Casten’s “Trading isn’t a Game Act” to Investigate Gamification of Trading Passes Out of Committee
Washington, DC — Today, U.S. Congressman Sean Casten's (D-IL) ‘Trading Isn't a Game Act' passed out of the House Financial Services Committee. The legislation cosponsored by Congressman Bill Foster (D-IL), Congresswoman Lauren Underwood (D-IL) and Congresswoman Cindy Axne (D-IA) would require the U.S. Government Accountability Office (U.S. GAO) to carry out a study on the harmful impacts of the gamification of online trading platforms—including the various ways brokers are using gamification in marketing strategies and incorporating these features into their online trading applications.
Given Robinhood's Initial Public Offering (IPO) today and initial valuation of over $30 billion, Casten fears that as Robinhood surges in popularity and value, these problems will only get worse--opening the door for further risks to individuals and to healthy markets and highlighting the responsibility lawmakers have to protect inexperienced investors.
To watch Rep. Casten's remarks on the Trading Isn't a Game Act from Financial Services Committee click here or on the image below.
Bill text for Casten's ‘Trading Isn't a Game Act' can be found here.
"As game-like features become more prevalent on online trading platforms, it's more important now than ever that we study the impacts of gamification. Robinhood continues to function like a virtual casino gamified to harness human psychology – where market makers are the House – designed to drive frequent, short duration, Roulette-like trades, ready to extract fast money from investors against their best interest," said Congressman Casten.
"App-based investment platforms like Robinhood are increasingly designing their products to look more like games than financial instruments, leading many Americans to risk their hard-earned money on wagers they may not fully understand. It's critical that we look closely at how these tactics are affecting consumers so that we can put the necessary safeguards in place to keep consumers safe so that what happened to Alex Kearns never happens again" said Congressman Foster.
"As the owner of small digital design firm, I know the risks retail investors face when trading platforms focus more on keeping folks using their platform with gamified app design than they do helping everyday Americans grow equity in a responsible and sustainable way," said Congresswoman Axne. "This legislation would give us more information about how platforms are working behind the scenes and how these designs shape investor activity. As I've discussed in our three hearings on this issue, too much of this is done in the dark, and I'm proud to work with Rep. Casten to help shed a light on these issues."
Casten has been the Congressional leader against Robinhood's failure to protect investors since last summer, when a 20-year-old-resident of the Illinois community he represents died by suicide after seeing a negative balance of more than $700,000. In a suicide note, Kearns named Robinhood, asking how it allowed a novice trader get into that position. After Casten learned that Robinhood failed to respond to Alex's repeated inquiries and, at that time, did not have a customer support phone number for Alex to call, he led his Congressional colleagues in efforts calling on Robinhood directly to improve transparency and user safety and urging federal regulators at SEC and FINRA to take action to protect investors, before grilling Robinhood CEO Vlad Tenev when he appeared before the House Financial Services Committee in February.
In March, Casten pushed SEC Chairman Gary Gensler to update regulation to protect investors during the third House Committee on Financial Services ?Committee (FSC)hearing on Gamestop, digital platforms, and retail investors. Casten pointed out incentivizing retail investors to trade frequently is usually not in their best interest.
"Regardless of party, we all want to see investors create as much wealth as possible," Casten continued. "But if you couple gamification with a business model that's incentivized to drive trades at maximal volume and complexity, I cannot conceive of a world where you are also fulfilling your best execution obligations."