OpenAI angrily criticized Robinhood for unauthorized stock tokenization, whose interests were touched?

Written by: Azuma, Odaily

With a series of moves to aggressively enter the "stock tokenization" market, Robinhood has dominated the headlines of major financial media over the past few days, and its stock price has even surpassed $100, setting a new historical high.

In addition to bringing listed stocks to the on-chain market through tokenization, Robinhood has also expanded the scope of stock tokenization to include unlisted private companies and will offer EU users tokens for the unlisted stocks of OpenAI and SpaceX. This move is widely interpreted by the market as Robinhood attempting to seize pricing power in the Pre-IPO market.

OpenAI condemns Robinhood for unauthorized actions

However, in the early hours of July 3, OpenAI officially clarified on X that: "These so-called OpenAI tokens are not equity in OpenAI. We have no collaboration with Robinhood, have not participated in this matter, and do not endorse it. Any transfer of OpenAI equity must be approved by us — we have not approved any transfers. Please be cautious."

In response to the criticism of OpenAI, Vlad Tenev, co-founder and CEO of Robinhood, posted on X: "In our recent cryptocurrency activities, we announced that we will be giving away limited OpenAI and SpaceX stock tokens to eligible European customers. Although technically, these tokens are not 'equity' (interested parties can check our terms for specifics), they actually provide retail investors with the opportunity to access these private assets. Our giveaway is a precursor to a grander plan. Since our announcement, we have received many letters from private enterprises eager to join us in participating in this tokenization revolution."

Regarding Vlad Tenev's description that "tokens are not equity", we found a more detailed explanation in Robinhood's product documentation: "Robinhood stock tokens track the prices of publicly traded stocks and ETFs; they are derivatives that track prices on the blockchain... When you purchase stock tokens, you are not buying actual stocks, but rather tokenized contracts that follow their prices and are recorded on the blockchain."

Core controversy: Can unlisted stocks be tokenized?

As two of the hottest companies in the current financial market, OpenAI's criticism of Robinhood quickly sparked heated discussions across the market. The focus of the discussions centered on — can shares of private companies like OpenAI and SpaceX, which are not publicly listed, be tokenized? Do platforms like Robinhood (or derivatives issuers) need authorization from the other party? Can private companies restrict the circulation of such tokenized stocks?

Odaily Note: It is worth mentioning that Elon Musk, who has a deep-seated grudge against OpenAI, today mocked OpenAI by saying it "only has fake stocks"... The enmity between Elon Musk and OpenAI is related to OpenAI's transformation from a non-profit organization to a for-profit entity, which has also become a highly watched case in the internet industry. Interested readers can search for more information on their own.

David Hoffman, the founder of Bankless, speculated that Robinhood may have reached an agreement with a wealthy investor holding shares in OpenAI / SpaceX — "Vlad Tenev specifically mentioned during his speech that there is a connection with a wealthy investor who owns shares in OpenAI / SpaceX, and these shares are likely still owned by that original investor (individual or entity). OpenAI may have also approved the original investor to sell their equity. In this case, Robinhood and the investor could sign a private agreement without the need for OpenAI's approval. Nevertheless, private companies like OpenAI can still refuse to allow their shares to be traded in accessible venues, which would be a real friction for Robinhood."

However, Dragonfly partner Rob Hadick believes that this model has another layer of potential risk, namely that private companies like OpenAI may refuse to recognize completed equity sale agreements under the guise of default: "OpenAI's clarification highlights another risk on the private company side that I did not mention yesterday, but these issues often arise in the secondary market. Private companies have no obligation to acknowledge the equity transfer rights you believe you possess — in fact, I recently stated in a closed-door meeting that I expect this inherent contradiction will lead more private companies to directly cancel equity sales that violate shareholder agreements. Overall, many issues with this generation of products remain to be resolved."

Venture capital lawyer Collins Belton provided a more detailed explanation on this matter. Collins stated that many lawyers outside the venture capital field believe that the primary restrictions on the operation of private and public stocks are imposed by securities laws and other regulations. While this is partly true, additional contractual obligations reached between shareholders and the company can also apply. For example, the company can reach an agreement with shareholders in the company's articles of association, memorandum, or terms that certain or all company shares cannot be "transferred" without the company's consent - "transfer" not only refers to an actual transfer but is usually defined quite broadly, encompassing everything from pledging to creating derivatives.

Collins added that popular Silicon Valley startups often impose secondary market restrictions through contracts in later stages. In early-stage companies, these restrictions may only apply to common stockholders, especially when venture capitalists have influence. However, as companies become highly popular and mature, they usually impose such restrictions on all shareholders, including well-known venture capitalists.

Collins also mentioned: "I was initially curious whether emerging stock token offerings like Robinhood and xStocks addressed this issue. I thought that with Robinhood's influence, they might have solved this potential problem, but based on OpenAI's statement, I doubt they did. They might be playing dumb, or they might genuinely not know about this limitation."

According to Collins' legal interpretation, if OpenAI indeed signed an additional agreement with investors regarding the restriction of share "transfer", then Robinhood's stock tokenization operation related to OpenAI (even in the derivative form as stated by Robinhood) should be restricted. Coupled with OpenAI's mention that "any equity transfer must be approved by us", it is very likely that such restriction agreements do exist at OpenAI—however, since Robinhood has not disclosed the specific source of these shares, the market is temporarily unable to determine the specific details of the agreement between OpenAI and the unknown investor.

The Game Behind: The Struggle for Pricing Power

OpenAI and Robinhood are publicly at odds, and neither side seems to be backing down. The reason for this is that behind the simple question of "Can stocks be tokenized?" lies a struggle for "IPO pricing power."

The founder of Huofeng Capital, Chen Yuetian, analyzed on his personal social circle: "After Robinhood purchased stocks from companies like OpenAI and SpaceX in the primary market, it issued tokenized STOs on its platform. It is important to note that OpenAI is not listed and has no IPO plans at this time. These belong to private equity, which ordinary people could not buy in the past due to insufficient funds, but now Robinhood has tokenized the equity after purchasing, directly pricing it in the secondary market. This is equivalent to a company having a tradable price without an IPO on any exchange. Moreover, since Robinhood purchased a small number of shares but there is a large amount of capital chasing after it, it will inevitably lead to an overvaluation of the shares, which in essence is seizing the pricing power of an IPO."

In traditional financial markets, the pricing of an IPO is dominated by the lead underwriter working with the company going public, and both parties will set the price based on various financing needs and development expectations. However, with the entry of Robinhood, which serves as a "catalyst," a secondary market has emerged for private equity that was previously inaccessible for public trading. Now, anyone, regardless of their financial capacity, can freely trade on-chain. This means that private equity will undergo ample price discovery before the IPO, and the pricing power will be stripped from the company going public and the lead underwriter, which is precisely what OpenAI does not want to see.

Retail Perspective: Can it still rise?

Given the current situation, when it comes to the tokenization of stocks that are already listed and have clearly public prices, platforms like Robinhood have some historical experience to draw upon, and the implementation path for this part is relatively simple; however, tokenizing the stocks of private companies like OpenAl and SpaceX is a path that has been explored by almost no one, and the solutions currently provided by Robinhood still contain a lot of uncertainty.

Dragonfly partner Rob Hadick stated: "Robinhood deliberately keeps extremely opaque the exact nature of derivatives, how they are hedged, who the counterparty is (where the equity comes from), and what legal recourse you have. Most importantly, private company equity is a type of asset derivative that does not have a public price, which includes a large number of securities/profit-sharing plans traded at different prices. Moreover, how derivatives are settled based on the actions of different underlying companies is also completely opaque."

From the perspective of retail investors, uncertainty may sometimes represent opportunity, but more often it points to risk.