BOSTON, Jan 18 (Reuters) - Online brokerage Robinhood on Thursday agreed to pay a $7.5 million fine and overhaul its practices to resolve allegations by Massachusetts' securities regulators that it encouraged inexperienced investors to place risky trades.

Massachusetts Secretary of State Bill Galvin filed an enforcement action in 2020 alleging Robinhood's app-based service used strategies that treated trading like a game to lure young, inexperienced customers into placing risky trades.

Galvin, the state's top securities regulator, said such "gamification" strategies including having confetti rain down for each trade made on Robinhood's app.

The

settlement

also addresses issues uncovered through another investigation by Galvin's office into a 2021 data security breach and allegations Robinhood failed to maintain reasonable cybersecurity policies.

Lucas Moskowitz, deputy general counsel and head of government affairs at Robinhood, said in a statement the deal "resolves historical matters dating back to 2021 that do not reflect Robinhood today."

"We are pleased to put this matter behind us and move forward steadfast in our commitment to providing access to the markets for our Massachusetts customers," he said.

Robinhood discontinued the confetti in 2021 after regulators filed the case, the first enforcement action under a state fiduciary duty rule that raised the investment-advice standard for brokers operating in Massachusetts.

Regulators through the case sought to

revoke

Robinhood's license to operate in Massachusetts. Robinhood denied wrongdoing and went to court to challenge the fiduciary duty rule.

The Massachusetts Supreme Judiciary Court in August

upheld the regulation

, which stated that broker-dealers have a fiduciary obligation to provide investment advice without regard to the interests of anyone but their customers.

The company faced a Monday deadline to appeal that decision to the U.S. Supreme Court. It instead agreed to settle the case. (Reporting by Nate Raymond in Boston; Editing by Richard Chang)