinhood Cash Card”) and a spending account that help customers invest, save, and earn rewards.

Acting as the agent of the user, we facilitate the purchase and sale of options, cryptocurrencies, and equities through our platform by routing transactions through market makers, who are responsible for trade execution.

Upon execution of a trade, users are legally required to purchase options, cryptocurrencies, or equities for cash from the transaction counterparty or to sell options, cryptocurrencies, or equities for cash to the transaction counterparty, depending on the transaction.

Acting as agent, we facilitate and confirm trades only when there are binding, matched legal obligations from the user and the market maker on both sides of the trade.

Our users have ownership of the securities, including those that collateralize margin loans, and cryptocurrencies transacted on our platform and, as a result, any such securities or cryptocurrencies owned by users are not presented in our consolidated balance sheets.

We do not allow users to purchase cryptocurrency on margin.

We hold cryptocurrency in custody for our users’ accounts in one or more omnibus cryptocurrency wallets.

Initial Public Offering

On August 2, 2021, we closed our IPO of 55.0 million shares of Class A common stock, including 2.6 million shares sold by selling shareholders, at a public offering price of $ 38.00 per share.

We facilitate and confirm trades only when there are binding, matched legal obligations from the user and the market maker on both sides of the trade.

Our users have ownership of the securities they transact on our platform, including those that collateralize margin loans, and, as a result, such securities are not presented on our consolidated balance sheets, other than user-held fractional shares which are presented gross.

Our users also have ownership of the cryptocurrencies they transact on our platform (none of which are allowed to be purchased on margin and which do not serve as collateral for margin loans);

however, following our adoption of Staff Accounting Bulletin 121 (“SAB 121”), we recognize a liability to reflect our safeguarding obligation along with a corresponding asset on our balance sheet related to the cryptocurrencies we hold in custody for users (refer to Note 2 - Recent Accounting Pronouncements, for more information on the recent adoption of SAB 121).

On August 2, 2021, we closed our IPO of 55.0 million shares of Class A common stock.

On August 31, 2021, we sold an additional 4.4 million shares of Class A common stock pursuant to the option granted to the underwriters to purchase additional shares.

The total net proceeds we received in the IPO were approximately $ 2.05 billion after deducting underwriting discounts and commissions of $ 90.8 million and offering expenses of $ 12.6 million.

In connection with the completion of the IPO:

1) the Company filed its Amended and Restated Certificate of Incorporation (the “Charter”), which authorizes a total of 21 billion shares of Class A common stock, 700 million shares of Class B common stock, 7 billion shares of Class C common stock, and 210 million shares of preferred stock, 2) all shares of our outstanding redeemable convertible preferred stock automatically converted into a total of 412.7 million shares of our common stock, 3) all 233.3 million previously outstanding shares of the Company’s common stock, along with the 412.7 million shares of common stock mentioned above, were automatically reclassified into an equivalent number of shares of the Company’s Class A common stock (the “Reclassification”), 4) a total of 130.2 million shares of Class A common stock held by our founders and their related entities were exchanged for an equivalent number of shares of Class B common stock pursuant to the terms of certain exchange agreements, 5) all of our outstanding convertible notes automatically converted into 137.3 million shares of Class A common stock and 6) all warrants became exercisable at a strike price of $ 26.60 per share for an aggregate of 14.3 million shares of Class A common stock.

As a result, following the completion of the IPO, we have three classes of authorized common stock:

Class A common stock, Class B common stock, and Class C common stock, of which only Class A common stock and Class B common stock were outstanding as of December 31, 2021.

See Note 12 for further information about the terms of our various classes of common stock.

Upon completion of the IPO, approximately $ 12.6 million of capitalized deferred offering costs were reclassified into stockholders’ equity as a reduction of the IPO proceeds.

Additionally, upon our IPO, we

recogni zed $ 1.01 billion of share-bas ed compensation expense related to restricted stock units (“RSUs”) for which the time-based vesting condition was satisfied or partially satisfied as the performance condition, a liquidity event, was satisfied.

Upon the IPO, 24.6 million RSUs vested and 10.8 million shares of Class A common stock were withheld to meet the related tax withholding requirements.

Basis of Presentation

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All intercompany balances and transactions have been eliminated.

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

The impact of these reclassifications is immaterial to the presentation of the consolidated financials statements taken as a whole.

Use of Estimates

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes.

We base our estimates on historical experience, and other assumptions we believe to be reasonable under the circumstances, which together form the basis for making judgments about the carrying values of assets and liabilities.

Assumptions and estimates used in preparing our consolidated financial statements include those related to the determination of allowances for credit losses, the capitalization and estimated useful life of internally developed software, contingent liabilities, useful lives of property and equipment, the incremental borrowing rate used to determine the present value of lease payments, the valuation and recognition of share-based compensation, the valuation of the convertible notes and warrant liability, the valuation and estimated useful lives of acquired intangible assets, uncertain tax positions, accrued liabilities, and the recognition and measurement of current and deferred income tax assets and liabilities.

Actual results could differ from these estimates and could have a material adverse effect on our consolidated financial statements.

The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial

statements and accompanying notes.

We base our estimates on historical experience, and other assumptions we believe to be reasonable under the circumstances.

Assumptions and estimates used in preparing our consolidated financial statements include, but are not limited to, those related to revenue recognition and share-based compensation, the determination of allowances for credit losses, valuation of user cryptocurrencies safeguarding obligation and corresponding asset, investment valuation, capitalization of internally developed software, useful lives of property, software, and equipment, valuation and useful lives of intangible assets, incremental borrowing rate used to calculate operating lease right-of-use assets and related liabilities, impairment of long-lived assets, uncertain tax positions, income taxes, accrued and contingent liabilities.

Actual results could differ from these estimates and could have a material adverse effect on our operating results.

Segment Information

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All our revenues and substantially all of our assets are attributed to or located in the United States.

Variable Interest Entities

We evaluate our ownership, contractual and other interests in entities to determine if we have a variable interest in an entity.

These evaluations are complex, involve judgment, and the use of estimates and assumptions based on available historical and prospective information, among other factors.

If we determine that an entity for which we hold a contractual or ownership interest in is a variable interest entity (“VIE”) and that we are the primary beneficiary, we consolidate such entity in the consolidated financial statements.

The primary beneficiary of a VIE is the party that meets both of the following criteria:

(1) has the power to make decisions that most significantly affect the economic performance of the VIE;

and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE.

Periodically, we determine whether any changes in the interest or relationship with the entity impacts the determination of whether we are still the primary beneficiary.

If we are not deemed to be the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP.

Revenue Recognition

Transaction-Based Revenues

We primarily earn transaction-based revenues from routing user orders for options, equities and cryptocurrencies to market makers when the performance obligation is satisfied, which is at the point in time when a routed order is executed by the market maker.

We primarily earn transaction-based revenues from routing user orders for options, cryptocurrencies, and equities to market makers when the performance obligation is satisfied, which is at the point in time when a routed order is executed by the market maker.

The transaction price for options is on a per contract basis, while for equities it is primarily based on the bid-ask spread of the underlying trading activity.

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Net interest revenues consist of interest revenues less interest expenses.

We earn and incur interest revenues and expense on securities lending transactions.

We also earn interest on margin loans to users, which constitute the majority of receivables from users, net in the consolidated balance sheets, and on our segregated cash, cash and cash equivalents, and deposits with clearing organizations.

We earn interest revenues on margin loans to users, corporate cash and investments, segregated cash and cash equivalents, deposits with clearing organizations, and Cash Sweep.

We also earn and incur interest revenues and expenses on securities lending transactions.

We incur interest expenses in connection with our revolving credit facilities.

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Subscription revenue is recognized ratably over the subscription period as the performance obligation is satisfied.

Other revenues also consist of proxy rebates and ACATS fees charged to users.

Other revenues also consist of proxy rebates, proxy revenues, and ACATS fees charged to users.

Proxy rebates are revenues earned through our partnership with a third-party investor communications company.

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We earn a share of the revenue the third-party company receives from issuers, and recognize the revenue when the performance obligation of providing data is satisfied.

During 2022, we terminated our partnership with the third-party proxy service provider and began using Say Technologies, a wholly-owned subsidiary, to provide proxy and investor communications services.

We now earn proxy revenue directly from issuers.

ACATS fees are charged to users for facilitating the transfer of part or all of their accounts to another broker-dealer.

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Citadel Securities, LLC 34 % 22 % 16 %

Tai Mo Shan Limited (1)

Entities affiliated with Susquehanna International Group, LLP (1)

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10 % 10 % 8 %

Tai Mo Shan Limited (3)

All others individually less than 10% 13 % 18 % 24 %

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________________

(1) Member of Jump Trading Group

(1) Consists of Global Execution Brokers, LP and G1X Execution Services, LLC

(2) Consists of Wolverine Execution Services, LLC and Wolverine Securities, LLC

(3) Member of Jump Trading Group

Concentrations of Credit

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The risk of default depends on the creditworthiness of the counterparty.

Default of a counterparty in equities and options trades, which are facilitated through clearinghouses, would generally be spread among the clearinghouse's members rather than falling entirely on us.

Default of a counterparty in equities and options trades, which are facilitated through

clearinghouses, would generally be spread among the clearinghouse's members rather than falling entirely on us.

It is our policy to review, as necessary, the credit standing of each counterparty.

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Brokerage and Transaction

Brokerage and transaction costs primarily consist of broker-dealer transaction expenses (such as fees paid to centralized clearinghouses and regulatory fees), market data expenses, cash and share-

based compensation and benefits as well as allocated overhead for employees engaged in clearing and brokerage functions, and cash management transactions expenses (such as network fees and card processing fees).

Brokerage and transaction costs primarily consist of broker-dealer transaction expenses (such as fees paid to centralized clearinghouses and regulatory fees), market data expenses, cash and share-based compensation and benefits as well as allocated overhead for employees engaged in clearing and brokerage functions, and Robinhood Cash Card transactions expenses (such as network fees and card processing fees).

A large portion of our brokerage and transaction costs are variable and tied to trading and transaction volumes on our platform.

For the year ended December 31, 2022, brokerage and transaction costs also included a $ 57 million as a result of a processing error occurred in December 2022 (refer to Part II, Item 7 of this Annual Report, “Non-GAAP Financial Measures” for further details).

Technology and Development

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Operations costs also include our provision for credit losses and fraud in connection with unrecoverable receivables due to Fraudulent Deposit Transactions and chargebacks for unauthorized debit card use.

Marketing costs primarily consist of marketing incentive expenses associated with the Robinhood Referral Program , as well as digital marketing, brand marketing, and creative services costs for creation, production, and placement of advertisements and marketing content.

Other marketing costs include cash credits we offer to users, which primarily relate to remediation for losses experienced by our users due to service interruptions on our platform and reimbursement of direct losses incurred by our users from allegedly unauthorized account activity.

Marketing costs also include cash and share-based compensation and benefits as well as allocated overhead for employees engaged in the marketing function.

Marketing costs primarily consist of cash and share-based compensation and benefits as well as allocated overhead for employees engaged in the marketing function.

Marketing costs also include digital marketing, brand marketing, and creative services costs for creation, production, and placement of advertisements and marketing content, as well as marketing incentive expenses associated with the Robinhood Referral Program.

Other marketing costs include cash credits we offer to customers, which primarily relate to remediation for losses experienced by our customers due to service interruptions on our platform and reimbursement of direct losses incurred by our customers from allegedly unauthorized account activity.

Advertising costs are expensed as incurred and were $ 78 million, $ 101 million and $ 52 million in the years ended December 31, 2020, 2021, and 2022.

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General and administrative costs primarily consist of cash and share-based compensation and benefits as well as allocated overhead for certain executives and employees engaged in legal, finance, human resources, risk, and compliance.

General and administrative costs also include legal expenses, settlements and penalties, business insurance, and other professional fees.

General and administrative costs also include legal expenses, other professional fees, settlements and penalties, and business insurance.

Employee Retirement Benefits

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Our research and development costs consist primarily of employee compensation and benefits for our engineering and research teams, including share-based compensation.

Research and development costs recorded in operating expenses under

ASC 730 were $ 27.7 million, $ 52.2 million, and $ 437.6 million for the years ended December 31, 2019, 2020, and 2021.

Research and development costs recorded in operating expenses under ASC 730 were $ 52 million, $ 438 million, and $ 381 million for the years ended December 31, 2020, 2021, and 2022.

Share-based Compensation

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Prior to our IPO, the absence of an active market for our common stock required our board of directors to determine the fair value of our common stock for each grant date with respect to which awards were approved.

Our board of directors considered numerous objective and subjective factors to determine the fair value of our common stock including:

contemporaneous third-party valuations of our common stock, sales of our common and redeemable convertible preferred stock to third-party investors in arms-length transactions, our operating and financial performance, the valuation of comparable companies, the lack of marketability, and general and industry specific economic outlook, amongst other factors.

Our board of directors exercised reasonable judgement and considered numerous objective and subjective factors to determine the best estimate of the fair value of our common stock including:

independent contemporaneous third-party valuations of our common stock, the prices paid for common and redeemable convertible preferred stock to third-party investors in arms-length transactions, our financial condition, results of operations, and capital resources, the valuation of comparable companies, the lack of marketability of our common stock, and general and industry specific economic outlook, among other factors.

Stock Options

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In addition to the fair value of our common stock, these variables include:

Expected volatility —As we do not have sufficient trading history of our common stock, we estimate the volatility of our common stock on the date of grant based on the weighted-average historical stock price volatility of comparable publicly-traded companies over a period equal to the expected term of the award.

Expected volatility —As we do not have sufficient trading history of our common stock, we estimate the volatility of our common stock on the date of grant using the blended approach which considers the weighted average of historical stock price of our own stock and comparable publicly-traded companies over a period equal to the expected term of the award.

Expected term —We determine the expected term based on the average period the stock options are expected to remain outstanding using the simplified method, generally calculated as the midpoint of the stock options’ vesting term and contractual expiration period, as we do not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.

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The time-based service condition for our awards is generally satisfied over four years .

We record share-based compensation expense for Time-Based RSUs on an accelerated attribution method over the

requisite service period.

For Time-Based RSUs granted pre-IPO, we record share-based compensation expense on an accelerated attribution method over the requisite service period, as these awards include a performance-based vesting condition.

The performance-based condition for our pre-IPO grants was satisfied upon the occurrence of the IPO in 2021, at which point we recorded a cumulative one-time share-based compensation expense determined using the awards’ grant-date fair value.

Share-based compensation related to the remaining time-based service after the IPO is recorded over the remaining requisite service period.

As of December 31, 2019 and 2020, we had not recognized share-based compensation for awards with performance-based conditions because the qualifying event described above had not occurred and, therefore, could not be considered probable.

No performance-based conditions exist for our post-IPO grants.

As of December 31, 2020 and 2021, we had not recognized share-based compensation for awards with performance-based conditions because the IPO had not occurred and, therefore, could not be considered probable.

No performance-based conditions exist for our post-IPO grants, and therefore for grants of Time-Based RSUs issued post-IPO, we record share-based compensation expense on a straight line basis over the requisite service period.

Market-Based RSUs

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The time-based service condition for these awards generally is satisfied over six years .

The performance-based conditions are satisfied upon the occurrence of a qualifying event, as described above.

The performance-based conditions are satisfied upon the occurrence of an IPO.

The market-based conditions are satisfied upon our achievement of specified share prices.

For market-based awards, we determine the grant-date fair value utilizing a Monte Carlo valuation model, which incorporates various assumptions including expected stock price volatility, expected term, risk-free interest rates, expected date of a qualifying event, and expected capital raise percentage.

We estimate the expected term based on various exercise scenarios, as these awards are not considered “plain vanilla.” We estimate the expected date of a qualifying event based on our expectation at the time of measurement of the award’s value.

We estimate the expected term based on various vesting scenarios, as these awards are not considered “plain vanilla.” We estimate the expected date of an IPO based on our expectation at the time of measurement of the award’s value.

We record share-based compensation expense for market-based equity awards on an accelerated attribution method over the requisite service period, and only if performance-based conditions are considered probable to be satisfied.

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We are subject to credit risk to the extent any financial institution with which we conduct business is unable to fulfill contractual obligations on our behalf.

As we have not experienced any losses in such accounts and we believe that we have placed our cash on

deposit with financial institutions which are financially stable, we do not have an expectation of credit losses for these arrangements.

Cash and Securities Segregated Under Federal and Other Regulations

We are required to segregate cash and/or qualified securities for the exclusive benefit of customers and proprietary accounts of brokers in accordance with the provision of Rule 15c3-3 under the Exchange Act.

As we have not experienced any losses in such accounts and we believe that we have placed our cash on deposit with financial institutions which are financially stable, we do not have an expectation of credit losses for these arrangements.

Cash Segregated Under Federal and Other Regulations

We are required to segregate cash for the exclusive benefit of customers and proprietary accounts of brokers in accordance with the provision of Rule 15c3-3 under the Exchange Act.

We continually review the credit quality of our counterparties and have not experienced a default.

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Cash subject to restrictions that expire within one year is included in other current assets in our consolidated balance sheets.

For the year ended December 31, 2020 and 2021, current restricted cash balances were nil and $ 0.7 million.

For the years ended December 31, 2021 and 2022, current restricted cash balances were $ 1 million.

Cash subject to restrictions that exceed one year is included in non-current assets in our consolidated balance sheets.

For the years ended December 31, 2021 and 2022, non-current restricted cash balances were $ 24 million and $ 22 million.

Securities Borrowing and Lending

We operate a securities lending program under which shares that users have pledged to us to collateralize their margin borrowing are lent by us to third parties (“Margin Securities Lending”) and a securities lending program under which we borrow fully-paid shares from participating users and lend them to third parties (“Fully-Paid Securities Lending”).

We also occasionally borrow securities from third parties for operational purposes, and we occasionally lend to third parties securities that we hold for our own account (such as our holdings to support fractional share operations).

When we lend securities to third parties, the borrower provides cash as collateral.

We earn interest revenue on cash collateral deposited by borrowers, and we can also earn additional revenue for lending certain securities based on demand for those securities.

For our Fully-Paid Securities Lending, portions of such revenues are paid to participating users, and those payments are recorded as interest expense.

the year ended December 31, 2021, interest revenue earned and interest expenses incurred related to the Fully-Paid Securities Lending program were not material.

For the year ended December 31, 2022, Fully-Paid Securities Lending program interest revenue earned was $ 11 million and interest expenses incurred was $ 2 million.

When we borrow securities from users participating in the Fully-Paid Securities Lending program (or from third parties), we provide cash as collateral and we record a receivable representing our right to the return of that collateral.

The amount of that receivable is presented in "securities borrowed" on our consolidated balance sheets.

In the case of our Fully-Paid Securities Lending program, the cash collateral is held by a third-party bank in a deposit account pledged to the user, which we administer as the user’s agent.

Users are not entitled to interest on such account, and any interest earned is for our benefit.

Our authorization from users to lend shares that collateralize their margin borrowing is found in our margin account agreement, our borrowing of fully-paid shares from users is conducted under the terms of our Fully-Paid Securities Lending program to which users consent when they enroll in that program, and substantially all of our securities lending and borrowing transactions with third parties are conducted under the terms of an industry-standard master securities loan agreement (“MSLA”), which has an open contractual term and may be terminated upon notice by either party.

We have also entered into fixed-term securities lending agreements with two financial institution counterparties (the “Fixed-Term Securities Lending Agreements”).

One of these agreements has a contractual term of 30 days per lending transaction with a daily minimum commitment of $ 25 million and the other has a contractual term of 21 days per lending transaction with a daily minimum commitment of $ 35 million.

Under these two agreements we lend to the counterparties (for a fixed term) securities that collateralize users’ margin borrowing, and we obtain cash collateral from the counterparties that we use to provide liquidity support for our margin lending to users.

Each of the MSLAs and Fixed-Term Securities Lending Agreements establishes a master netting arrangement between the lender and the borrower.

A master netting arrangement is an agreement between two counterparties that creates a right of set-off for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy.

In connection with our securities borrowing and lending activities, however, our policy is to recognize all amounts that are subject to master netting arrangements on a gross basis in our consolidated balance sheets even though some of those amounts may be eligible for offset (i.e., to be presented on a net basis) under GAAP.

Refer to Note 11 - Securities Borrowing and Lending, for more information and the gross presentation in tabular format.

Our users may elect to participate in Cash Sweep, which allows them to earn interest on their uninvested brokerage cash.

As these balances are automatically swept to our partner banks they are not reflected on the consolidated balance sheet.

For the year ended December 31, 2021, interest revenue earned and interest expenses incurred related to Cash Sweep were not material.

For the year ended December 31, 2022, Cash Sweep interest revenue earned was $ 68 million and interest expenses incurred was $ 46 million.

Cryptocurrencies

We act as an agent in the cryptocurrency transactions that users initiate on our platform.

We have determined we are an agent, for accounting purposes, because we do not control the cryptocurrency before delivery to the user, we are not primarily responsible for the delivery of cryptocurrency to our users, we are not exposed to risks arising from fluctuations of the market price of cryptocurrency before delivery to the user, and we do not set the prices charged to users.

After purchasing cryptocurrency on the platform, users are the legal owners of cryptocurrency held under custody by us and users have all the rights and benefits of ownership, including the rights to appreciation and depreciation of the cryptocurrency.

We do not allow users to purchase cryptocurrency on margin and cryptocurrency does

not serve as collateral for margin loans.

We hold cryptocurrency in custody for users in one or more omnibus cryptocurrency wallets;

we do not utilize third-party custodians.

We hold cryptographic key information and maintain internal record keeping for the cryptocurrencies we hold in custody for users, and we are obligated to secure such assets from loss or theft.

Based on the terms of our user agreement and applicable law, we believe the cryptocurrency we hold in custody for users of our platform should be respected as users’ property (and should not be available to satisfy the claims of our general creditors) in the event we were to enter bankruptcy.

For additional information relating to platform bankruptcy generally, see Part I, Item 1A of this Annual Report, “Risk Factors—Risks Related to Cryptocurrency Products and Services—Cryptocurrency laws, regulations, and accounting standards are often difficult to interpret and are rapidly evolving in ways that are difficult to predict.

Changes in these laws and regulations, or our failure to comply with them, could negatively impact cryptocurrency trading on our platform.

We invest in marketable debt securities which are classified as available-for-sale and are initially recorded at fair value.

These securities are comprised of asset-backed securities, commercial paper, corporate bonds and government bonds.

These securities are included in other current assets on the audited consolidated balance sheets and are comprised of asset-backed securities, commercial paper, corporate bonds and government bonds.

We have elected the fair value option for our debt securities as we believe carrying these investments at fair value and taking changes in fair value through earnings best reflects their underlying economics.

We elected to present interest earned on the debt securities as interest income.

Fair value adjustments are presented in other expense (income), net in our consolidated statements of operations, and we elected to present interest earned on the debt securities as interest income.

Fair Value of Financial Instruments

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A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts of certain financial instruments approximate their fair value due to the short-term nature, which include cash, cash and securities segregated under federal and other regulations, receivables from brokers, dealers, and clearing organizations, receivables from users, net, deposits with clearing organizations, other current assets, accounts payable and accrued expenses, payable to users, securities loaned, and other current liabilities.

The carrying amounts of certain financial instruments approximate their fair value due to the short-term nature, which include cash, cash segregated under federal and other regulations, receivables from brokers, dealers, and clearing organizations, receivables from users, net, deposits with clearing organizations, other current assets, accounts payable and accrued expenses, payable to users, securities loaned, and other current liabilities.

Receivables From Brokers, Dealers, and Clearing Organizations

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Margin receivables are adequately collateralized by users’ securities balances and are reported at their outstanding principal balance, net of an allowance for credit losses.

We monitor margin levels and require users to deposit additional collateral, or reduce margin positions, to meet minimum collateral requirements and avoid automatic liquidation of their positions.

We monitor margin levels and require users to deposit additional collateral, or reduce margin positions, to meet minimum collateral requirements and to avoid automatic liquidation of their positions.

We apply the practical expedient based on collateral maintenance provisions in estimating an allowance for credit losses for receivables from users.

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When a user purchases a fractional share, we record the cash received for the user-held fractional share as pledged collateral and an offsetting liability to repurchase the shares as we concluded that we did not meet the criteria for derecognition under the accounting guidance.

We measure our inventory of securities, user-held fractional shares and our repurchase obligation at fair value at each reporting period via the election of the fair value option, with realized and unrealized gains and losses , which totaled $ 3.0 million and $ 11.5 million for the years ended December 31, 2020 and 2021, recorded in brokerage and transaction expenses in our consolidated statement of operations.

We do not earn

revenue from our users when they purchase or sell fractional shares from us.

We measure our inventory of securities, user-held fractional shares and our repurchase obligation at fair value at each reporting period via the election of the fair value option, with realized and unrealized gains and losses , which equaled a net loss of $ 12 million and $ 7 million for the years ended December 31, 2021 and 2022, recorded in brokerage and transaction expenses in our consolidated statement of operations.

We do not earn revenue from our users when they purchase or sell fractional shares from us.

We earn transaction-based revenue when shares are purchased from market makers to fulfill fractional share transactions.

Other Current Assets

Other current assets primarily includes prepaid expenses, securities owned by us for the Robinhood Referral Program and fractional share program, and other receivables.

We classify prepayments made under contracts as prepaid expenses and expense them over the contract terms.

These prepaid expenses include items such as prepayments on insurance, cloud infrastructure service costs, and software subscriptions.

As of December 31, 2020 and 2021, prepaid expenses included in other current assets were $ 28.6 million and $ 92.0 million.

Other current assets primarily includes securities owned by us for the Robinhood Referral Program and fractional share program, investments, and other receivables.

Robinhood Referral Program

The stock rewarded under this program is a share or shares, selected randomly from our previously purchased inventory of settled shares held exclusively for this program, which are included in other current assets in our consolidated balance sheets.

The stock rewarded under this program could be fractional share, one share or shares of one of twenty stocks, selected by our users from our previously purchased inventory of settled shares held exclusively for this program, which are included in other current assets in our consolidated balance sheets.

Each stock reward is assigned at the time the reward is earned and each share cannot be associated with more than one reward at a time.

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Internally developed software is capitalized when preliminary development efforts are successfully completed and it is probable that the project will be completed and the software will be used as intended.

Capitalized costs consist of salaries and payroll related costs for employees and fees paid to third-party

consultants who are directly involved in development efforts.

Capitalized costs consist of salaries and payroll related costs for employees and fees paid to third-party consultants who are directly involved in development efforts.

Capitalized costs are amortized over the estimated useful life of the software on a straight-line basis and included in technology and development in the consolidated statements of operations.

We expense software development costs as they are incurred during the preliminary project stage.

Other Non-Current Assets

Other non-current assets primarily includes right-of-use assets, net of accumulation of amortization, and prepaid expenses, for contract terms longer than 12 months.

As of December 31, 2020 and 2021, non-current prepaid expenses included in other non-current assets were $ 8.2 million and $ 43.6 million.

Non-Marketable Equity Securities

Investments in non-marketable equity securities without readily determinable fair values are initially recorded at cost and are subsequently adjusted to fair value for impairments and price changes from observable transactions in the same or a similar security from the same issuer.

Non-marketable equity securities were not material for the periods presented and were included in other non-current assets on the audited consolidated balance sheets.

We elected to apply the short-term lease measurement and recognition practical expedient to our leases where applicable, thus leases with an initial term of 12 months or less are not recorded on the balance sheet;

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Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations.

See Note 3 for further information.

See Note 3 - Business Combinations, for further information.

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination and is allocated to reporting units expected to benefit from the business combination.

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The quantitative assessment compares the estimated fair value of a reporting unit to its book value, including goodwill.

If the fair value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary.

If the fair value exceeds book value, goodwill is considered not to be impaired and no

additional steps are necessary.

However, if the book value of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

See Note 4 for further information.

See Note 4 - Goodwill and Intangible Assets, for further information.

Intangible Assets, Net

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The Company evaluates the remaining estimated useful life of its intangible assets being amortized on an ongoing basis to determine whether events and circumstances warrant a revision to the remaining period of amortization.

See Note 4 for further information.

See Note 4 - Goodwill and Intangible Assets, for further information.

Payables to Users

Payables to users represent users’ funds on deposit, and/or funds accruing to users as a result of settled trades and other security related transactions.

Securities Borrowed and Loaned

Securities borrowed and loaned result from transactions with other brokers, dealers, or financial institutions.

Securities borrowing transactions require us to deposit cash with the lender whereas securities lending transactions result in us receiving cash collateral, with both requiring cash in an amount generally in excess of the market value of the securities.

We earn interest revenue on cash collateral deposited with us, and can earn or incur additional revenue or expense for lending certain securities based on demand for that security.

Substantially all of our securities borrowing and loan transactions have an open contractual term and, upon notice by either party, may be terminated within three business days.

We manage risks associated with our securities lending and borrowing activities by requiring credit approvals for counterparties, by monitoring the market value of securities loaned and collateral values for securities borrowed on a daily basis and requiring additional cash as collateral for securities loaned or return of collateral for securities borrowed when necessary, and by participating in a risk-sharing program offered through the Options Clearing Corporation.

Our securities lending transactions are subject to enforceable master netting arrangements with other broker-dealers, however we do not net securities lending transactions.

We apply the practical expedient based on collateral maintenance provisions in estimating an allowance for credit losses for securities borrowed receivables.

Loss Contingencies

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We monitor these matters for developments that would affect the likelihood of a loss and the accrued amount, if any, and adjust the amount as appropriate.

Cryptocurrencies

We act as an agent in the cryptocurrency transactions of our users.

We have determined we are an agent because we do not control the cryptocurrency before delivery to the user, we are not primarily responsible for the delivery of cryptocurrency to our users, we are not exposed to risks arising from fluctuations of the market price of cryptocurrency before delivery to the customer, and we do not set the prices charged to users.

Accordingly, the cryptocurrency we hold in custody on behalf of our users is not reflected on our consolidated balance sheets.

Income tax expense is an estimate of current income taxes payable in the current fiscal year based on reported income before income taxes.

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We recognize a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation, based on the technical merits.

Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized.

Income tax positions must meet a more-likely-than-not recognition

threshold at the effective date to be recognized.

We account for uncertain tax positions, including net interest and penalties, as a component of income tax expense or benefit.

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To the extent that the final tax outcome of these matters is different from the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact to our consolidated financial statements and operating results.

Reclassifications

Certain prior-year amounts have been reclassified to conform to the current year’s presentation.

The impact of these reclassifications is immaterial to the presentation of the financials.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued Accounting Standard Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity .

This guidance simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments, amends the accounting guidance for evaluating the classification of certain contracts in an entity’s own equity, and modifies the diluted earnings per share

calculations for convertible instruments.

The guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted.

We adopted this guidance effective January 1, 2021 using the full retrospective method.

The adoption of the guidance did not have a material impact on our consolidated financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share, Debt—Modifications and Extinguishments, Compensation—Stock Compensation, and Derivatives and Hedging—Contracts in Entity’s Own Equity .

The guidance clarifies modifications or exchanges of freestanding equity-classified written call options (e.g.

The guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted.

We adopted this guidance effective July 1, 2021.

The adoption of the guidance did not have a material impact on our consolidated financial statements.

In March 2022, the staff of the SEC issued SAB 121, which provides guidance to entities that have obligations to safeguard crypto-assets held in custody on behalf of their platform users.

SAB 121 states that the entity should recognize a liability representing its obligation to safeguard such crypto-assets accompanied by a corresponding asset on its balance sheet representing the platform users’ crypto-assets held in custody measured at fair value initially and at each subsequent reporting period.

SAB 121 also states that accompanying disclosures should be considered regarding the entity’s obligation to safeguard crypto-assets for platform users.

We adopted SAB 121 as part of the financial statements covering the interim period ended June 30, 2022, with retrospective application as of the beginning of fiscal year 2022.

As a result of (and solely by virtue of) our adoption of SAB 121, we recognized an asset captioned “Asset related to user cryptocurrencies safeguarding obligation” and a liability captioned “User cryptocurrencies safeguarding obligation” on our consolidated balance sheets.

As of December 31, 2022, the carrying value of each was $ 8.4 billion We also added disclosures to Note 1 - Description of Business and Summary of Significant Accounting Policies and Note 8 - Investments and Fair Value Measurement.

Recently Issued Accounting Pronouncements Not Yet Adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations .

This guidance requires contract assets and contract liabilities from contracts with customers that are acquired in a business combination to be recognized and measured as if the acquirer had originated the original contract.

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This guidance requires contract assets and contract liabilities from contracts with customers that are acquired in a business combination to be recognized and measured as if the acquirer had originated the original contract.

The guidance is effective for fiscal years beginning after December 15, 2022 on a prospective basis, including interim periods within those fiscal years.

Early adoption is permitted.

We are currently evaluating the timing of adoption and impact of this new guidance on our consolidated financial statements.

As of December 31, 2022, the planned adoption of this guidance is not expected to have any impact on our financial statements.

BUSINESS COMBINATIONS

Acquisition of Say Technologies

On August 13, 2021, we acquired all outstanding stock of Say Technologies.

New York-based Say Technologies, founded in 2017, is an investor communications and shareholder engagement platform.

The acquisition of Say Technologies will allow us to empower retail investors to access their full ownership rights by facilitating proxy and issuer materials delivery and making shareholder voting on corporate matters easier.

The acquisition of Say Technologies allows us to empower retail investors to access their full ownership rights by facilitating proxy and issuer materials delivery and making shareholder voting on corporate matters easier.

The acquisition date fair value of the consideration transferred for Say Technologies was $ 133 million, which consisted of the following:

(in thousands) Fair Value

Cash $ 132,168

(in millions) Fair Value

Share-based compensation awards attributable to pre-combination services 1

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For employees of Say Technologies with unvested Say Technologies equity awards, we issued replacement awards whose aggregate estimated fair value was $ 6 million.

See Note 12 for further information.

Transaction costs associated with the acquisition, which included legal, due diligence, and other professional fees, were not material.

The purchase price allocation is based on a preliminary valuation and subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available, including certain tax matters, during the measurement period (up to one year from the acquisition date).

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the date of acquisition:

(in thousands) Fair Value

The following table summarizes the fair value of assets acquired and liabilities assumed as of the date of acquisition:

(in millions) Fair Value

Cash and cash equivalents $ 15

Accounts receivable 2

Goodwill 92,951

Intangible assets 35

Other current assets 192

Accounts payable, accrued expenses and other current liabilities ( 9 )

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The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:

(in thousands, except years) Fair Value Useful Life

(in millions, except years) Fair Value Useful Life

Developed technology $ 22 3

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Trade names 1 3

Total $ 34,600

The overall weighted average useful life of the identified amortizable intangible assets acquired is five years .

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GOODWILL AND INTANGIBLE ASSETS

The carrying amount of goodwill for the period indicated was as follows:

(in thousands) Carrying Amount

As of December 31, 2020 $ —

The following table summarizes the carrying amount of goodwill:

(in millions) 2021 2022

Beginning balance $ — $ 101

Accumulated impairment — —

Beginning balance, net — 101

Additions due to business combinations (1)

As of December 31, 2021 $ 100,521

Substantially all of the additions related to the Say Technologies acquisition as disclosed in Note 3 and the remainder related to other immaterial business acquisitions.

There was no impairment of goodwill during the year ended December 31, 2021.

We had no goodwill as of December 31, 2020.

Post-acquisition adjustments — ( 1 )

Ending balance $ 101 $ 100

________________

(1) Substantially all of the additions related to the Say Technologies acquisition as disclosed in Note 3 - Business Combinations, and the remainder related to other immaterial business acquisitions.

There was no impairment of goodwill for the years ended December 31, 2021 and 2022.

Intangible Assets

The components of intangible assets, net as of December 31, 2021 were as follows:

(in thousands, except years) Gross Carrying Value Accumulated Amortization Net Carrying Value Weighted Average Remaining Useful Life - Years

The following tables summarize the components of intangible assets:

December 31, 2021

(in millions, except years) Gross Carrying Value Accumulated Amortization Net Carrying Value Weighted Average Remaining Useful Life - Years

Finite-lived intangible assets

2 unchanged sentences

Trade names — $ — — 2.62

Domain names 163 ( 43 ) 120 11.63

Indefinite-lived intangible assets 2 $ — 2 N/A

Total $ 37 $ ( 3 ) $ 34

As of December 31, 2021, the estimated future amortization expense of finite-lived intangible assets was as follows:

(in thousands) Intangible Assets

Thereafter 5,609

December 31, 2022

(in millions, except years) Gross Carrying Value Accumulated Amortization Net Carrying Value Weighted Average Remaining Useful Life - Years

Finite-lived intangible assets

Developed technology $ 23 $ ( 10 ) $ 13 1.70

Customer relationships 12 ( 2 ) 10 8.62

Indefinite-lived intangible assets 2 — 2 N/A

Total $ 37 $ ( 12 ) $ 25

Amortization expense of intangible assets was $ 3.4 million for the year ended December 31, 2021.

There was no impairment of intangible assets during the year ended December 31, 2021.

Amortization expense of intangible assets was nil , $ 3 million, and $ 9 million for the years ended December 31, 2020, 2021, and 2022.

There was no impairment of intangible assets for the years ended December 31, 2021 and 2022.

As of December 31, 2022, the estimated future amortization expense of finite-lived intangible assets was as follows:

(in millions) Finite-lived Intangible Assets

Disaggregation of Revenues

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Year Ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Transaction-based revenues:

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Equities 251 287 117

Other — 2,155 6,335

Total transaction-based revenues 720 1,402 814

Net interest revenues:

Securities lending 6,380 98,165 137,153

Margin interest 67 132 177

Interest on segregated cash and securities 36,281 13,401 4,023

Other interest revenue 9,865 3,972 4,181

Interest on corporate cash and investments 2 1 103

Securities lending, net 98 136 89

Interest on segregated cash and cash equivalents and deposits 14 4 57

Cash Sweep, net 1 3 22

Interest expenses related to credit facilities ( 5 ) ( 20 ) ( 24 )

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Transaction-based revenue receivables due from market makers are reported in receivables from brokers, dealers, and clearing organizations while other revenue receivables due from our relationship with a third-party investor communications company are reported in other current assets on the consolidated balance sheets.

The table below sets forth contract receivables balances for the periods indicated:

(in thousands) 2020 2021

Beginning of the period $ 20,577 $ 111,871

End of the period 111,871 83,207

Increase (decrease) in contract receivables during the period $ 91,294 $ ( 28,664 )

The increase between the beginning and ending balance of our contract receivables for the year ended December 31, 2020 primarily results from the growth of our business over the period.

The decrease for the year ended December 31, 2021 primarily results from lower transaction-based revenues for equities and options for the month of December 2021 as compared to the month of December 2020.

Timing differences between our performance and counterparties’ payments also contributed to the change during the periods presented.

Contract liabilities consist of unearned subscription revenue, are recognized when users remit contractual cash payments in advance of the time we satisfy our performance obligations under the contract, and are recorded as other current liabilities on the consolidated balance sheets.

The table below sets forth contract liabilities balances for the period indicated:

(in thousands) 2020 2021

Beginning of the period $ 954 $ 2,060

End of the period 2,060 3,211

Increase in contract liabilities during the period $ 1,106 $ 1,151

We recognized all revenue from amounts included in the opening contract liabilities balances in the years ended December 31, 2020 and 2021.

The difference between the beginning and ending balance of our contract liability balances primarily results from the increase in subscription users and the timing difference between our performance and payments from the users.

Contract liabilities, which consist of unearned subscription revenue, are recognized when users remit cash payments in advance of the time we satisfy our performance obligations and are recorded as other current liabilities on the consolidated balance sheets.

The table below sets forth contract receivables and liabilities balances for the periods indicated:

December 31, 2021

(in millions) Contract Receivables Contract Liabilities

Beginning of the period, January 1, 2021 $ 112 $ 2

End of the period, December 31, 2021 83 3

Changes during the period $ ( 29 ) $ 1

December 31, 2022

(in millions) Contract Receivables Contract Liabilities

Beginning of period, January 1, 2022 $ 83 $ 3

End of period, December 31, 2022 60 3

Changes during the period $ ( 23 ) $ —

The difference between the opening and ending balances of our contract receivables primarily results from lower transaction-based revenue driven by the market environment which had a negative impact on the number of traders and Notional Trading Volume and timing differences between our performance and counterparties’ payments.

We recognized all revenue from amounts included in the opening contract liability balances for the year end December 31, 2022 .

RESTRUCTURING ACTIVITIES

April 2022 Restructuring

On April 26, 2022, we announced the April 2022 Restructuring as part of our efforts to improve efficiency and operating costs, increase our velocity, and ensure that we are responsive to the changing needs of our customers.

The April 2022 Restructuring involved approximately 330 employees, representing approximately 9 % of our full-time employees at that time.

We allowed affected employees’ share-based awards to continue vesting over a transitional period (generally two months during which they remained employed but were not expected to provide active service), which were generally accounted for as a modification allowing a portion of the awards to vest that otherwise would have been forfeited.

However, as a result of the reversal of share-based compensation expense that had been previously recognized (under the accelerated attribution method, generally), the April 2022 Restructuring resulted in a net reduction to share-based compensation of $ 24 million, which was recognized in the second quarter of 2022 (refer to Note 13 - Common Stock and Stockholders' (Deficit) Equity, for more information).

In addition, we recognized $ 17 million of cash restructuring and related charges in the second quarter of 2022, which primarily consisted of employee-related wages, benefits, and severance expense.

As of December 31, 2022, all of the restructuring charges relating to the April 2022 Restructuring had been paid in full.

August 2022 Restructuring

On August 2, 2022, we announced the August 2022 Restructuring, which involved approximately 780 employees, representing approximately 23 % of our full-time employees at the time, the planned closure of two offices, and related matters.

These actions were part of a Company reorganization into a general manager (“GM”) structure under which GMs have assumed broad responsibility for our individual businesses.

As we continued to execute the August 2022 Restructuring, our lower headcount led us to evaluate our real estate portfolio.

In the third quarter of 2022, we decided to partially or completely close five additional offices as part of the August 2022 Restructuring, four of which were not occupied.

In connection with the office closures describe above, we determined the carrying amount of the right-of-use assets and associated leasehold improvements exceeded their respective fair value, resulting in impairments of $ 30 million and $ 15 million.

We utilized a probability-weighted approach and market estimates from a third-party real estate brokerage firm to project sublease income cash flows, net of brokerage commissions, for each of the office spaces and applied a market rate of return on similar assets as a discount factor to determine fair value.

We attributed the impairments on a relative carrying value basis between the right-of-use assets and leasehold improvements.

In addition, we accelerated

depreciation of $ 9 million related to other fixed assets.

The impairments were recognized in general and administrative expense on our consolidated statements of operations.

Similar to the April 2022 Restructuring, we allowed affected employees’ share-based awards to continue vesting over a transitional period allowing a portion of the awards to vest that otherwise would have been forfeited.

However, as a result of the reversal of share-based compensation expense that had been previously recognized (under the accelerated attribution method, generally), the August 2022 Restructuring resulted in a net reduction to share-based compensation of $ 53 million, which was recognized in the third quarter of 2022 (refer to Note 13 - Common Stock and Stockholders' (Deficit) Equity, for more information).

In addition, we recognized $ 34 million of cash restructuring and related charges primarily related to employee-related wages, benefits, and severance expense.

As of December 31, 2022, all of the restructuring charges relating to the April 2022 Restructuring had been paid in full.

ALLOWANCE FOR CREDIT LOSSES

The following table summarizes the allowance for credit losses, which primarily relate to unsecured balances of receivables from Fraudulent Deposit Transactions and losses on margin borrowings, for the periods indicated:

Substantially all of the allowance for credit losses relate to unsecured balances of receivables from users due to Fraudulent Deposit Transactions and losses on margin lending.

The following table summarizes the allowance for credit losses:

Year Ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Beginning balance $ 17 $ 34 $ 40

2 unchanged sentences

Ending balance $ 34 $ 40 $ 18

During the years ended December 31, 2019, 2020, and 2021, the provision for credit losses related to unsecured balances of receivables from users was $ 11.1 million, $ 58.0 million and $ 77.1 million while the remaining balances were related to other receivables.

As of December 31, 2019, 2020, and 2021, the ending allowance for credit losses related to unsecured balances of receivables from users was $ 17.1 million, $ 33.5 million, and $ 38.4 million while the remaining balances were related to other receivables.

During the year ended December 31, 2020, we implemented our policy to write-off unsecured balances when the balance becomes outstanding for over 180 days or when we otherwise deem the balance to be uncollectible.

Previously, we did not have sufficient historical information to provide a reasonable basis upon which to write off balances.

INVESTMENTS AND FAIR VALUE MEASUREMENT

We invest in marketable debt securities which are classified as available-for-sale.

We elected the fair value option on our available-for-sale debt securities and carry them at fair value with adjustments to fair

value presented in other expense (income), net in our consolidated statements of operations.

Investments on the consolidated balance sheet consisted of the following:

Investments are included in other current assets on the consolidated balance sheet and consisted of the following:

December 31, 2021

(in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value

(in millions) Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Debt securities:

4 unchanged sentences

Total investments $ 27 $ — $ — $ 27

We did not hold any investments as of December 31, 2020.

December 31, 2022

(in millions) Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Debt securities:

Commercial paper 5 — — 5

Corporate bonds 2 — — 2

Government bonds 3 — — 3

Total investments $ 10 $ — $ — $ 10

All of our debt securities as of December 31, 2022 had a stated contractual maturity or redemption date within one year.

2 unchanged sentences

December 31, 2021

(in thousands) Level 1 Level 2 Level 3 Total

(in millions) Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market funds $ 4,004 $ — $ — $ 4,004

Cash and securities segregated under federal and other regulations:

Treasury securities 134,994 — — 134,994

User-held fractional shares 802,483 — — 802,483

Other current assets:

Asset-backed securities — 5 — 5

Commercial paper — 14 — 14

Corporate bonds — 7 — 7

Government bonds 1 — — 1

Equity securities - securities owned 14 — — 14

User-held fractional shares 1,834 — — 1,834

Total financial assets $ 5,853 $ 26 $ — $ 5,879

Accounts payable and accrued expenses:

Equity securities - referral program liability

$ 695 $ — $ — $ 695

Fractional share repurchase obligations $ 1,834 $ — $ — $ 1,834

1 unchanged sentence

December 31, 2022

(in thousands) Level 1 Level 2 Level 3 Total

(in millions) Level 1 Level 2 Level 3 Total

Cash equivalents:

Money market funds $ 735 $ — $ — $ 735

Asset-backed securities — 5,078 — 5,078

Other current assets:

Commercial paper — 5 — 5

1 unchanged sentence

Government bonds 3 — — 3

User-held fractional shares 1,834,479 — — 1,834,479

Other current assets:

Equity securities - securities owned 8 — — 8

Asset related to user cryptocurrencies safeguarding obligation — 8,431 — 8,431

User-held fractional shares 997 — — 997

Total financial assets $ 1,743 $ 8,438 $ — $ 10,181

Accounts payable and accrued expenses:

Equity securities - referral program liability

$ 97 $ — $ — $ 97

Fractional shares repurchase obligations

1,834,479 — — 1,834,479

User cryptocurrencies safeguarding obligation $ — $ 8,431 $ — 8,431

Fractional share repurchase obligations 997 — — 997

Total financial liabilities $ 997 $ 8,431 $ — $ 9,428

During the year ended December 31, 2022, we did not have any transfers in or out of Level 3 assets or liabilities.

Safeguarded user cryptocurrencies

Safeguarded user cryptocurrencies were as follows:

(in millions) December 31, 2022

Dogecoin (DOGE) $ 2,802

Ethereum (ETH) 2,341

Bitcoin (BTC) 2,327

Total user cryptocurrencies safeguarding obligation and corresponding asset $ 8,431

The fair value of the user cryptocurrencies safeguarding obligation and the corresponding asset were determined based on observed market pricing representing the last price executed for trades of each cryptocurrency as of December 31, 2022.

Convertible Notes and Warrant Liability

2 unchanged sentences

Under the fair value option, the convertible notes were initially measured at their issuance date estimated fair value and subsequently remeasured at their estimated fair value at the end of each reporting period.

Upon the closing of the IPO, all of our outstanding convertible notes and warrants were reclassified from liability to equity.

See Note 11 for further information.

For the year ended December 31, 2021, we recorded expense due to changes in fair value of $ 1.92 billion for the convertible notes in our consolidated statements of operations, none of which was attributable to the change in the instrument-specific credit risk.

We have elected to present the component related to accrued interest in the change in fair value of convertible notes and warrant liability.

For the year ended December 31, 2021, due to changes in fair value, we recorded $ 127.1 million for the warrant liability in our consolidated statements of operations.

Upon the closing of the IPO, all of our outstanding convertible notes and warrants were reclassified from liability to equity and the fair value was no longer required to be remeasured.

The following table sets forth a summary of the changes in the estimated fair value of our convertible notes and warrant liability:

(in thousands) Convertible notes Warrant liability

Beginning of period, January 1, 2021 $ — $ —

December 31, 2021

(in millions) Convertible notes (2)

Warrant liability

Beginning balance $ — $ —

Issued during the period 3,299 253

1 unchanged sentence

Reclassifications to equity ( 5,218 ) ( 380 )

End of period, December 31, 2021 $ — $ —

Ending balance $ — $ —

________________

(1) We have elected to present the component related to accrued interest in the change in fair value of convertible notes and warrant liability.

(2) None of the expense recorded due to changes in fair value for the convertible notes was attributable to the change in the instrument-specific credit risk.

The components of income (loss) before income taxes were as follows:

Year Ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Domestic $ 14 $ ( 3,687 ) $ ( 1,028 )

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Year Ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Federal $ 3 $ — $ —

State ( 295 ) 3,801 4,990

Foreign — — —

5 unchanged sentences

Total provision for (benefit from) income taxes $ 6 $ 2 $ 1

The reconciliation of federal statutory income tax to our provision for (benefit from) income taxes was as follows:

The reconciliation of statutory federal income tax rate and our effective income tax rate was as follows (in percentages):

Year Ended December 31,

(in thousands) 2019 2020 2021

2020 2021 2022

Federal tax benefit at statutory rate 21.0 % 21.0 % 21.0 %

10 unchanged sentences

Total provision for (benefit from) income taxes 46.1 % ( 0.1 ) % ( 0.1 ) %

Significant components of our deferred tax assets and liabilities consist of the following:

Significant components of our deferred tax assets and liabilities consisted of the following:

Year Ended December 31,

(in thousands) 2020 2021

Deferred tax assets:

Accruals and other liabilities 14,849 $ 24,319

Lease liabilities 13,794 39,909

Tax credit carryforwards 9,058 81,457

User cryptocurrencies safeguarding obligation $ — $ 2,167

Net operating loss carryforwards 251 266

Tax credit carryforwards 81 134

Share-based compensation 135 85

Other 3,386 21,411

Research and Experimentation expenditure amortization — 83

Lease liability 40 38

Accruals and other liabilities 24 21

Total deferred tax assets $ 553 $ 2,809

Deferred tax liabilities:

Asset related to user cryptocurrencies safeguarding obligation $ — $ ( 2,167 )

Right of use assets ( 34 ) ( 24 )

3 unchanged sentences

Net deferred tax assets $ 1 $ 1

The following is a reconciliation of the beginning and ending amount of the deferred tax asset valuation allowance:

The reconciliation of the beginning and ending amount of the deferred tax asset valuation allowance was as follows:

Year ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Balance at beginning of period $ 35 $ 27 $ 495

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Based on all available evidence for the year ending December 31, 2022, we believe it is more likely than not that the tax benefits of the remaining U.S.

federal and state net deferred tax assets may not be realized, and accordingly, the net deferred tax assets have been fully offset by a valuation allowance.

federal, state, and certain foreign net deferred tax assets may not be realized, and accordingly, the net deferred tax assets have been fully offset by a valuation allowance.

The valuation allowance increased by approximately $ 112 million for the year ended December 31, 2022.

5 unchanged sentences

net operating losses do not expire.

federal tax credit carryforwards of $ 80.8 million that will begin to expire in 2040, if not utilized, and state tax credit carryforwards of $ 2.2 million that will begin to expire in 2026 and $ 52.4 million that do not expire.

federal tax credit carryforwards of $ 125 million that will begin to expire in 2039, if not utilized, and state tax credit carryforwards of $ 78 million that will begin to expire in 2026.

Utilization of the net operating loss and credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions.

3 unchanged sentences

We record interest and penalties related to unrecognized tax benefits in income tax expenses.

There were no interest or penalties during the years ended December 31, 2020 and 2021.

The reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

There were no interest or penalties accrued during the years ended December 31, 2021 and 2022.

The reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows (in millions):

Year Ended December 31,

2 unchanged sentences

Gross increases - prior year tax positions 1 —

Gross decrease - prior year tax positions — ( 4 )

Unrecognized benefit - end of period $ 46 $ 58

7 unchanged sentences

Year Ended December 31,

(in thousands) 2020 2021

Tenant improvements $ 18,945 $ 64,313

(in millions) 2021 2022

Internally developed software $ 31 $ 106

Leasehold improvements 64 52

Computer equipment 24 32

6 unchanged sentences

Amortization expense of internally developed software was $ 4 million, $ 7 million, and $ 26 million for the years ended December 31, 2020, 2021, and 2022.

OFFSETTING ASSETS AND LIABILITIES

Certain financial instruments are eligible for offset on our consolidated balance sheets under GAAP.

Our securities borrowing and lending agreements are subject to master netting arrangements and collateral arrangements and meet the GAAP guidance to qualify for offset.

A master netting arrangement with a counterparty creates a right of offset for amounts due to and from that same counterparty that is enforceable in the event of a default or bankruptcy.

Our policy is to recognize amounts subject to master netting arrangements on a gross basis on the consolidated balance sheets.

Substantially all securities borrowing and lending agreements have an open contractual term and may be terminated upon notice by either party except for one of these agreements, which has a contractual term of 30 days with a daily minimum commitment of $ 25 million.

Our assets and liabilities subject to master netting arrangements are as follows:

(in thousands) 2020 2021

In connection with our August 2022 Restructuring, we recognized an impairment of $ 15 million associated with our leasehold improvements and accelerated depreciation of $ 9 million related to other fixed assets for the year ended December 31, 2022.

Refer to Note 6 - Restructuring Activities for more information.

SECURITIES BORROWING AND LENDING

When we lend securities to third parties we receive cash as collateral for the securities loaned.

In the table below, the cash collateral we hold related to loaned securities is presented in “securities loaned” and the fair value of securities lent is presented in “security collateral pledged.” Similarly, when we borrow securities from third parties or fully-paid securities from users, we provide cash collateral.

In the table below, the amount of that cash collateral is presented in “securities borrowed” and the fair value of the securities received is presented in “security collateral received.”

Our securities lending transactions are subject to enforceable master netting arrangements with other broker-dealers;

however, we do not net securities borrowing and lending transactions.

Therefore, activity related to securities borrowing and lending activities are presented gross in our consolidated balance sheets (refer to Note 1 - Description of Business and Summary of Significant Accounting Policies, for more information).

The following tables set forth certain balances related to our securities borrowing and lending activities:

(in millions) 2021 2022

Assets Securities borrowed

14 unchanged sentences

Net amount $ 224 $ 205

________________

(1) Securities borrowed are included in receivables from brokers, dealers, and clearing organizations on the consolidated balance sheets.

We also obtain securities under margin agreements on terms which permit us to pledge and/or transfer securities to others.

As of December 31, 2020 and 2021, we were permitted to re-pledge securities with a fair value of $ 4.63 billion and $ 9.21 billion under the margin agreements and $ 0.4 million and $ 0.3 million under the securities lending agreements.

As of December 31, 2021, we re-pledged $ 220.1 million of the permitted amount with clearing organizations to meet deposit requirements.

As described in Note 1 - Description of Business and Summary of Significant Accounting Policies, we obtain securities on terms that permit us to pledge and/or transfer securities to others.

As of December 31, 2021 and 2022, we were permitted to re-pledge securities with a fair value of $ 9.21 billion and $ 4.36 billion under margin account agreements with users, and securities with a fair value of $ 0.3 million and $ 18.4 million that we had borrowed under MSLAs with third parties.

Under the Fully-Paid Securities Lending program, as of December 31, 2022, we were permitted to re-pledge securities with a fair value of $ 4.45 billion including securities with a fair value of $ 490.4 million that we had borrowed from users.

As of December 31, 2021 and 2022, we had re-pledged securities with a fair value of $ 3.43 billion and $ 1.63 billion, in each case under MSLAs and Fixed-Term Securities Lending Agreements with third parties.

In addition, as of December 31, 2021 and 2022, we had re-pledged $ 220.1 million and $ 231.2 million of the permitted amounts under the Margin Securities Lending program with clearing organizations to meet deposit requirements.

FINANCING ACTIVITIES AND OFF-BALANCE SHEET RISK

Revolving Credit Facilities

In September 2019, we entered into a $ 400.0 million committed and secured line of credit with a maturity date of September 25, 2020 (the “September 2019 Credit Facility”).

In June 2020, we amended the September 2019 Credit Facility and increased the aggregate committed and secured revolving line of credit amount to $ 550.0 million with a maturity date of June 5, 2021.

This line of credit was primarily collateralized by users’ securities held as collateral for users’ margin loans.

Interest for this line of credit was determined at the time a loan was initiated and the applicable interest rate under this line of credit was calculated as a per annum rate equal to 1.25 % plus the federal funds rate at the applicable time.

There were no outstanding borrowings under the September 2019 Credit Facility at December 31, 2020.

We were obligated to pay a commitment fee calculated as a per annum rate equal to 0.35 % on any unused amount of the credit facility quarterly in arrears.

The September 2019 Credit Facility was terminated in April 2021.

October 2019 Credit Facility

In October 2019, we entered into a $ 200.0 million committed and unsecured revolving line of credit with a syndicate of banks maturing in October 2023 (the “October 2019 Credit Facility”).

In October 2020,

we amended the October 2019 Credit Facility and, among other things, increased the aggregate committed and unsecured revolving line of credit amount to $ 600.0 million with a maturity date of October 29, 2024.

In April 2021, we further increased the aggregate credit amount available under the October 2019 Credit Facility to $ 625.0 million.

Loans under the October 2019 Credit Facility bear interest, at our option, at a per annum rate of either (a) the Eurodollar Rate plus 1.00 % or (b) the Alternative Base Rate.

The Eurodollar Rate is equal to the Eurodollar Base Rate, which is derived from London Interbank Offered Rate (“LIBOR”), multiplied by the Statutory Reserve Rate at the applicable time.

The Alternative Base Rate is the greatest of (i) the prime rate then in effect, (ii) the Federal Reserve Bank of New York rate then in effect plus 0.50 % and (iii) the Eurodollar Rate at such time for a one month interest period plus 1.00 %.

If LIBOR is unavailable or if we and the administrative agent elect, the Eurodollar Rate will be replaced by a rate calculated with reference to the Secured Overnight Financing Rate as set forth in the October 2019 Credit Facility agreement or an alternate benchmark rate selected by us and the administrative agent.

There were no outstanding borrowings under the October 2019 Credit Facility at December 31, 2020 and 2021.

In October 2020, we amended the October 2019 Credit Facility and, among other things, increased the aggregate committed and unsecured revolving line of credit amount to $ 600.0 million with a maturity date of October 29, 2024.

In April 2021, we further increased the aggregate credit amount available under the October

2019 Credit Facility to $ 625.0 million.

Loans under the October 2019 Credit Facility bear interest, at our option, at a per annum rate of either (a) the Eurodollar Rate plus 1.00 % or (b) the ABR.

The Eurodollar Rate is equal to the Eurodollar Base Rate, which is derived from London Interbank Offered Rate (“LIBOR”), multiplied by the Statutory Reserve Rate (as defined in the agreement) at the applicable time.

The ABR is the greatest of (i) the prime rate then in effect, (ii) the Federal Reserve Bank of New York rate then in effect plus 0.50 % and (iii) the Eurodollar Rate at such time for a one month interest period plus 1.00 %.

If LIBOR is unavailable or if we and the administrative agent elect, the Eurodollar Rate will be replaced by a rate calculated with reference to the Secured Overnight Financing Rate (as defined in the agreement) as set forth in the October 2019 Credit Facility agreement or an alternate benchmark rate selected by us and the administrative agent.

In December 2022, the terms of the October 2019 Credit Facility were amended.

Under the amendment, the October 2019 Credit Facility bears interest, at our option, at a per annum rate of either (a) the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus 1.00 % or (b) the Alternative Base Rate.

The Adjusted Term SOFR Rate is equal to the Term SOFR Rate for such interest period, published by the Term SOFR Administrator, plus the applicable Term SOFR Adjustment at the applicable time.

The Term SOFR Adjustment is (i) 0.11 % per annum for an interest period of one month;

(ii) 0.26 % per annum for an interest period of three months;

and (iii) 0.43 % per annum for an interest period of six months.

If the Adjusted Term SOFR Rate is less than the floor of 0 %, such rate shall be deemed to be equal to the floor.

As amended, the ABR is the greatest of (i) the prime rate then in effect, (ii) the Federal Reserve Bank of New York rate then in effect plus 0.50 % and (iii) the Adjusted Term SOFR for a one month Interest Period plus 1.00 %.

There were no outstanding borrowings under the October 2019 Credit Facility, as amended, at December 31, 2021 and 2022.

We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.10 % on any unused amount of the October 2019 Credit Facility quarterly in arrears.

April 2022 Credit Facility

In April 2021, we entered into a $ 2.18 billion committed and secured revolving line of credit, subject to certain borrowing base limitations, with a maturity date of April 15, 2022 (the “April 2021 Credit Facility”).

1 unchanged sentence

Tranche A loans are secured by users’ securities purchased on margin and are used primarily to finance margin loans.

Tranche B loans are secured by the right to the return from NSCC Margin Deposits and cash and property in a designated collateral account and used for the purpose of satisfying NSCC Deposit Requirements.

Tranche C loans are secured by the right to the return of eligible funds from any reserve account of Robinhood and cash and property in a designated collateral account and used for the purpose of satisfying reserve requirements under Rule 15c3-3 of the Exchange Act.

Tranche B loans are secured by the right to the return from National Securities Clearing Corporation (“NSCC”) of NSCC margin deposits and cash and property in a designated collateral account and used for the purpose of satisfying NSCC deposit requirements.

Tranche C loans are secured by the right to the return of eligible funds from any reserve account of the borrower and cash and property in a designated collateral account and used for the purpose of satisfying reserve requirements under Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Interest for this line of credit is determined at the time a loan is initiated and the applicable interest rate is calculated as a per annum rate equal to 1.25 % for Tranche A loans and 2.50 % for Tranche B and Tranche C loans, plus the Short-Term Funding Rate at the applicable time.

The Short-Term Funding Rate is equal to the greatest of (i) the Eurodollar Rate for a one month interest period on such day, which equals to the Eurodollar Base Rate that is derived from LIBOR, multiplied by the Statutory Reserve Rate at the applicable time, (ii) the Federal Funds Effective Rate, and (iii) the Overnight Bank Funding Rate in effect on such day.

The Short-Term Funding Rate is equal to the greatest of (i) the Eurodollar Rate for a one month interest period on such day, which equals to the Eurodollar Base Rate that is derived from LIBOR, multiplied by the Statutory Reserve Rate at the applicable time, (ii) the Federal Funds Effective Rate (as defined in the agreement) and (iii) the Overnight Bank Funding Rate (as defined in the agreement) in effect on such day.

There were no outstanding borrowings under the April 2021 Credit Facility at December 31, 2021.

We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.50 % on any unused amount of the April 2021 Credit Facility quarterly in arrears.

All of the agreements for the September 2019 Credit Facility, October 2019 Credit Facility, and April 2021 Credit Facility contain customary covenants restricting our ability to incur debt, incur liens, and undergo certain fundamental changes.

In April 2022, we entered into a $ 2.275 billion committed and secured revolving line of credit with a maturity date of April 10, 2023 (the “April 2022 Credit Facility”), amending and restating the April 2021 Credit Facility.

Under circumstances described in the agreement for the April 2022 Credit Facility, the aggregate commitments may be increased by up to $ 1.138 billion, for a total commitment under the agreement of $ 3.413 billion.

The April 2022 Credit Facility terms are otherwise substantially the same as

the April 2021 Credit Facility in all material aspects except for the Short-Term Funding Rate, which is equal to the greatest of (i) Daily Simple SOFR (as defined in the agreement) plus 0.10 %, (ii) the Federal Funds Effective Rate (as defined in the agreement) and (iii) the Overnight Bank Funding Rate (as defined in the agreement), in each case, in effect on such day.

There were no outstanding borrowings under the April 2022 Credit Facility at December 31, 2022.

We are obligated to pay a commitment fee calculated as a per annum rate equal to 0.50 % on any unused amount of the April 2022 Credit Facility quarterly in arrears.

The October 2019 Credit Facility, as amended, and the April 2022 Credit Facility contain customary covenants, including limitations with respect to debt, liens, fundamental changes, asset sales, restricted payments, investments and transactions with affiliates, subject to certain exceptions.

We were in compliance with all covenants under these facilities as of December 31, 2021 and 2022, as applicable.

Convertible Notes and Warrant Liability

Convertible Notes

In February 2021, we issued two tranches of convertible notes, consisting of $ 2.53 billion aggregate principal amount of Tranche I convertible notes and $ 1.02 billion aggregate principal amount of Tranche II convertible notes.

Interest on the convertible notes accrued at 6 % per annum, compounding semi-annually in arrears, and was payable in kind.

The convertible notes did not have a maturity date.

In the event of a public offering of our common stock to the public in an IPO on a nationally-recognized exchange in the United States, resulting in at least $ 500 million of gross proceeds to us (a “Qualifying IPO”) before the 12 month anniversary of the convertible notes issuance date, the convertible notes were to automatically convert into shares of our Class A common stock at a conversion price equal

to the lower of (i) 70 % of the cash price per share paid by investors in the Qualifying IPO and (ii) $ 38.29 (in the case of the Tranche I convertible notes) or $ 42.12 (in the case of the Tranche II convertible notes).

As our IPO was a Qualifying IPO, upon completion, the aggregate outstanding principal and accrued interest of the convertible notes converted into 137.3 million shares of Class A common stock at a conversion price of $ 26.60 per share.

Warrant Liability

We granted to each purchaser of the Tranche I convertible notes a warrant, equal to 15 % of the aggregate proceeds invested by such purchaser, to purchase a variable number of equity securities.

In aggregate, the maximum purchase amount of all warrants is $ 379.8 million with a strike price that was to equal the lower of (i) 70 % of the price per share in the Qualifying IPO and (ii) $ 38.29 .

As our IPO was a Qualified IPO, upon completion, the warrants became exercisable for 14.3 million shares of Class A common stock at a strike price of $ 26.60 .

As a result, the warrant liability was reclassified to additional paid-in capital, as the warrants are now exercisable for a fixed number of shares.

Off-Balance Sheet Risk

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In such events, we may be required to purchase financial instruments at prevailing market prices in order to fulfill our obligations.

MEZZANINE EQUITY, COMMON STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY

COMMON STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY

Redeemable Convertible Preferred Stock

The following table is a summary of redeemable convertible preferred stock as of December 31, 2020:

(in thousands, except share data and per share amounts)

Series Shares Authorized Shares Issued and Outstanding Per Share Liquidation Preference Liquidation Amount Per Share Initial Conversion Price Carrying Value of Stock, Net of Issuance Costs

A 131,913,460 131,913,460 $ 0.1954 $ 25,777 $ 0.1954 $ 16,139

B 80,263,020 80,263,020 0.6354 50,999 0.6354 50,999

C 43,788,180 43,788,180 2.5121 110,000 2.5121 109,870

D 35,774,761 35,774,761 10.1450 362,935 10.1450 362,670

E 29,887,357 29,887,357 12.4827 373,075 12.4827 372,733

F 48,000,000 48,000,000 12.5000 600,000 12.5000 599,284

G 44,406,442 43,116,119 15.5000 668,300 15.5000 668,044

414,033,220 412,742,897 $ 2,191,086 $ 2,179,739

In February 2021, we authorized 244.3 million shares of Series G-1 redeemable convertible preferred stock in connection with our convertible notes.

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Immediately prior to our IPO, all outstanding shares of redeemable convertible preferred stock were converted into shares of our Class A common stock on a one -to-one basis and their carrying value of $ 2.18 billion was reclassified into stockholders' equity.

As such, there were no shares of redeemable convertible preferred stock authorized or issued and outstanding as of December 31, 2021.

As such, there were no shares of redeemable convertible preferred stock authorized or issued and outstanding as of December 31, 2021 and 2022.

Preferred Stock

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Voting Rights

We have three classes of common stock:

We have three authorized classes of common stock:

Class A, Class B, and Class C.

Holders of our Class A common stock are entitled to one vote per share on all matters to be voted upon by our stockholders, holders of our Class B common stock are entitled to 10 votes per share on all matters to be voted upon by our stockholders and, except as otherwise required by applicable law, holders of our Class C common stock are not entitled to vote on any matter to be voted upon by our stockholders.

The holders of our Class A common stock and Class B common stock vote together as a single class, unless otherwise required by our Charter or applicable law.

of our Class A common stock and Class B common stock vote together as a single class, unless otherwise required by our Charter or applicable law.

Conversion of Class B Common Stock

Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock.

All Class B common stock will automatically convert (as a class) into Class A common stock upon the earliest of (i) the date and time specified by the affirmative vote of the holders of at least 80 % of the then-outstanding shares of Class B common stock, voting separately as a class, (ii) the date fixed by our board of directors that is no less than 61 days and no more than 180 days following the date on which the number of then-outstanding shares of Class B common stock represents less than 5 % of the aggregate number of shares of Class A common stock and Class B common stock then outstanding, (iii) the date fixed by our board of directors that is no less than 61 days and no more than 180 days following the date that (A) each founder is no longer providing services to our Company as an officer, employee, or consultant and (B) each founder is not a director of our Company as a result of a voluntary resignation by such founder from our board of directors or as a result of a written request or agreement by such founder not to be renominated as a director of our Company at an annual or special meeting of stockholders, (iv) nine months after the death or total disability of both founders (subject to a delay of up to 18 months as may be approved by a majority of our independent directors), or (v) August 2, 2036, the date that is 15 years from the completion of our IPO (the “Final Conversion Date”).

Shares of Class B common stock will also automatically convert into shares of Class A common stock upon sale or transfer except for certain permitted transfers described in our Charter.

In addition, each share of Class B common stock held by a stockholder who is a natural person, or held by permitted transferees or permitted entities of such natural person (each as described in our Charter) will automatically convert into shares of Class A common stock nine months following the death or total disability of such natural person (subject to a delay of up to 18 months as may be approved by a majority of our independent directors).

Notwithstanding the foregoing, in the event such natural person is a founder, to the extent (i) a person designated by such founder and approved by a majority of the

independent directors then in office or (ii) the other founder, in each case, has or shares voting control over the shares of Class B common stock held by the deceased or disabled founder, such shares will be treated as being held of record by such person or other founder and will not convert into shares of Class A common stock as a result of such founder’s death or total disability.

Notwithstanding the foregoing, in the event such natural person is a founder, to the extent (i) a person designated by such founder and approved by a majority of the independent directors then in office or (ii) the other founder, in each case, has or shares voting control over the shares of Class B common stock held by the deceased or disabled founder, such shares will be treated as being held of record by such person or other founder and will not convert into shares of Class A common stock as a result of such founder’s death or total disability.

Conversion of Class C Common Stock

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No redemption or sinking fund provisions are applicable to our common stock.

The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.

The rights, preferences and

privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.

The convertible notes issued in February 2021 (see Note 8 - Investments and Fair Value Measurement for further information) were converted into 137.3 million shares of Class A common stock at a conversion price of $ 26.60 per share upon completion of our IPO.

As of December 31, 2022, warrants outstanding consisted of warrants to purchase 14.3 million shares of Class A common stock with a strike price of $ 26.60 per share.

The warrants expire on February 12, 2031.

The warrants can be exercised with cash or net shares settled at the holder’s option.

The warrants expire on February 12, 2031 and can be exercised with cash or net shares settled at the holder’s option.

In aggregate, the maximum purchase amount of all warrants is $ 380 million.

No warrants were exercised during 2021.

As of December 31, 2022, the warrants have not been exercised and are included as a component of additional paid in capital on the consolidated balance sheets.

Equity Incentive Plans

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Our Amended and Restated 2013 Stock Plan, as amended (the “2013 Plan”), and our 2020 Equity Incentive Plan, as amended (the “2020 Plan”), provided for share-based awards to eligible participants, granted as incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), restricted stock units ("RSUs"), stock appreciation rights (“SARs”) or restricted stock awards (“RSAs”).

Options could be granted with an exercise price per share not less than the fair market value at the date of grant.

Options granted generally vest over a four-year term from the date of grant, at a rate of 25 % after one year , then monthly on a straight-line basis thereafter.

Generally, options granted are exercisable for up to ten years from the date of grant.

RSUs granted generally vest quarterly on a straight-line basis and expire seven years from the date of grant.

Our 2013 Plan was terminated in connection with adoption of our 2020 Plan, and our 2020 Plan was terminated in connection with the adoption of our 2021 Plan (defined below) but any awards outstanding under our 2013 Plan and 2020 Plan remain in effect in accordance with their terms.

Any shares that were or otherwise would become available for grant under the 2013 Plan or 2020

Plan will be available for grant under the 2021 Plan.

Any shares that were or otherwise would become available for grant under the 2013 Plan or 2020 Plan will be available for grant under the 2021 Plan.

No new awards may be granted under our 2013 Plan or 2020 Plan.

2021 Omnibus Incentive Plan

In June 2021, our board of directors and our stockholders approved and adopted our 2021 Omnibus Incentive Plan (the “2021 Plan”).

Our 2021 Plan became effective on July 27, 2021, immediately prior to the date on which the SEC declared effective our IPO registration statement, for which the final prospectus was dated July 28, 2021 and filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933 on July 30, 2021 (the “IPO Prospectus”).

Our 2021 Plan provides for the grant of share-based awards (such as options, including ISOs and NSOs, SARs, RSAs, RSUs, performance units, and other equity-based awards) and cash-based awards.

The aggregate number of shares available for grant under the 2021 Plan was equal to approximately 14 % of the number of shares of our common stock (of all classes) outstanding immediately upon the closing of the IPO.

Thereafter, any shares subject to awards under the 2013 Plan, the 2020 Plan, or the 2021 Plan that expire or terminate or are forfeited to or repurchased or withheld for taxes by the Company will again become available under the 2021 Plan.

In addition, the number of shares available under the 2021 Plan will automatically increase on the first day of each calendar year beginning on January 1, 2022 and ending with (and including) January 1, 2031.

Such annual increase will be equal to the lesser of (i) 5 % of the outstanding shares of all classes of our common stock on the last day of the immediately preceding calendar year and (ii) such number of shares determined by our board of directors.

As of December 31, 2021, an aggregate of 316.7 million shares had been authorized for issuance under the 2013 Plan, 2020 Plan, and 2021 Plan since inception, of which 71.0 million shares had been issued under the plans since inception, 122.9 million shares were reserved for issuance upon the exercise or settlement of outstanding equity awards under the plans, and 122.8 million shares remained available for new grants under the 2021 Plan.

Our 2021 Omnibus Incentive Plan (the "2021 Plan") became effective on July 27, 2021, and provides for the grant of share-based awards (such as options, including ISOs and NSOs, SARs, RSAs, RSUs, performance units, and other equity-based awards) and cash-based awards.

Under the 2021 Plan, options could be granted with an exercise price per share not less than the fair market value at the date of grant.

Options granted generally vest over a four-year term from the date of grant, at a rate of 25 % after one year , then monthly on a straight-line basis thereafter.

Generally, options granted are exercisable for up to ten years from the date of grant.

RSUs granted generally vest quarterly on a straight-line basis and expire seven years from the date of grant.

As of December 31, 2022, an aggregate of 360 million shares had been authorized for issuance under the 2013 Plan, 2020 Plan, and 2021 Plan, of which 98 million shares had been issued under the plans, 130 million shares were reserved for issuance upon the exercise or settlement of outstanding equity awards under the plans, and 132 million shares remained available for new grants under the 2021 Plan.

On January 1, 2023, an additional 44.6 million shares became available for grant under the 2021 Plan pursuant to its annual evergreen feature.

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Number of Shares Weighted-Average Exercise Price Weighted- Average Remaining Life Total Intrinsic Value

(in thousands)

(in millions)

Balance at December 31, 2021 14,527,468 $ 2.20 5.37 $ 226

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No options were granted during 2021.

The fair value of each stock

option was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions:

The fair value of each stock option was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions:

Year Ended December 31,

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The total intrinsic value of options exercised during 2020, 2021, and 2022 was $ 45 million, $ 179 million, and $ 25 million.

The intrinsic value is calculated as the difference between the exercise price of the underlying stock option award and the market value of the stock at the time of exercise.

The total grant date fair value of options that vested for each of the periods presented was immaterial.

Time-Based RSUs

We have granted Time-Based RSUs that vest upon the satisfaction of a time-based service condition.

The awards become eligible to vest based on continuous employment by each recipient through the vesting date, which is considered a service condition.

Prior to our IPO, our outstanding Time-Based RSUs vested based upon the satisfaction of both a time-based service condition and a performance-based condition, namely the occurrence of a liquidity event, such as the IPO.

We have granted Time-Based RSUs that vest upon the satisfaction of a time-based service condition (“Time-Based RSUs”).

The following table summarizes the activity related to our Time-Based RSUs for the year ended December 31, 2022:

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Unvested at December 31, 2021 49,428,070 $ 31.78

Granted in acquisitions (1)

124,934 50.63

Granted (other than in acquisitions) 33,044,671 38.26

Granted 61,100,831 11.63

Vested ( 25,213,252 ) 21.51

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Unvested at December 31, 2022 56,116,782 $ 18.55

_______________

(1) Represents replacement RSUs granted in connection with our acquisition of Say Technologies.

Per the terms of the merger agreement with Say Technologies, certain unvested outstanding RSUs held by Say Technologies employees were canceled and replaced with RSUs under our 2021 Plan.

The fair value of Time-Based RSUs that vested on the IPO date was $ 780.7 million.

The fair value of all other Time-Based RSUs that vested during 2021 was $ 273.5 million as of the respective vesting dates.

No Time-Based RSUs vested during 2020 or 2019.

The fair value of Time-Based RSUs vested during 2021 and 2022 was $ 1,054 million and $ 542 million, respectively.

No Time-Based RSUs vested during 2020.

Market-Based RSUs

We granted 27.7 million market-based RSUs to our co-founders, Mr.

Tenev and Mr.

Bhatt, during the year ended December 31, 2019 that were modified in May 2021 (the “2019 Market-Based RSUs”).

The awards become eligible to vest based on (i) achievement of share price targets considered market vesting conditions (approximately 5.6 million, 8.3 million, and 13.8 million RSUs vest upon achievement of share price targets of $ 30.45 , $ 50.75 , and $ 101.50 , respectively, with the stock price targets initially measured based on our IPO price and, for all RSUs that did not vest upon IPO, measured based on the average of our Class A common stock’s volume weighted average trading price for each trading day during any 60 consecutive trading days), and (ii) continuous employment by each recipient through the vesting date, which is considered a service condition.

Once the number of 2019 Market-Based RSUs eligible to vest has been determined based on the satisfaction of the 2019 Market-Based RSU share price target (the

“Eligible 2019 Market-Based RSUs”), half of those Eligible 2019 Market-Based RSUs will immediately vest and be settled and the remaining half vest according to a quarterly time-based vesting condition, which is satisfied based on three-month service periods retroactive to August 1, 2018 through August 1, 2024, subject to continued service on each such vesting date during that period.

A total of approximately 5.6 million of the 2019 Market-Based RSUs became Eligible 2019 Market-Based RSUs in connection with our IPO.

Of these, a total of 4.0 million vested immediately upon our IPO and the remainder will be subject to vesting in equal installments on each August 1, November 1, February 1, and May 1 through August 1, 2024.

Prior to the modification, any tranche of 2019 Market-Based RSUs that had not achieved its share price target upon IPO would have been forfeited.

The modification allows the awards to continue to be measured against the same price targets as were outlined in the original 2019 grant though December 31, 2025.

The amendment to the 2019 Market-Based RSUs was determined to be a modification of a market condition, therefore, we estimated the pre-modification and post-modification fair value of the awards to determine the incremental fair value generated by the modification.

To value the awards, we used a model based on multiple stock price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the price targets might not be satisfied.

If the price targets are met sooner than the derived service period, we will adjust our share-based compensation expense to reflect the cumulative expense associated with the vested award.

The 2019 Market-Based RSUs had a weighted-average grant date fair value of $ 0.29 per RSU.

Upon modification, the weighted-average incremental fair value of the 2019 Market-Based RSUs was $ 21.01 per RSU.

In May 2021, we granted 35.5 million additional market-based RSUs to Mr.

Tenev and Mr.

Bhatt (the “2021 Market-Based RSUs” and together with the 2019 Market-Based RSUs, “Market-Based RSUs”) with a weighted-average grant date fair value of $ 22.68 per RSU.

These awards vest based on (i) achievement of share price targets, considered a market condition, over a period of 8 years from issuance ( 4.5 million will vest upon achievement of each of the $ 120 and $ 150 share price targets, and 5.3 million will vest upon achievement of each of the $ 180 , $ 210 , $ 240 , $ 270 , and $ 300 share price targets, in each case, measured using the average of the volume weighted average trading price for each trading day during any 60 consecutive trading days ) , and (ii) continuous employment by each recipient through the vesting date , which is considered a service condition.

We estimated the grant date fair value of the 2021 Market-Based RSUs using a model based on multiple stock price paths developed through the use of a Monte Carlo simulation that incorporates into the valuation the possibility that the price targets might not be satisfied.

If the price targets are met sooner than the derived service period, we will adjust our share-

based compensation expense to reflect the cumulative expense associated with the vested award.

In 2019 and 2021, we granted Market-Based RSUs to our founders under which vesting is conditioned upon both the achievement of share price targets and the continued employment by each recipient over defined service periods.

There were no Market-Based RSUs granted during 2022.

As of December 31, 2022, none of the 2021 Market-Based RSUs had vested based on share price targets.

In February 2023, the 2021 Market-Based RSUs (corresponding to 35.3 million unvested shares) were canceled (see Note 18 - Subsequent Events).

The following table summarizes the activity related to our Market-Based RSUs for the year ended December 31, 2022:

Number of RSUs Weighted- average grant date fair value

Eligible to Vest (1)

Not Eligible to Vest (2)

Total Number of RSUs Weighted- average grant date fair value

Unvested at December 31, 2021 1,267,918 57,650,926 58,918,844 $ 23.50

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Unvested at December 31, 2022 806,858 57,650,926 58,457,784 $ 23.50

The fair value of Market-Based RSUs that vested on the IPO date was $ 153.3 million.

The fair value of all other Market-Based RSUs that vested during 2021 was $ 8.1 million as of the respective vesting dates.

No Market-Based RSUs vested during 2020 or 2019.

________________

(1) Represents RSUs that became eligible to vest upon achievement of share price targets and vest upon satisfaction of time-based service requirements.

(2) Represents RSUs that have not yet become eligible to vest because share price targets have not yet been achieved.

The fair value of Market-Based RSUs that vested during 2021 and 2022 was $ 161 million and $ 5 million .

No Market-Based RSUs vested during 2020.

2021 Employee Share Purchase Plan

In June 2021, our board of directors and our stockholders approved and adopted the 2021 Employee Share Purchase Plan (the “ESPP”).

Our ESPP became effective on July 27, 2021, immediately prior to the effective date of the IPO Prospectus.

The purpose of the ESPP is to enable eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15 % of their eligible compensation up to the statutory maximum.

The first ESPP purchase occurred in November 2021, and subsequent purchases will occur in May and November each year.

Our ESPP became effective on July 27, 2021 and enables eligible employees to purchase shares of our common stock at a discount through payroll deductions of up to 15 % of their eligible compensation up to the statutory maximum.

The purchase price is equal to 85 % of the fair market value of a share of our common stock on the first date of an offering or the date of purchase, whichever is lower.

The ESPP has an automatic rollover feature, whereby employees begin a new 12-month offering period if the fair value of the Company’s common stock on a purchase date is less than that on the original offering date.

The aggregate number of shares reserved for issuance under the ESPP was equal to approximately 2 % of the number of shares of our common stock (of all classes) outstanding upon the closing of the IPO.

The number of shares available under our ESPP will automatically increase on the first day of each calendar year beginning on January 1, 2022 and ending with (and including) January 1, 2031.

The aggregate number of shares reserved for issuance under the ESPP will automatically increase on the first day of each calendar year beginning on January 1, 2022 and ending with (and including) January 1, 2031.

Such annual increase will be equal to the lesser of (i) 1 % of the outstanding shares of all classes of our common stock on the last day of the immediately preceding calendar year and (ii) such number of shares determined by the board of directors.

No more than 200 million shares of common stock may be issued under our ESPP.

In November 2021, 0.3 million shares were purchased under the ESPP at a weighted-average price of $ 24.64 .

The fair value of each stock option was estimated on the grant date using the Black-Scholes option pricing model.

In the year ended December 31, 2022 , 1.9 million shares were purchased under the ESPP at a weighted-average price of $ 8.42 .

The fair value of shares to be issued under our ESPP was estimated on the grant date using the Black-Scholes option pricing model.

As of December 31, 2022 , approximately 25.6 million shares remained available for issuance under the ESPP.

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Year Ended December 31,

(in thousands) 2019 2020 2021

Brokerage and transaction $ 427 $ 227 $ 7,527

(in millions) 2020 2021 2022 (1)

General and administrative $ 5 $ 885 $ 425

Technology and development 18 610 212

Operations — 20 8

Brokerage and transaction — 7 5

Marketing 1 50 4

General and administrative 16,517 5,405 885,427

Total $ 24 $ 1,572 $ 654

Included in the table above, we recorded share-based compensation expense of $ 1.05 billion related to Time-Based RSUs, $ 501.2 million related to Market-Based RSUs, and $ 5.9 million related to the ESPP for the year ended December 31, 2021.

No share-based compensation was recorded in 2019 or 2020 related to Time-Based RSUs, Market-Based RSUs, or the ESPP.

The tax benefits recognized in the consolidated statements of operations for share-based compensation were not material during the years ended December 31, 2019, 2020, and 2021.

We capitalized share-based compensation expense related to internally developed software of $ 0.7 million, $ 0.6 million, and $ 34.8 million for years 2019, 2020, and 2021.

In the year ended December 31, 2019, subsequent to the sale of our Series E redeemable convertible preferred stock, certain employees sold shares of common stock to new and existing stockholders in a tender offer (the “2019 Tender Offer”).

The 2019 Tender closed on September 9, 2019, when existing employees sold 5.4 million shares of our common stock for an aggregate purchase price of $ 67.6 million.

As the share price paid in the 2019 Tender was in excess of fair value and a portion of the purchasers were existing stockholders, we recorded share-based compensation expense of $ 18.7 million for the year ended December 31, 2019.

________________

( 1) Included in the table above, we recorded share-based compensation expense of $ 323 million related to Market-Based RSUs, $ 314 million related to Time-Based RSUs, $ 11 million related to ESPP, and $ 6 million related to options for the year ended December 31, 2022.

In the year ended December 31, 2020, subsequent to the sale of our Series G redeemable convertible preferred stock, certain employees sold shares of common stock to new and existing stockholders in a tender offer (the “2020 Tender Offer”).

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We recorded share-based compensation expense of $ 17 million in connection with this tender offer in the year ended December 31, 2020.

Out of the $ 17 million expenses, $ 16 million related to options and $ 2 million related to Time-Based RSUs.

In March 2021, we modified certain Time-Based RSUs of approximately 500 employees to remove the one-year vesting cliff, considered to be an improbable to improbable modification.

The modified RSUs were revalued at the modification date, and the modified grant date fair value of the awards of $ 39.75 per share was used to calculate share-based compensation expense.

We have capitalized share-based compensation expense related to internally developed software of $ 1 million , $ 35 million , and $ 28 million for years 2020, 2021, and 2022.

The April 2022 Restructuring and the August 2022 Restructuring resulted in net reductions of $ 24 million and $ 53 million in share-based compensation expense, respectively.

Both reductions were substantially all related to Time-Based RSUs.

The net reductions were primarily recognized in technology and development expense, $ 16 million and $ 22 million, and general and administrative expense, $ 6 million and $ 28 million.

As of December 31, 2022, there was $ 1.23 billion of unrecognized share-based compensation expense that is expected to be recognized over a weighted-average period of 1.99 years.

vesting for awards outstanding as of December 31, 2021, is as follows:

(in thousands, except for number of shares)

Number of Shares (1)

2022 19,332,903 $ 861,709

Scheduled vesting for awards outstanding as of December 31, 2022 , is as follows:

(in millions, except for number of shares) Number of Shares (1)

2023 24,081,983 $ 563

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The following table presents the calculation of basic and diluted income (loss) per share:

(in thousands, except per share data) Year ended December 31,

(in millions, except per share data) Year Ended December 31,

2020 2021 2022

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Net income (loss) attributable to common stockholders $ 3 $ ( 3,687 ) $ ( 1,028 )

Weighted-average common stock outstanding - basic 221,664,610 225,748,355 492,381,190

Weighted-average common shares outstanding - basic 225,748,355 492,381,190 878,630,024

Dilutive effect of stock options and unvested shares 19,249,033 — —

Weighted-average common stock outstanding - diluted 221,664,610 244,997,388 492,381,190

Weighted-average common shares used to compute diluted loss per share 244,997,388 492,381,190 878,630,024

Net income (loss) per share attributable to common stockholders:

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Stock options 60,082 14,527,468 15,226,096

Unvested shares 749,943 8,423 15,126

Early-exercised stock options 8,423 15,126 —

Warrants — 14,278,034 14,278,034

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We have defined related parties as members of our board of directors, executive officers, principal owners of our outstanding stock, and any immediate family members of each such related party, as well as any other person or entity with significant influence over our management or operations and any other affiliates.

In February 2021, we issued two tranches of convertible notes and granted to each purchaser of the Tranche I convertible notes a warrant to purchase equity securities, see Note 11 for further information.

In 2022, we did not have any material related party transactions.

In February 2021, we issued two tranches of convertible notes and granted to each purchaser of the Tranche I convertible notes a warrant to purchase equity securities (see Note 8 - Investments and Fair Value Measurement, for further information).

Two of the Tranche I investors were related parties prior to the completion of our IPO.

Their respective aggregate outstanding principal and accrued interest of their convertible notes automatically converted into shares of Class A common stock upon the closing of our IPO .

$ 2.0 billion of the gross proceeds received from the issuance was contributed to RHS in February 2021.

Pursuant to the SEC Uniform Net Capital Rule , capital contributed to RHS is included in its net capital calculation and may not be withdrawn for one year from the time of contribution.

This restriction lapsed in February 2022, however, no capital has been returned to the parent company as of the date of filing this Annual Report.

Our operating leases are comprised of office facilities, with the most significant leases relating to our corporate headquarters in Menlo Park and our office in New York City.

Our leases have remaining terms of 1 to 11 years, and many leases include one or more options to renew.

Our operating leases are comprised of office facilities, with the most significant leases relating to our corporate headquarters in Menlo Park, CA and our office in New York City, NY.

Our leases have remaining terms of less than one year to 10 years, and many leases include one or more options to renew.

We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement.

We do not have any finance leases.

As of December 31, 2020 and 2021, we had $ 49.2 million and $ 129.4 million of operating right-of-use assets included as non-current assets and $ 54.1 million and $ 151.1 million of operating lease liabilities:

$ 6.1 million and $ 22.4 million included as other current liabilities and $ 48.0 million and $ 128.7 million as other non-current liabilities on the consolidated balance sheets.

As of December 31, 2021, we have an executed operating lease that had not yet commenced for office facilities that is expected to be commenced in the first quarter of 2022.

Under the terms of the lease, we will have the right to construct tenant improvements to the underlying asset upon commencement.

See Note 6 - Restructuring Activities, for further information relating to impacts on leases due to the April and August 2022 Restructurings.

In 2022, we executed agreements to assign some of our operating leases to third-party assignees who assumed all of our obligations, liabilities, covenants, and conditions under the assigned leases.

As a result of these agreements, we derecognized the related right-of-use assets of $ 28 million and lease liability of $ 33 million and recognized an immaterial amount of net gain.

Lease assets and liabilities recognized on our consolidated balance sheets were as follows:

(in millions) Classification 2021 2022

Lease Right-of-use Assets

Operating lease assets Other non-current assets $ 129 $ 92

Lease Liabilities

Current operating lease liabilities Other current liabilities 22 21

Non-current operating lease liabilities Other non-current liabilities 129 127

Total lease liabilities $ 151 $ 148

Fixed operating lease costs primarily consist of monthly base rent amounts due.

Variable operating lease costs primarily relate to common area maintenance, property taxes, insurance, and other operating expenses.

The components of lease expense were as follows:

Year Ended December 31,

(in thousands) 2019 2020 2021

Fixed operating lease expenses $ 5,422 $ 11,420 $ 23,750

Variable operating lease expenses 1,078 3,009 5,376

Short-term lease expenses 1,188 1,222 1,428

Total lease expenses $ 7,688 $ 15,651 $ 30,554

Fixed operating lease expenses primarily consist of monthly base rent amounts due.

Variable operating lease expenses are primarily related to payments made to our landlords for common area maintenance, property taxes, insurance, and other operating expenses.

(in millions) 2020 2021 2022

Fixed operating lease costs $ 12 $ 24 $ 33

Variable operating lease costs 3 6 7

Short-term lease costs 1 1 —

Total lease costs $ 16 $ 31 $ 40

Other information related to our operating leases was as follows:

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Year Ended December 31,

(in thousands) 2019 2020 2021

(in millions) 2020 2021 2022

Operating cash flows:

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Future minimum lease payments under non-cancellable operating leases (with initial lease terms in excess of one year) as of December 31, 2022 are as follows:

(in thousands)

2022 $ 32,646

(in millions)

Thereafter 68

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lease incentives ( 2 )

leases executed but not yet commenced ( 53,185 )

Total lease liabilities $ 148

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If the reasonable estimate is a range and no amount within that range is considered a better estimate than any other amount, an accrual is recorded based on the bottom amount of the range.

If a loss is not probable, or a probable loss cannot be reasonably estimated, no accrual is recorded.

Amounts accrued for contingencies in the aggregate were $ 84.8 million and $ 85.2 million as of December 31, 2021 and 2022.

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The securities industry is highly regulated and many aspects of our business involve substantial risk of liability.

In past years, there has been an increasing incidence of litigation involving the brokerage industry, including class action suits that generally seek substantial damages.

Damages may include, in some cases, punitive damages.

Compliance and trading problems that are reported to federal and state regulators, exchanges, or other SROs by dissatisfied users are investigated by such regulatory bodies, and, if pursued by such regulatory bodies or such users, may rise to the level of arbitration or disciplinary action.

We are also subject to periodic regulatory audits and inspections.

Like other brokerage firms, we have been named as a defendant in lawsuits and from time to time we have been threatened with, or named as a defendant in arbitrations and administrative proceedings.

In past years, there has been an increase in litigation and regulatory investigations involving the brokerage and cryptocurrency industries.

Litigation has included and may in the future include class action suits that generally seek substantial and, in some cases, punitive damages.

Federal and state regulators, exchanges, or other SROs investigate issues related to regulatory compliance that may result in enforcement action.

We are also subject to periodic regulatory audits and inspections that have in the past and could in the future lead to enforcement investigations or actions.

We have been named as a defendant in lawsuits and from time to time we have been threatened with, or named as a defendant in arbitrations and administrative proceedings.

The outcomes of these matters are inherently uncertain and some may result in adverse judgments or awards, including penalties, injunctions, or other relief, and we may also determine to settle a matter because of the uncertainty and risks of litigation.

With respect to matters discussed below for which no accrual has been made or which have a potential loss in excess of amounts accrued, we believe, based on current knowledge, that any losses or ranges of losses (in excess of amounts accrued, if applicable) as of December 31, 2021 that are reasonably possible and can be reasonably estimated will not, in the aggregate, have a material adverse effect on our business, financial position, operating results, or cash flows.

With respect to matters discussed below, we believe, based on current knowledge, that any losses (in excess of amounts accrued, if applicable) as of December 31, 2022 that are reasonably possible and can be reasonably estimated will not, in the aggregate, have a material adverse effect on our business, financial position, operating results, or cash flows.

However, for many of the matters disclosed below, particularly those in early stages, we cannot reasonably estimate the reasonably possible loss (or range of loss), if any.

In addition, the ultimate outcome of legal proceedings involves judgments, estimates, and inherent uncertainties and cannot be predicted with certainty.

Any judgment entered against us, or any adverse settlement, could materially and adversely impact our business, financial condition, operating results, and cash flows.

In addition, the ultimate outcome of legal proceedings involves judgments and inherent uncertainties and cannot be predicted with certainty.

Any judgment entered against us, or any adverse settlement, could materially and adversely impact our business, financial condition, operating results, and

We might also incur substantial legal fees, which are expensed as incurred, in defending against legal and regulatory claims.

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We intend to continue to defend these matters vigorously.

Best Execution, Payment for Order Flow, and Sources of Revenue Matters

Best Execution, Payment for Order Flow, and Sources of Revenue Civil Litigation

Beginning in December 2020, multiple putative securities fraud class action lawsuits were filed against RHM, RHF, and RHS.

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In February 2022, the court granted Robinhood’s motion to dismiss the amended consolidated complaint without prejudice.

In March 2022, plaintiffs filed a second consolidated amended complaint, alleging only violations of Section 10(b) of the Exchange Act, which Robinhood moved to dismiss.

In October 2022, the court granted Robinhood’s motion in part and denied it in part.

In November 2022, Robinhood filed a motion for judgment on the pleadings, which the court denied in January 2023.

March 2020 Outages

A consolidated putative class action lawsuit relating to service outages on our stock trading platform on March 2-3, 2020 and March 9, 2020 (the “March 2020 Outages”) is pending in the United States District Court for the Northern District of California.

A consolidated putative class action lawsuit relating to the March 2020 Outages is pending in the United States District Court for the Northern District of California.

The lawsuit generally alleges that putative class members were unable to execute trades during the March 2020 Outages because our platform was inadequately designed to handle customer demand and we failed to implement appropriate backup systems.

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The lawsuit generally seeks damages, restitution, and/or disgorgement, as well as declaratory and injunctive relief.

Plaintiffs’ motion for class certification, which we oppose, and our motion for summary judgment in favor of Robinhood are currently pending.

In September 2021, approximately 400 jointly-represented customers initiated an arbitration of individual claims against us arising out of the March 2020 Outages and other alleged system outages.

Robinhood is contesting the claims, and a hearing has been scheduled for September 2022.

Options Trading and Related Customer Communications and Displays

The SEC’s Examinations Division conducted an examination and identified deficiencies, to which RHF responded, with respect to account takeovers, identity theft in connection with new account opening, processes for approving or rejecting certain accounts for options trading, and customer support response times.

Certain state regulatory authorities are conducting investigations regarding RHF’s options trading and related customer communications and displays and options trading approval process.

RHF is cooperating with the regulators’ requests.

FINRA also conducted an investigation and reached a settlement, described below, with RHF regarding the same options trading issues.

FINRA Multi-Matter Settlement

On June 30, 2021, RHF resolved with FINRA, on a no admit, no deny basis, certain investigations and examinations, including investigations into systems outages, RHF’s options product offering, and margin-related communications with customers, among others.

The resolution did not address all the matters FINRA is investigating, including those relating to the Early 2021 Trading Restrictions (as defined below), account takeovers and anti-money laundering issues, RHS’s fractional share trade reporting, customer support procedures, or customer arbitration agreements.

RHF and RHS have continued to cooperate with FINRA on these matters.

The resolution involved the following components:

(i) charges of violations of FINRA rules;

(ii) a fine of $ 57.0 million;

(iii) customer restitution of approximately $ 12.6 million;

(iv) a censure;

and (v) engagement of an independent consultant.

In July 2021, we paid the $ 57.0 million penalty in cash.

As of December 31, 2021, we had paid all of the customer restitution.

RHC Anti-Money Laundering, Cybersecurity, and Other Issues

In July 2020, the NYDFS issued a report of its examination of RHC citing a number of “matters requiring attention” focused primarily on anti-money laundering and cybersecurity-related issues.

The matter was subsequently referred to the NYDFS’s Consumer Protection and Financial Enforcement Division for investigation.

In March 2021, the NYDFS informed RHC of alleged violations of applicable (i) anti-money laundering and New York Banking Law requirements, including the failure to maintain and certify a compliant anti-money laundering program, (ii) notification provisions under RHC’s Supervisory Agreement with the NYDFS, and (iii) cybersecurity and virtual currency requirements, including deficiencies in our policies and procedures regarding risk assessment, lack of an adequate incident response and business continuity plan, and deficiencies in our application development security.

RHC and the NYDFS have reached a settlement in principle with respect to these allegations, subject to final documentation, in connection with which, among other things, RHC expects to pay a monetary penalty and engage a monitor.

Additionally, in April 2021, the California Attorney General’s Office issued an investigative subpoena to RHC, seeking documents and answers to interrogatories about RHC’s trading platform, business and operations, application of California’s commodities regulations to RHC, and other matters.

In May 2022, the parties notified the court that they had reached an agreement in principle resolving this action.

The settlement agreement has been preliminarily approved by the court.

In addition, in September 2021, approximately 400 jointly-represented customers initiated an arbitration of individual claims against us arising out of the March 2020 Outages and other alleged system outages.

The parties have reached an agreement to resolve this matter.

State Regulatory Matters

Certain state regulatory authorities have conducted investigations regarding RHF’s options trading and related customer communications and displays, options and margin trading approval process, March 2020 platform outages, and customer support prior to June 2020.

RHF has reached a settlement in principle with the Alabama Securities Commission and anticipates a potential multi-state settlement related to these issues.

FINRA previously conducted an investigation and reached a settlement with RHF regarding many of these issues.

Brokerage Enforcement Matters

FINRA Enforcement staff are conducting investigations related to, among other things, RHS’s reporting of fractional share trades, as applicable, to a Trade Reporting Facility (“TRF”), the Over-the-Counter Reporting Facility (“ORF”), the Order Audit Trail System (“OATS”), and the Consolidated Audit Trail (“CAT”);

RHS’s reporting of accounts holding significant options positions to the Large Option Position Report (“LOPR”) system;

processing of certain requests for transfers of assets from Robinhood through the Automated Customer Account Transfer System (“ACATS”);

responses to Electronic Blue Sheets requests from FINRA;

RHF’s compliance with FINRA registration requirements for member

marketing involving social media influencers and affiliates;

and collaring the prices of certain trade orders.

We are cooperating with these investigations.

RHS has received requests from the SEC Division of Enforcement regarding its compliance with Regulation SHO’s trade reporting and other requirements in connection with securities lending and fractional share trading and previously received similar requests from FINRA examinations staff.

RHS and RHF have also received requests from the SEC Division of Enforcement and FINRA Enforcement staff related to the Firms’ compliance with recordkeeping requirements.

We are cooperating with these investigations.

Robinhood Crypto Matters

RHC has received subpoenas from the California Attorney General’s Office seeking information about, among other things, RHC’s trading platform, business and operations, custody of customer assets, customer disclosures, and coin listings.

RHC is cooperating with this investigation.

We cannot predict the outcome of this investigation or any consequences that might result from it.

Account Takeovers

In November 2020, FINRA Enforcement commenced an investigation into RHF concerning account takeovers, or circumstances under which an unauthorized actor successfully logs into a customer account, as well as anti-money laundering and cybersecurity issues.

Since February 2021, RHF has received requests for documents and information from the SEC’s Enforcement Division in connection with its investigation into account takeovers and, more recently, suspicious activity report filings and issues related to the Electronic Funds Transfer Act.

Additionally, state regulators, including the New York Attorney General’s Office, have opened inquiries into RHM, RHF, and RHC related to account takeovers.

We are cooperating with these investigations and inquiries.

The SEC’s Examinations Division also conducted an examination and identified deficiencies, to which RHF responded, with respect to, among other things, account takeovers and identity theft in connection with new account opening.

Account Takeovers, Anti-Money Laundering, and Cybersecurity Matters

FINRA Enforcement and the SEC Division of Enforcement are investigating account takeovers (i.e., circumstances under which an unauthorized actor successfully logs into a customer account), as well as anti-money laundering compliance and cybersecurity issues.

The SEC’s Division of Enforcement is also investigating issues related to compliance with the Electronic Funds Transfer Act.

We are cooperating with these investigations.

In January 2021, Siddharth Mehta filed a putative class action in California state court against RHF and RHS, purportedly on behalf of approximately 2,000 Robinhood customers whose accounts were allegedly accessed by unauthorized users.

RHF and RHS removed this action to the United States District Court for the Northern District of California.

Plaintiff generally alleges that RHF and RHS breached commitments made and duties owed to customers to safeguard customer data and assets and seek monetary damages and injunctive relief.

The matter is currently in the discovery stage.

Plaintiff generally alleges that RHF and RHS breached commitments made and duties owed to customers to safeguard customer data and assets and seeks monetary damages and injunctive relief.

In April 2022, the parties reached a settlement in principle to resolve this matter.

The settlement agreement has been preliminarily approved by the court.

Massachusetts Securities Division Matter

In December 2020, the Enforcement Section of the Massachusetts Securities Division (“MSD”) filed an administrative complaint against RHF, which stems from an investigation initiated by the MSD in July 2020.

The complaint alleges three counts of Massachusetts securities law violations regarding alleged unethical and dishonest conduct or practices, failure to supervise, and failure to act in accordance with the Massachusetts fiduciary duty standard, which became effective on March 6, 2020 and had an effective enforcement date beginning September 1, 2020.

Among other things, the MSD alleges that our product features and marketing strategies, outages, and options trading approval process constitute violations of Massachusetts securities laws.

The complaint alleged three counts of Massachusetts securities law violations regarding alleged unethical and dishonest conduct or practices, failure to supervise, and failure to act in accordance with the Massachusetts fiduciary duty standard, which became effective on March 6, 2020 and had an effective enforcement date beginning September 1, 2020.

Among other things, the MSD alleged that our product features and marketing strategies, outages, and options trading approval process constitute violations of Massachusetts securities laws.

MSD subsequently filed an amended complaint that seeks, among other things, injunctive relief (a permanent cease and desist order), censure, restitution, disgorgement, appointment of an independent consultant, an administrative fine, and revocation of RHF's license to operate in Massachusetts.

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In April 2021, RHF filed a complaint and motion for preliminary injunction and declaratory relief in Massachusetts state court seeking to enjoin the MSD administrative proceeding and challenging the legality of the Massachusetts fiduciary duty standard.

In May 2021, the state court denied RHF’s motion for a preliminary injunction, finding that RHF would not suffer irreparable harm if MSD proceeded with the pending administrative action, but determined that RHF may seek a declaration that the disputed regulation is unlawful without first exhausting its remedies in the administrative action.

2021, the parties filed cross-motions for partial judgment on the pleadings and a hearing was held on those motions in December 2021.

In September 2021, the parties filed cross-motions for partial judgment on the pleadings.

In March 2022, the court ruled in favor of RHF, declaring that the Massachusetts fiduciary duty regulation was unlawful.

The MSD is appealing the ruling.

A hearing on the two remaining counts alleged by the MSD in its amended administrative complaint is currently scheduled to begin in March 2023.

Text Message Litigation

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District Court for the Western District of Washington.

RHF has filed a motion to dismiss the complaint.

RHF filed a motion to dismiss the complaint.

In February 2022, Moore and Andrew Gillette filed an amended complaint, which RHF again moved to dismiss.

In August 2022, the court denied RHF’s motion to dismiss.

Early 2021 Trading Restrictions Matters

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In September 2021, plaintiffs filed an amended complaint asserting state law claims of negligence, breach of fiduciary duty, tortious interference with contract and business relationship, civil conspiracy, and breaches of the covenant of good faith and fair dealing and implied duty of care.

In November 2021, the court dismissed the federal antitrust complaint without prejudice, and plaintiffs for the federal securities tranche filed a complaint alleging violations of Sections 9(a) and 10(b) of the Exchange Act.

In January 2022, we moved to dismiss the federal securities law complaint, and plaintiffs filed an amended complaint in connection with the federal antitrust tranche.

In January 2022, the court dismissed the state law complaint with prejudice.

In February 2022, Robinhood moved to dismiss the amended complaint filed in connection with the federal antitrust tranche.

Department of Justice, Antitrust Division, the SEC’s Division of Enforcement, FINRA, the New York Attorney General’s Office, other state attorneys general offices, and a number of state securities regulators.

Plaintiffs have appealed the court’s order to the United States Court of Appeals for the Eleventh Circuit.

In November 2021, the court dismissed the federal antitrust complaint without prejudice.

In January 2022, plaintiffs filed an amended complaint in connection with the federal antitrust tranche and Robinhood moved to dismiss the amended complaint.

In May 2022, the court dismissed the federal antitrust complaint with prejudice.

Plaintiffs have appealed the court’s order to the United States Court of Appeals for the Eleventh Circuit.

In November 2021, plaintiffs for the federal securities tranche filed a complaint alleging violations of Sections 9(a) and 10(b) of the Exchange Act.

In January 2022, we moved to dismiss the federal securities law complaint.

In August 2022, the court granted in part and denied in part Robinhood’s motion to dismiss.

RHM, RHF, RHS, and our Co-Founder and CEO, Vladimir Tenev, among others, have received requests for information, and in some cases, subpoenas and requests for testimony, related to investigations and examinations of the Early 2021 Trading Restrictions from the United States Attorney’s Office for the Northern District of California (“USAO”), the DOJ, Antitrust Division, the SEC’s Division of Enforcement, FINRA, the New York Attorney General’s Office, other state attorneys general offices, and a number of state securities regulators.

Also, a related search warrant was executed by the USAO to obtain Mr.

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There have been several inquiries based on specific customer complaints.

We have also received requests from the SEC’s Division of Examinations and Division of Enforcement and FINRA related to employee trading in certain securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp.

We have also received requests from the SEC Division of Enforcement and FINRA related to employee trading in certain securities that were subject to the Early 2021 Trading Restrictions, including GameStop Corp.

and AMC Entertainment Holdings, Inc., during the week of January 25, 2021.

These matters include requests related to whether any employee trading in these securities may have occurred after the decision to impose the Early 2021 Trading Restrictions and before the public announcement of the Early 2021 Trading Restrictions on January 28, 2021.

The SEC’s Division of Examinations concluded their examinations related to the Early 2021 Trading Restrictions.

In February 2021, SEC staff notified us of their findings to which we are in the process of responding.

FINRA has also requested information about policies, procedures, and supervision related to employee trading generally.

In addition, we have received information and testimony requests from

certain committees and members of the U.S.

Congress and Mr.

Tenev, among others, has provided testimony with respect to the Early 2021 Trading Restrictions.

We are cooperating with these investigations and examinations.

Registration Requirements for Member Personnel

In July 2021, RHF received a FINRA investigative request seeking documents and information related to its compliance with FINRA registration requirements for member personnel, including related to the FINRA non-registration status of Mr.

Tenev and Co-Founder and Chief Creative Officer Mr.

Robinhood is cooperating with the investigation.

We are cooperating with these investigations.

FINRA Enforcement has also requested information about policies, procedures, and supervision related to employee trading generally.

IPO Litigation

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District Court for the Northern District of California against RHM, the officers and directors who signed Robinhood’s IPO offering documents, and Robinhood’s IPO underwriters.

Plaintiff’s claims are based on alleged false or misleading statements in Robinhood’s IPO offering documents allegedly in violation of Sections 11 and 12(a) of the Securities Act.

Plaintiff seek compensatory damages, rescission of shareholders’ share purchases, and an award for attorneys’ fees and costs.

In February 2022, certain alleged Robinhood stockholders submitted applications seeking appointment by the court to be the lead plaintiff to represent the putative class in this matter.

Pursuant to the Private Securities Litigation Reform Act of 1995, the deadline for the court to appoint a lead putative class plaintiff is March 17, 2022.

Plaintiff’s claims are based on alleged false or misleading statements in Robinhood’s IPO offering documents allegedly in violation of Sections 11 and 12(a) of the Securities Act of 1933, as amended (the “Securities Act”).

Plaintiff seeks compensatory damages, rescission of shareholders’ share purchases, and an award for attorneys’ fees and costs.

In February 2022, certain alleged Robinhood stockholders submitted applications seeking appointment by the court to be the lead plaintiff to represent the putative class in this matter, and in March 2022, the court appointed lead plaintiffs.

In June 2022, plaintiffs filed an amended complaint.

In August 2022, Robinhood filed a motion to dismiss the complaint.

In February 2023, the court granted Robinhood’s motion without prejudice.

In January 2022, Robert Zito filed a complaint derivatively on behalf of Robinhood against Robinhood’s directors at the time of its IPO in the U.S.

District Court for the District of Delaware.

Plaintiff alleges claims for breach of fiduciary duties, waste of corporate assets, unjust enrichment, and violations of Section 10(b) of the Exchange Act.

Plaintiff alleges breach of fiduciary duties, waste of corporate assets, unjust enrichment, and violations of Section 10(b) of the Exchange Act.

Plaintiff’s claims are based on allegations of false or misleading statements in Robinhood’s IPO offering documents, and plaintiff seeks an award of damages and restitution to the Company, injunctive relief, and an award for attorney’s fees and costs.

In March 2022, the district court entered a stay of this litigation pending resolution of Robinhood’s motion to dismiss in the Golubowski securities action discussed above.

In August 2022, a shareholder sent a letter to the RHM board of directors demanding, among other things, that the board of directors pursue causes of action on behalf of the Company related to allegations of misconduct in connection with the Early 2021 Trading Restrictions, Robinhood’s IPO offering documents, and the November 2021 Data Security Incident.

The Board has formed a Demand Review Committee that is reviewing the demand.

SUBSEQUENT EVENTS

Termination of Ziglu Stock Purchase Agreement

On April 16, 2022, we entered into a definitive stock purchase agreement to acquire all outstanding equity of Ziglu Limited (“Ziglu”).

Advances of $ 12 million made to Ziglu during the year were accounted for as non-marketable equity securities under the fair value alternative, considering the securities lacked a readily determinable fair value.

In February 2023, we notified Ziglu of the termination

of the stock purchase agreement.

Due to this and other factors, we have adjusted the carrying value of our investment in Ziglu to zero as of December 31, 2022.

Market-Based RSUs Cancellation

In February 2023, we cancelled the 2021 Market-Based RSUs of 35.5 million unvested shares.

We expect to recognize approximately $ 485 million SBC expense related to the cancellation during the first quarter of 2023.

We will no longer be required to recognize any further SBC expense associated with these awards over future fiscal quarters upon the cancellation.

No other payments, replacement equity awards or benefits were granted in connection with the cancellation.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data