Massachusetts is trying to ban Robinhood from the state
Regulators say the company is targeting young, inexperienced investors.
Super popular investing app Robinhood is having more legal problems in the state of Massachusetts. State regulators are looking to revoke the company’s broker-dealer license, an escalation of the battle that has been going on for months concerning the company’s marketing strategies.
The issues in Massachusetts all started a few months ago, with state regulators filing a 24-page complaint against the company. In the complaint, regulators claim that Robinhood maliciously targeted inexperienced traders using gimmicks like exploding confetti, which would make the app exciting to new, younger users. In the time since the original complaint was filed, the company said that they will be removing some of these features that may have made investing seem more like a game.
Additionally, regulators claim that Robinhood has failed to account for fractional shares traded on the platform. According to regulators, failure to do this means that Robinhood has proven itself incapable of following the most basic requirements.
Robinhood released a statement responding to the amended complaint filed recently. The company’s CEO, Vlad Tenev, noted in a blog post on the company’s website:
“The Massachusetts Securities Division’s attempt to prevent Massachusetts residents from choosing how they invest is elitist and against everything we stand for. We don’t believe our customers are naive as the Massachusetts Securities Division paints them to be.”
The company claims that this complaint is a complete overreach of the state regulators’ powers. By getting rid of Robinhood in Massachusetts, the company claims that regulator would be setting the state’s residents back in time, by taking away a tool that brings investing to more people. The company also filed a complaint and motion with the Massachusetts State Court to stop the regulators’ case.
This is just the latest in a long line of negative PR for Robinhood. Recently, there was an issue with the platform restricting buying and selling while stocks like GameStop soared. The company was recently fined $65 million by the SEC, and the company was also sued by the parents of a 20-year-old who killed himself after his account falsely showed a negative $730,000 balance.
Despite all of this, the app has continued to rise in popularity. It will be interesting to see how all of this plays out in the state of Massachusetts.
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