BOSTON (CBS) — Massachusetts Secretary of the Commonwealth Bill Galvin is charging the company behind the investing app Robinhood with targeting inexperienced investors and failing to prevent numerous outages on its platform. Robinhood is a popular stock trading app in Massachusetts; Galvin said nearly half a million customers in the state have accounts totaling over $1.6 billion.
Galvin said Robinhood targets customers “with no investment experience.” The median age of a Robinhood user is 31 years old and 68% of those using the company in Massachusetts said they had limited or no investment experience, according to Galvin’s office.
Galvin cited Robinhood’s “gameification strategies,” noting that confetti appears on the app screen every time a customer makes a trade.
“As a broker-dealer, Robinhood has a duty to protect its customers and their money,” Galvin said in a statement Wednesday. “Treating this like a game and luring young and inexperienced customers to make more and more trades is not only unethical, but also falls far short of the standards we require in Massachusetts.”
Galvin also said Robinhood has had about 70 outages in 2020, including one lasting almost two days in early March when the Dow Jones saw its biggest one-day gain to date. He said Robinhood keeps inviting more customers to sign up without addressing their infrastructure issues.
Robinhood responded in a statement to The Boston Globe, saying it is working to prevent future outages and to educate its users.
“Robinhood is a self-directed broker-dealer and we do not make investment recommendations,” Robinhood told the newspaper. “Millions of people have made their first investments through Robinhood, and we remain continuously focused on serving them.”