Senate panel to hold hearing into GameStop stock frenzy

The move follows calls for an inquiry from top Congress members

The Senate’s banking committee will hold a hearing into the “current state of the stock market,” according to incoming chairman Sherrod Brown, as a battle between amateur investors on Reddit and Wall Street firms has caused multi-billion dollar fluxuations, with each side making competing bets on shares of companies like GameStop.

“People on Wall Street only care about the rules when they’re the ones getting hurt. American workers have known for years the Wall Street system is broken – they’ve been paying the price,” Mr Brown told Bloomberg, which first reported the news, in a statement. “It’s time for the SEC and Congress to make the economy work for everyone not just Wall Street."

In recent days, investors online have been flocking to buy shares in companies like video games retailer GameStop and movie theatre chain AMC that Wall Street firms had bet against, driving their share prices up so dramatically that trading platforms like Robinhood and Interactive Brokers placed restrictions on certain trades coming through their platform, and causing firms like Melvin Capital Management to lose billions of dollars.  

These restrictions, which seemed to some to tip the scales against everyday investors, provoked prominent officials in both parties like senator Ted Cruz and congresswoman Alexandria Ocasio-Cortez to call for inquiries into what happened.

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“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,” Ms Ocasio-Cortez wrote on Monday on Twitter. “As a member of the Financial Services [Committee], I’d support a hearing if necessary.”

Mr Cruz said he fully agreed with that position. 

Meanwhile, customers hit Robinhood with a class-action lawsuit in federal court on Thursday, claiming the company "purposefully, willfully, and knowingly removing the stock ‘GME’ [GameStop] from its trading platform in the midst of an unprecedented stock rise thereby deprived retail investors of the ability to invest in the open-market and manipulating the open-market.” 

Robinhood did not respond to a request for comment.

“We continuously monitor the markets and make changes where necessary,” the company said in a statement announcing the restrictions. “In light of recent volatility, we are restricting transactions for certain securities.”