Robinhood (HOOD  ) shares were initially higher by 10% following a report that the SEC won't ban payment for order flows which comprises the bulk of Robinhood's revenues. However, these gains quickly faded amid risk-off sessions on Thursday and Friday and larger concerns about Robinhood's user growth and decline in engagement amid the market selloff.

According to reporting from Bloomberg News, the SEC is expected to not ban payment for order flow (PFOF) which would compromise Robinhood's entire business model. However, there could still be changes to PFOF which could limit its profitability.

PFOF allows brokerages and market makers to split the profits made on trades from retail customers. It gives market makers insight into the order books of retail traders and investors, but it does enable commission-free trading. However, critics contend that large institutions getting order flows gives them an undue advantage in markets and leads to a less level playing field.

The SEC has been critical of PFOF, and it has questioned whether this is hurting the execution price that customers are getting. The SEC in a statement said that it wants to modify rules to ensure that equity markets are as 'fair, efficient, and competitive as possible'. It's specifically looking at executions, disclosure of order quality, best bid and offer, tick size, exchange access fees, and order-by-order competition in addition to PFOF.

In a statement, Robinhood responded that the company wasn't surprised by the report and that a ban would "overly complicated market structure rule changes, will only harm the millions of Americans who are now participating in the stock market for the first time."

Overall, Robinhood shares are down 47% YTD. One silver lining is that shares are essentially flat after the big plunge from above $35 in late 2021 to below $10 in late January 2022. However, the company's outlook has deteriorated with user growth flat and a big slowing in user activity given the bear market in stocks, especially among retail favorites and cryptocurrencies which were fueling Robinhood's explosive growth.