Rule

April

Robinhood, the renowned crypto and stock trading app, has reached an agreement with Massachusetts’ securities regulator, ending a legal dispute that began in December 2020. The corporation has agreed to pay a $7.5 million penalty and change its digital engagement policies. This judgment comes after complaints that Robinhood gamified cryptocurrency and stock trading to attract inexperienced investors.
<h2 class="wp-block-heading" id="robinhood-settles-a-case-with-7-5m">Robinhood settles a case with $7.5M</h2>
According to a Jan. 18 announcement by Secretary of the Commonwealth of Massachusetts William Galvin, Robinhood has agreed to pay a $7.5 million penalty and “overhaul its digital engagement practices” for targeting inexperienced investors in what many have described as the “gamification” of crypto and stock trading.&nbsp;
Galvin said in the original complaint that the trading app had advertised itself as “some sort of game that you might be able to win” and proposed removing the company’s broker-dealer license in the state.
The settlement ended a roughly three-year legal struggle between the trading platform and Massachusetts. Following the December 2020 complaint, the crypto entity filed a lawsuit against Galvin’s office to reverse the rule that the state said the company breached. Following an appeal, the case was brought back to court in 2023.
<blockquote class="wp-block-quote">
 While I’m happy that this case with Robinhood has finally been resolved, I’m most grateful that after being thoroughly tested in court, the Massachusetts Fiduciary Rule remains the law of the land […] This rule allows my office to ensure that investors’ interests are being protected in this state, and I hope that other states follow suit. <cite> Secretary of the Commonwealth William F. Galvin&nbsp;</cite>
</blockquote>
In addition to the “gamification” claims, the Massachusetts Securities Commission required the entity to resolve “serious cybersecurity issues” as part of the settlement. The trading firm denied the claim that its app was “gamified” and stated that it had “taken numerous steps” to address cybersecurity concerns since 2021.
<h2 class="wp-block-heading" id="robinhood-s-response">Robinhood’s response</h2>
<a href="https://www.sec.state.ma.us/divisions/news/left-story.htm" rel="noopener noreferrer nofollow" target="_blank">Galvin’s initial</a> complaint in 2020 accused Robinhood of using strategies that simplified trading and investing, equating it to a game that could be won, thereby misinforming unsophisticated investors. This trading strategy highlighted worries about the risks and obligations connected with investment, particularly among inexperienced traders.
<blockquote class="wp-block-quote">
 While Robinhood ceased many of its gamification tactics after complaints were filed by the Securities Division, the settlement in this case ensures that for Massachusetts customer accounts, Robinhood will cease any future use of celebratory imagery tied to the frequency of trading, push notifications highlighting specific lists, and features that mimic games of chance.
 Robinhood must also add disclosures to its lists and engage an independent compliance consultant to evaluate other digital engagement practices that remain in use. <cite>Official court ruling</cite>
</blockquote>
In response to these claims, Robinhood has always denied that their software was gamified. Since 2021, the corporation claims to have taken several steps to address these concerns, including cybersecurity risks. Robinhood’s efforts to fight the state’s charges included launching a lawsuit against Galvin’s office in an attempt to overturn the rule they were accused of breaking.
The Financial Industry Regulatory Authority fined Robinhood around $70 million in 2021 for causing “widespread and significant harm” to thousands of consumers. Following charges that the firm failed its clients due to frequent disruptions, Robinhood settled for $10 million in April 2023 with securities authorities in Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas.&nbsp;
<blockquote class="wp-block-quote">
 It is clear from the facts gathered in our investigation that Robinhood’s internal cybersecurity policies and procedures were deficient […] Not only did the company not have the necessary technological safeguards in place to protect investor information, but the failure to ensure that an employee could immediately and easily report a data breach to an actual human is unacceptable. <cite> Secretary of the Commonwealth William F. Galvin&nbsp;</cite>
</blockquote>
As part of the settlement, Robinhood promised to discontinue several practices that were a source of controversy. This includes celebratory graphics linked to trade frequency, push messages emphasizing certain lists, and aspects that resemble games of chance. The corporation must also include disclosures in its listings and collaborate with an outside compliance consultant to assess other digital engagement activities.

Robinhood’s $7.5M settlement – The gamification scandal deep dive

Table of Contents

Cryptopolitan_News

Other articles published on Jan 18, 2024

Trump Meme Coin: Can MAGA Rise Above By The Next Hampshire Event?

Regulatory Challenges in the U.S. Crypto Landscape Highlighted by Ripple CEO

Open Science Contest Utilizes AI to Identify Potential Parkinson’s Disease Treatments

Dimon Skepticism and Cautionary Words on Bitcoin

What is the Expected Timeline for Bitcoin’s Next Peak? Meanwhile, Observing the Growth of Rebel S...

Deus X and Fabiano Consulting Join Forces for Bitcoin Mining Companies

Join our free newsletter for daily crypto updates!