Massachusett’s regulator looks set to sue financial exchange platform Robinhood. The basis is that it offers a gamification platform to Gen Z and Millennials with zero fees.
Robinhood has been around for several years now. The renowned financial services company has become overly popular in the past several weeks.
The American company headquartered out of California rose to prominence by offering a simple and effective trading platform with commission-free trading of stocks and cryptocurrencies. Following over five years of development and growth, the company’s app became one of the top mobile applications in the finance sector in 2021.
However, Robinhood could now be facing the might of William Galvin, the Secretary of the Commonwealth of Massachusetts. Galvin is not the U.S. Securities and Exchange Commission. But in the past, he won penalties against major corporations such as Morgan Stanley and Goldman Sachs.
Galvin and his office are suing Robinhood. Galvin claims that the trading platform violated state laws by focusing on the addictive rush of trading over helping new traders learn how to manage their investment decision properly.
The mobile app’s gamification lured in over six million new cryptocurrency users in the first two months of 2021.
Galvin believes the company has offered little focus on small traders’ success against the big fish of the financial trading realm. This sounds ironic considering the origins of the company’s name. Robinhood also used the tagline “democratizing finance.” However, Galvin believes this is just propaganda.
Robinhood’s Growth Due to Gen Z Interest in Trading
Robinhood has blown up in 2021 following the recent surge in stock trading. Specifically with the GameStop Reddit revolution, which saw the stock climb over 2,000%. Robinhood saw millennials and Gen Z traders buying the stock in droves on the mobile application.
The company even had to halt stocks’ trading due to what the company cited as “volatility”. The company prevented users from buying any more stocks. Instead, traders were only allowed to sell their positions in several stocks that had surged in price.
While Robinhood has been fined several times for business discrepancies, it believes it has done nothing wrong. But rather, it has saved Massachusetts customers between $180 to $360 million in trading costs since December 2017.
Galvin, however, does not believe the company has held to the state law of putting customers first. According to Galvin, Robinhood’s fiduciary responsibility to put customers’ interests above that of their own was violated.
Galvin may have a mountain to climb if he plans on suing the trading company. But that is what his forte has been since he joined the Massachusetts political space in 1975.
Robinhood could easily be in line for another major fine if Galvin has anything to do with it.