Robinhood launched in May 2013 as a mobile-first brokerage

Robinhood opened to the public on May 2, 2013. The platform was founded by Vladimir Tenev and Baiju Bhatt, two software engineers who built it to let people trade stocks and exchange-traded funds (ETFs) without paying commission fees — something that was unusual at the time. Most brokerages charged $5 to $10 per trade.

The company started with a waiting list. Early users had to request access and wait for an invitation before they could open an account. This slow rollout lasted through 2013 and into 2014, as the founders worked to build out the platform and make sure the systems could handle real trading volume.

Robinhood was based in Menlo Park, California, and operated as a Financial Industry Regulatory Authority (FINRA) member broker-dealer. The app was designed for iPhone first, which was a deliberate choice — the founders wanted to reach people who preferred mobile phones over desktop computers for managing money.

Key Takeaways

  • Robinhood began accepting users on May 2, 2013, with a commission-free trading model that was rare for brokerages at that time.
  • The platform started with an invitation-only waiting list and gradually opened access over the course of 2013 and 2014.
  • The company was founded by Vladimir Tenev and Baiju Bhatt, two engineers who wanted to lower barriers to stock trading.
  • Robinhood launched as a mobile app first, focusing on iPhone users rather than building a desktop platform initially.

How Robinhood made commission-free trading possible

Traditional brokerages made money by charging per-trade commissions. Robinhood's founders realized they could operate differently by using a technology infrastructure that was cheaper to run and by making money through other means — primarily by lending out customer cash balances and selling order flow data to market makers.

Order flow is information about customer buy and sell orders. Market makers (firms that buy and sell stocks constantly) pay brokerages for this data because it helps them predict price movements and manage their own risk. This became Robinhood's main revenue source in the early years, along with interest earned on uninvested cash sitting in customer accounts.

The commission-free model caught on quickly. Within a few years, other brokerages like Charles Schwab, TD Ameritrade, and Fidelity dropped their own commission fees to compete. By 2019, commission-free trading had become standard across the industry.

Growth from 2013 through the early 2020s

Robinhood grew slowly at first. By the end of 2014, the company had roughly 100,000 users. Growth accelerated in 2015 and 2016 as more people learned about the app and as the stock market recovered from the 2008 financial crisis aftermath.

The platform expanded its offerings over time. In 2015, Robinhood added options trading (the ability to trade contracts that give you the right to buy or sell stocks at a set price). In 2018, the company added cryptocurrency trading, letting users buy and sell Bitcoin and Ethereum. In 2020, Robinhood added fractional shares, which meant you could buy a portion of an expensive stock instead of having to buy a whole share.

The company went public in July 2023, listing on the NASDAQ under the ticker symbol HOOD. By that time, Robinhood had millions of users and had become one of the most recognizable names in retail investing.

The 2021 GameStop trading event and regulatory attention

Robinhood became the center of a major news story in January 2021 when the company temporarily restricted trading in GameStop and other stocks that were being heavily bought by retail investors. The restriction lasted only a few hours, but it sparked criticism from users, lawmakers, and the media, who questioned whether Robinhood had acted fairly.

The company said it had restricted trading because of clearing house requirements — the financial institutions that settle trades require brokerages to hold a certain amount of cash on hand. When trading volume in GameStop spiked, Robinhood's cash reserves dropped, forcing the temporary halt.

This event led to increased regulatory scrutiny of Robinhood and other retail brokerages. The Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) both opened investigations. Robinhood settled with the SEC in 2023 for $70 million over various compliance issues, though the GameStop trading halt itself was not the primary focus of that settlement.

Robinhood's business model today

Robinhood now makes money through several channels. The company still earns revenue from order flow, though this has become a smaller part of its business as it has grown. Robinhood Gold, a paid subscription service, charges users a monthly fee for margin trading (borrowing money to invest) and other premium features. The company also earns interest on customer cash balances and has added cryptocurrency wallets and other services.

The platform remains free to use for basic stock and ETF trading. Options trading and cryptocurrency trading are also commission-free, though they carry their own risks and fees depending on what you trade.

Frequently Asked Questions

Who founded Robinhood and why?

Vladimir Tenev and Baiju Bhatt founded Robinhood in 2013. Both were software engineers who wanted to make stock trading cheaper and more accessible to ordinary people by eliminating commission fees. They believed that technology could make brokerage services simpler and less expensive to operate.

Was Robinhood the first commission-free brokerage?

Robinhood was not the absolute first, but it was the first to make commission-free trading the core of its business model and to reach a large number of retail investors. A few other platforms had offered limited commission-free trading before 2013, but Robinhood's mobile app and focus on young investors made it the most visible and influential early player in the space.

Why did Robinhood restrict GameStop trading in 2021?

Robinhood said it restricted trading because clearing house requirements forced it to hold more cash on hand during extreme trading volume. The company did not have enough cash reserves to cover the settlement requirements for all the trades being placed. The restriction lasted a few hours and was lifted once the situation stabilized.

How does Robinhood make money if trading is free?

Robinhood earns money through order flow (selling information about customer trades to market makers), interest on uninvested cash, subscription fees from Robinhood Gold, and other services. The company does not charge per-trade commissions, but it generates revenue through these other channels.

Can I still use Robinhood today?

Yes. Robinhood is a regulated brokerage that is open to new users. You can download the app, open an account, and start trading stocks, ETFs, options, and cryptocurrencies. The platform operates in most U.S. states, though a few states have restrictions on certain services like cryptocurrency trading.