Robinhood is a brokerage firm that lets you buy and sell stocks, options, and cryptocurrencies through a phone app or website
Robinhood is a financial company that holds your money and executes trades — buying and selling investments — on your behalf. You open an account, deposit cash, and use their app or website to place orders for stocks (shares of companies), options (contracts that let you bet on price movement), exchange-traded funds (ETFs), and cryptocurrencies like Bitcoin. Robinhood does not charge per-trade commissions, which was unusual when the company started in 2013 but is now standard across most brokerages.
The company makes money through other means: interest on cash you hold in the account, payment for routing your orders to market makers, premium subscription features, and margin lending (letting you borrow money to trade with). Robinhood is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), the same bodies that oversee other brokerages.
Key Takeaways
- Robinhood is a brokerage — a company that executes trades and holds your money — not a bank, and your deposits are not FDIC-insured unless you opt into their cash management feature.
- You can trade stocks, options, ETFs, and cryptocurrencies through Robinhood's app or website with no per-trade commission fees.
- Robinhood makes money through interest on cash balances, order routing fees, margin lending, and premium subscription tiers, not from charging you to trade.
- The company is regulated by the SEC and FINRA but has faced enforcement actions and lawsuits over order routing practices and trading halts during volatile periods.
How to open and fund a Robinhood account
Opening an account takes about 10 minutes. You download the Robinhood app or visit robinhood.com, provide your name, date of birth, Social Security number, and address, and answer questions about your investment experience and financial situation. Robinhood runs a background check and verifies your identity. Most accounts are approved within a few minutes, though some may take longer if additional verification is needed.
Once approved, you link a bank account and transfer money into your Robinhood account. Transfers from a linked bank account typically arrive within one to three business days. You can then use that cash to place trades immediately, though the cash itself may not settle for a few days — Robinhood allows you to trade on unsettled funds, which is a feature but also a risk if the trade goes against you.
What you can trade on Robinhood
Robinhood offers stocks (individual company shares), ETFs (funds that hold many stocks or bonds), options (contracts that let you bet on whether a stock price will go up or down by a certain date), and cryptocurrencies including Bitcoin, Ethereum, and others. Not every stock or crypto is available — Robinhood maintains a list of tradeable assets, and some penny stocks or very new cryptocurrencies may not be offered.
Options trading requires you to pass an options approval process. Robinhood assigns you a level (usually Level 1 through 4) based on your experience and financial situation, and each level unlocks different types of options strategies. Cryptocurrency trading is available to most users but is not insured by the Securities Investor Protection Corporation (SIPC), which protects stocks and options holdings.
Fees and costs you should know about
Robinhood charges no per-trade commission for stocks, ETFs, options, or cryptocurrencies. However, you will encounter other costs. If you hold a margin account (borrowing money to trade), you pay interest on the borrowed amount. If you use Robinhood Gold, a premium subscription tier, you pay a monthly fee (currently around $5 per month) for features like margin and extended-hours trading.
Robinhood also charges a $75 fee if you transfer your account to another brokerage (an outgoing transfer fee). Cryptocurrency trades may have wider spreads — the difference between the buy and sell price — than stocks, which means you pay more to enter and exit positions. There are no account maintenance fees or inactivity fees.
How Robinhood makes money and regulatory issues
Because Robinhood does not charge you per trade, it generates revenue from interest on cash balances in accounts, payment for order flow (money market makers pay Robinhood to route trades to them), margin interest, and Robinhood Gold subscriptions. This business model has drawn scrutiny: in 2021, the SEC fined Robinhood $70 million for misleading customers about how much it made from order routing and for failing to disclose conflicts of interest.
Robinhood has also faced criticism and legal action over trading halts during volatile periods. In January 2021, Robinhood restricted trading in GameStop and other stocks during a surge in retail investor interest, citing risk management and regulatory capital requirements. The company later settled with regulators and paid fines, though the incident raised questions about how brokerages balance customer access with their own financial risk.
How your money is protected
Robinhood is a brokerage, not a bank. Cash held in a standard Robinhood account is not FDIC-insured (FDIC insurance protects bank deposits up to $250,000). However, stocks, ETFs, and options in your account are protected by SIPC up to $500,000 per account category if Robinhood fails or goes out of business. Cryptocurrencies are not SIPC-protected.
Robinhood offers optional cash management features that sweep your uninvested cash into partner banks, which then becomes FDIC-insured. If you want your cash deposits to be FDIC-insured, you need to opt into this feature — it is not automatic. Read the terms carefully, as the coverage depends on how much cash you hold and how many partner banks are involved.
Robinhood versus other brokerages
Most major brokerages — Fidelity, Charles Schwab, E*TRADE, TD Ameritrade — now offer commission-free trading, so Robinhood's main competitive advantage has narrowed. Differences now lie in research tools, customer service, user interface, and available assets. Robinhood's app is known for being simple and mobile-first, which appeals to newer investors. Other brokerages offer more research, educational content, and phone support.
If you want to trade options or cryptocurrencies, availability varies by brokerage. Robinhood offers both, but so do many competitors. If you want FDIC-insured cash by default, other brokerages may offer that more straightforwardly. If you want to speak to a human on the phone about your account, Robinhood's customer service is app-based and chat-based, not phone-based — other brokerages offer phone support.
Frequently Asked Questions
Is my money safe on Robinhood?
Stocks and options are protected by SIPC up to $500,000 if Robinhood fails. Cash is not FDIC-insured unless you opt into cash management. Cryptocurrencies are not protected by SIPC or FDIC. Your account itself is secure if you use a strong password and enable two-factor authentication.
Can I lose more money than I deposit?
With stocks and ETFs, you can only lose what you invested. With options, you can lose more than your initial investment because options are leveraged — a small move in the underlying stock can wipe out your entire options position and more. With margin (borrowed money), losses can exceed your deposit if the market moves against you sharply.
How long does it take to withdraw money from Robinhood?
Withdrawals to a linked bank account typically take one to three business days. The exact timing depends on your bank. Robinhood processes the withdrawal request immediately, but your bank controls when the money arrives in your account.
Does Robinhood report my trades to the IRS?
Yes. Robinhood sends you a Form 1099 at tax time if you have taxable gains or losses. You are responsible for reporting all trades on your tax return, regardless of whether Robinhood reports them. Keeping records of your trades throughout the year makes tax filing easier.
What happens if Robinhood goes out of business?
Your stocks and options would be transferred to another brokerage through SIPC protection. Cash would be returned up to FDIC limits if you enrolled in cash management. Cryptocurrencies would not be protected and could be lost. This scenario is unlikely but possible — it is why understanding SIPC and FDIC coverage matters.