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Massachusetts regulators to start legal case against Robinhood

Alisha Roy

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Regulators in Massachusetts are planning to file a legal complaint against California-based trading app Robinhood. Authorities allege that the digital investment platform aggressively marketed to inexperienced investors without having any controls in place that offer to protect users, as reported by the Wall Street Journal

According to the report, Massachusetts Securities Division has accused Robinhood of “failing to protect its customers as well as their assets.” In addition to this, the draft of the complaint alleges Robinhood violated “state laws and regulations.”

Earlier this year, new regulations came into place that now requires brokers to act in their users’ best interest. However, the WSJ report said that a draft of the administrative complaint that runs for over 20-pages claimed:   

Robinhood exposed Massachusetts investors to “unnecessary trading risks” by “falling far short of the fiduciary standard…” 

A Robinhood spokeswoman claimed that the firm had not seen the complaint, but that it would continue to work closely with all regulators. She told the WSJ: 

Robinhood has opened up financial markets for a new generation of people who were previously excluded…We are committed to operating with integrity, transparency, and in compliance with all applicable laws and regulations.

Robinhood Markets, Inc. is registered with the US Security and Exchange Commission and enables its users to invest in stocks, ETFs, and options through Robinhood Financial and crypto trading through Robinhood Crypto.

The startup brokerage had announced in August that it raised $200 million in funding, which increased the firm’s valuation to $11.2 billion. However now, Robinhood boasts over 13 million client accounts, of which, those clients are offered to trade stocks and crypto, free of commission fees.

According to the complaint, Robinhood focused on the “gamification” of investing. Other accusations in the document also stated that several times, Robinhood has allowed investors with little or no experience to access trading tools. The report stated:

Like many brokerages, Robinhood makes money by […] sending customer orders to trading firms in return for cash payments. Robinhood prioritized its revenue over the best interest of its customers…


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Alisha is a full-time journalist at AMBCrypto. Her interests lie in blockchain technology, crypto-crimes, and market developments in Africa and the United States

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