Reps. Casten, Foster Introduce “Trading isn’t a Game Act” to Investigate Gamification of Investing Ahead of Robinhood’s IPO
Washington, DC — Today, U.S. Congressman Sean Casten (D-IL) and Congressman Bill Foster (D-IL) introduced the Trading Isn’t a Game Act, which would require the U.S. Government Accountability Office (U.S. GAO) to carry out a study on the impact of the gamification of online trading platforms—including the various ways in which brokers are using gamification in marketing strategies and incorporating these features into their online trading applications.
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. With Robinhood’s billion dollar Initial Public Offering (IPO) approaching this Thursday, Casten fears that these problems will only get worse--opening the door for further risks to individuals and to healthy markets.
“Robinhood functions 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,” said Congressman Foster.
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.
“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.”