The Massachusetts regulator is trying to revoke the broker-dealer license for the government’s cryptocurrency-compatible Robinhood app.
According to a Bloomberg report on Thursday, William Galvin, head of the state securities department, said in a new management complaint that Robinhood “continues to aggressively stimulate and harass its clients, including Massachusetts clients with little or no investment experience.”
The new registration is a follow-up to a complaint from Galvin’s office in December 2020, alleging that Robinhood’s marketing was illegally targeted at inexperienced investors.
The state cited Robinhood’s recent activities, including campaigns to give customers cash rewards based on new deposits, as proof of their “continued corporate culture.”
Robinhood responded to a new complaint, claiming that the move could prevent millions of Bay Staters from accessing the platform. The company said in December that the platform has nearly 500,000 Massachusetts customers.
The company has filed a lawsuit to overturn the recently enacted lending rule in Massachusetts, which state regulators are accused of violating. This rule was adopted in 2020, and it requires brokers and traders to trade for the benefit of their clients.
“The new management rule for the Massachusetts Department of Securities exceeds the mandate under Massachusetts and federal laws,” Robinhood said. Robinhood is an “autonomous” brokerage firm and does not provide investment advice or investment advice. The company indicated in the lawsuit on its own terms that the new rule does not apply to self-governing companies.
Robinhood has faced increasing pressure from regulators and users after getting involved in the controversial GameStop Stop card game. Robinhood suspended the purchase of GameStop shares in January 2021, which triggered unrest from the trading community.
Last year, 20-year-old Robinhood user Alex Kearns committed suicide after seeing a negative balance of $ 730,000 on his Robinhood app. Reportedly, a note on his computer asked the question: “How was he 20 and had no income that could affect nearly $ 1 million?” In February 2021, the parents of Kearns Robinhood sued for his death.
Robinhood also faced a number of technical issues that caused major losses to traders and led to further lawsuits against the company.
The latest such incident occurred on Thursday, when the trading platform for cryptocurrency Robinhood got into technical trouble when Dogecoin (DOGE) reached a new full-time high of $ 0.27.