Are Stock Trading Apps Creating A New Generation Of Gambling Addicts?

The rise of Robinhood Markets Inc HOOD and other commission-free trading apps during the COVID-19 pandemic has ushered in a new generation of stock traders. At the same time, the so-called “gamification” of stock trading is now blurring the lines between investing and gambling — and generating some predictably unfortunate side effects.

Felicia Grondin, acting executive director of the Council on Compulsive Gambling of New Jersey, recently told the Financial Times the group’s 1-800-Gambler helpline has seen a nearly 50% increase in the number of calls related to day trading since the pandemic began.

Gamification Under Investigation: Robinhood may not be the only app utilizing game-like features, such as scratch-off games, digital confetti, emojis and high-five symbols. However, it has been the most successful at luring inexperienced traders to the app. Robinhood has estimated that half of all new brokerage accounts opened between 2016 and 2021 were Robinhood accounts.

The U.S. Securities and Exchange Commission has already opened up an investigation into just how much brokers and investment advisors are utilizing gamification tactics to influence investors and potentially encourage problematic trading.

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Trading Vs. Gambling: Other critics, such as Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) vice chairman Charlie Munger, aren’t waiting on the SEC investigation to condemn Robinhood.

In June, Munger called Robinhood “a gambling parlor masquerading as a respectable business.”

Studies have found stock trading addiction shares many similarities with gambling addiction, including traders chasing losses and taking increasingly extreme risks for higher potential payouts and a bigger thrill.

A spokesperson from the National Council on Problem Gambling told Benzinga the organization has witnessed stock trading creating problems for more people, some of whom have turned to gambling helplines seeking the same type of help sports or casino gamblers need to address their addiction.

Red Flags: If you believe you may have issues with stock trading addiction, here are several potential red flags to look out for:

• You find yourself seeking larger and larger potential payouts for trades to maintain excitement.
• Your preoccupation with stock trading is having a negative impact on your work, your relationships with friends and family and/or your health.
• You lose interest in hobbies or other activities that you previously enjoyed.
• You have unsuccessfully tried to quit or reduce your stock trading activity.
• You have lied to loved ones about the extent of your stock trading activity and/or losses.

Benzinga’s Take: Addiction of any kind is nothing to be ashamed of, but it's certainly something that should be taken seriously. If you or someone you love may be experiencing trading addiction, there are a number of addiction hotlines that are just a phone call away.