The Securities and Exchange Commission (SEC) recently released a 45-page report on the use of gamification in online stock brokerages. The agency is concerned that gamification is encouraging investors to trade more aggressively than they would otherwise. The report does not make any regulatory recommendations, however, and the agency punted on the issue for the time being. But it is likely to be a hot topic in the coming months, as FINRA and other regulators will be closely monitoring the developments.
The Department of Justice’s opening of the investigation comes as GameStop and AMC Theatres’ stocks have had a tremendous rise in value recently. Meanwhile, the Justice Department’s fraud section is seeking information from brokers and social media companies like Robinhood. This action has temporarily barred some users of Robinhood from buying GameStop stock. In the meantime, investors will be required to sell their GameStop shares on the stock trading app in order to avoid losing their investments.
The investigation is also being conducted by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission. A DOJ spokesperson did not respond to a request for comment. Meanwhile, a House Financial Services Committee hearing is being scheduled for Feb. 18, with Robinhood CEO Vlad Tenev, Reddit executives, and others expected to testify. The Hill has removed its comment section on the issue, but readers are encouraged to join the discussion by posting comments on Facebook.
The SEC is considering new rules for digital engagement in financial services, which are now widely used by investors. Gamification techniques may have encouraged investors to spend too much time using investment applications, which is not always healthy for their finances. While many investors find these apps attractive, others may find them overly addictive. So it is important to understand the pros and cons of using gamification techniques in stock trading. In the meantime, these regulations are designed to protect consumers and the public.
As more people become accustomed to using online brokerages, the SEC is evaluating the use of gaming in stock trading. It has also gathered public opinions regarding gaming trading. In fact, Warren Buffet, a prominent investor, said that gaming in stock trading is contributing to gamification. He also pointed out that Robinhood has experienced massive drops in its user base as the pandemic-related boost to the industry has waned. The company’s revenue fell drastically in early 2021.
