Question: Is there any way Robinhood could phrase this decision that makes it OK to selectively prevent their users from buying certain stocks during an arbitrary time period?
Of course, the users are free to file any lawsuits they wish. Saying "the game is rigged and its unfair" isn't exactly a legal argument, though.
This feels like another example of, "Their house, their rules." You don't have to use Robinhood to trade on the NYSE, so the question becomes, "Couldn't these users execute these trades elsewhere?"
Volatility increases risk, and higher risk requires higher levels of safety to operate properly, and Robinhood couldn't provide the higher level of safety, so they were given no choice by the people who actually execute their trades.
In the coming days, more information will add context that, I expect, will make the populist outrage look foolish/uninformed. In many ways, we're already there.
Not really, it takes days to withdraw money.
Robinhood probably is also trying to protect most of its users from being the last ones holding the hot potato. Robinhood has very little incentive to conspire with hedge funds, but every reason to protect their users form themselves, if they think many of their users are taking on risks that will likely hinder their ability and/or willingness to use Robinhood in the future.
This should not be construed as investment advice for or against GME at its current price.
But this could happen with literally any stock that crashes. RH doesn't protect their users in any way from losing money in the stock market so to try to claim they are simply doing this for users seems flimsy.
You're leaving the probability of a crash out of your analysis. If the value proposition of GME is based on the short squeeze (hypothetically speaking... I'm not saying it is or isn't), what happens when either all of the shorts capitulate, or the price reverses direction? You're likely to see liquidity dry up.
Don't pretend like GME is behaving just like all of the other stocks today. There are legitimate reasons for RH to be concerned about GME in ways that don't make sense for most other names.
This narrative is false. Robinhood users are executing a short squeeze on Melvin Capital, who have shorted the stock which gives them an obligation to buy the stock when their short expires at whatever price it exists at. They stock is also "over-shorted" (sorry I'm not wise in this domain), so they are literally obligated to buy at whatever price the stock is at.
The hot potato holders are those who have to cover their short position. Robinhood traders are not these users; no casual retail trader short stocks.
tl;dr Robinhood and others are participating in collusion and market manipulation to prevent Robinhood users from finishing a short squeeze which would extract billions from Melvin Capital, who have already received a multi-billion bailout on their ridiculous short position
The fear is that many Robinhood users may not realize that exiting their position may be much much harder than they expect. If the entire value proposition is that Melvin Capital is being squeezed, what happens to the price of GME the moment after Melvin Capital exits their position?
This should not be construed as investment advice in any way.
Anyways, the situation sounds a lot like Bitcoin to me, from what I hear about the delays and costs of using the exchanges on that platform. And that has not yet been made illegal.