Massachusetts wants to pull the plug from Robinhood

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To support its situation, state regulators accused Robinhood of failing to properly account for fractional shares traded by customers on its platform and said the company “continues to attract and induce customers with no trading experience.” risky ”.

The Massachusetts push to revoke the Robinhood license is yet another hurdle the company faces as it prepares to go public after filing a confidential IPO late last month. The big question is whether Robinhood’s legal and PR issues will matter to investors compared to the startup’s staggering growth.

In a blog post, Robinhood harshly criticized what he described as “unfounded, politicized allegations and unreasonable demands” from Massachusetts regulators and warned that revoking its license would block access to millions of customers.

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“The Massachusetts Division of Securities’ attempt to prevent Massachusetts residents from choosing how to invest is elitist and against everything we support,” Robinhood said. “We don’t think our clients are naive because the Massachusetts Securities Division makes them.”

Robinhood denied filing a complaint and a motion in Massachusetts State Court for a preliminary ruling that would stop the regulatory case against the company. Robinhood argues that the regulator’s new fiduciary rule “exceeds its authority,” in both state and federal law.

“In an attempt to block Robinhood, the division is trying to bring its residents back in time and restore the financial barriers that Robinhood was founded to break,” Robinhood said in a blog post.

More than just confetti

The battle began in December, when Massachusetts regulators filed a 24-page complaint against Robinhood, accusing the company of violating state laws and regulations by failing to protect customers and protect its system. Officials claimed that Robinhood brought inexperienced investors to its platform with game elements such as colored confetti – a practice the company recently said it was getting rid of.

The amended complaint filed Thursday says Robinhood has continued a model of aggressively attracting customers, including some with “little or no investment experience.” He cites news reports that Robinhood has extended margin lending and tried to persuade customers to deposit incentive checks by offering “free cash” for deposits.

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Robinhood’s behavior since the complaint was filed in December “poses a substantial and ongoing risk to Massachusetts investors,” the complaint says.

Massachusetts regulators said Robinhood had not reported its trade on fractional shares for more than a year, “demonstrating its inability to meet the most basic requirements” required of brokers.

Growing in full expansion

The fight with Massachusetts adds to a long list of problems Robinhood has faced in recent months.

CEO Vlad Tenev was transported to Congress earlier this year amid control over Robinhood’s trading restrictions during the GameStop turmoil. Robinhood was also fined $ 65 million by the SEC for allegedly defrauding customers.
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The company was sued by the parents of a 20-year-old trader, who committed suicide after seeing a negative balance of $ 730,000 in his trading account and mistakenly thought this was the amount he owed.

And yet, despite this turbulent stretch for Robinhood, the company continues to grow rapidly – especially in the crypto space.

In the first quarter alone, 9.5 million customers traded cryptocurrencies on Robinhood, according to the company. It rose from just 1.7 million in the last three months of last year.

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