Robinhood and the 'gamification' of investing

In the latest step toward democratizing investing, online brokerages led by Robinhood are seeking to make buying and selling stocks not just cheap but seamless and even fun. That’s drawn a new class of young retail traders into the market. It’s also raised worries about the "gamification" of investing.

Robinhood offers trading of stocks — and more exotic financial products, including cryptocurrencies — on a sleek phone app popular with young investors dipping into markets for the first time.

The app has a colorful, uncluttered layout and lets users begin trading with as little as $1. For inspiration, they can browse the 100 most-held stocks among fellow users. An entertainment ecosystem has risen up alongside Robinhood. TikTok videos under #robinhoodstocks have millions of views, and communities of young investors use online forums such as Reddit’s WallStreetBets to join forces on stock-buying campaigns.

But one of these campaigns shocked investing professionals and roiled the financial markets. In January and February, individual investors — many using Robinhood — banded together on Reddit to drive prices of video game retailer GameStop and other "meme stocks" — stocks bought for reasons other than the company’s performance — to astronomical levels. This "trading frenzy" triggered volatility that caused hedge fund short-sellers to lose billions.

Even before the GameStop episode, Robinhood drew the ire of government officials. Massachusetts securities regulators in December filed a complaint against Robinhood, calling out its "gamification" tactics. And the company last week agreed to pay $70 million to resolve federal allegations that its strategies cause "widespread and significant harm" to its customers.

A Robinhood spokesperson said, "Those who dismiss new and younger investors, who come from increasingly diverse backgrounds, as unsophisticated or unserious perpetuate the myth that investing is only for the wealthy."