Robinhood Settles with Massachusetts Regulator-'Gamification' Case
Robinhood, a popular cryptocurrency and stock trading app, has settled an enforcement action with the Massachusetts securities regulator for $7.5 million. The case, initiated by Massachusetts’ Secretary of the Commonwealth William Galvin in December 2020, revolved around allegations of Robinhood marketing its platform akin to a game, particularly targeting inexperienced investors.
The resolution, announced on January 18th, involves Robinhood paying a hefty penalty and overhauling its digital engagement practices. Galvin had claimed that Robinhood's approach to trading crypto and stocks was akin to "some sort of game that you might be able to win," proposing to revoke the firm's broker-dealer license in Massachusetts.
Lucas Moskowitz, Robinhood's deputy general counsel and head of government affairs, stated that the settlement puts to rest historical matters dating back to 2021, which do not reflect the company's current operations. Robinhood remains committed to providing market access to its Massachusetts customers.
This settlement concludes a nearly three-year legal battle between Robinhood and the Massachusetts regulator. Following the initial complaint in December 2020, Robinhood sued Galvin’s office to overturn the rule it was accused of violating. The case made its way back to court in 2023 following an appeal.
As part of the settlement, Robinhood is also required to address serious cybersecurity issues. The trading firm has disputed the claim that its app was "gamified" but acknowledges having taken significant steps to address cybersecurity concerns since 2021.
Additionally, the Massachusetts securities regulator ordered Robinhood to cease the use of certain engagement practices for Massachusetts customer accounts. These include the elimination of celebratory imagery tied to trading frequency, specific push notifications, and features resembling games of chance. The company must also include disclosures in its lists and hire an independent compliance consultant to evaluate other digital engagement practices.
This settlement follows a series of regulatory challenges for Robinhood. In 2021, the Financial Industry Regulatory Authority fined the firm approximately $70 million for causing harm to thousands of users. In April 2023, Robinhood reached a $10 million settlement with securities regulators in multiple states over allegations of client service failures and system outages.
Disclaimer: Please note that the information provided in this article is based on the referenced research articles. It is essential to conduct further research and analysis before making any investment decisions. The cryptocurrency market is highly volatile, and investors should exercise caution and consult with financial professionals before engaging in cryptocurrency trading or investment activities.
