It looks like a new checking account that pays 3% interest is not going to fly. Broker-dealer Robinhood announced the product with great fanfare on Thursday, saying that money deposited in its new checking and savings accounts would be protected up to $250,000 by the SIPC, which guarantees cash in brokerage accounts.

The bottom line: Robinhood is trying to game the system. It's a brokerage masquerading as a bank. It wants to get the advantages of being a bank, like deposit insurance and maturity transformation, without the concomitant regulatory oversight. That's very unlikely to fly.

What they're saying: Stephen Harbeck, the president and CEO of the SIPC, tells Axios that he never heard from Robinhood before the announcement, and that he will not insure such a product.

He only protects cash which is being used with the intention of purchasing securities. "Money that is doing nothing but earning interest looks like a loan," he says. "We do not protect loans to a broker-dealer."

The Robinhood website says that its checking account is insured by the SIPC and that “You do not need to invest to use Robinhood Checking & Savings."

"That statement is incorrect as a matter of law," says Harbeck. The Securities Investor Protection Act of 1970 does not protect money which is not being used to invest in securities.

Robinhood spokesperson: “We added new features to our Robinhood brokerage platform and are thrilled to give customers the opportunity to invest, save, and manage their money all in one Robinhood brokerage account. Robinhood brokerage accounts are protected by SIPC insurance.”