Robinhood has had quite a mixed year, with ups and downs relating to its core business and expansion plans.

While the company has been working to end the year on a high note, a potential lawsuit could derail such aspirations.

The Massachusetts Securities Division's enforcement arm is preparing a possible lawsuit against crypto-friendly app Robinhood, the Wall Street Journal reports. According to the report, the regulators had discovered substantial proof showing that the company had deliberately targeted ill-experienced investors through its marketing campaigns.

The regulators added that the company's deceptive advertising was far below the fiduciary standard, essentially exposing local investors to unnecessary risks.

The lawsuit is championed by William Galvin, the secretary to the Commonwealth of Massachusetts. Galvin's office had reportedly filed the complaint against Robinhood, explaining that the company had been deliberately “gamifying the idea of investing.”

Speaking to CNBC, Galvin explained that Robinhood's tactics – as well as its aggressive marketing – showed that the company was merely concerned about growth. This obsession had led to some reckless practices, with Robinhood choosing expansion over investors' safety.

Along with aggressive marketing, Robinhood was also accused of failing to protect investors from outages and service glitches on its platform. The platform had had several notable service outages this year, with the most severe happening in March.

Amid the largest single-day jump in the Dow Jones Industrial Average's history, Robinhood users found themselves locked out of their accounts. Many were unable to access their portfolios and complete exchange orders, and they eventually lost significant sums.

Investors eventually sued the company, claiming that the outage had cost them a great deal of money. Even at that, the company's technical problems have continued. In June, the company announced that its crypto, stock, and equities trading services had experienced operational issues. In October, Bloomberg also reported that Robinhood Markets, one of its subsidiaries, had suffered several hacks, leading to the exposure of about 2,000 customers' contact details.

A spokeswoman for Robinhood told CNBC that the company plans to fight the suit in court. While Robinhood has been in the news for many of the wrong reasons in 2020, the firm also made some significant progress.

The investment firm confirmed that it had raised $460 million in its Series G funding round in September. The capital haul, led by firms like Andreessen Horowitz and Sequoia Capital, valued the company at $11.7 billion.

The company also tapped investment bank Goldman Sachs to lead its Initial Public Offering (IPO). Citing insider sources, major online news media revealed that Robinhood is looking to list next year, with a planned valuation of about $20 billion.

While the company was reportedly looking to list in the first quarter of the year, it has yet to confirm any date. It is anyone's guess how much this lawsuit could affect such plans.

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