New rules could tackle the ‘gamification’ of trading on popular apps following GameStop, SEC chief Gary Gensler says

Gary Gensler is the new head of the Securities and Exchange Commission.

New rules may be needed to tackle the “gamification” of trading on popular apps, which can prompt users to make bad investing decisions, according to the new head of the Securities and Exchange Commission.

Gary Gensler said in written testimony to Congress on Wednesday that many of the US’s regulations on trading were created before fast and commission-free apps started to dominate the retail investing landscape.

In particular, Gensler expressed concern about the “gamification” of retail trading. Apps are increasingly using features like points, rewards, leaderboards, bonuses and competitions to boost user engagement, he said.

Gensler is set to appear before the House Committee on Financial Services on Thursday, as part of its investigation into January’s GameStop saga, which saw retail traders unite to pump up the video game store’s stock.

Some lawmakers have become concerned about the influence of Robinhood, the commission-free trading app that has boomed in popularity and was at the centre of January’s volatility.

The new boss of the SEC – the powerful regulator that oversees US financial markets – said the gamification of trading could be costly to users.

“If we watch a movie that a streaming app recommends and don’t like it, we might lose a couple of hours of our evening,” he said.

“Following the wrong prompt on a trading app, however, could have a substantial effect on a saver’s financial position. A big loss could have immediate implications for the app user’s ability to afford their rent or pay other important bills. A small loss now could compound into a significant loss at retirement.

“Many of these features encourage investors to trade more. Some academic studies suggest more active trading or even day trading results in lower returns for the average trader.”

Gensler said these issues may require new rules. “Many of our regulations were largely written before these recent technologies and communication practices became prevalent. I think we need to evaluate our rules, and we may find that we need to freshen up our rule set.”

The House will begin the third of its hearings into the GameStop saga on Thursday. It is particularly focused on the impact of modern trading apps and the power they can have, after many of them suspended trading and shut out users during January’s market volatility.

Apps like Robinhood argue their popular and easy-to-use platforms have broken down barriers to investing.

Speaking before the House during an earlier part of the hearing in February, Robinhood CEO Vlad Tenev said: “The mobile app provides the intuitive experience customers want, while also providing them with tools and information to learn about investing and keep tabs on their finances.”

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Robinhood is ditching the controversial confetti feature that critics say turns investing into a game

Robinhood on cellphone
Robinhood is preparing for its public debut.

  • Robinhood is getting rid of a confetti animation that appears when users make their first trade.
  • The company said Wednesday it plans to introduce new features to mark certain actions.
  • Robinhood has faced criticism over the way it gamifies investing for inexperienced traders.
  • See more stories on Insider’s business page.

Robinhood is getting rid of one of its most controversial features, the company announced Wednesday.

The stock trading website is redesigning the look of its interface, and that includes dumping one of its trademark features: a confetti animation that pops up after users make their first trade.

“In the past, we used the same confetti design to celebrate firsts with customers,” Robinhood said in a blog post. “Those included customers’ first trades, their first steps with cash management, and successful referrals of friends and family. Now, we’re introducing new, dynamic visual experiences that cheer on customers through the milestones in their financial journeys.”

The free stock trading app has caught heat from critics who say it makes investing too much like a game, enticing novice investors to trade obsessively and place bigger bets than they should. Robinhood’s easy-to-use, flashy platform leads some inexperienced users to play the market compulsively, Insider previously reported.

Read more: GENERATION ROBINHOOD: How the trading app conditioned its inexperienced users to obsessively play the market

Robinhood, for its part, rejects the notion that it gamifies investing, saying instead that its sleek interface helps people invest more easily.

“Robinhood was designed to help investing fit easily into people’s lives. That’s why our app is simple, easy-to-use, bright-maybe even delightful,” the company said in Wednesday’s blog post.

Starting next week, Robinhood will roll out new animations to mark actions like making an inaugural trade, depositing money, or signing up for Robinhood’s paid offering, Robinhood Gold.

The changes come as Robinhood faces heightened scrutiny over how traders use its app. In January, users pushed GameStop and other so-called meme stocks to record highs. The move comes as Robinhood prepares to go public.

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