Robinhood, a trading platform with 13 million users, is being accused of making it a little too easy for inexperienced investors to make unlimited trades. The Secretary of the Commonwealth of Massachusetts alleges in a complaint that the firm doesn’t adequately screen its investors and takes issue with Robinhood’s gamification strategies.
“Confetti rains down on the screen of the app after each trade and customers are encouraged to interact with the app repeatedly to move up a waitlist for early access to new products,” the complaint states.
The company denies the allegations.
“We disagree with the allegations in the complaint by the Massachusetts Securities Division and intend to defend the company vigorously,” a Robinhood spokesperson said in a statement to the trade publication Investment News. “Robinhood is a self-directed broker-dealer and we do not make investment recommendations.”
Robinhood has grown to 13 million users since its founding in 2013. The users’ average age is 31 and 68% report having little or no previous investment experience.
In June, a 20-year-old Robinhood trader, Alexander Kearns, died in an apparent suicide after mistakenly thinking he had lost $730,000 in a series of trades. In press reports, Kearns’ family criticized Robinhood for not doing enough to explain the intricacies of options trading.
Robinhood has also taken heat for outages on its platform, an issue also raised in the Massachusetts complaint. The complaint asks that Robinhood be ordered to hire an independent compliance consultant to tighten up its procedures.