Judge Approves Robinhood’s $9M Settlement in Text Message Lawsuit

A United States of America federal judge has authorised a $9 million settlement in the class-action lawsuit against Robinhood Financial LLC.

The suit, filed in relation to Robinhood’s ‘refer-a-friend’ feature, alleged that the company had violated the law by sending texts to people in Washington state without their consent. On July 17, Judge Barbara Rothstein of the US District Court for the Western District of Washington sided with the plaintiffs and said Robinhood had violated state consumer protection laws.

The plaintiffs’ claims and the facts of the lawsuit.

The lawsuit was filed by Cooper Moore and Andrew Gillette on the basis that Robinhood’s referral programme was unlawful under the Washington Commercial Electronic Mail Act and the Washington Consumer Protection Act. The program enabled the Robinhood users to invite their friends by sending them text messages to join the platform. 

As stated in the lawsuit, 827,327 people received these messages without their consent. The settlement does not apply to any person who had opted-in for the reception of the texts containing the referral.

Judge Rothstein deemed the terms of the settlement as reasonable given the length, cost, and nature of the litigation. The court granted the $9 million settlement and also approved $2.2 million in lawyers’ charges. Moore and Gillette will receive $10,000 each for the role they played in the case.

The notice plan that was given the seal of approval by the court has managed to locate 96% of the class members that were listed. More than 51,000 claims have been filed and each member is expected to get a payment of between $111 and $170 depending on the number of confirmed claims. The settlement has been signed after two years of the legal battle and numerous discussions.

Regulatory Issues that Affect Robinhood to Date

This is another legal and regulatory problem that Robinhood has encountered in its operations. In May, the US Securities and Exchange Commission (SEC) made a statement that it is going to sue the firm for alleged securities laws violations concerning the crypto trading services it provided. 

Nonetheless, Robinhood has been adding more services such as recently purchasing the crypto exchange Bitstamp.

The referral program whereby users received bonuses for referring their friends to Robinhood was meant to increase the number of users and their interaction with the application.

However, the program led to legal consequences as will be seen from this settlement. The decision of the lawsuit shows that consumers should strictly adhere to consumer protection laws since the transmission of messages especially through electronic media may contribute to legal and financial repercussions.