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.
I could see the case if trading for the stock was halted, they'd be liable for the inaction of continuing to allow trades on the platform.
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.
No, it's not unusual. And, in fact, the exchanges HAVE used brief halts in trading to curb volatility in GameStop stock. But those were done in accordance with standard policies that simply reference a certain amount of change within a certain timeframe.
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.
The justifiable reason is because if they continue to allow purchases of GME, they might get hit with an even bigger lawsuit from retail. See JumpCrisscross's comments: https://news.ycombinator.com/item?id=25943058
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 they halted selling you know as well as I do that there would have been an immediate "Robinhood is holding my money hostage! They didn't let me sell and the price dropped, so they are responsible for my losses" lawsuit.
Which, lets be honest, would have more merit than a "I missed out potential gains" lawsuit.
Selling is important because it lets people close out their positions as they need to. If Robinhood halted all trading they would have a huge mess à la the complete shutdown back in March.
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?
Robinhood have themselves to blame. They made it dead-easy to trade on margin and do irresponsible naked option plays all these years. And they benefited from that massively in terms of revenue from Citadel (order flow) and raising their own valuation. All of a sudden they care about investor risk?
> 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?
My understanding is that brokerages are generally not liable for what happens on their platform so long as they ensure trades remain legal (eg margin requirements) and they don't make false promises and keep appropriate disclaimers.
On the other hand, manipulating the market seems like a good way to lose a business.
Liable to get on the SEC, and industry's bad side.
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.
Customers use a trading platform for access to buy and sell on stock markets. If one day you prevent me from doing that but don’t tell me before I sign up when you would restrict my ability to interface with the market it seems like a interference.
Platforms are there to enable interface with market, not decide what I can and cannot buy from that markets.
Some folks on WSB may know what they're doing, but many folks are joining Robinhood and buying GME and AMC due to the hype and that they heard they can make a quick buck. When GME eventually crashes, many of them will lose a fair bit of money and blame Robinhood for the poor experience.
I'm not arguing either of those (and wholeheartedly agree with you). I'm simply stating a potential concern/justification that Robinhood may have or use.
I think this is a reasonable attempt at "what RH did was right", although I'd certainly be happier if the timing and coordinating were brought to light:
You have been reading too many memes. Citizens United does not say money is speech.
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.)
The financial system has _many_ guard rails including licensure (see the FINRA exams), regulations and regulatory bodies, and orders to halt or limit trades and positions on volatile securities.
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.
Right now the retail investors are winning. But imagine if they lost tons of money instead. You might have regulators yelling that Robinhood is not doing enough to inform and protect their customers from self harm. Or even that they were encouraging risky behavior.
Yeah, but all they can do is halt trading for everyone, that's not what Citadel wants.
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.
