Robinhood faces backlash from both parties for limiting trades
Both Democratic and Republican lawmakers are criticizing stock trading app Robinhood’s Thursday decision to block users from buying or trading stocks popular on a Reddit forum, including GameStop, AMC and BlackBerry.
The decision followed efforts by users on the r/WallStreetBets forum to drive up prices of stocks that had been shorted by traditional hedge funds.
In one tweet, Sen. Ted Cruz (R-Texas) included a questioning face emoji along with a 2016 screenshot of a tweet from Robinhood that read, “Let the people trade.”
Cruz next to this screenshot included the company’s Thursday announcement that “in light of current market volatility, we are restricting transactions for certain securities to position closing only,” including the stocks for GameStop and AMC.
— Ted Cruz (@tedcruz) January 28, 2021
Democratic Rep. Alexandria Ocasio-Cortez (N.Y.) also took to Twitter to vocalize her concern, writing that Robinhood’s decision was “unacceptable.”
“We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit,” the progressive congresswoman added.
Ocasio-Cortez went on to say that as a member of the House Financial Services Committee, she supported a potential hearing on the matter.
Cruz shared Ocasio-Cortez’s tweet, adding, “Fully agree.”
Fully agree. https://t.co/rW38zfLYGh
— Ted Cruz (@tedcruz) January 28, 2021
A Financial Services Committee spokesperson did not immediately respond to The Hill’s request for comment on whether Chairwoman Maxine Waters (D-Calif.) plans to hold a hearing on the issue.
Following rapid surges Wednesday, GameStop’s stock collapsed by 62 percent before 11:30 a.m. on Thursday, triggering multiple trading freezes. AMC Entertainment was down 67 percent, BlackBerry was down 44 percent and Nokia was down 30 percent.
The falling prices could be bad news for some of the traders who bought shares in GameStop and the other companies in the last two days.
The stock market rebounded early Thursday after taking steep losses Wednesday, with the Dow Jones Industrial Average up more than 550 points shortly before 11:30 a.m.
The r/WallStreetBets forum briefly went private Wednesday amid GameStop’s rapid surge, and online messaging platform Discord announced that it had banned the forum’s server due to users sharing “hateful and discriminatory content after repeated warnings.”
Democratic Rep. Ro Khanna (Calif.) also weighed in on the decision Thursday, writing in a statement, “While retail trading in some cases, like on Robinhood, blocked the purchasing of GameStop, hedge funds were still allowed to trade the stock.”
“We need more regulation and equality in the markets,” he continued. “Instead of investing in future technologies to help America win the 21st Century, Wall Street poured billions into shorting this stock to crush this company and put workers out of business. The future of this country lies in that access and equality across every sector of our economy.”
Khanna also noted that “this entire episode has demonstrated the power of technology to democratize access to American financial institutions, ultimately giving far more people a say in our economic structures. This also showed how the cards are stacked against the little guy in favor of billionaire Wall Street Traders.”
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