When companies like Robinhood don’t keep their promises, learn about your legal rights…
Sometimes online financial companies like Robinhood fail their users, and cost you money, whether it’s by offering misleading information about products, providing poor customer service, not fixing technical issues, or other issues. Read more about FairShake users’ common complaints against Robinhood.
Here’s some things to know if you’re thinking about suing Robinhood:
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As a consumer finance app, Robinhood can be subject both to general consumer laws and to those regulating financial companies, at both the state and federal level.
According to Robinhood’s own standard contract, accessed by FairShake in January 2023, the company is subject to California’s state laws “except to the extent governed by the federal securities laws, FINRA Rules,” and the conventions of exchanges on which transactions take place.
Consult a lawyer about your specific situation and which laws may apply. But here are some starting points to think about the sorts of laws that may help you sue Robinhood:
One class of laws protecting you as a consumer, including when you sign up for an app or financial account, are called UDAP laws, which stands for Unfair and Deceptive Acts and Practices.
UDAP laws function as a catch-all to provide you a recourse against companies that deceive you in a consumer transaction. And in many states they also prevent practices that are simply unfair or unconscionable.
These laws differ by state and to understand whether they apply to your case you may want to consult an experienced attorney.
Certain laws and regulations apply to Robinhood based on the business they’re in. Traditionally the government has taken seriously the responsibility to prevent individual investors from being taken advantage of by big players in financial markets.
At the federal level, Robinhood is overseen by the Securities and Exchange Commission (SEC) which regulates “broker-dealers,” meaning companies that serve as middlemen in the stock market.
For instance, in Robinhood’s own words “‘Best execution’ requirements under SEC guidelines and FINRA rules, [require] us to obtain the best reasonably available terms for customer orders.”
Federal securities laws are complex, and for a fuller list of the applicable laws and what they could mean for a lawsuit against Robinhood, you may want to consult an attorney.
Your Robinhood contract likely includes provisions telling you both what state’s laws apply to your account, as well as what kinds of courts you can sue in.
Companies like Robinhood often include arbitration clauses, meant to limit your rights about where you can sue them. Under an arbitration clause you typically can sue Robinhood either in small claims court (under a certain amount) or in consumer arbitration, a private court system.
Arbitration clauses typically forbid you from accessing state and federal courts, and from suing as part of a Robinhood class action lawsuit.
To sue Robinhood in small claims court, you’ll want to read your contract carefully, find the instructions for your local court, and then make sure you follow the instructions from each.
Small claims court comes with pluses and minuses: it’s meant to be able to be navigated by an individual without a lawyer, but you’ll have to go to court in person and figure out the specific forms and requirements for your local court.
Small claims regulations also cap how much you can ask for in compensation. In most states the limit to how much you can ask for in small claims court is $5000 or $10,000, but it can be as low as $2,500. (You can find a full list of state limits here.)
Read more here about the steps to sue in small claims court.
Consumer arbitration is a process of bringing a case in a private court system with its own set of rules. The rules can depend on what’s written in your contract, as well as which private court is used.
As of January 2023, according to Robinhood’s posted online contract, the company requires arbitrations be pursued through the dispute resolution arm of FINRA, the investment industry’s self-regulator. FINRA provides its own set of resources on the process of how to pursue an arbitration.
Arbitration through FINRA may be your only option if you want to file a lawsuit against Robinhood that’s too large for small claims court. But it may be intimidating to pursue without a lawyer.
If you’re looking for a lawyer against Robinhood, FairShake may be able to help. Most lawyers only have experience with certain kinds of claims, and FairShake knows lawyers who have experience with consumer lawsuits—maybe even Robinhood lawsuits—and want to help you.
Tell us about your issue below and we may forward it to eligible attorneys.
(Unfortunately, as of the time of writing, most complaints aren’t matched).
Company reports show that Robinhood has been a frequent target of both government lawsuits against Robinhood and also of customers who have sued Robinhood.
Robinhood paid a $65 million civil penalty to the Securities and Exchange Commission and pledged to improve compliance going forward.
Robinhood says that in June 2021 it “resolved multiple matters with FINRA (including investigations into systems outages, our options product offering, and margin-related communications with customers), resulting in censure, fines and restitution of $70 million.”
In August 2022, Robinhood wrote another settlement check, this time for $30 million, to resolve allegations brought by New York’s Department of Financial Services.
As of November 2022, Robinhood disclosed that information into actions by the company and its CEO Vladimir Tenev was being pursued by an alphabet soup of agencies including the SEC, FINRA, New York’s Attorney General, the US Attorney for the Northern District of California, and the US Department of Justice.
Robinhood’s November 2022 disclosures also showed that SEC and FINRA were investigating insider trading allegations against certain Robinhood employees.
Robinhood has faced at least five attempted class action lawsuits over how it executes trades. Specifically, users accuse Robinhood of violating its duty to execute their trades under the best terms and not being straightforward about the ways in which it may allow other financial companies to pay for access to its trading flow.
Hundreds of customers sued Robinhood via arbitration over platform outages that took place in early March 2020. According to the company, these Robinhood lawsuits were filed in September 2021 and were due to start being heard in January 2023.
A California resident sued Robinhood in 2021 over how it handled unauthorized access to his account. The lawsuit claimed that 2,000 other Robinhood customers saw their accounts taken over by unauthorized users. According to the company, the SEC and FINRA are also investigating Robinhood for account takeover issues. Robinhood settled the California claim privately.
A Washington state resident sued Robinhood over unsolicited text messages, which can be a violation of the Telephone Consumer Protection Act. As of November 2022 the case remained pending.
Massachusetts’s state securities regulator has also sued Robinhood beginning in 2020. Among other things, the state accused Robinhood of “unethical and dishonest conduct or practices” in relation to its marketing and product features.
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