This morning, Robinhood Markets shares dropped more than 2% in premarket trading after the company’s cryptocurrency division was hit with a “Wells Notice.” Filed by the U.S. Securities and Exchange Commission on Saturday, the notice is a formal warning that the SEC intends to take civil action against Robinhood.

Here’s everything you need to know.

What does the Wells Notice mean?

A Wells Notice is a written statement (or sometimes a phone call) informing its recipient that the SEC has concluded an investigation against them and plans to follow up with some kind of enforcement action. The notice lays out some of the reasoning behind the proposed action, as well as the forms that it might take (like injunction, penalties, and bars).

Typically, the concerned party has less than a month to respond to the Wells Notice with a “Wells Submission”: a written or oral statement providing legal evidence to refute the SEC’s argument. While it’s tricky to actually convince the SEC against bringing a case, the submission can allow the recipient to point out weaknesses in the agency’s argument or begin to discuss settlement options. However, any response is not confidential and can be used as evidence in court.

A Wells Notice is not required, but it’s considered standard practice for the SEC.

Why is Robinhood receiving this notice?

According to the notice, Robinhood has complied with earlier subpoenas from the SEC regarding its “cryptocurrency listings, custody of cryptocurrencies, and platform operations.” Through its subsequent investigation, the SEC said that it found Robinhood in violation of Sections 15(a) and 17A of the Securities Exchange Act of 1934. In general, the SEC’s argument is that certain cryptocurrency tokens are securities and therefore should be registered with the agency, and Robinhood has failed to register some of its assets.

The SEC’s potential action against Robinhood, it said, “may involve a civil injunctive action, public administrative proceeding, and/or a cease-and-desist proceeding and may seek remedies that include an injunction, a cease-and-desist order, disgorgement, pre-judgment interest, civil money penalties, and censure, revocation, and limitations on activities.”

What happens now?

In response to the Wells Notice, Robinhood published its own statement this morning. Dan Gallagher, chief legal, compliance, and corporate affairs officer, rebutted the idea that Robinhood’s cryptocurrency assets are securities.

“After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business,” Gallagher said. “We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law.”

The response went on to assure customers that “this development will not affect your account or the services we provide.” However, it may be several weeks before the public has a better idea of the Wells Notice’s impact on the company, depending on whether the SEC moves forward with its civil action.