Picture this: I fan a deck of cards face down, tell you to pick a card, and if you grab a face card, I’ll give you 50 bucks. Lo and behold, you select the king of hearts, and I reluctantly pay you. So, I tell you to do it again, double or nothing, but this time, I remove all the face cards from the deck, and you draw a two, then a seven, then a five, then a three, then a nine, and so on, and so on, and so on. Are you ever going to trust me again? In so many ways, that’s really what Robinhood has done recently; not only is it disgusting, but it’s getting them sued, hated, and frankly, just not trusted anymore.
If you’re reading this blog post, then you’re probably somewhat familiar with day trading, and you’re well aware that the Robinhood app has been central to the GameStop and AMC mania that’s been making headlines everywhere, amidst Reddit’s WallStreetBets controversy.
Since its inception, Robinhood had normally allowed its users to buy shares of stocks. Some people picked wisely and made money; more people lost money. But then, finally, a large (but precisely unknown) number of stock trading laypeople on Reddit’s WallStreetBets subreddit community were able to legally coordinate their efforts, buy GameStop stock (GME) in droves, and drive the price exponentially upward, making them all a lot of money in the process – good for them!
However, as the GME stock continued to rise, instead of honoring their tradition of allowing people to purchase any stock they want, Robinhood removed the face cards from the deck. They blocked GME (and other) stock purchases because Joe Sixpack was making too much money, and the major brokerage firms who shorted that stock were losing billions. And then, when all the Joe Sixpacks couldn’t even buy the stock anymore, it plummeted, entirely artificially.
And people freaked out.
As they should.
The Robinhood app was supposed to be the stock trading app for the little guy. But then, at the first sign that the little guy could make some money, Robinhood screwed the little guy. Sure, there might be behind-the-scenes reasons why Robinhood did what they did, but none of that matters, nor should it. When you promise your customer one thing, and then bait and switch when they might actually benefit, you’re going to have some serious problems with consumer trust after that. And rightly so.