Which is not remotely illegal, and most brokers do the same thing, except they used to charge people to buy and sell as well but now just make money from order flow. In fact market makers have always been involved in stock sales to ensure a fluid market; none of this is new. What is new is that buying and selling stocks costs you nothing, so there is no barrier to anyone to put money in or take it out. While everyone thinks it's a great thing, it's no different that allowing free communication in exchange for your personal data (ie Facebook) instead of requiring you to pay to communicate via mail or phone or plan things in person. Free always has a cost; in this case free involve scads of money changing hands with the folks at the end holding the bag, and anyone can pump the market to ensure they make a profit, and someone else takes a loss.

The theory isn't "it's illegal", the theory is "someone at their main source of revenue might call them up and pressure".

It's not a question of legality, it's one of incentives.

Similar to Google or Facebook, if I get the service for free, the service-providers' incentives may be aligned against me in favour of their paying customers.

Nah, it’s likely net interest that is the largest portion.

Yes. Hedge funds profit from every trade on RH.