I think there's a lot the SIPC president can do if they believe a product doesn't fall under their jurisdiction. Specifically, he can decide SIPC won't act when the firm goes belly up. Disagree with that interpretation? Well the firm doesn't exist any more, they can't fight it. Feel free to mount your own legal offensive against SIPC. If you can get to your money.

But that aside, here's the point you're missing: Robinhood is marketing this as a product that can be used independently of brokerage purposes. SIPC covers brokerage firms and, yes, cash in such accounts. But the SIPC president is arguing that it's not a brokerage account if it's marketed as an independent product for people with no intention of using it as such.