The Federal Reserve this week released a report that raised concern over the volatility of meme stocks, saying heavily traded names like Game Stop (GME) and AMC (AMC) could pose a risk to overall financial stability.
The Fed joins a host of investing lions, including "Big Short" investor Michael Burry and Berkshire Hathaway CEO Warren Buffett, who have sounded the alarm over meme investing.
But the notion of "meme investing" insults a growing set of well-informed retail investors who understand their long-term financial interest, Robinhood (HOOD) Crypto COO Christine Brown told Decrypt Editor-in-Chief Daniel Roberts at a Yahoo Finance-Decrypt cryptocurrency event on Tuesday.
"There's this undercurrent that retail investors are not smart enough to make right decisions and they're choosing these things just as gamblers," Brown said at the event, titled "Crypto Goes Mainstream."
"I think that's kind of insulting, honestly," she adds. "So the idea of meme investing needs a little bit of an attitude adjustment."
Robinhood, a top app for retail traders, reported 18.9 million monthly active users in third quarter earnings last month. The company considers itself a much-needed trading platform for small investors who often lack affordable and easy access to the stock market.
In response to criticism of the platform in May from Berkshire Hathaway CEO Warren Buffett and Vice Chairman Charlie Munger, Robinhood said, "People are tired of the Warren Buffetts and Charlie Mungers of the world acting like they are the only oracles of investing."
The SEC released a report last month that raised concern over platforms that have "game-like features" for stock trading, opening up the possibility of "additional considerations" in the future but offering no policy recommendations.
The report suggested that gamification could be incentivized by the practice of payment for order flow, whereby platforms like Robinhood accept smaller price improvement for traders in exchange for higher payments from the market makers that fulfill the trades.
Brown, of Robinhood, said onlookers should respect the decisions made by retail traders.
"Retail investors have a wealth of information that's available to them," she says. "They are long term in their outlook, and we really shouldn't be criticizing them for what stocks they're picking specifically."
Max Zahn is a reporter for Yahoo Finance. Find him on twitter @MaxZahn_.
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