House Bill Would Study 'Gamification' By Robinhood, Online Trading Platforms

House Democrats introduced a bill last week that would require the Government Accountability Office to study the “gamification, psychological nudges and other design techniques” leveraged by online trading companies.

The legislation aims to understand the degree to which investors and everyday people are manipulated and potentially abused by the online trading industry, according to its language. 

What Happened: Robinhood HOOD, which went public Thursday in an IPO, is directly targeted by this bill’s cosponsor, U.S. Rep. Sean Casten (D-IL).

“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,” his office said in a press release.

While introducing the bill, Casten referenced Alex Kearns, a 20-year-old college student who killed himself after mistakenly believing he owed hundreds of thousands of dollars in market losses to Robinhood.

Kearns’ family filed a lawsuit against Robinhood earlier this year. The company also faces lawsuits related to its banning and restriction of trading in GameStop Corp GME and other popular WallStreetBets stocks earlier this year. 

Robinhood prides itself on being a company that democratizes investing and does not charge its users fees.

A Robinhood representative would not speak on the record regarding HR 4685 or the lawsuits filed against the company, but pointed to the company's previously issued responses, including being “devastated” by Kearns’ death, and countering gamification claims as being too “vague and short on details when defining it.”

What Else: The Trading isn’t A Game Act needs to pass out of committee before passing the House, Senate and eventually being signed by the president to become law.

Although Democrats like Senator Elizabeth Warren (D-MA) have been more committed to taking on tech companies in recent years, it’s unknown yet what coalition would form around this bill beyond HR 4685’s Democratic cosponsors.

Photo Credit: Unsplash photo by Andy Feliciotti.