Zero-commission brokerage Robinhood is facing charges from Massachusetts’ top securities watchdog over both its recent outages and the firm's use of "gamification" tactics, which the regulator says lured customers into trading more often than they should.

Massachusetts Secretary of the Commonwealth William Galvin alleges that the company used “gamification strategies to manipulate customers,” including through the promise of free stock and effects such as confetti “rain[ing]” on the screen of the app after a trade is placed, to grow its client base exponentially and encourage frequent trading.

“Once individuals become customers, Robinhood relentlessly bombards them with a number of strategies designed to encourage and incentivize continued and repeated engagement with its application,” Galvin says in a statement. “Treating this like a game and luring young and inexperienced customers to make more and more trades is not only unethical, but also falls far short of the standards we require in Massachusetts.”

Meanwhile, the rapid expansion of its customer base resulted in what the regulator says was an inadequate infrastructure, resulting in around 70 outages from the start of 2020 through the end of November. Galvin’s office says the worst outage occurred on March 2 and 3, when the Dow Jones Industrial Average had its largest single-day gain to date.

The regulator is seeking an administrative fine and an order to force Robinhood to hire an independent compliance consultant to review its platform, infrastructure and polices and procedures.

Robinhood’s March outages have resulted in several lawsuits already and the firm is also reportedly facing an investigation by the SEC and Finra over the issue. The SEC is also reportedly investigating Robinhood’s disclosures about its routing of customer orders to high-speed trading firms in exchange for fees.

The median age of a Robinhood customer is 31-years-old, according to the firm — and 68% of its customers in Massachusetts approved for options trading report having limited or no investment experience, Galvin’s office says.

The brokerage also attracted nationwide attention in June when a 20-year-old Robinhood customer committed suicide after seeing his account show a negative $730,000 cash balance that may have been a temporary balance. The man had been trading a complex strategy known as a “bull put spread,” which involves selling put options at a higher strike price while at the same time buying puts, with the same expiration date, at a lower strike price.

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