<p>NEW YORK — Stakes are rising in Massachusetts’ legal battle against Robinhood Financial, and regulators are asking for the popular trading app’s brokerage registration to be revoked, which would effectively bar it from the state. </p>
<p>Robinhood, meanwhile, calls the complaint brought by Secretary of the Commonwealth William Galvin’s office elitist and based on a rule that should not apply in its case. It’s asking to move the issue to a state court, rather than continue to work through an administrative process. </p>
<p>The legal battle began in December, when state regulators filed an administrative complaint against Robinhood, whose easy-to-use app has helped bring a new generation of investors to the market. The app has grown so popular that the company is preparing to sell its own stock on the market through an initial public offering. </p>
<p>In its initial complaint, Massachusetts’ securities division alleged Robinhood exploited its customers to make bigger profits and failed to meet standards of conduct required by the state, something called the “fiduciary rule.” It said Robinhood used techniques to make investing seem like a game, such as showering users’ screens with confetti, in hopes of encouraging unsophisticated customers to make more and more trades. </p>
<p>On Thursday, the securities division said Robinhood’s culture has not changed since the initial filing and that it "continues to entice and induce inexperienced customers into risky trading.” Regulators cited Robinhood’s offering bonuses to customers for depositing cash in their accounts as an example of tactics that it said demonstrate a “cavalier approach to complying with the duties it owes Massachusetts customers.”</p>
<p>Regulators are asking a hearing officer in the administrative case to consider revoking Robinhood’s registration as a broker-dealer in the state. </p>
<p>Also on Thursday, Robinhood filed its own suit in Massachusetts state court, asking a judge to prevent the securities division from continuing its administrative case and to declare that applying the fiduciary rule to brokerages is invalid, in part because doing so runs counter to state law.</p>
<p>The company also said in a court filing that the state’s fiduciary rule, which requires someone to provide advice solely in the financial interest of the customer, should not apply to self-directed brokerages like Robinhood, which doesn’t provide investment advice. It criticized examples that Massachusetts regulators gave when accusing Robinhood of violating the fiduciary rule, such as showing customers lists of popular stocks without considering whether they were suitable investments.</p>
<p>“We don’t believe our customers are naive as the Massachusetts Securities Division paints them to be,” Robinhood said in a blog posting. “Showing a list of companies in a certain sector is not a recommendation.” </p>
<p>Robinhood said the complaint “reflects the old way of thinking: That new, younger, and more diverse investors don’t have a place in the markets.”</p>
<p>Earlier this month, Robinhood stopped using animations of confetti bursting on users’ screens after they made their first trade and reached other milestones, saying criticism of the animation had created a distraction. </p>
