Casten Statement on SEC Announcement Requesting Public Input on Gamification of Online Trading Apps

Statement

U.S. Congressman Sean Casten (D-IL-06) released the following statement in response to the Securities and Exchange Commission (SEC)'s announcement requesting information and public comment on matters related to the use of digital engagement practices by broker-dealers & investment advisers.

"Today's SEC announcement to request public input on the gamification of online trading apps signals that Chairman Gensler is serious about protecting young, inexperienced investors like Alex Kearns from psychologically manipulative practices," said Congressman Casten. "I applaud his decision to seek open public comment on these important topics."

"Online trading platforms like Robinhood make money by using the same psychological nudges that Silicon Valley originally developed to get us addicted to games like Candy Crush and Farmville--but they've actually gone a step further: generating behavioral loops to push users--many of whom aren't even old enough to gamble at a casino--to not only spend one more minute engaged, but make one more trade, often of higher complexity," continued Rep. Casten. "At best, these business models have very little economic interest in creating value for their users. At worst, they serve as a conduit to feed fish to sharks. As Chair Gensler pointed out, platform design's optimization functions to increase revenues, data collection, and customer engagement lead to potential conflicts between the platform and investors.

"Over the course of the three hearings on Gamestop and Robinhood, a great number of my colleagues expressed serious concern about gamification. My bill, the Trading Isn't a Game Act, passed through committee by last month because examining the impacts of gamification, psychological nudges and design used to influence investor behavior should be a no brainer. I look forward to it coming to the House floor for a vote."

Casten has been the Congressional leader against Robinhood's failure to protect investors since last summer, when a 20-year-old-resident of the Illinois community he represents died by suicide after seeing a negative balance of more than $700,000. In a suicide note, Kearns named Robinhood, asking how it allowed a novice trader get into that position. After Casten learned that Robinhood failed to respond to Alex's repeated inquiries and, at that time, did not have a customer support phone number for Alex to call, he led his Congressional colleagues in efforts calling on Robinhood directly to improve transparency and user safety and urging federal regulators at SEC and FINRA to take action to protect investors, before grilling Robinhood CEO Vlad Tenev when he appeared before the House Financial Services Committee in February. In March, Casten pushed SEC Chairman Gary Gensler to update regulation to protect investors during the third House Committee on Financial Services ​Committee (FSC)hearing on Gamestop, digital platforms, and retail investors. Casten pointed out incentivizing retail investors to trade frequently is usually not in their best interest. In July, Casten's Trading Isn't a Game Act passed the House Financial Services Committee on the same day as Robinhood's Initial Public Offering.

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