#Charlie Munger calls Robinhood a ‘gambling parlor’

Charlie Munger, vice chairman of Berkshire Hathaway and Warren Buffett’s longtime business partner, slammed commission-free trading app Robinhood as being “beneath contempt” in a new interview.

“It’s a gambling parlor masquerading as a respectable business,” the 97-year-old investor told CNBC late Tuesday. “And it’s telling people they aren’t paying commissions when the commissions are simply disguised in the trading.”

“It’s basically a sleazy, disreputable operation. And the interesting thing about it is that some good people you would be glad to have marry into your family have backed it,” he added.

Critics of Robinhood have accused the company of gamifying investing. But the app has also made trading more accessible to younger people and those with less cash on hand by eliminating commission fees.

Instead, it and other online brokerage firms rely on a practice called payment for order flow as a profit engine. The practice, while common, has often been criticized for its lack of transparency.

Market makers, such as Citadel Securities, pay Robinhood and other online brokers for the right to execute customer trades. The broker is then paid a small fee for the shares that are routed, which can add up to millions when customers trade actively.

Buffett added in the interview published Tuesday that Robinhood is not encouraging its users to hold investments over long periods of time.

“It’s not encouraging people to buy a very, very, very low-cost index fund and hold it for 50 years. I will guarantee you that you will not walk in there, get that advice,” Buffett said.

It’s not the first time Buffett’s taken aim at Robinhood.

He said last month at Berkshire Hathaway’s annual meeting that the app’s “become a very significant part of the casino aspect, the casino group, that has joined into the stock market in the last year or year and a half.”

He added that there’s “nothing illegal to it, there’s nothing immoral, but I don’t think you build a society around people doing it.” 

When reached for comment, Robinhood directed The Post to a May blog post responding to Buffett and Munger’s comments made last month.

“If the last year has taught us anything, it is that people are tired of the Warren Buffetts and Charlie Mungers of the world acting like they are the only oracles of investing,” Jacqueline Ortiz Ramsay, a spokeswoman at Robinhood, wrote. “And at Robinhood, we’re not going to sit back while they disparage everyday people for taking control of their financial lives.”

Robinhood, which is eyeing an IPO later this year, landed in regulators’ crosshairs earlier this year when the app helped fuel a GameStop stock frenzy that saw the stock run up nearly 400% at one point.

At a Congressional hearing in February, lawmakers pressed Robinhood CEO Vlad Tenev on the company’s relationship with market makers and its use of payment for order flow. A handful of lawmakers also alleged that Robinhood gamifies the stock market.

In a December lawsuit, Massachusetts Secretary of State Bill Galvin said Robinhood used aggressive tactics to attract inexperienced investors. He accused the app of using strategies that treated trading like a game to lure young, inexperienced customers, including having confetti rain down for each trade made on its app, a practice the app ditched in March.