Robinhood launched in May 2013 as a mobile-first brokerage

Robinhood went live on May 1, 2013, as an iOS app that let people buy and sell stocks without paying commission fees. The company was founded by Vladimir Tenev and Baiju Bhatt, two engineers who wanted to make stock trading accessible to people who couldn't afford the $5 to $10 per trade that traditional brokerages charged at the time. The app started with a waiting list of thousands of people before it even had a full product.

The timing mattered. In 2013, most brokerages still charged per-trade commissions, and the minimum account balance to avoid fees was often $2,500 or higher. Robinhood's zero-commission model and $1 minimum to start investing were genuinely different from what existed. The company expanded to Android in 2014 and added options trading in 2015, then expanded to cryptocurrency trading in 2018.

Key Takeaways

  • Robinhood launched on May 1, 2013, as a mobile app that eliminated commission fees for stock trades.
  • The company started with a $1 minimum investment requirement, which was far lower than the $2,500 minimums many traditional brokerages required.
  • By 2015, Robinhood had added options trading, and by 2018 it added cryptocurrency trading to its platform.
  • The zero-commission model eventually forced traditional brokerages like Fidelity, Charles Schwab, and E-Trade to eliminate their own trading commissions.

How Robinhood changed the brokerage industry

Robinhood's commission-free model put pressure on every other brokerage. Within a few years, Fidelity, Charles Schwab, TD Ameritrade, and E-Trade all dropped their commission fees. That shift happened because Robinhood proved that retail investors would move their money to save on costs, and the larger brokerages couldn't afford to lose market share to a startup.

The business model worked differently than traditional brokerages. Instead of making money from commissions, Robinhood made money from interest on uninvested cash in accounts, from selling order flow to market makers (a practice called payment for order flow), and later from a premium subscription tier called Robinhood Gold. This meant the company could afford to charge zero commissions while still operating profitably.

What Robinhood offered in its first years

When Robinhood launched, it was a simple app: you could buy and sell stocks, see real-time quotes, and track your portfolio. There were no mutual funds, no bonds, no retirement accounts. The app was designed for speed and simplicity, not for the full range of investment products a traditional brokerage offered.

The company added features gradually. Options trading arrived in 2015, which let users trade contracts that bet on price movements rather than owning the stock itself. Cryptocurrency trading came in 2018, starting with Bitcoin and Ethereum. Robinhood added fractional shares in 2019, which meant you could buy a piece of an expensive stock instead of needing enough money for a full share. Each addition brought new users and expanded what the platform could do.

The 2020 boom and the GameStop controversy

Robinhood's user base exploded during 2020 and early 2021. The combination of pandemic lockdowns, stimulus checks, and a surge in retail investing brought millions of new accounts. The app became the most-downloaded financial app in the United States. But that growth came with a major problem in January 2021.

When retail investors coordinated on social media to buy GameStop stock, Robinhood restricted trading on the stock, citing risk management and clearing house requirements. The move sparked outrage, congressional hearings, and lawsuits. The incident damaged Robinhood's reputation among some users and raised questions about whether a commission-free brokerage could truly serve retail investors when conflicts arose.

Robinhood's path to going public

Robinhood filed to go public in July 2021 and began trading on the NASDAQ under the ticker symbol HOOD on July 29, 2021. The IPO priced shares at $38 each, and the company raised about $2 billion. The stock opened at $35 on the first day of trading, below the IPO price, which reflected lingering concerns about the GameStop incident and questions about the company's profitability.

As a public company, Robinhood had to file quarterly earnings reports and disclose more information about how it made money. The company continued to add features like retirement accounts and expanded its cryptocurrency offerings, but it also faced ongoing regulatory scrutiny about payment for order flow and how it handled customer data.

Where Robinhood stands today

Robinhood remains one of the largest retail brokerages in the United States, with millions of active users. The zero-commission model it pioneered is now standard across the industry. However, the company faces competition from established brokerages like Fidelity and Charles Schwab, which now offer commission-free trading plus additional features and customer service that Robinhood doesn't provide.

The app itself has evolved from a simple stock-trading tool into a platform that offers stocks, options, cryptocurrency, and fractional shares. Robinhood has also expanded into retirement accounts and added features like recurring investments. But the core appeal remains the same: low barriers to entry and no commission fees.

Frequently Asked Questions

Did Robinhood actually invent commission-free trading?

Robinhood was the first to make commission-free trading the core of its business model for retail investors, but it didn't invent the concept. Some brokerages had offered commission-free trades on certain products before 2013. Robinhood's innovation was making it the default for all stock trades and backing it with a business model that actually worked.

Why did Robinhood restrict GameStop trading?

Robinhood said it restricted trading because of risk management and clearing house requirements. When trading volume surged, the company had to post more money to the clearing house to may provide trades. Robinhood cited liquidity concerns, though the company later said it had the capital to continue. The incident remains controversial and led to lawsuits and regulatory investigations.

Is Robinhood still free to use?

Stock and options trading on Robinhood remain commission-free. Cryptocurrency trading is also free. However, Robinhood Gold, the premium subscription tier, costs $5 per month and offers features like margin trading and extended-hours trading. The basic app is still free, but some advanced features require a paid subscription.

Can you use Robinhood for retirement accounts?

Robinhood added retirement accounts (IRAs) in 2022, allowing users to open traditional IRAs, Roth IRAs, and SEP IRAs. These accounts have the same commission-free trading as regular accounts but come with the tax advantages of retirement accounts. Contribution limits and withdrawal rules follow standard IRA rules.