Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa Bay news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Charlotte news in your inbox

Catch up on the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Illustration: Sarah Grillo/Axios

Robinhood is an unreliable trading platform that takes advantage of the poor, uses sophisticated gamification techniques to get them to spend money, and lies to them about their trades being free, according to a pair of lawsuits filed yesterday and today by the Securities and Exchange Commission and the state of Massachusetts.

Why it matters: Robinhood is the fastest-growing brokerage the world has ever seen, growing to an $11 billion valuation on the back of its ostensibly free trades and the gamification tools it uses to encourage its customers to do more of them.

Driving the news: Robinhood has agreed to pay $65 million to settle SEC charges that it lied about its trades being free. Its duty of "best execution" to its customers forced to offer better prices than the official "NBBO" price if those were available, the SEC says. Instead, Robinhood would settle all trades at NBBO (which stands for national best bid-offer) and pocket the difference.

The state of Massachusetts has sued the discount brokerage; that suit has not been settled, and Robinhood says it will fight it "vigorously".

  • Robinhood is held to a fiduciary standard in Massachusetts: It has a legal duty of care with respect to its customers, which involves checking that their investments are suitable.
  • Instead, per the suit, Robinhood seeks to maximize the number of times that its customers trade. One Massachusetts resident has averaged 92 trades per day on the platform.

Daily push notifications showing the change in value of customers's stocks encourage excess trading.

  • Other push notifications include one saying "Choosing stocks is hard. 💪 Get started by checking which stock prices are changing the most."

What they're saying: "We are fully transparent in our communications with customers about our current revenue streams, have significantly improved our best execution processes, and have established relationships with additional market makers to improve execution quality," a Robinhood spokesperson said in a statement.

By the numbers: Robinhood approved 71,744 Massachusetts residents for options trading. Of those, 14,439 had no investment experience at all.

Our thought bubble: Investing should be boring. If you think it's fun, and free, and if confetti rains down your screen every time you complete a trade, that's a sign you're being manipulated.

Read the SEC complaint here.

Go deeper

Massachusetts securities regulators file complaint against Robinhood

William Galvin, Massachusetts secretary of the Commonwealth, speaking in Boston in October 2020.

Massachusetts regulators filed a complaint against online investing platform Robinhood on Wednesday, accusing the company of violating state securities laws by aggressively marketing to inexperienced investors and failing to protect customers and their assets.

Why it matters: The complaint suggests Robinhood's tactics exposed investors in the state to "unnecessary trading risks" and encouraged its customers to use the platform through “gamification.”

Updated 2 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Annelise Capossela/Axios

  1. Health: CDC director defends agency's response to pandemic — CDC warns highly transmissible coronavirus variant could become dominant in U.S. in March.
  2. Politics: Biden readies massive shifts in policy for his first days in office.
  3. Vaccine: Fauci: 100 million doses in 100 days is "absolutely" doable.
  4. Economy: Unemployment filings explode again.
  5. Tech: Kids' screen time sees a big increase.
  6. World: WHO team arrives in China to investigate pandemic origins.
Dave Lawler, author of World
3 hours ago - World

Alexey Navalny detained after landing back in Moscow

Navalny and his wife shortly before he was detained. Photo: Kirill Kudryavtsev/AFP via Getty

Russian opposition leader Alexey Navalny was detained upon his return to Moscow on Sunday, which came five months after he was poisoned with the nerve agent Novichok. He returned despite being warned that he would be arrested.

The latest: Navalny was stopped at a customs checkpoint and led away alone by officers. He appeared to hug his wife goodbye, and his spokesman reports that his lawyer was not allowed to accompany him.