• SEC Chair Gary Gensler on Wednesday issued a warning to retail investors who use commission-free brokerage applications to buy and sell stocks.
• "I would say to you all, the public, as you're investing: Beware that they're trying to get you to trade more often. That's their motivation," he told CNBC's Jim Cramer.
• "Statistics usually show that investing is good, but trading often is not," Gensler added.

Securities and Exchange Commission Chair Gary Gensler on Wednesday issued a warning to retail investors who use commission-free brokerage apps to buy and sell stocks.

In an interview with CNBC's Jim Cramer, the head of the top U.S. securities regulator expressed concerns about what he sees as misaligned incentives between some investors and the services they use to participate in equity markets.

"I would say to you all, the public, as you're investing: Beware that they're trying to get you to trade more often. That's their motivation," Gensler said in an interview on "Mad Money." "Statistics usually show that investing is good, but trading often is not."

Gensler's comments came in response to a question about the Reddit-fueled meme stock frenzy that began in January 2021 and the spotlight it put on the so-called gamification of investing.

Gensler said that even though it's no secret Americans are "bombarded every day by ... behavioral prompts" while using technology, the implications become worrisome when it extends into finance.

"The brokerage apps, the robo advisors, are doing it as well, and I think that we have to be aware that their motivation is to make more revenues for that startup or more money for that application and that business," Gensler said. "We have a basic idea in America that they should be making advice and recommendations to us for our benefit."

The SEC has been looking into gamification and behavioral prompts to see what steps, if any, the regulator can take to deliver greater protection for investors, Gensler noted. At the same time, Gensler acknowledged that there's recently been an increase in the number of people who are interested in investing.

"It's good to have more of the public of every generation thinking about their future and investing in this great thing of American capital markets and the companies that stand behind it," he said. "But the constant daily prompts and motivations to trade more generally lowers returns."

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