eToro Acquires TradeZero for $231M to Navigate Crypto Regulatory Constraints

eToro Makes Strategic US Bet with TradeZero Acquisition

According to an announcement by eToro Group Ltd., as reported by Decrypt, the crypto-friendly trading platform has agreed to acquire TradeZero, a US-focused online brokerage specializing in active traders, for up to $231 million. The acquisition will be structured as a combination of cash and up to 2.5 million newly issued Class A common shares, subject to customary adjustments, with the transaction expected to close during the first half of 2027.

Gaining Infrastructure and Market Access

TradeZero, established in 2015, operates commission-free US stock and options trading platforms through its broker-dealer subsidiaries, with a presence spanning the United States, Canada, and international markets. The company generated approximately $80 million in revenue over the last twelve months with gross margins of 81 percent. For eToro, the acquisition provides access to crucial infrastructure including next-generation trading platforms, established broker-dealer operations, and an engaged community of active traders. The deal also grants eToro a pathway into the Canadian market, an area where the platform previously lacked direct presence. In a statement, eToro emphasized that the acquisition accelerates the company’s ability to launch new products for US customers and strengthens its overall platform capabilities.

Navigating Regulatory Constraints

The acquisition underscores eToro’s ongoing challenge in the US cryptocurrency market. Following a 2021 settlement with the Securities and Exchange Commission, eToro’s American users face significant restrictions—they can only trade Bitcoin, Ethereum, and Bitcoin Cash, with a 180-day window mandated to sell other digital assets. This regulatory constraint has pushed eToro to explore alternative strategies, including its $70 million acquisition of self-custody wallet firm Zengo and trials of tokenized stocks on Ethereum that offer around-the-clock trading. The TradeZero acquisition represents a more dramatic pivot toward traditional equities, positioning eToro to compete directly with larger brokers like Robinhood in the US market.

Market reaction to the announcement proved disappointing for eToro shareholders. The company’s stock, trading under ticker ETOR, dropped more than 10 percent during Tuesday’s trading session, falling to a low of $30.11 and ending the day down approximately 10.5 percent. This decline came despite eToro beating second-quarter earnings expectations with earnings per share of $0.68 against consensus estimates of $0.61. The selloff was partly attributed to ongoing headwinds from the cryptocurrency bear market affecting the company’s overall sentiment.

As regulatory constraints tighten around US crypto trading, major platforms like eToro must diversify into traditional equities to maintain growth and relevance in the market.

Source: eToro, via Decrypt. Not financial advice.