"Gamification" of the stock market through trading apps such as Robinhood shouldn't be considered a problem, Sen. Pat Toomey, R-Pa., said Tuesday.
Toomey spoke with CNBC before the Senate Banking Committee's hearing on the GameStop trading incidents from earlier this year, and on retail investors.
"We're going to hear [about] basically unsubstantiated warfare, about how the system is rigged against the little guy," Toomey said on CNBC's "Squawk Box." "There's a lot of criticism about gamification, as you know. The idea that you make the experience of investment enjoyable and easy is somehow a problem for some folks, but not for me."
Stock trading platforms have brought about a whole new class of investors, and the "democratization of these markets has been fantastic," Toomey said.
"Zero commissions, extremely narrow bid-offer [spreads] means retail investors can buy into stocks in a way they never could before, being able to buy a fraction of a share, for instance," Toomey said.
The hearing on the GameStop market play is pitting Democrats and Republicans against each other whether companies that offer no-commission trades through smartphone apps are dangerous or valuable, reports MarketWatch.
Senate Banking Committee Chairman Sherrod Brown, D-Ohio, said Tuesday the quick rise of GameStop shares in January spurred by rapid online trading, and the continued volatility of the company, shows the market is "detached from the economy and the reality of most Americans' lives."
Brown also slammed Robinhood's business model, saying such companies "were founded on a model that exploits small investors by encouraging fast and loose trading, and then sells their trades to big market players."
Robinhood co-founder and CEO Vlad Tenev told the House Financial Services Committee in February, during an earlier hearing on GameStop, that the company has made investing easier, but "we recognize it is not a game.”
"I am confident that the easy-to-use interface enables customers to understand, control, and direct their finances in a responsible way," Tenev testified.
Robinhood was one of the favored online brokers a group of social media investors used to prompt GameStop shares, forcing other investors betting against the company to close out their short positions on the stock. In late January, GameStop shares rose to a high of $483 in late January from about $17 a share.
MarketWatch reported Tuesday that GameStop is up about 124% this month, selling for more than $240 a share.
“The worst aspect of what they do clearly is the way they are gamifying the idea of investing,” Massachusetts Secretary of the Commonwealth William Galvin told CNBC in December after the securities regulator in his state filed a complaint against Robinhood accusing the company of manipulating its customers.
Toomey told CNBC he does not believe in "this paternalistic idea that we have to protect people from themselves and not letting them invest. I think we should celebrate these innovations."
The senator also discussed the Democrats' $1.9 trillion coronavirus bill, which the House is expected to pass in a final vote this week before sending it on to President Joe Biden to sign.
"This is an embarrassment and it's a disaster," he said of the bill. "In 2020, state and local governments in the aggregate collected more revenue than ever before. This is not about COVID," he said.
"This is not about an economic recovery. We're going to borrow or print $2 trillion and then send out a bunch of money to a lot of states, state governments. They're just going to cut taxes because they've got so much cash. Nothing else they can do makes sense."
Sandy Fitzgerald ✉
Sandy Fitzgerald has more than three decades in journalism and serves as a general assignment writer for Newsmax covering news, media, and politics.
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