Your Trading App Looks Like a Gambling Shop. Regulators Have Noticed.
The retail trading industry should pay very close attention
to what regulators are signalling right now.
Buried inside ESMA’s latest Common Supervisory Action
priorities was a message that many firms likely underestimated: digital
platforms ranked second among regulatory concerns.
Not leverage. Not disclosures. Not even product complexity. It’s digital platforms.
That alone should tell the industry where this is heading.
Because regulators are no longer just looking at what retail investors trade.
They are now looking at how platforms influence them to trade in the first
place.
And the tone is rapidly changing.
An Empirical Case by a Regulator
For years, regulatory concerns about trading app design were theoretical. Regulators raised concerns. Papers were published. Industry
pushed back.
That phase is over.
In April 2025, the Financial Conduct Authority published
what is likely the most consequential piece of regulatory research on trading
app design ever produced. Drawing on real consumer transaction data linked to
credit files across multiple UK trading platforms, the first study of its kind,
the FCA’s findings are not directional warnings. They are data.
The median user of a high digital engagement practice (DEP)
app made seven times more trades than the median user of a low engagement app.
Users of high engagement apps were 4.8 percentage points more likely to suffer
a large loss, defined as a realised loss exceeding 2% of annual net income.
They were almost twice as likely to display what the FCA calls potentially
problematic engagement, elevated, erratic, or concerning trading behaviour
modelled directly on problem gambling frameworks. They logged in at night,
between 11 pm and 6 am, four times as often as users of low engagement platforms.
And the rate of financial distress among high-engagement app users was 5.1%, more than twice the 1.9% seen on low-engagement platforms, rising to 7.3% for
CFD users specifically.
These are not survey results. These are real transactions,
linked to real credit files, across real platforms.
Related: Will Curbs on the Gamification of Trading End Retail Demand?
The FCA has produced an
empirical case that platform design drives materially worse outcomes for retail
investors.
One further finding deserves particular attention. As of the
period studied, none of the firms in the sample had conducted any internal
testing of the causal impact of their digital engagement practices on consumer
outcomes. Not one.
The Global Standard-Setter Has Spoken
If the FCA paper established the evidence base, IOSCO’s
final report on digital engagement practices, published on 19 May 2025, as part of its
Roadmap for Retail Investor Online Safety, established the global regulatory
expectation.
IOSCO’s membership includes the ESMA, the FCA, the SEC, and virtually every other major financial regulator worldwide.
When IOSCO
publishes a final report, it is not a discussion paper. It is a global signal
about the direction of supervisory travel.
The DEPs’ final report addresses gamification of trading websites and apps directly, badges, rewards, celebratory messages, and instant gratification features, noting that these affect investors’ evaluation of risk and potentially lead to worse outcomes. IOSCO made a specific observation that cuts to the heart of the issue: in the traditional model, where a trader called their broker to place a trade, there was an intermediary who could mitigate risky behaviour. That buffer no longer exists.
Simultaneously, IOSCO published companion reports on finfluencers and online imitative trading, identifying a growing intersection between platform-driven engagement, influencer-driven acquisition, and the gamification mechanics that push retail investors toward behaviour they would not otherwise exhibit.
Read more: The UAE Regulated Finfluencers First. Now Comes the Hard Part.
The three reports together are not coincidental. They
describe the same ecosystem from three different angles.
IOSCO’s Chairman was direct: “From finfluencer
promotions to gamified apps and imitative content, these reports set out
globally aligned expectations for ethical conduct and effective
oversight.”
Globally aligned expectations. That phrase should be read
carefully by every compliance officer in the retail trading industry.
The Industry’s Defence Is Already Under Pressure
SIFMA, representing the US securities industry, pushed back
on IOSCO’s consultation, arguing that digital engagement practices are
“nothing more than the natural evolution of customer engagement
practices” and that additional DEP-specific policies, procedures, risk
management systems, testing, and disclosures are not necessary beyond existing
frameworks.
That argument is the most revealing thing the industry has
said on this topic. Because it describes precisely the gap that regulators have
now documented empirically.
The FCA found that none of the firms studied had
tested the impact of their own engagement features on consumer outcomes. IOSCO
found that existing frameworks were insufficient to address the emerging risk.
ESMA elevated digital platforms to the second priority of its Common
Supervisory Action.
Surveill’s own assessment of 154 CySEC-regulated CFD
and FX firms found that 90% had no policy language governing how platform
design choices create conflicts between firm commercial interests and client
outcomes.
The firms saying existing frameworks are sufficient are the
same firms whose existing frameworks contain nothing about the conflict
implications of their platform design. That is not a defence. It is an
illustration of the problem.
#WSJWhatsNow: Some behavioral researchers say the simplicity of Robinhood’s brokerage app nudges inexperienced investors to take bigger risks. @4BetterOrWurst explains. https://t.co/g2VHVy80ub pic.twitter.com/Yf0eTRQkgi
— The Wall Street Journal (@WSJ) August 29, 2020
The Regulatory Convergence
Three major regulatory bodies published or acted on digital
engagement practices within a twelve-month window. The FCA published empirical
research in April 2025. IOSCO published its final global report in May 2025. ESMA’s Common Supervisory Action is already underway across every EU national competent authority, including CySEC and MFSA, which has digital platforms as its second priority.
This is not a coincidence. This is coordination. And
coordination at this level has historically preceded enforcement.
Historically, brokers defended themselves through
disclosure. Risk warnings, terms and conditions, appropriateness tests. The
assumption was that if the customer understood the risks, the responsibility
ultimately sat with the investor.
But digital engagement practices challenge that framework
entirely because they influence behaviour before the investment decision is even
made.
A push notification encouraging a user to trade volatility is not neutral
infrastructure. A leaderboard encouraging users to outperform other traders is
not a passive design. A frictionless onboarding process engineered to minimise hesitation is not merely convenient. These are behavioural systems.
Regulators are now
treating them that way.
Where This Is Heading
Once regulators begin viewing trading apps through the same
lens as addictive digital products, social media algorithms, or online gambling
mechanics, and the FCA’s research explicitly draws on problem gambling
frameworks to measure potentially problematic engagement, the regulatory
conversation moves far beyond disclosure obligations.
It becomes a discussion about manipulation.
That is a far more dangerous conversation for industry because, unlike leverage restrictions or marketing rules, behavioural regulation cuts directly into the growth engine of many retail platforms.
Engagement is no longer just a UX strategy. It is becoming a
regulatory risk.
The firms that survive the next wave of scrutiny will not be
the ones with the flashiest interfaces or the highest acquisition numbers. They
will be the firms that recognise, early, that regulators are no longer
examining only the products being sold.
They are examining the psychology of the platforms selling
them.
The retail trading industry should pay very close attention
to what regulators are signalling right now.
Buried inside ESMA’s latest Common Supervisory Action
priorities was a message that many firms likely underestimated: digital
platforms ranked second among regulatory concerns.
Not leverage. Not disclosures. Not even product complexity. It’s digital platforms.
That alone should tell the industry where this is heading.
Because regulators are no longer just looking at what retail investors trade.
They are now looking at how platforms influence them to trade in the first
place.
And the tone is rapidly changing.
An Empirical Case by a Regulator
For years, regulatory concerns about trading app design were theoretical. Regulators raised concerns. Papers were published. Industry
pushed back.
That phase is over.
In April 2025, the Financial Conduct Authority published
what is likely the most consequential piece of regulatory research on trading
app design ever produced. Drawing on real consumer transaction data linked to
credit files across multiple UK trading platforms, the first study of its kind,
the FCA’s findings are not directional warnings. They are data.
The median user of a high digital engagement practice (DEP)
app made seven times more trades than the median user of a low engagement app.
Users of high engagement apps were 4.8 percentage points more likely to suffer
a large loss, defined as a realised loss exceeding 2% of annual net income.
They were almost twice as likely to display what the FCA calls potentially
problematic engagement, elevated, erratic, or concerning trading behaviour
modelled directly on problem gambling frameworks. They logged in at night,
between 11 pm and 6 am, four times as often as users of low engagement platforms.
And the rate of financial distress among high-engagement app users was 5.1%, more than twice the 1.9% seen on low-engagement platforms, rising to 7.3% for
CFD users specifically.
These are not survey results. These are real transactions,
linked to real credit files, across real platforms.
Related: Will Curbs on the Gamification of Trading End Retail Demand?
The FCA has produced an
empirical case that platform design drives materially worse outcomes for retail
investors.
One further finding deserves particular attention. As of the
period studied, none of the firms in the sample had conducted any internal
testing of the causal impact of their digital engagement practices on consumer
outcomes. Not one.
The Global Standard-Setter Has Spoken
If the FCA paper established the evidence base, IOSCO’s
final report on digital engagement practices, published on 19 May 2025, as part of its
Roadmap for Retail Investor Online Safety, established the global regulatory
expectation.
IOSCO’s membership includes the ESMA, the FCA, the SEC, and virtually every other major financial regulator worldwide.
When IOSCO
publishes a final report, it is not a discussion paper. It is a global signal
about the direction of supervisory travel.
The DEPs’ final report addresses gamification of trading websites and apps directly, badges, rewards, celebratory messages, and instant gratification features, noting that these affect investors’ evaluation of risk and potentially lead to worse outcomes. IOSCO made a specific observation that cuts to the heart of the issue: in the traditional model, where a trader called their broker to place a trade, there was an intermediary who could mitigate risky behaviour. That buffer no longer exists.
Simultaneously, IOSCO published companion reports on finfluencers and online imitative trading, identifying a growing intersection between platform-driven engagement, influencer-driven acquisition, and the gamification mechanics that push retail investors toward behaviour they would not otherwise exhibit.
Read more: The UAE Regulated Finfluencers First. Now Comes the Hard Part.
The three reports together are not coincidental. They
describe the same ecosystem from three different angles.
IOSCO’s Chairman was direct: “From finfluencer
promotions to gamified apps and imitative content, these reports set out
globally aligned expectations for ethical conduct and effective
oversight.”
Globally aligned expectations. That phrase should be read
carefully by every compliance officer in the retail trading industry.
The Industry’s Defence Is Already Under Pressure
SIFMA, representing the US securities industry, pushed back
on IOSCO’s consultation, arguing that digital engagement practices are
“nothing more than the natural evolution of customer engagement
practices” and that additional DEP-specific policies, procedures, risk
management systems, testing, and disclosures are not necessary beyond existing
frameworks.
That argument is the most revealing thing the industry has
said on this topic. Because it describes precisely the gap that regulators have
now documented empirically.
The FCA found that none of the firms studied had
tested the impact of their own engagement features on consumer outcomes. IOSCO
found that existing frameworks were insufficient to address the emerging risk.
ESMA elevated digital platforms to the second priority of its Common
Supervisory Action.
Surveill’s own assessment of 154 CySEC-regulated CFD
and FX firms found that 90% had no policy language governing how platform
design choices create conflicts between firm commercial interests and client
outcomes.
The firms saying existing frameworks are sufficient are the
same firms whose existing frameworks contain nothing about the conflict
implications of their platform design. That is not a defence. It is an
illustration of the problem.
#WSJWhatsNow: Some behavioral researchers say the simplicity of Robinhood’s brokerage app nudges inexperienced investors to take bigger risks. @4BetterOrWurst explains. https://t.co/g2VHVy80ub pic.twitter.com/Yf0eTRQkgi
— The Wall Street Journal (@WSJ) August 29, 2020
The Regulatory Convergence
Three major regulatory bodies published or acted on digital
engagement practices within a twelve-month window. The FCA published empirical
research in April 2025. IOSCO published its final global report in May 2025. ESMA’s Common Supervisory Action is already underway across every EU national competent authority, including CySEC and MFSA, which has digital platforms as its second priority.
This is not a coincidence. This is coordination. And
coordination at this level has historically preceded enforcement.
Historically, brokers defended themselves through
disclosure. Risk warnings, terms and conditions, appropriateness tests. The
assumption was that if the customer understood the risks, the responsibility
ultimately sat with the investor.
But digital engagement practices challenge that framework
entirely because they influence behaviour before the investment decision is even
made.
A push notification encouraging a user to trade volatility is not neutral
infrastructure. A leaderboard encouraging users to outperform other traders is
not a passive design. A frictionless onboarding process engineered to minimise hesitation is not merely convenient. These are behavioural systems.
Regulators are now
treating them that way.
Where This Is Heading
Once regulators begin viewing trading apps through the same
lens as addictive digital products, social media algorithms, or online gambling
mechanics, and the FCA’s research explicitly draws on problem gambling
frameworks to measure potentially problematic engagement, the regulatory
conversation moves far beyond disclosure obligations.
It becomes a discussion about manipulation.
That is a far more dangerous conversation for industry because, unlike leverage restrictions or marketing rules, behavioural regulation cuts directly into the growth engine of many retail platforms.
Engagement is no longer just a UX strategy. It is becoming a
regulatory risk.
The firms that survive the next wave of scrutiny will not be
the ones with the flashiest interfaces or the highest acquisition numbers. They
will be the firms that recognise, early, that regulators are no longer
examining only the products being sold.
They are examining the psychology of the platforms selling
them.
