Democratic and Republican lawmakers want answers about why Robinhood prevented its investors from purchasing certain stocks on its platform on Thursday. The liberal Rep. Alexandria Ocasio-Cortez and conservative Sen. Ted Cruz are among the voices urging congressional action to determine why Robinhood interfered with its users’ ability to buy various stocks.
Robinhood, a no-fee investment app, prevented its users on Thursday from purchasing new stock in certain publicly traded companies, including GameStop, AMC Entertainment, and BlackBerry, among others.
The restriction came after a groundswell of users motivated through calls on social media sites such as Reddit to pump the prices of various stocks sent those stocks skyrocketing. GameStop’s stock, for example, began the month below $20 per share, but was north of $300 per share at Wednesday’s market close.
Robinhood and Reddit became the top two apps listed in Apple’s App Store on Thursday because of their user growth, with a large portion of their users investing in the stocks driven higher by social media users. More than half of Robinhood’s investors held GameStop stock on Thursday, according to Vice.
Then Robinhood announced on Thursday it would block users trying to buy the surging stocks and only allow them to sell.
“We continuously monitor the markets and make changes where necessary,” the company said on its blog. “In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AAL, $AMC, $BB, $BBBY, $CTRM, $EXPR, $GME, $KOSS, $NAKD, $NOK, $SNDL, $TR, and $TRVG. We also raised margin requirements for certain securities.”
Investors benefiting from the rising stock prices immediately raised objections, and federal lawmakers soon began calling for answers.
“This is 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,” said Ms. Ocasio-Cortez, New York Democrat, on Twitter. “As a member of the Financial Services Cmte, I’d support a hearing if necessary.”
“Fully agree,” said Mr. Cruz, Texas Republican, on Twitter in response to Ms. Ocasio-Cortez.
Rep. Rashida Tlaib, Michigan Democrat, also called on Twitter for the House Financial Services Committee to hold hearings on “Robinhood’s market manipulation.”
“They’re blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who’ve used the stock market as a casino for decades,” said Ms. Tlaib on Twitter.
Rep. Kelly Armstrong, North Dakota Republican, similarly said he thought Congress should invite Robinhood to answer lawmakers’ questions.
“My first [question] will be ‘What has changed since 2016?’” said Mr. Armstrong on Twitter while sharing a screenshot of Robinhood’s Twitter account proclaiming in 2016, “Let the people trade.”
— Full disclosure: The author is a Robinhood user.