[Dylan S]

As someboy who has seen firsthand what happens when people face financial ruin, I can’t help but wonder if platforms like Robinhood should be held accountable for turning the serious business of online trading into a game?

Watching friends lose everything they had on a whim makes this question personal. It’s time to consider the human cost of gamified trading in my view.

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[TradesForDays]

100% brother, it’s completely unacceptable we’re traders not gamers!

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[Steve]

Dylan, I think you’re absolutely spot on. I also believe Robinhood has now been landed with a pretty chunky fine for its actions – https://www.wealthmanagement.com/regulation-compliance/robinhood-pays-75m-settle-massachusetts-gamification-charge

I’m not saying that’s enough and you’re right to call it out. Hopefully other ‘trading’ apps take notice and buck up their ideas.

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[Joan]

It’s not just Robinhood, Trading212 is bad for it as well.

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[Alfie]

ETrade as well. It was handing our rewards and the like, not good!

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[James Barra]

Hi Dylan,

Thanks for your message.

It is a worrying trend. Personally, I don’t believe features like confetti when you place a trade or incentives for frequently trading should be encouraged.

Steve is right that Robinhood has faced regulatory action for some of its practices, including a $70 million penalty from FINRA in 2021 relating to various events like system outages but also its gamification of features.

The hope is that other firms learn from this and focus on developing a serious trading environment.

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[Dylan S]

Big time agree with everyone here and it is reassuring (to an extent) to hear Robinhood is being punished. Is a 70 million fine large enough for a firm that is worth billions though? Hmmmmm

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[Steve]

I mean you could argue not but it was, at least at the time anyway, the biggest fine FINRA has ever dished out so it’s not inconsequential!

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[Christian Harris]

I think Robinhood’s biggest ‘problem’ is that it attracted a younger demographic during the GameStop short squeeze in early 2021, many of whom lacked the financial literacy needed to make informed trading decisions.

This raises ethical concerns about exploiting a vulnerable population and the responsibility of platforms to provide adequate education and warnings about the risks involved in trading – especially day trading.

The regulatory action taken against Robinhood won’t be the end of it.

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[Sal]

For sure – most firms need to do more in my book.

I just don’t know if the high level risk disclosures go far enough, especially when they are scribbled away somewhere on the website or you rattle through it during account opening amongst the sea of other information you have to read and provide.

Here’s an idea: Should new traders have to take mandatory courses provided by brokers to demonstrate they’re committed to learning about how markets function and that they truly understand the risks involved before they can trade with a large amount of capital? That might motivate brokers to provide more on the education front.

I’m sure there will be loads of reasons why it would be difficult to implement but it’s a thought…

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[Ethan]

This would never work and there’s already enough hoops you have to jump through before you can start trading with real money.

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[Steve]

It’s a nice idea in a dream world where the brokers are really looking out for traders’ interests. But brokers will generally make more money the more clients are trading, so they won’t want to seriously cap their access to capital.

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