Massachusetts’ securities regulator is seeking to revoke the broker-dealer license of cryptocurrency-friendly stock trading app Robinhood in the state.<\/p>\n
William Galvin, the head of the state\u2019s securities division, said in a new administrative complaint that Robinhood has \u201ccontinued a pattern of aggressively inducing and enticing trading among its customers \u2014 including Massachusetts customers with little or no investment experience,\u201d Bloomberg reports Thursday.<\/p>\n
The new filing is a follow-up to a complaint filed by Galvin\u2019s office in December 2020, alleging that Robinhood\u2019s marketing illegally targeted inexperienced investors.<\/p>\n
The state pointed to Robinhood’s recent activity, including a promotion that provides customers with cash rewards based on new deposits, as proof of a \u201cfirm culture which has not changed.\u201d\u00a0<\/p>\n
Robinhood\u00a0responded to the new complaint, arguing that the action could prevent \u201cmillions of Bay Staters\u201d from accessing their platform. In December, the company said that its platform had nearly 500,000 customers in Massachusetts.<\/p>\n
The firm has\u00a0filed a lawsuit seeking to invalidate a recently adopted fiduciary rule in Massachusetts that state regulators have accused it of violating. Adopted in 2020, the rule requires broker-dealers to act in their clients\u2019 best interest.<\/p>\n
\u201cThe Massachusetts Securities Division\u2019s new Fiduciary Rule exceeds its authority under both Massachusetts state law and federal law,\u201d Robinhood said. \u201cRobinhood is a \u2018self-directed\u2019 brokerage firm that does not make investment recommendations or provide investment advice. By its own terms, the new rule does not apply to self-directed firms,\u201d the firm noted in the lawsuit.<\/p>\n
Robinhood has faced mounting pressure from regulators and users alike after it\u00a0became involved in the controversial\u00a0GameStop stop short-squeeze. Robinhood halted buying for GameStop stock in January 2021, drawing the ire of the trading community.\u00a0<\/p>\n
Last year, 20-year-old Robinhood user Alex Kearns committed suicide after seeing a $730,000 negative balance on his Robinhood app. A note on his computer reportedly posed the question,\u00a0\u201cHow was a 20 year old with no income able to get assigned almost a million dollars worth of leverage?\u201d In February 2021, Kearns\u2019 parents filed a lawsuit against Robinhood over his death.<\/p>\n
Robinhood has been also experiencing a number of technical issues, reportedly causing major losses for traders and triggering further legal action against the company.<\/p>\n
The most recent such event occurred on Thursday when Robinhood’s crypto trading platform ran into technical issues as Dogecoin (DOGE) hit a new all-time high of $0.27.\u00a0<\/p>\n