The intense attention focused on GameStop and its stock performance has dominated social media discussions, financial news outlets, and the investment strategies of numerous individual investors. This situation has even led some to believe that inflicting short-term financial setbacks on certain hedge funds equates to fundamentally altering the global financial system.

This comparison is inaccurate, yet many individuals are still engaging in considerably high-risk investment activities with their personal funds. A significant number of these investments—essentially, wagers—are being made through platforms that have simplified stock buying and selling by eliminating trading commissions. Examples of these platforms include Robinhood, Public, M1 Finance, and Freetrade.

Following reports that some established brokerage firms were restricting access to GameStop and other popular, so-called “meme stocks,” TechCrunch investigated the actions being taken by these newer, app-based investment services regarding their own customers.

A representative from M1 Finance, a financial technology company based in the Midwest offering a range of banking and investment solutions—details on its expansion can be found here and here—informed TechCrunch via email that the company was not implementing “specific” measures concerning individual stocks.

However, the company also shared a statement from its Chief Executive Officer, Brian Barnes. In his remarks, Barnes distinguished between investing and trading, characterizing the latter as akin to gambling, and further stated that his company “questions whether short-term trading is predictable, sustainable or repeatable.”

Indeed, it is not for most investors. Barnes continued by explaining that his company believes that “owning excellent companies and assets at sensible prices that grow over extended periods is the most reliable and consistent method for wealth creation,” and that their business is structured around this principle, “avoiding the current frenzy.”

Regarding Robinhood, a company that experienced substantial growth in 2020, TechCrunch posed the same inquiry about potential warnings or safeguards for users regarding specific stocks.

In an email, a Robinhood spokesperson directed TechCrunch to comments made earlier today by its CEO, Vlad Tenev, on CNBC:

TechCrunch understands that Robinhood increased margin requirements for GameStop and AMC Entertainment to 100%. Similar to M1, Robinhood does not permit users to short sell stocks. That is another aspect of their approach.

A noteworthy observation about these companies is that none of them wish to be identified as a hub for frequent trading activity. This is somewhat ironic, considering that eliminating trading fees—which they have largely done—is both a powerful way to broaden access to investing and a strong incentive for more frequent trading. Furthermore, as these free trading apps often generate revenue from user trades (see this article), their claims about users focusing on long-term buying and holding often seem questionable.

In any case, some apps are implementing warnings. Public, a company recently covered by TechCrunch, announced that it has added “‘High Risk’ safety labels” to the meme stocks generating significant attention.

Public has consistently emphasized building a community around investing rather than prioritizing trading, which prompted questions about its future monetization strategies. The recent hiring of a Chief Financial Officer suggests this move aligns with the company’s overall direction, and further developments are anticipated.

Finally, there’s U.K.-based Freetrade. TechCrunch has previously reported on this service, making it a relevant addition to this discussion. According to the company, Freetrade limits access to small-cap stocks to its subscription-based service tier, which should restrict access to GameStop and other meme stocks for many of its users.

The company also highlighted that it does not offer options trading or “any other form of leveraged derivatives” and has made “significant investments in investor education and financial literacy.”

Overall, there is a trend among these companies toward either designing products that are not optimized for short-term trading in volatile stocks or providing some level of protection against users’ impulsive decisions. This creates a tension, similar to the following dynamic.

However, their ability to mitigate risk is limited. People can act irrationally, and there is little indication that this will change in the near future.