The thing is ... If you don't step in, you could be liable. Let's not pretend that US financial regulation is fairly, evenly, or even logically applied.
But this is straight-up market manipulation. There's no justifiable reason to halt trading on GME except as a means of cooling the market long enough for Important People to exit their bleeding positions.
There's a big ass disclaimer that you sign saying that markets fluctuate and that Robinhood isn't liable for losses of capital.
It's only certain retail brokers, and, mystifyingly, mostly the ones who have hedge funds with significant ownership interests.
But the general case of “the market should never interfere with trading” isn’t true, but typically we only allow that at the exchange level.
What Robinhood has done is apparently to ALLOW trading, but only selling, not buying. At a time when a close partner of theirs is at significant risk if the stock price goes up.
Robinhood is stuck between a set of large lawsuits and a set of even bigger lawsuits. It seems like their internal counsel has decided halting trading will lead to the set containing the smaller lawsuits of the two.
If it was purely a halt on all trading I could see the logic, but only preventing people from buying seems fishy to me.
(I'm not involved one way or the other; I don't trade shares at all)
Which, lets be honest, would have more merit than a "I missed out potential gains" lawsuit.
Buying exposes them to additional risk in the form of potential future lawsuits.
You think they are legitimately scared of being successfully sued for "tricking people" into buying through gameification? That looks like CYA-BS from here. If that were a legitimate concern, why wasn't the interface de-gameified long ago?
> If a retail customer loses money and makes a FINRA complaint that Robinhood induced them to buy through its gameified interface, it is liable
This seems like an attempt to pass the buck to FINRA, and I'm fairly skeptical, but open to being convinced. Have there been FINRA complaints that resulted in substantive enforcement actions centered on a broker's gamified user interface?
On the other hand, manipulating the market seems like a good way to lose a business.
Regulators are (intentionally) designed to be able to exert pressure with a lot of discretion. The financial industry is having a ferocious rage fit. The NASDAQ CEO even went on air calling for immediate SEC regulation... the irony didn't even seem lost to him.
Getting on the industry and SEC's bad side is the liability, and that kind of pressure is a big part of hw the SEC actually "regulates." It isn't strictly through rules.
Platforms are there to enable interface with market, not decide what I can and cannot buy from that markets.
https://www.bloomberg.com/opinion/articles/2021-01-28/robinh...
If Citizens United says money is speech, the financial system effectively has no guard rails
Except when it does for the institutions
Citizens United says specifically that when a bunch of people take their money and get together and start a new corporation (Citizens United) (a not-for-profit corporation in this case, though not a charity) and the corporation proceeds to engage in political speech (by filming a movie named Hillary: The Movie)...
then the corporation, as an entity, is considered to have the rights like the right to free speech, because it is owned by people who have rights, and this is a way for those people to exercise those rights together. Therefore this political speech is protected by the First Amendment, and restrictions on it are evaluated on the standard of strict scrutiny, and the FEC cannot halt this distribution just because the corporation was using money to make it happen.
(You will notice that people are not allowed to band together and exercise the right to vote, and thus corporations don't get to vote.)
This concern is relevant to GME, BB, AMC, etc. because folks are joining Robinhood, Webull, and similar apps in record numbers in a rush to jump in on these hyped-up opportunity.
Go look at past instances of Robinhood going down and the amount of people who claim they're going to take action because of lost money
Citadel wants to stop retail investors from buying so they can both buy and sell to themselves and drive the price down and scare retail investors into selling.
What is a brokerage liable for by doing their job?