"Even though we have made investing easier, we recognize it is not a game," Tenev said in his testimony ahead of a Congressional hearing.
Robinhood CEO Vlad Tenev rejected claims his app allows for the "gamification" of investing.
Tenev, in his newly released testimony ahead of a Thursday Congressional hearing into January's GameStop
trading frenzy, said Robinhood has made investing easier for a broader range of people. Tenev and his co-founder Baiju Bhatt said they created Robinhood, a commission-free investing site, to "democratize" finance.
"Even though we have made investing easier, we recognize it is not a game," Tenev said in the testimony.
Several industry experts and investors said the app takes advantage of its young and inexperienced user base by encouraging risky trades. A game developer previously told Insider Robinhood's use of free gifts, rewards for bringing in new users, and glowing colors can deepen users engagement and relationship with the app.
Regulators are also examining whether a "gamified" product design leads Robinhood users to make risky trades they don't fully understand.
The consequences of risky Robinhood use can be disastrous, some users said. One user told The New York Times he took out two home equity loans to buy and sell options, but ended up losing thousands of dollars. The parents of a 20-year-old who died by suicide after thinking he lost $730,000 filed a wrongful death lawsuit against Robinhood earlier this month.
According to Tenev's testimony, Robinhood has encouraged investing among young people, people of color, and first-time traders. The median age of Robinhood users is 31 and half of customers identify as first-time investors. Black and Latino users represented 9% and 16% of Robinhood customers, respectively.
Robinhood makes money through payment for order flows, or by taking the buy and sell orders that users place and selling them directly to large trading firms. The business model means Robinhood benefits the more users make trades.
One December 16 complaint filed against Robinhood claims the company used visual strategies, including confetti celebrations, when users make trades, to "gamefy" trading and encourage repetitive use of the app.
Tenev said in his testimony the app uses confetti animation "sparingly" to celebrate milestone events. He denied that Robinhood used levels or rewards to encourage more trading.
"I am confident that the easy-to-use interface enables customers to understand, control, and direct their finances in a responsible way," he said.