So Robinhood is being sued for 65M dollars, for basically misleading over 13M millions users on how they really make money. And Robinhood has a valuation well over an 11.2Billion ( so I don’t this is actually going to hurt them)

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1. Misleading Users on how they really make money
– Robinhood makes money by selling their user trades to high frequencies traders
– What this means is that they make a small fraction of money every time they sell your order to another brokerage
– Now to us the average person it might not mean a lot to make a few pennies per 100 shares or 1000 shares, but when you have 13M users trading back and forth, it becomes a lot of money.

Robinhood Revenue Breakdown:
– Dart: Daily Average Revenue Trades and they make around 17c per 100 shares ( not including options because those are more expensive
– And average Dart per day is around 4.3 Million ( so literally 4.3M trades per day )
– Now obviously you do common math it’s not that much money, it’s somewhere around 200k plus a month ( but again we missed a ton of data ) – how many shares per average, how do you make per options, and so on.
– ( but the true number is 466M during the first 3 quarters of this year )

Now Honestly that’s not even the big deal ( on why the SEC is mad)
– They are mad because by selling off trades
– Customer not getting the best prices
– Which costing customer money without them even knowing
– And we are talking almost 34.1M in losses to customers ( 2015-2018)

But Now the Big Problem is:
– That Robinhood is saving Hey we are actually very transparent these days
– So we should be getting sued but the Sec is like, you did wrong and you are going to pay for it
– So yeah that’s what going on. ( well Part 1 to the lawsuit)

Tip: Robinhood took the L without admitting anything.

2. Gaming Investing and No Help for or stops for new investors
– Because allegedly Robinhood is targeting new investors and making it look like investing is a game
– Whenever you buy a share your Confetti
– A new investor was allowed to make more than 12,700 trades over 6 months

Now I’m not going to play clueless to human behavior:
– One of the most powerful tools when creating an app is feedback
– When you buy some you get confetti and a message saying you bought this or sold this
– And that can be used to create a habit

However Robinhood Response as saying:
– We just want to make an easier for beginners to start investing
– To me it just looks like, making it easier for people to make bad investments
– But should you limit it the app to new investors NO, should you tell someone what to buy or what not to buy NO, in the end ( investing is a game where the knowledgeable make a lot of money, but everyone is allowed to play)

3. Overall here is My opinion
– RobinHood is just getting started
– It’s going to be even more massive in the future unless competition gets them first

But the shows:
– High-Frequency Traders: makes them 466M
– Money lending money to customers
– Money with Debit cards
– Interest on savings

Potentially in the future a lot more revenue streams

Conclusion: even if they are transparent most people have no idea what this stuff means anyway, its best to play the game the correct way, a lot more success in that.

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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I’m an Accountant but I’m not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

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