With its playful interface, online brokerage Robinhood Markets Inc. has brought a new class of U.S. traders into the market, raising concerns about the “gamification” of investing. Some say Robinhood and other platforms that have turned investing into an online social activity -- such as when readers of a Reddit board bid GameStop Corp. shares into the stratosphere -- are making it too easy, and too fun, to wager money on stocks and more complicated investments. Regulators are weighing whether such practices belong in the financial realm.

1. How is Robinhood different?

Its core offering -- stock trading on a fun, game-like phone app -- is controversial and has become widely imitated. Founded in 2013, Robinhood courted long-ignored small-dollar and novice investors by charging zero commissions on trades. It later offered fractional stocks that allow people who can’t afford, say, the almost $3,200 price of a single Amazon.com Inc. share to buy just a piece of one instead. None of that is unusual anymore: Free trading is now the industry standard, and retail brokerage Charles Schwab Corp. made “stock slices” available in June.

2. How is it fun?

Robinhood offers a trading experience with social interaction seeped into its DNA. Investors are congratulated for their first trade with a confetti animation. They’re offered a (tiny) chance of snagging a share of a high-price glamour stock such as Apple Inc. if they get a friend to sign up. 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. So, too, have communities of at-home investors who use online forums such as Reddit’s WallStreetBets to join forces on stock-buying campaigns. They ran up GameStop’s price from less than $20 at the end of 2020 to more than $400 a share in late January. That was too much even for Robinhood, which, along with other brokerages, temporarily halted trading on GameStop and other so-called meme stocks.

3. What do other platforms do?

A Chinese competitor, Webull, has become one of the fastest-growing retail trading platforms in the U.S. partly by following the Robinhood model of offering free stock trades with a slick online interface, while also offering the live customer-service hotline that some Robinhood users have asked for. Other online trading platforms are pushing forward with what’s known as social trading. The Israeli-British firm eToro lets customers see each other’s portfolios and provides a chat function that lets them talk to one another about stocks, Bitcoin, or conditions in the markets. EToro, which had more than 18 million registered users as of early 2021, is also big on copy-trading. Under this practice, it designates the top performing amateur traders on its site as “Popular Investors” and lets other customers copy their trades with simple tap on their smart phones. EToro pays Popular Investors up to 2.5% of the value of the assets that follow them, in a sense making them de facto money managers.

4. What’s the problem?

Massachusetts securities regulators on Dec. 16 filed a complaint against Robinhood, calling out its “gamification” tactics. A day later, the U.S. Securities and Exchange Commission fined Robinhood $65 million for concealing from customers that, from 2015 to 2018, its biggest source of revenue was sending orders to high-speed trading firms. (As part of a settlement, Robinhood didn’t admit or deny the SEC claim.) Academic research has shown that self-guided investors do worse the more actively they trade. It’s true that most of those studies were done before the death of brokerage commissions, a major drag on traders’ performance. On the other hand, markets have gotten faster and more competitive, meaning anyone trading from a phone app is trying to outwit increasingly sophisticated pros on the other side of the bet.

5. Isn’t encouraging more investment a good thing?

That’s one argument offered by Robinhood and its supporters. “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,” a company spokesperson said in response to the Massachusetts complaint. Even the concept of “gamification” has had its admirers. A 2018 Ernst & Young analysis said that adding game-like aspects to financial services could help reach users who might otherwise feel reluctant to try investing. “Gamification could be invaluable in educating clients,” it said. A 2017 “The Future of Financial Services” brochure on the website of business consultant WillisTowers Watson Plc says that adopting the game-like elements of exercise apps like Fitbit or of loyalty point programs like those of airlines “may be one way for asset managers to engage and educate future investors.”

6. How much new money are these platforms bringing into the market?

Because many of these platforms are privately held it’s hard to ascertain precisely how much money is flowing into them. But there is evidence that 2020 has been a banner year for inflows across the industry. EToro says it’s recorded more than $1 trillion worth of trades on its platform in 2020.

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