State Regulatory Authority
State securities regulators — operating under blue sky laws — have authority over broker-dealers doing business in their states, including the ability to bring enforcement actions for fraud and misconduct affecting state residents. State AGs in states with powerful statutes (particularly New York's Martin Act) have historically been aggressive investor protection enforcers even when federal regulators were less active.
The Massachusetts Robinhood Action
Massachusetts's securities regulator brought action against Robinhood in 2020, alleging that the broker's gamification features and order routing practices harmed Massachusetts retail investors. The resulting $7.5 million settlement (2021) was one of the first regulatory actions to address platform design and PFOF-incentive issues at the state level.
NASAA and Coordinated State Action
The North American Securities Administrators Association (NASAA) coordinates state securities regulatory activity and has addressed PFOF and market structure issues in public positions and comment letters. A coordinated multistate action on PFOF — building on individual state authorities — could potentially compel attention to the issue even in the absence of federal action.
Retail Investors as Advocates
Retail investors who want to advance market structure reform can engage their state securities regulators directly — filing complaints, attending public hearings, and contacting their representatives in state legislatures. State regulatory attention to PFOF has historically preceded and motivated federal regulatory consideration of the same issues.