He used to serve on the SEC. Can he help Robinhood avoid its wrath?

Dan Gallagher is pushing back on accusations that Robinhood has turned trading into a game.

Robinhood Chief Legal Officer ​Dan Gallagher

As the online broker's top lawyer, Dan Gallagher is gearing up for big legal battles.

Photo: Robinhood

Dan Gallagher, Robinhood's chief legal officer, joined the company in the spring of 2020, just as the COVID crisis was giving the online brokerage an unexpected lift.

The lockdowns and sudden shift to remote work sparked a surge in users who turned to Robinhood to buy and sell stocks, turning investing into a pandemic pastime.

But that spike in traffic and users led to a big crisis. In January, the GameStop trading frenzy brought new force to claims that Robinhood had turned stock trading into a dangerous game.

Gallagher said nobody at the company saw that coming.

"I don't think too many people could have predicted the confluence of events like we had on Jan. 28, the idea of a band of retail traders getting together to short squeeze a hedge fund by buying the stock of companies who are suffering greatly because of the pandemic," he told Protocol.

But he argued that it's wrong to blame Robinhood for the GameStop fiasco. Gallagher also pushed back on criticisms of payment for order flow, the rebates Robinhood earns for sending trade orders to market makers, from which the company draws a big chunk of its revenue.

"It's a false narrative to say that payment for order flow or gamification or something else caused Jan. 28," he said. "If you take a step back, social media created a phenomenon that resulted in a lot of market activity. To me, it's an age-old issue. I mean it certainly is as old as the internet."

Gallagher has been around long enough to know how the internet has changed the way the stock market works, including as a federal regulator.

As an intern at the SEC in the 1990s, he worked on the Systems of Excellence insider trading case which involved promoters talking up the company's stock in online newsletters. Part of Gallagher's job was to dig up the online chatter related to the controversy.

"I had to read the Yahoo Finance chat board, trying to figure out who people were and all that," he said. "It was mind-numbing, some of it. But it's the same thing. It was people getting in a chat room, talking about stocks, sharing ideas and doing other things to drive activity. … What's changed, obviously, is just how much more pervasive it is."

Gallagher later served as an SEC commissioner from 2011 to 2015 before moving to the private sector; he worked briefly at law firm WilmerHale's securities practice before joining Robinhood.

As the online broker's top lawyer, he is gearing up for big legal battles. That includes possible showdowns with the SEC, now led by Gary Gensler, whom Gallagher got to know and even worked with during his time as a federal regulator. Gensler was a commissioner of the Commodity Futures Trading Commission when Gallagher was with the SEC.

"I've known Chairman Gensler for a really long time," Gallagher said. "I have a lot of respect for him."

Gensler could pose a major challenge to Robinhood. He has rattled the fintech world with strong signals that the ways by which fintech powerhouses, led by Coinbase and Robinhood, operate and make money are flawed.

Gensler has been particularly critical of the crypto industry, which has recently gone from a sideline to the main show in Robinhood's trading business. He recently compared stablecoins to "poker chips," and Coinbase recently cancelled a planned coin-lending service after the SEC threatened to sue the crypto marketplace. He has also spoken out against payment for order flow, even suggesting the agency could ban the practice, as some other countries have done.

In an interview with Protocol, Gallagher talked about this new potential challenge for Robinhood, how his SEC experience is helping him in his role and how his team plans to take on the legal fights ahead.

(This interview has been edited for brevity and clarity.)

What do you think of Gensler's stint as SEC chairman so far? There's a view that the agency is being too heavy-handed.

I've known Chairman Gensler for a really long time. I've known him since he started as CFTC chairman back in '09. I was a staffer at the SEC and got to know him in that capacity and then when I was on the commission, he was still chairman [of the CFTC] and we got to work together. So I think — I hope — I have a really good relationship with him. I have a lot of respect for him.

I'm sort of amazed by the breadth of his agenda. You know anyone who's been at the agency knows that it takes a really long time usually to get things done, especially on the rulemaking side. There's a lot of process and comment and meetings and study and all these things.

He's got an incredibly ambitious agenda that he put together and it's all so disparate as far as subject matter. It might be ESG [environmental, social and corporate governance] disclosure for public companies on one side and equity market structure issues on another and proxy advisory firms on another. It's really a very, very broad agenda, and I would say I don't think the SEC has had an agenda like this since Congress handed the agency 100-plus rulemakings in Dodd-Frank back in 2010.

The big issue for you is payment for order flow. Gensler has sent a strong signal that they could propose changes or even ban it. You said recently that you don't think that's going to happen. Can you elaborate on that?

It's certainly on the table. That was his phrase. So clearly the SEC will review this and maybe even make proposals in a rulemaking context that impact payment for order flow, up to and including banning. So all of that is clearly within the realm of potential here.

My point that I made is that I personally — and this is just given my personal experience at the SEC — believe that when they undertake the process that's required to create a rule, when they get comments and when they have meetings with the industry and others, I believe, based on what I've seen by way of evidence, that they're going to see that payment for order flow is very beneficial for retail investors. And when they see that they're not going to want to ban it.

Obviously, we are going to engage with the process and make sure our viewpoints and the viewpoints of our customers are heard and taken into account. I hope that that's where they end up, realizing the benefits of it and not trying to ban it.

What if they do ban payment for order flow? What would Robinhood do?

If that happens, we'll have to look obviously at the final rulemaking, the rationale, the analysis that underlie the decision. At that point, depending on how we feel about whether the decision was supported by the process, we would take whatever action is appropriate.

How do you respond to the main criticism of payment for order flow, that under this system, it is in Robinhood's interest to encourage clients to make as many trades as possible?

This is a statement about any agency business where it's transaction-related. If you think about the old system, where you had not only payment for order flow but commissions, if you earned $5 per trade, guess what? You wanted as many trades as possible. Any time you have transaction-based compensation, there is a potential conflict. Look back at the history of the SEC and all the churning cases that have been brought. Those are cases where brokers have traded actively in customer accounts simply to generate commissions, over time, that's something that needs to be looked at.

I will point out, though, that transaction-based compensation is probably the No. 1 [indicator] of what it means to be a broker under the securities laws. If you're collecting transaction-based compensation, especially in the context of a securities transaction, it's highly likely that you're going to be deemed to be a broker. And what comes with that is a ton of regulation. The FINRA rulebook is inches thick. You have the SEC rules. You have oversight by both FINRA and the SEC, and the states. If you're selling futures, you have the CFTC. There's so many layers of regulation to being a broker, and it's incumbent on the regulators to look for abuses of brokerage activity.

But the idea that payment for order flow is somehow novel in the world of transaction-related compensation is just silly. It's not novel at all.

It drew a lot of attention during the GameStop controversy in January which led to the view that investors who are new, young and inexperienced were getting swept up in a trading frenzy, and vulnerable to losing a lot.

I think it's a false narrative to say that payment for order flow or gamification or something else caused Jan. 28. If you take a step back and you look at it, social media created a phenomenon that resulted in a lot of market activity. If you're a policymaker, you're looking at it and saying, "Oh boy, I'm not gonna try to regulate social media. I'm not gonna try to regulate what people say consistent with their First Amendment rights."

I think this is a deflection, quite frankly, by folks to not let a good crisis go to waste. We have Jan. 28. We realize, "Oh gee, there was no collusion between retail firms like Robinhood and hedge funds. So let's move on to something else here." This is what the gadflies are saying: "What do we always want to take a look at? Payment for order flow and let's throw in gamification." It's a non sequitur to say it's tied to Jan. 28. I just don't agree with that.

Have there been efforts to have a dialogue with the SEC?

We're at the very beginning stages of conversations about payment for order flow, about gamification.

Have you had a conversation with Gensler about this, given that you know each other?

Not since he's been chairman, no.

Gallagher testifies at his 2011 confirmation hearing as an SEC commissioner nominee. Gallagher testifies at his 2011 confirmation hearing as an SEC commissioner nominee.Photo: Andrew Harrer/Bloomberg via Getty Images

You were a former SEC official. What lessons from that experience are most valuable for you in this role?

You know, being a commissioner, it's a crazy job. You sit atop an agency whose jurisdiction is incredibly broad. You have trading issues and asset management issues and corporate disclosure issues. There's just so many things that you're responsible for. As a commissioner, you're voting on the important issues. Unlike some in Washington, I like to know what I'm voting on before I vote on it. It was just a lot of hard work and a lot of reading and a real dependence on the quality staff that I have.

Being at Robinhood, being a chief legal officer, in some ways, is the same. There's just this incredible steady diet of things to deal with. It might be the Jan. 28 issue. It might be analyzing jurisdictions. There's so many things we're pulled into.

And I've been really proud to build an incredible team around me. I've gotten three new deputies who report to me on the legal side who are incredible. They've all been in place for almost a year. We've created a culture of excellence in our legal department. We have each other's backs and we demand from each other and from our department excellence in everything we do. It's been a thrill. I set out when I started in May of last year to build the best financial services legal department in the country. And I think we already have. We're still improving but I think it's a real quality team doing great work.

Are there strategies or tactics that some companies embraced when you were at the SEC which clearly were counterproductive that are top of mind for you today, that you stress to Vlad and Baijiu and your executive team, "We will not do this"?

Vlad [Tenev] and Baiju [Bhatt] have been very clear with me from Day One. Our first corporate value is called "Safety First." Safety First includes compliance. They have made it abundantly clear to me that compliance comes first. I've made it clear to my team and everyone cross-functionally that noncompliance is a non-starter with me.

We are all about compliance with the rules and laws. Where we see noncompliance, we fix it. We don't tolerate lingering noncompliance. You've seen us settle some regulatory matters that, in my view, reflect the old Robinhood because they weren't properly fairly ferreting out regulatory issues as they arose. That is not going to happen on my watch and I've gotten the full support of the founders and the rest of the C-team. If you talk to regulators, they'll tell you that they've seen a pretty noticeable difference at Robinhood. We're just working hard every day to earn their respect.

Let's go to the flip side of that question: Are there examples of companies that had productive and constructive relationships with the SEC when you were there that you think is sort of an example for you?

When I look back, there's companies that just represent in some ways the best of a given industry. I think of Vanguard, for example. I think of the seniormost leadership of Vanguard and how I enjoyed a relationship with them, exchanging information and ideas and getting color on the markets that they operate in, and getting a strong sense from them that compliance and regulatory relationships were key and critical. That was a big part of the trust they had with their customers.

For Robinhood, that would be a goal for me, to your point, to be the sort of standard-bearer, or at least a go-to firm that has the lens into the retail brokerage world, to be a trusted partner with the regulators for information, for color about market practices and things like that.

You joined Robinhood as the pandemic was escalating. That was also the time when retail investing was taking off, which led to the Jan. 28 controversy. How do you look back on the factors that led to that — social media, the pandemic, the pivot to remote work?

I don't think too many people could have predicted the confluence of events like we had on Jan. 28, the idea of a band of retail traders getting together to short squeeze a hedge fund by buying the stock of companies who are suffering greatly because of the pandemic given their business models.

It obviously started to get more and more in focus throughout the days of January. But I can't tell you anybody who saw this coming in 2020.

Clearly, many investors today are processing different types of information. They may not be reading financial filings or press releases. They're reacting to what they're reading or seeing on social media. Given your background, how do you reflect on that trend?

How would I view it if I was back in my old job?

Yeah, in a way.

To me, it's an age-old issue. I mean it certainly is as old as the internet. When I was an intern at the SEC, I worked on the Systems of Excellence case which was a pump-and-dump on the internet. I had to read the Yahoo Finance chat board, trying to figure out who people were and all that. It was-mind numbing, some of it. But it's the same thing. It was people getting in a chat room, talking about stocks, sharing ideas and doing other things to drive activity.

That was the goal. What do we have here with Reddit and WallStreetBets? I mean, very similar stuff. I think what's changed, obviously, is just how much more pervasive it is. It used to be that I had to go to the SEC and there was one computer terminal in the middle of our floor that had the internet. You went down and you would dial into it. Now you have it sitting on your phone. It's just so much more accessible and I think that's why there's so much more activity.

But the principles are the same. If you're on a chat board, if you're talking about a stock, if you're lying and misrepresenting in connection with the purchase or sale of a security, you're breaking the law. If you're not, you're fine. You're just exercising your First Amendment right.

You've got to go in there, figure out who's saying what, who they are. You've got to find trading records, and see if they were lying or not. It's just a grind. It's not an exciting thing for a young enforcement lawyer to be sitting there. I did it as an intern grinding through all this stuff.

Let's go to another issue: crypto. What is it that you're most worried about or watching more closely in this space?

Crypto, it's another vexing area in the sense that there's no existing legislative framework to regulate it. Crypto without any sort of organic legislation is hard to regulate. You have various regulators who are set up to do different things clawing away various pieces of jurisdiction. You have Chairman Gensler and the SEC bringing cases where they're saying that things that are otherwise crypto might be securities like in a lending capacity. That's sort of a developing area.

What is your own opinion of the issue related to Coinbase?

Oh, boy. Yeah, I'm loath to weigh in on someone else's public fight. I'm just happy it's not my public fight. I have enough of my own.

I'm fascinated by it. I can clearly see the frustration from the Coinbase side. On the flip side of it, based on what's publicly available — I know nothing other than what's publicly available — the SEC seems to have kind of operated in its traditional fashion and met with them and gave them an answer. Sometimes you get a lot of frustration when you're at the SEC, you meet with folks and you just don't give them an answer and the issue hangs out there. Kind of like the bitcoin ETFs. You have massive frustrations because they just don't have an answer.

Here they got an answer. So I don't know what else really the SEC owes them besides the answers. I see both sides of it.

I do think it's emblematic of the larger frustration related to the lack of clarity on regulation of crypto assets. I quite frankly think Congress owes everyone some clarity. I don't think the regulators sort of scratching and clawing away at jurisdiction is the best way to bring surety to the markets.

Hybrid work has some distinct advantages when it comes to onboarding.

Photo: LogMeIn

Jo Deal is the chief human resources officer at LogMeIn. She is responsible for leading global people strategy with a focus on attracting, developing and engaging talent.

The desire for change that sprung up during the pandemic resulted in the highest attrition levels in decades and a fierce war for talent playing out in the market. The Great Resignation forced managers to suddenly make hiring their top priority, and recruitment partners became everyone’s best friend as leaders scrambled to replace key roles within their teams.

Keep Reading Show less
Jo Deal
Jo Deal serves as LogMeIn’s Chief Human Resources Officer. She is responsible for leading global people strategy with a focus on attracting, developing and engaging world class talent by expanding LogMeIn’s reputation as one of tech’s most desirable career destinations, and by providing a collaborative learning environment where employees can grow their careers.
Sponsored Content

A CCO’s viewpoint on top enterprise priorities in 2022

The 2022 non-predictions guide to what your enterprise is working on starting this week

As Honeywell’s global chief commercial officer, I am privileged to have the vantage point of seeing the demands, challenges and dynamics that customers across the many sectors we cater to are experiencing and sharing.

This past year has brought upon all businesses and enterprises an unparalleled change and challenge. This was the case at Honeywell, for example, a company with a legacy in innovation and technology for over a century. When I joined the company just months before the pandemic hit we were already in the midst of an intense transformation under the leadership of CEO Darius Adamczyk. This transformation spanned our portfolio and business units. We were already actively working on products and solutions in advanced phases of rollouts that the world has shown a need and demand for pre-pandemic. Those included solutions in edge intelligence, remote operations, quantum computing, warehouse automation, building technologies, safety and health monitoring and of course ESG and climate tech which was based on our exceptional success over the previous decade.

Keep Reading Show less
Jeff Kimbell
Jeff Kimbell is Senior Vice President and Chief Commercial Officer at Honeywell. In this role, he has broad responsibilities to drive organic growth by enhancing global sales and marketing capabilities. Jeff has nearly three decades of leadership experience. Prior to joining Honeywell in 2019, Jeff served as a Partner in the Transformation Practice at McKinsey & Company, where he worked with companies facing operational and financial challenges and undergoing “good to great” transformations. Before that, he was an Operating Partner at Silver Lake Partners, a global leader in technology and held a similar position at Cerberus Capital LP. Jeff started his career as a Manufacturing Team Manager and Engineering Project Manager at Procter & Gamble before becoming a strategy consultant at Bain & Company and holding executive roles at Dell EMC and Transamerica Corporation. Jeff earned a B.S. in electrical engineering at Kansas State University and an M.B.A. at Dartmouth College.

Peloton’s terrible, horrible, no good, very bad year

2022 just started, and Peloton has already halted bike production and is talking about mass layoffs. How did the pandemic darling get here?

How did Peloton go from pandemic star to sinking ship? One answer is the classic problem of supply and demand.

Image: Peloton; Protocol

It’s been a hell of a ride for Peloton. The headlines have been practically nonstop, from 2019’s cringey wife ad to 2021’s series of unfortunate “Sex and The City” events. But in 2020, Peloton could do no wrong. The at-home fitness company saw a 172% spike in sales over the course of that year, buoyed by the pandemic forcing wealthy gym-goers to stay home.

But nothing is ever easy or certain when it comes to Peloton. In the past week, Business Insider reported that Peloton is considering laying off 41% of its sales and marketing staff and closing down stores. CNBC learned that the company has hired McKinsey & Co. to help cut costs. And yesterday, CNBC reported that Peloton is temporarily halting production of its bikes. Peloton shares promptly plunged 24%.

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at

Boost 2

Can Matt Mullenweg save the internet?

He's turning Automattic into a different kind of tech giant. But can he take on the trillion-dollar walled gardens and give the internet back to the people?

Matt Mullenweg, CEO of Automattic and founder of WordPress, poses for Protocol at his home in Houston, Texas.
Photo: Arturo Olmos for Protocol

In the early days of the pandemic, Matt Mullenweg didn't move to a compound in Hawaii, bug out to a bunker in New Zealand or head to Miami and start shilling for crypto. No, in the early days of the pandemic, Mullenweg bought an RV. He drove it all over the country, bouncing between Houston and San Francisco and Jackson Hole with plenty of stops in national parks. In between, he started doing some tinkering.

The tinkering is a part-time gig: Most of Mullenweg’s time is spent as CEO of Automattic, one of the web’s largest platforms. It’s best known as the company that runs, the hosted version of the blogging platform that powers about 43% of the websites on the internet. Since WordPress is open-source software, no company technically owns it, but Automattic provides tools and services and oversees most of the WordPress-powered internet. It’s also the owner of the booming ecommerce platform WooCommerce, Day One, the analytics tool and the podcast app Pocket Casts. Oh, and Tumblr. And Simplenote. And many others. That makes Mullenweg one of the most powerful CEOs in tech, and one of the most important voices in the debate over the future of the internet.

Keep Reading Show less
David Pierce

David Pierce ( @pierce) is Protocol's editorial director. Prior to joining Protocol, he was a columnist at The Wall Street Journal, a senior writer with Wired, and deputy editor at The Verge. He owns all the phones.


Netflix looks to expand gaming with major IP deals, Fortnite-like updates

Remarks made to investors and recent job postings hint at big ambitions for Netflix’s nascent gaming efforts.

Netflix may be taking some cues from games like Fortnite and Apex: Legends for its own video game initiative.

Photo: Cameron Venti/Unsplash

Two months after launching mobile games to all of its members, Netflix is looking to double down on gaming: The company told investors Thursday that it wants to expand its portfolio of games “across both casual and core gaming genres.” Recent job offers suggest that this could include both live services games as well as an expansion to PC and console gaming, and the company's COO hinted at major licensing deals ahead.

Keep Reading Show less
Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.


Tim Cook, Ted Cruz and the strange politics of tech antitrust

Democrats and Republicans have found the tech reform debate scrambles traditional party politics — and the Apple CEO and Texas senator have found themselves chatting.

The Senate Judiciary Committee advanced a bill on Thursday that could remake the tech industry.

Photo: PartTime Portraits/Unsplash

Strange alliances formed ahead of Thursday's vote to advance a key antitrust bill to the Senate floor, with frequent foes like Sens. Amy Klobuchar and Ted Cruz supporting the measure, and prominent Democrats including California Sen. Dianne Feinstein pushing back against it.

Ultimately the bill moved out of the Senate Judiciary Committee by a vote of 16-6 after a surprisingly speedy debate (at least, speedy for the Senate). Even some of the lawmakers who called for further changes agreed to move the bill forward — a sign that the itch to finally regulate Big Tech after years of congressional inaction is intensifying, even as the issue scrambles traditional party politics in a way that could threaten its final passage.

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

Latest Stories