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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
______________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from  ________ to ________
Commission File Number: 001-40691
______________________
Robinhood Markets, Inc.
(Exact name of registrant as specified in its charter)
______________________
Delaware 46-4364776
(State or other jurisdiction of
incorporation or organization)
 (IRS Employer
Identification No.)
85 Willow Rd
Menlo Park, CA 94025
(Address of principal executive offices, including zip code)
(844) 428-5411
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock
$0.0001 par value per share
HOODThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ý     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý     Accelerated filer o    Non-accelerated filer o  Smaller reporting company  Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  
As of July 28, 2023, the numbers of shares of the issuer’s Class A and Class B common stock outstanding were 784,178,895 and 127,168,211.




TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
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ITEM 1A.
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CAUTIONARY NOTE REGARDING FORWARD‑LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) of Robinhood Markets, Inc (together with its subsidiaries, “we”, “Robinhood”, or the “Company”) contains forward-looking statements (as such phrase is used in the federal securities laws), which involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “believe,” “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “estimate,” “predict,” “potential”, or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. This Quarterly Report includes, among others, forward-looking statements regarding:
our expectations regarding legal and regulatory proceedings and investigations;
our goal to offer brokerage services in the U.K. by the end of 2023 and our intent to continue expanding our operations outside of the United States;

our expectations for no credit losses for our held-to-maturity investments that are obligations of states and political subdivisions and securities issued by U.S. government sponsored agencies; and

our belief that, based on our current level of operations, our primary sources of liquidity will be adequate to meet our current liquidity needs for the next 12 months.
Our forward-looking statements are subject to a number of known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual future results, performance, or achievements to differ materially from any future results expressed or implied in this Quarterly Report. Reported results should not be considered an indication of future performance. Factors that contribute to the uncertain nature of our forward-looking statements include, among others:
our limited operating experience at our current scale;
the difficulty of managing our business effectively, including the size of our workforce, and the risk of continued declining or negative growth;
the fluctuations in our financial results and key metrics from quarter to quarter;
our reliance on transaction-based revenue, including payment for order flow (“PFOF”), and the risk of new regulation or bans on PFOF and similar practices;
our exposure to fluctuations in interest rates and rapidly changing interest rate environments;
the difficulty of raising additional capital (to provide liquidity needs and support business growth and objectives) on reasonable terms, if at all;
the need to maintain capital levels required by regulators and self-regulatory organizations (“SROs”);
the risk that we might mishandle the cash, securities, and cryptocurrencies we hold on behalf of customers, and our exposure to liability for processing, operational, or technical errors in clearing functions;
the impact of negative publicity on our brand and reputation;
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the risk that changes in business, economic, or political conditions that impact the global financial markets, or a systemic market event, might harm our business;
our dependence on key employees and a skilled workforce;
the difficulty of complying with an extensive, complex, and changing regulatory environment and the need to adjust our business model in response to new or modified laws and regulations;
the possibility of adverse developments in pending litigation and regulatory investigations;
the effects of competition;
our need to innovate and invest in new products and services in order to attract and retain customers and deepen their engagement with us in order to maintain growth;
our reliance on third parties to perform some key functions and the risk that processing, operational or technological failures could impair the availability or stability of our platform;
the risk of cybersecurity incidents, theft, data breaches, and other online attacks;
the difficulty of processing customer data in compliance with privacy laws;
our need as a regulated financial services company to develop and maintain effective compliance and risk management infrastructures;
the volatility of cryptocurrency prices and trading volumes;
the risk that our platform and services could be exploited to facilitate illegal payments; and
the risk that substantial future sales of Class A common stock in the public market, or the perception that they may occur, could cause the price of our stock to fall.
Because some of these risks and uncertainties cannot be predicted or quantified and some are beyond our control, you should not rely on our forward-looking statements as predictions of future events. More information about potential risks and uncertainties that could affect our business and financial results is included in the section of this Quarterly Report titled “Risk Factors” and our other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available on the SEC’s web site at www.sec.gov. Moreover, we operate in a very competitive and rapidly changing environment; new risks and uncertainties may emerge from time to time and it is not possible for us to predict all risks nor identify all uncertainties. The events and circumstances reflected in our forward-looking statements might not be achieved and actual results could differ materially from those projected in the forward-looking statements. Except as otherwise noted, all forward-looking statements are made as of the date we file this Quarterly Report, and are based on information and estimates available to us at this time. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Except as required by law, Robinhood assumes no obligation to update any of the statements in this Quarterly Report whether as a result of any new information, future events, changed circumstances, or otherwise. You should read this Quarterly Report with the understanding that our actual future results, performance, events, and circumstances might be materially different from what we expect.
We use the "Overview" tab of our Investor Relations website (accessible at investors.robinhood.com/overview) and its Newsroom, (accessible at newsroom.aboutrobinhood.com), as means of disclosing information to the public in a broad, non-exclusionary manner for purposes of the SEC’s Regulation Fair Disclosure (“Reg. FD”). Investors should routinely monitor those web pages, in addition to our press releases, SEC filings, and public conference calls and webcasts, as information posted on them could be deemed to be material information. Visitors to Robinhood’s blog, Under the Hood (accessible at
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blog.robinhood.com), which it had used for this purpose, will be redirected to its Newsroom. The contents of our websites are not intended to be incorporated by reference into this Quarterly Report or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

December 31,June 30,
(in millions, except share and per share data)20222023
Assets
Current assets:
Cash and cash equivalents$6,339 $5,829 
Cash segregated under federal and other regulations2,995 4,220 
Receivables from brokers, dealers, and clearing organizations76 117 
Receivables from users, net3,218 3,313 
Securities borrowed517 960 
Deposits with clearing organizations186 223 
Asset related to user cryptocurrencies safeguarding obligation8,431 11,503 
User-held fractional shares997 1,409 
Held-to-maturity investments 321 
Prepaid expenses86 88 
Other current assets72 123 
Total current assets22,917 28,106 
Property, software, and equipment, net146 131 
Goodwill100 100 
Intangible assets, net25 21 
Non-current held-to-maturity investments 165 
Non-current prepaid expenses17 6 
Other non-current assets132 131 
Total assets$23,337 $28,660 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses$185 $236 
Payables to users4,701 5,111 
Securities loaned1,834 2,982 
User cryptocurrencies safeguarding obligation
8,431 11,503 
Fractional shares repurchase obligation997 1,409 
Other current liabilities105 115 
Total current liabilities16,253 21,356 
Other non-current liabilities128 117 
Total liabilities16,381 21,473 
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock, $0.0001 par value. 210,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and June 30, 2023.
  
Class A common stock, $0.0001 par value. 21,000,000,000 shares authorized, 764,888,917 shares issued and outstanding as of December 31, 2022; 21,000,000,000 shares authorized, 782,433,899 shares issued and outstanding as of June 30, 2023.
  
Class B common stock, $0.0001 par value. 700,000,000 shares authorized; 127,862,654 shares issued and outstanding as of December 31, 2022; 700,000,000 shares authorized, 127,260,803 shares issued and outstanding as of June 30, 2023.
  
Class C common stock, $0.0001 par value. 7,000,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and June 30, 2023.
  
Additional paid-in capital11,861 12,581 
Accumulated other comprehensive income (loss) (3)
Accumulated deficit(4,905)(5,391)
Total stockholders’ equity
6,956 7,187 
Total liabilities and stockholders’ equity$23,337 $28,660 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
 June 30,
(in millions, except share and per share data)2022202320222023
Revenues:
Transaction-based revenues$202 $193 $420 $400 
Net interest revenues74 234 129 442 
Other revenues42 59 68 85 
Total net revenues318 486 617 927 
Operating expenses:
Brokerage and transaction 30 39 61 75 
Technology and development245 207 513 406 
Operations86 36 177 78 
Marketing23 25 55 51 
General and administrative226 159 494 806 
Total operating expenses610 466 1,300 1,416 
Other (income) expense, net2 (2)2 (2)
Income (loss) before income taxes(294)22 (685)(487)
Provision for (benefit from) income taxes1 (3)2 (1)
Net income (loss)$(295)$25 $(687)$(486)
Net income (loss) attributable to common stockholders:
Basic$(295)$25 $(687)$(486)
Diluted$(295)$25 $(687)$(486)
Net income (loss) per share attributable to common stockholders:
Basic$(0.34)$0.03 $(0.79)$(0.54)
Diluted$(0.34)$0.03 $(0.79)$(0.54)
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders:
Basic874,873,301 904,984,863 871,343,295 900,977,045 
Diluted874,873,301 921,269,749 871,343,295 900,977,045 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended
 June 30,
Six Months Ended
 June 30,
(in millions)2022202320222023
Net income (loss)$(295)$25 $(687)$(486)
Other comprehensive loss, net of tax:
Foreign currency translation  (1) 
Net loss on hedging instruments (3) (3)
Total other comprehensive loss, net of tax (3)(1)(3)
Total comprehensive income (loss)$(295)$22 $(688)$(489)
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
 June 30,
(in millions)20222023
Operating activities:
Net income (loss)$(687)$(486)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization29 35 
Provision for credit losses19 15 
Share-based compensation384 707 
Changes in operating assets and liabilities:
Securities segregated under federal and other regulations(20) 
Receivables from brokers, dealers, and clearing organizations(1)(41)
Receivables from users, net2,473 (111)
Securities borrowed(66)(443)
Deposits with clearing organizations39 (37)
Current and non-current prepaid expenses11 9 
Other current and non-current assets(9)(58)
Accounts payable and accrued expenses(7)51 
Payables to users(680)410 
Securities loaned(2,284)1,148 
Other current and non-current liabilities(27)(1)
Net cash provided by (used in) operating activities(826)1,198 
Investing activities:
Purchase of property, software, and equipment(19) 
Capitalization of internally developed software(14)(9)
Purchase of available-for-sale investments(27) 
Proceeds from maturities of available-for-sale investments5 10 
Purchase of held-to-maturity investments (485)
Proceeds from maturities of held-to-maturity investments 2 
Other(5) 
Net cash used in investing activities(60)(482)
Financing activities:
Proceeds from issuance of common stock under the Employee Stock Purchase Plan13 9 
Taxes paid related to net share settlement of equity awards(7)(5)
Payments of debt issuance costs(10)(10)
Draws on credit facilities11 10 
Repayments on credit facilities(11)(10)
Proceeds from exercise of stock options, net of repurchases5 2 
Net cash provided by (used in) financing activities1 (4)
Effect of foreign exchange rate changes on cash and cash equivalents  
Net increase (decrease) in cash, cash equivalents, segregated cash and restricted cash(885)712 
Cash, cash equivalents, segregated cash and restricted cash, beginning of the period10,270 9,357 
Cash, cash equivalents, segregated cash and restricted cash, end of the period$9,385 $10,069 
Cash and cash equivalents, end of the period$5,962 $5,829 
Segregated cash, end of the period3,400 4,220 
Restricted cash (current and non-current), end of the period23 20 
Cash, cash equivalents, segregated cash and restricted cash, end of the period$9,385 $10,069 
Supplemental disclosures:
Cash paid for interest$6 $6 
Cash paid for income taxes, net of refund received$3 $2 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited)

Common stockAdditional
paid-in
capital
Accumulated other comprehensive
income
Accumulated
deficit
Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmount
Balance as of March 31, 2022869,808,009 $ $11,400 $ $(4,269)$7,131 
Net loss— — — — (295)(295)
Shares issued in connection with stock option exercise, net of repurchases424,596 — 1 — — 1 
Issuance of common stock in connection with Employee Stock Purchase Plan1,529,727 — 13 — — 13 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld6,494,832 — (4)— — (4)
Share-based compensation— 0— 0171 0— 0— 171 
Balance as of June 30, 2022878,257,164 $ $11,581 $ $(4,564)$7,017 


Common stockAdditional
paid-in
capital
Accumulated other comprehensive lossAccumulated
deficit
Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmount
Balance as of March 31, 2023900,241,522 $ $12,462 $ $(5,416)$7,046 
Net income— — — — 25 25 
Shares issued in connection with stock option exercise, net of repurchases294,104 — 1 — — 1 
Issuance of common stock in connection with Employee Stock Purchase Plan1,225,069 — — — 9 — — — — 9 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld7,934,007 — (3)— — (3)
Change in other comprehensive loss— — — (3)— (3)
Share-based compensation— — 112 — — 112 
Balance as of June 30, 2023909,694,702 $ $12,581 $(3)$(5,391)$7,187 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.


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ROBINHOOD MARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited)

Common stockAdditional
paid-in
capital
Accumulated other comprehensive
income (loss)
Accumulated
deficit
Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmount
Balance as of December 31, 2021863,912,613 $ $11,169 $1 $(3,877)$7,293 
Net loss— — — — (687)(687)
Shares issued in connection with stock option exercise, net of repurchases1,862,954 — 5 — — 5 
Issuance of common stock in connection with Employee Stock Purchase Plan1,529,727 — 13 — — 13 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld10,951,870 — (7)— — (7)
Change in other comprehensive loss— — — (1)— (1)
Share-based compensation— — 401 — — 401 
Balance as of June 30, 2022878,257,164 $ $11,581 $ $(4,564)$7,017 


Common stockAdditional
paid-in
capital
Accumulated other comprehensive income (loss)Accumulated
deficit
Total stockholders’
(deficit) equity
(in millions, except for number of shares)SharesAmount
Balance as of December 31, 2022892,751,571 $ $11,861 $ $(4,905)$6,956 
Net loss— — — — (486)(486)
Shares issued in connection with stock option exercise, net of repurchases796,966 — 2 — — 2 
Issuance of common stock in connection with Employee Stock Purchase Plan1,225,069 — 9 — — 9 
Issuance of common stock upon settlement of restricted stock units, net of shares withheld14,921,096 — (5)— — (5)
Change in other comprehensive loss— — — (3)— (3)
Share-based compensation— — 714 — — 714 
Balance as of June 30, 2023909,694,702 $ $12,581 $(3)$(5,391)$7,187 
See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
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ROBINHOOD MARKETS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Robinhood Markets, Inc. (“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:
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 on our platform; and
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. 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 unaudited condensed 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), and 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.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC for interim financial reporting. The condensed consolidated financial statements are unaudited, and in management’s opinion, include all adjustments, including normal recurring adjustments and accruals necessary for a fair presentation of the results for the interim periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2023 or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”).
There have been no material changes in our significant accounting policies as described in our audited consolidated financial statements included in our 2022 Form 10-K. The unaudited condensed consolidated financial statements include the accounts of RHM and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.
Certain prior-period amounts have been reclassified to conform to the current period’s presentation. The impact of these reclassifications is immaterial to the presentation of the unaudited condensed
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consolidated financial statements and had no impact on previously reported total assets, total liabilities and net loss.
During the three months ended March 31, 2023, we reorganized our management reporting structure from a single entity-level reporting unit into four reporting units. As a result, we performed a goodwill impairment assessment immediately before and after the reorganization. This quantitative assessment did not result in impairment, considering the fair value of each reporting unit was substantially in excess of the corresponding carrying amount of net assets. We continue to operate and report financial information in one operating segment.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the unaudited condensed 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 unaudited condensed 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, determination of hedge effectiveness, 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.
Concentrations of Revenue and Credit Risk
Concentrations of Revenue
We derived transaction-based revenues from individual market makers in excess of 10% of total revenues, as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202320222023
Market maker:
Citadel Securities, LLC19 %12 %21 %13 %
Entities affiliated with Susquehanna International Group, LLP(1)
9 %3 %11 %4 %
B2C2 USA Inc.10 %2 %9 %2 %
All others individually less than 10%25 %21 %27 %22 %
Total as percentage of total revenue:63 %38 %68 %41 %
________________
(1)Consists of Global Execution Brokers, LP and G1 Execution Services, LLC

Concentrations of Credit Risk
We are engaged in various trading and brokerage activities in which the counterparties primarily include broker-dealers, banks, and other financial institutions. In the event our counterparties do not fulfill their obligations, we may be exposed to risk. 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. It is our policy to review, as necessary, the credit standing of each counterparty.
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In March 2023, certain U.S. banks failed and were taken over by the U.S. Federal Deposit Insurance Corporation (“FDIC”). Our exposure to impacted U.S. banks was immaterial. However, we took steps to help ensure that the loss of all or a significant portion of any uninsured amount would not have had an adverse effect on our ability to pay our operational expenses or make other payments.
Investments
We invest in marketable debt securities and determine the classification at the time of purchase.
Available-for-sale investments are recorded at fair value. We have elected the fair value option for our available-for-sale investments as we believe carrying these investments at fair value and taking changes in fair value through earnings best reflects their underlying economics. Fair value adjustments are presented in other expense (income), net and interest earned on the debt securities as net interest revenues in our unaudited condensed consolidated statements of operations.
Held-to-maturity investments are securities that we have both the ability and positive intent to hold until maturity and are recorded at amortized cost. Interest income is calculated using the effective interest method, adjusted for deferred fees or costs, premium, or discount existing at the date of purchase. Interest earned is included in net interest revenues in our unaudited condensed consolidated statements of operations. We evaluate held-to-maturity investment for credit losses on a quarterly basis. We do not expect credit losses for our held-to-maturity investments that are obligations of states and political subdivisions and securities issued by U.S. government sponsored agencies. We monitor remaining securities by type and standard credit rating. There was no reserve for credit losses as of June 30, 2023.
Derivatives and Hedging Activities
All derivatives are recorded at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate the derivative in a hedging relationship and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting if elected. As part of our interest rate risk management strategy, we use interest rate floors designated as cash flow hedges which involve the receipt of offsetting cash flows from a counterparty if interest rates fall below the strike rate on the contract in exchange for an up-front premium. Changes in fair value of the cash flow hedges are recognized in accumulated other comprehensive income (“AOCI”) and are subsequently reclassified to net interest revenues as interest payments are received on the hedged item. We assess hedge effectiveness on a quarterly basis to ensure all hedges remain highly effective. If the derivative financial instruments designated as cash flow hedges are deemed ineffective, changes in the fair value of the derivative financial instrument are recognized directly in net interest revenues.
We are exposed to credit risk if counterparties to our derivative contracts do not perform pursuant to the terms of our interest rate floors. Should a counterparty fail to perform under the terms of our interest rate floors, our credit exposure is limited to the net positive fair value and accrued interest owed from the failing counterparty. We mitigate counterparty credit risk through credit approvals, credit limits and monitoring procedures, as appropriate.

We enter into master netting agreements with counterparties that permit the net settlement of amounts owed under the derivative contracts. The master netting agreements generally provide for net settlement of all outstanding contracts with a counterparty in the case of an event of default or a termination event. We do not offset fair value amounts recognized for derivative instruments under master netting arrangements. Our derivative contracts do not require collateral to be posted by us or the counterparties.

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NOTE 2: RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
There are no recently adopted accounting pronouncements that are material to us as of June 30, 2023.
Recently Issued Accounting Pronouncements Not Yet Adopted
There are no new accounting pronouncements that we have not yet adopted that are material to us as of June 30, 2023.
NOTE 3: BUSINESS COMBINATIONS
Acquisition of X1
On June 21, 2023, we entered into a definitive agreement to acquire all of the outstanding equity of X1 Inc. (“X1”), a U.S.-based company that offers a no-fee credit card with rewards on each purchase. The aggregate consideration to be paid in cash is approximately $104 million, subject to customary purchase price adjustments set forth in the definitive agreement and customary closing conditions.
On July 3, 2023, we completed the acquisition of X1. We are currently evaluating purchase price allocation.

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NOTE 4: REVENUES
Disaggregation of Revenues
The following table presents our revenue disaggregated by revenue source:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in millions)2022202320222023
Transaction-based revenues:
Options$113$127$240$260
Cryptocurrencies583111269
Equities29256552
Other210319
Total transaction-based revenues202193420400
Net interest revenues:
Interest on corporate cash and investments
107411142
Margin interest395774110
Interest on segregated cash and cash equivalents and deposits652797
Securities lending, net23274753
Cash sweep229251
Interest expenses related to credit facilities(6)(5)(12)(11)
Total net interest revenues74234129442
Other revenues42596885
Total net revenues$318$486$617$927
For our fully-paid securities lending program under which we borrow fully-paid shares from participating users and lend them to third parties (“Fully-Paid Securities Lending”), we earn revenue for lending certain securities based on demand for those securities and portions of such revenues are paid to participating users, and those payments are recorded as interest expense. For the three and six months ended June 30, 2023, such interest revenue earned was $13 million and $23 million and such interest expenses paid to participating users was $1 million and $3 million. The program was launched during the three months ended June 30, 2022 and such interest revenue earned and interest expenses paid to participating users in those periods were immaterial.
Contract Balances
Contract receivables are recognized when we have an unconditional right to invoice and receive payment under a contract and are derecognized when cash is received. Transaction-based revenue receivables due from market makers are reported in receivables from brokers, dealers, and clearing organizations while other revenue receivables related to proxy revenues due from issuers are reported in other current assets on the unaudited condensed consolidated balance sheets.
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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 unaudited condensed consolidated balance sheets.
The table below sets forth contract receivables and liabilities for the period indicated:
(in millions)Contract ReceivablesContract Liabilities
Beginning of period, January 1, 2023$60 $3 
End of period, June 30, 2023101 3 
Changes during the period$41 $ 
The difference between the opening and ending balances of our contract receivables primarily results from increased revenues from our proxy services and timing differences between our performance and counterparties’ payments. We recognized all revenue from amounts included in the opening contract liability balances in the six months ended June 30, 2023.
NOTE 5: RESTRUCTURING ACTIVITIES
April 2022 Restructuring
On April 26, 2022, we announced a reduction in force (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 12 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.

NOTE 6: ALLOWANCE FOR CREDIT LOSSES
Our allowance for credit losses relates to unsecured balances of receivables from users due to Fraudulent Deposit Transactions, losses on margin lending, and reserves on proxy revenue receivables. Fraudulent Deposit Transactions occur when users initiate deposits into their accounts, make trades on our platform using a short-term extension of credit from us, and then repatriate or reverse the deposits, resulting in a loss to us of the credited amount. The following table summarizes the allowance for credit losses:
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Three Months Ended
June 30,
Six Months Ended
June 30,
(in millions)2022202320222023
Beginning balance$20 $20 $40 $18 
Provision for credit losses11 6 19 15 
Write-offs(13)(6)(41)(13)
Ending balance$18 $20 $18 $20 
NOTE 7: INVESTMENTS AND FAIR VALUE MEASUREMENT
Investments
Available-for-sale
At December 31, 2022, our available-for-sale investments, which are included in other current assets on the audited consolidated balance sheets, was $10 million with no significant unrealized gains or losses. These investments had a stated contractual maturity or redemption date within one year. As of June 30, 2023, we had no available-for-sale investments. Refer to Fair Value of Financial Instruments below for further details.
Held-to-maturity
We had no held-to-maturity investments as of December 31, 2022. The following table summarizes our held-to-maturity investments as of June 30, 2023:
June 30, 2023
(in millions)Amortized CostAllowance for Credit LossesUnrealized GainsUnrealized LossesFair Value
Debt securities:
Corporate debt securities$243 $ $ $(2)$241 
U.S. Treasury securities103    103 
Certificates of deposit54    54 
U.S. government agency securities43    43 
Commercial paper43    43 
Total held-to-maturity investments$486 $ $ $(2)$484 
There were no sales of held-to-maturity investments during the six months ended June 30, 2023.
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The table below presents the amortized cost and fair value of held-to-maturity investments by contractual maturity and the maximum maturity per security is two years:
June 30, 2023
(in millions)Within 1 Year1 to 2 YearsTotal
Amortized cost
Debt securities:
Corporate debt securities$108 $135 $243 
U.S. Treasury securities75 28 103 
Certificates of deposit54  54 
U.S. government agency securities41 2 43 
Commercial paper43  43 
Total held-to-maturity investments$321 $165 $486 
Fair value
Debt securities:
Corporate debt securities$107 $134 $241 
U.S. Treasury securities75 28 103 
Certificates of deposit54  54 
U.S. government agency securities41 2 43 
Commercial paper43  43 
Total held-to-maturity investments$320 $164 $484 
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Fair Value of Financial Instruments
Financial assets and liabilities measured at fair value on a recurring basis were presented on our unaudited condensed consolidated balance sheets as follows:
December 31, 2022
(in millions)Level 1Level 2Level 3Total
Assets
Cash equivalents:
Money market funds$735 $ $ $735 
Other current assets:
Available-for-sale investments:
Commercial paper 5  5 
Government bonds3   3 
Corporate bonds 2  2 
Equity securities - securities owned8   8 
Asset related to user cryptocurrencies safeguarding obligation 8,431  8,431 
User-held fractional shares997   997 
Total financial assets$1,743 $8,438 $ $10,181 
Liabilities
User cryptocurrencies safeguarding obligation$ $8,431 $ $8,431 
Fractional share repurchase obligations997   997 
Total financial liabilities$997 $8,431 $ $9,428 
June 30, 2023
(in millions)Level 1Level 2Level 3Total
Assets
Cash equivalents:
Money market funds$251 $ $ $251 
Other current assets:
Stablecoin10   10 
Equity securities - securities owned9   9 
Asset related to user cryptocurrencies safeguarding obligation 11,503  11,503 
User-held fractional shares1,409   1,409 
Total financial assets$1,679 $11,503 $ $13,182 
Liabilities
User cryptocurrencies safeguarding obligation$ $11,503 $ $11,503 
Fractional share repurchase obligations1,409   1,409 
Total financial liabilities$1,409 $11,503 $ $12,912 
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The fair value for certain financial instruments that are not required to be measured or reported at fair value was presented on our unaudited condensed consolidated balance sheets as follows:
June 30, 2023
(in millions)Level 1Level 2Level 3Total
Assets
Held-to-maturity investments:
Corporate debt securities$ $241 $ $241 
U.S. Treasury securities103   103 
Certificates of deposit 54  54 
U.S. government agency securities 43  43 
Commercial Paper 43  43 
Total financial assets$103 $381 $ $484 
The fair values used for held-to-maturity investments are obtained from an independent pricing service and represent fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatility, relevant yield curves, credit spreads and prices from market makers and live trading systems. Management reviews the valuation methodology and quality controls utilized by the pricing services in management's overall assessment of the reasonableness of the fair values provided.
During the six months ended June 30, 2023, we did not have any transfers in or out of Level 3 assets or liabilities.
Safeguarded user cryptocurrencies
Safeguarded user cryptocurrencies were as follows:
December 31,June 30,
(in millions)20222023
Bitcoin (BTC)$2,327 $4,241 
Ethereum (ETH)2,341 3,398 
Dogecoin (DOGE)2,802 2,626 
Other961 1,238 
Total user cryptocurrencies safeguarding obligation and corresponding asset$8,431 $11,503 
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 and June 30, 2023.
NOTE 8: DERIVATIVES AND HEDGING ACTIVITIES
As of June 30, 2023, we had two interest rate floors that were designated as cash flow hedges of interest rate risk associated with our margin receivables. One interest rate floor with a notional amount of $2 billion was effective as of June 30, 2023 and another with a notional amount of $1 billion will be effective in the first quarter of 2024. Both interest rate floors have a maturity of six months.

As of June 30, 2023, the fair value of hedging instruments was immaterial and included in other current assets in our unaudited condensed consolidated balance sheets. We had no derivatives and hedging activities during the year ended December 31, 2022.

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Amounts reported in AOCI related to interest rate floors will be reclassified to net interest revenues as interest payments are received or paid on the hedged items. During the next 12 months, we expect to reclassify $4 million of losses from AOCI as a reduction to net interest revenues. As of June 30, 2023, we hedged our exposure to the variability in future cash flows for forecasted transactions over a maximum period of one year.
The following table summarizes the amount of gain or loss recognized in AOCI on our unaudited condensed consolidated financial statements:

Three Months Ended
June 30,
Six Months Ended
June 30,
(in millions)2022202320222023
Derivatives designated as hedging instruments:
Loss on derivatives included in effectiveness assessment$ $(3)$ $(3)

The following table summarizes the components of AOCI related to hedging activities on our unaudited condensed consolidated financial statements:

Three Months Ended
June 30,
Six Months Ended
June 30,
(in millions)2022202320222023
Beginning balance$ $ $ $ 
Other comprehensive loss before reclassifications, net of tax (3) (3)
Reclassification adjustment for net losses included in net interest revenues, net of tax    
Other comprehensive loss after reclassifications, net of tax$ $(3)$ $(3)
Ending balance$ $(3)$ $(3)

NOTE 9: INCOME TAXES
Three Months Ended
June 30,
Six Months Ended
June 30,
(in millions, except percentages)2022202320222023
Income (loss) before income taxes$(294)$22 $(685)$(487)
Provision for (benefit from) income taxes1 (3)2 (1)
Effective tax rate(0.3)%(15.7)%(0.3)%0.2 %
Our tax provision for interim periods is determined using an estimated annual effective tax rate (“ETR”), adjusted for discrete items arising in the period. In each quarter, we update our estimated annual ETR and make a year-to-date calculation of the provision.
For the three and six months ended June 30, 2022, the ETR was lower than the U.S. federal statutory rate primarily due to the full valuation allowance on our U.S. federal and state deferred tax assets offset by current state taxes payable.
For the three months ended June 30, 2023, the ETR was lower than the U.S. federal statutory rate primarily due to the change in business operations related to our ongoing efficiency efforts. For the six months ended June 30, 2023, the ETR was lower than the U.S. federal statutory rate primarily due to the
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non-deductible cancellation of the 2021 Founders Award Cancellation, and the change in valuation allowance on our U.S. federal and state deferred tax assets offset by our current taxes payable.
The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence during the six months ended June 30, 2023, we believe it is more likely than not that the tax benefits of the remaining U.S. net deferred tax assets may not be realized.
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. The annual limitation may result in the expiration of net operating losses and tax credits before utilization.
NOTE 10: 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 unaudited condensed consolidated balance sheets.
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The following tables set forth certain balances related to our securities borrowing and lending activities as of December 31, 2022 and June 30, 2023:
December 31,June 30,
(in millions)20222023
AssetsSecurities borrowed
Gross amount of securities borrowed$517 $960 
Gross amount offset on the consolidated balance sheets  
Amounts of assets presented on the consolidated balance sheets517 960 
Gross amount of securities borrowed not offset on the consolidated balance sheets:
Securities borrowed517 960 
Security collateral received(509)(951)
Net amount$8 $9 
LiabilitiesSecurities loaned
Gross amount of securities loaned$1,834 $2,982 
Gross amount of securities loaned offset on the consolidated balance sheets  
Amounts of liabilities presented on the consolidated balance sheets1,834 2,982 
Gross amount of securities loaned not offset on the consolidated balance sheets:
Securities loaned1,834 2,982 
Security collateral pledged(1,629)