Regulators in Massachusetts are taking steps to pull Robinhood’s broker-dealer license, alleging that the digital trading app lures inexperienced investors and puts their money at risk, Reuters reported. Robinhood responded to the charge with a lawsuit accusing the Commonwealth officials of being “elitist.”
Massachusetts Secretary of State Bill Galvin announced in December 2020 that the state was seeking to revoke Robinhood’s license — and that was before the GameStop trading frenzy. The state instituted changes in its fiduciary rules that took effect in September, prompting the Silicon Valley startup to file a lawsuit in Boston. The company also filed a motion for a preliminary injunction.
The case against Robinhood is the first enforcement under the new law. The updated mandates raised the bar to entry for investment advice brokers in the state.
In a blog post, Robinhood accused the Commonwealth regulators of being “elitist” and the move to pull its trading license is an old-school way of thinking.
“By trying to block Robinhood, the division is attempting to bring its residents back in time and reinstate the financial barriers that Robinhood was founded to break down,” reads the post.
“We will not succumb to unfounded, politicized allegations and unreasonable demands from the Massachusetts Securities Division. We welcome the opportunity to correct the record on both the facts and the law and expect to prevail in state court,” per the post.
Robinhood is also being probed by federal lawmakers for market manipulation or other misconduct after the rally in January that drove up the share price of GameStop and AMC. The company was subpoenaed by prosecutors to hand over information.
The digital trading platform is looking to go public with an initial public offering (IPO) that would set aside IPO stock options for its 13 million customers trading on the app.