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Home CRYPTO

Robinhood Pays $7.5 Million in Landmark Settlement Over Illegal Trading Practices

by Conie
January 25, 2024
in CRYPTO
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  • Robinhood agreed to pay $7.5 million and cease using celebratory imagery to settle an enforcement action brought by Massachusetts for allegedly “gamifying” stock trading.
  • The state claimed Robinhood marketed itself like a game where users could win prizes through frequent trading.
  • The settlement ends a years-long dispute over Robinhood’s digital engagement practices, which have faced increased regulatory scrutiny for exploiting inexperienced investors.

Robinhood Financial has agreed to pay a $7.5 million penalty as part of a settlement for an enforcement action brought by the Massachusetts Securities Division. Secretary William Galvin brought the enforcement action in December 2020 claiming that Robinhood marketed itself as some sort of game that you might be able to win.

Background on the Enforcement Action

In December 2020, Galvin filed a complaint alleging that Robinhood had “gamified” stock trading on its platform. The complaint proposed revoking the firm’s broker-dealer license in Massachusetts. Galvin claimed Robinhood marketed itself as a game where users could win prizes through frequent trading.

Details of the Settlement

Under the settlement, Robinhood agreed to pay a $7.5 million fine. The firm also agreed to cease using celebratory imagery tied to frequent trading and to add disclosures about its digital engagement practices. Additionally, Robinhood must hire an independent compliance consultant to evaluate its remaining digital engagement tactics.

Robinhood’s Response

Robinhood said the settlement resolves historical issues from 2021 that do not reflect the company today. While it rejected the gamification allegations, Robinhood said it has taken steps to improve cybersecurity since the original complaint.

JUST IN: Robinhood settles with Massachusetts' securities regulator for $7.5 million following allegations of targeting inexperienced investors

— BlockNews.com (@blocknewsdotcom) January 18, 2024

Regulatory Scrutiny of Robinhood

The settlement concludes a three-year legal battle between Robinhood and Massachusetts regulators. In 2021, the Financial Industry Regulatory Authority fined Robinhood $70 million for harming thousands of users. Robinhood has also reached settlements this year with securities regulators in multiple states over allegations of failing its clients.

Conclusion

The settlement requires Robinhood to change its digital engagement practices in Massachusetts. While Robinhood says it has evolved since the original allegations, the enforcement action highlights regulators’ increased scrutiny of practices seen as exploiting inexperienced investors. The settlement resolves a long-running dispute between the trading app and Massachusetts authorities.

Tags: BitcoincryptoRobinhood
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