Bloomberg Law
Dec. 21, 2021, 1:54 PM

Robinhood Fixer Dan Gallagher Takes On His Old Frenemy at SEC

Annie Massa
Annie Massa
Bloomberg News

Dan Gallagher and Gary Gensler used to catch the same commuter train to Washington -- Gallagher bound for one federal agency, Gensler for another.

Today, the commuting buddies from metro Baltimore are running on very different tracks.

Dan Gallagher
Photographer: Andrew Harrer/Bloomberg

A Republican, Gallagher has spun through Washington’s revolving door into a $30 million position as chief legal officer at Robinhood Markets Inc., whose free trading app has drawn millions of novice investors to meme stocks, cryptocurrencies and more, sometimes with devastating results.

Gensler, a Democrat, has moved up in Washington to become chair of the Securities and Exchange Commission -- with Robinhood, among other things, now firmly in his sights.

They’ve long been on opposite ends of the political spectrum, but developed a friendly rivalry as they debated the merits of imposing new constraints on Wall Street firms after the 2008 financial crisis.

Gary Gensler
Photographer: Evelyn Hockstein/Reuters/Bloomberg

That old familiarity occasionally breaks through, like when Gallagher refers to the SEC chief as “Gary” rather than “Chairman Gensler” in public appearances.

But make no mistake: It now falls to Gallagher, a former SEC commissioner himself, to protect Robinhood from the regulators looking to bridle it, including his old train pal.

“Everyone talks about how overly ambitious his agenda is, but I take it seriously,” Gallagher said in an interview.

Wall Street is bracing for the SEC to start cracking down on today’s wild, memefied markets. Everything from crypto to freewheeling special purpose acquisition companies, or SPACs, could face greater oversight in 2022.

That could weigh on Robinhood, which rode pandemic fads like GameStop Corp. and virtual token Dogecoin all the way to its own initial public offering. Shares of the brokerage have plunged 53% since their July debut, closing Monday at a record low.

Read more: Robinhood’s IPO Brings Broker That Wooed the Masses Full Circle

Now comes the hard part.

In hiring Gallagher, Robinhood got a lawyer with an insider’s view of the SEC -- and a lot of experience in damage control. At the SEC, in an earlier role, he worked to contain the fallout after Lehman Brothers collapsed. In the private sector, he helped Mylan Inc. navigate its scandal over EpiPen pricing.

“I’ve had some pretty stressful jobs,” Gallagher, 49, said via Zoom. “I wouldn’t say Robinhood is not stressful.”

He said it’s the best job he’s ever had, and it’s certainly a lucrative one. His pay package -- mostly in stock awards that will vest over the next few years -- was worth about $30 million at the time it was disclosed.

His first job at Robinhood was overhauling compliance and shepherding the company onto the stock market. He’s helped pilot the firm through the meme-stock craze, class-action lawsuits and a $70 million settlement with the brokerage industry’s regulator.

Read more: Robinhood’s Luster Stained Again With a Record $70 Million Fine

Robinhood has also been shelling out money in Washington, more than tripling its lobbying spending to more than $1 million this year, compared with 2020, according to data from OpenSecrets.

He made some big hires, too, including Lucas Moskowitz, a former partner at law firm WilmerHale who also served as ex-SEC Chair Jay Clayton’s chief of staff, as well as financial industry veterans Norm Ashkenas from Fidelity Investments and Kelly Zigaitis from Wells Fargo & Co., who run compliance for the brokerage and securities sides of the business.

“They had issues with the product” before Gallagher arrived, said Piper Sandler analyst Rich Repetto. “He gave the industry and the investment community a lot more comfort with Robinhood.”

Crypto Crackdown

Gallagher will need all the help he can get to beat back potential regulation. Three major areas of focus for Gensler’s SEC could be crucial to Robinhood’s fate: an evaluation of game-like features in investing apps, a reassessment of one critical way brokerages earn money, and a crackdown on cryptocurrencies.

“I don’t doubt that he has every intention of touching all of those issues,” Gallagher said.

An SEC spokesman declined to comment.

Like most lawyers, Gallagher isn’t afraid to get a little combative. Gensler has signaled that a ban on payment for order flow, a crucial revenue stream for Robinhood, is a possibility, as are rule changes on how brokerages engage users.

In both cases, Gallagher has reminded the SEC that Menlo Park, California-based Robinhood would consider legal action.

“I don’t want to sue the SEC -- I don’t want that posture at all with our main regulator,” he said. But he added: “I don’t want the SEC to promulgate rules that cause us to sue them.”

‘Pure Applesauce’

Gallagher was an SEC commissioner from 2011 through 2015, overlapping with Gensler’s tenure leading the Commodity Futures Trading Commission. They’d chat about rules and regulations on their train commute.

But the two have always had different political allegiances. Gallagher’s free market ideals are well known, while Gensler has made no secret about his inclination to rein in Wall Street.

In his four years as an SEC commissioner, Gallagher didn’t shy away from criticizing what he saw as regulatory overreach. He took a stand against rules on corporations disclosing the use of conflict minerals, for instance, and called rules about publishing CEO pay ratios “nakedly political” and, borrowing a line from late Supreme Court Justice Antonin Scalia, “pure applesauce.”

Still, Gallagher, a creature of Washington’s revolving door, is a smooth politician -- a conversationalist who can hold forth as easily on market structure arcana as his hometown football team, the Philadelphia Eagles, and defuse tense meetings with an easy smile.

In the trading industry, some refer to him as Robinhood’s “adult in the room.” He demurs.

“It’s this gray hair.”

To contact the reporter on this story:
Annie Massa in New York at

To contact the editors responsible for this story:
Sam Mamudi at

David Gillen, Peter Eichenbaum

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