advertisement
advertisement

Calls for congressional hearings grow as Robinhood and other brokerages restrict GameStop trades

Both Democrats and Republicans expressed concern over recent moves by trading platforms, which say they are acting in the interest of users.

Calls for congressional hearings grow as Robinhood and other brokerages restrict GameStop trades
[Photo: Caleb Perez/Unsplash; rawpixel]

GameStop’s astounding saga captivated America this week, as it rocketed to new heights fueled by starry-eyed investors from Reddit’s WallStreetBets who’ve waged a bootstrapped war against the Wall Street establishment. The video-and-computer-game vendor’s stock soared from $40 per share in mid-January to, at one point, $470 per share this Thursday, flying in the face of its many short bets from financial elites.

advertisement
advertisement

But while WallStreetBets was looking ahead to what meteoric rise tomorrow would bring, a number of online brokers favored by at-home investors moved to restrict trading on stocks exhibiting “recent volatility,” putting an abrupt end to GameStop’s rally.

Popular zero-fee trading platform Robinhood said Thursday it would block purchasing of shares for eight securities including GameStop, AMC, and Bed Bath & Beyond, all widely shorted stocks that became recent targets of WallStreetBets campaigns. Its peer Interactive Brokers said it would do the same for a separate list that also included GameStop and AMC.

Investors were, however, still allowed to sell off their assets.

advertisement
advertisement

The move seemed to succeed in bringing the high-flying stocks back down to earth, as GameStop has already dropped more than 30% in midday trading, but it drew fast and furious backlash. Rapper Ja Rule, for instance, tweeted that it was a “crime” and claimed that “Wall Street crushes the American dream.”

Outrage circulated on web forums, and Robinhood has already been hit with a class-action lawsuit accusing it of “purposefully, willfully, and knowingly removing the stock ‘GME’ from its trading platform in the midst of an unprecedented stock rise, thereby depriving retail investors of the ability to invest in the open-market and manipulating the open-market.”

advertisement

The move has also prompted scrutiny from Congress, as members on both sides of the aisle are calling for investigations into the trading restrictions and whether they constitute market manipulation. Democratic representative Alexandria Ocasio-Cortez of New York recommended a hearing, tweeting that it was “unacceptable.”

Similar messages came from Democratic representatives Rashida Tlaib of Michigan and Ro Khanna of California, who noted that the move benefits billion-dollar financial firms that had shorted GameStop and were losing chunks of cash as the stock rallied on, but does so at the expense of the individual investor.

advertisement

And Republican senators Ted Cruz of Texas and Marsha Blackburn of Tennessee expressed criticism by calling for, in true Republican style, a freer market.

advertisement

Cruz also backed Ocasio-Cortez’s call for a hearing, to which she responded, “you almost had me murdered 3 weeks ago so you can sit this one out,” and then she called on him to resign.

Reached for comment, a Robinhood spokesperson referred Fast Company to its earlier blog post but did not respond to a follow-up question about a potential investigation from Congress.

advertisement

A spokesperson from Interactive Brokers also referred us to its earlier statement.

advertisement
advertisement
advertisement