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Will Curbs in the Gamification of Trading End Retail Demand?

Regulators are critical of gamifying trading platforms and digital engagement practices. Generally, they believe these platforms democratize the financial market.

Hillary Opondo May 24, 2022

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Games are enjoyable, but the cocktail of financial services and gaming is risky. It features techniques that add game-like competitive elements to trading stocks and other non-gaming contexts.

Therefore, regulators like the ESMA (European Securities & Markets Authority) are concerned about gaming practices. Thus, they seek to curb some practices. 

In any case, computers like high-speed internet and mobile phones have altered the retail investing industry. Traders can now create a brokerage account to trade financial assets in the stock market without complications.

They need no experience in the financial markets to trade stocks. For that reason, most retail companies that advertise game-like features make an excellent profit. Robinhood is one of the most popular companies that leverage this opportunity through fun lottery scratching.

What makes this investment strategy concerning is the fact that more newbie investors opt for such options. This retail demand surge has garnered the industry over 22.8 million users since 2014. 

Robinhood and other such companies have a massive impact on the US stock trading behavior. Thus, regulators like the SEC (Securities & Exchange Commission) have initiated a formal probe on platforms that promote the securities industry. 

They are concerned that although new tech options provide access to frequent trading, it is crucial to protect investors. They have now collected public opinion on gaming trading and concluded they must conduct further investigations.

On the other hand, experienced traders are also concerned about the metrics that such platforms use. Some like Warren Buffet say these platforms play a significant role in the gamification aspect.

 

What is the Impact on Gaming and Financial Services?

 

Robinhood is now recording a massive drop in user base demand. Also, the pandemic-related boost to the industry is now wearing off and altering volatility. The company’s revenue dropped drastically in early 2021. 

It dropped by about 43% to $299 million. Hence, the platform has switched to crypto trading in the UK and other nations. Newbies say Robinhood has democratized trading via lowering the entry barriers. Although most American regulators have not submitted such gaming reports, other European nations have curbed it. 

They concluded that gaming promotions in personal recommendations on social media and trading apps lures traders to invest in opportunities before understanding risks.

Nonetheless, these regulators do not offer methods to help implement the curbs on trading platforms. Some options might include design changes and compulsory risk warnings. 

The challenge is the fact that the industry is already widespread. Above all, these curbs seek to protect gullible investors from inadequate disclosures and disclaimers that can result in losses.

 

Final Word to Retail Investors

 

Whatever regulatory discourse regulators implement will heighten investor protection in the gaming industry. For the most part, it should not be insecure gambling. 

Hillary Opondo

All the content is provided for general information only and trade signals should not be construed as any form of regulated advice. It does not take into consideration your personal circumstances, including your investment objectives, risk profile, tax status, knowledge and understanding or financial situation. Past performance is no guarantee of future results.