Opinion: Reddit didn’t rig Wall Street. It already was

Typically, when Wall Street fails, it takes down most of America with it. But several weeks ago, we saw perhaps the most unpredictable and astonishing revolution in the history of Wall Street. And we could laugh at it without crying at a tanking economy. 

Unlike the 2008 financial crisis or the stock market crash of 1929 where Wall Street collapsed under its own weight, this time they were beaten by an unlikely foe— Reddit. 

That is right, Reddit. The self proclaimed “degenerates” of Reddit’s r/wallstreetbets managed to beat large hedge funds such as Melvin Capital and the Citadel at their own game. They noticed that these firms were shorting stocks like Gamestop, and immediately organized their army to fight back. 

While Melvin Capital and the “suits” of Wall St. were risking their client’s money that the price of Gamestop would decrease, the degenerates were working to make it rise. And it worked. 

At the opening bell on January 19th, Gamestop was around $37 per share. By week’s end, it was at $64. Those gains would soon seem miniscule. 

The full force of Reddit had been gathered over the weekend. When the opening bell rang on Monday, Reddit was on a rocket to the moon. The wallstreetbets discord was filled with disbelief  as GME hit $100, $200 and then $300 throughout the course of Monday, Tuesday and Wednesday. Hedge funds were forced to buy more to cut their losses, ultimately driving the price higher. At its highest, GME was valued at $470.

This is when the boot came down.

Robinhood, the popular e-trading platform which was used by many of the Redditors and new investors who were looking to make a quick buck, stopped it’s users ability to buy GameStop on Thursday the 28th, along with other shorted stocks including AMC, Nokia and Blackberry. Other trading platforms like Webull and Interactive Brokers made similar decisions. 

A statement emailed to Robinhood users Thursday night explained the decision was made based on complying with Securities Exchange Commission (SEC) guidelines. 

It said that, “These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.”

In other words, the hedge funds can trade and risk their client’s money, but you cannot risk your own. Ironically, the same statement read that, “Democratizing finance for all means giving more people access, not less.”

The stoppage of trading played right into the hands of the suits. Gamestop fell below $200 at the end of the day Thursday, as those who wished to buy more could not. 

And on a rare occasion, politicians from both sides of the political aisle came together on an issue. Congresswoman Alexanda Ocasio-Cortez (D-NY) called for an investigation into Robinhood’s decision to halt trading, and Senator Ted Cruz (R-TX) tweeted his agreement. 

All White House Press Secretary Jen Psaki had to say on the matter was, “We have the first female treasury secretary,” and that they were monitoring the situation. 

Under this and increasing pressure from the masses on social media, Robinhood resumed limited trading of the shorted stocks on Friday the 29th, and the prices reflected it. GameStop reached as high as $340, fueled by millions of new investors riding the Reddit wave. 

While this wave has since died out, and Gamestop currently sits below $100, Robinhood and the markets have forever changed. Yahoo News reported that Robinhood raised approximately 3.4 billion during the surge, largely thanks to new investors. 

So why did all these new investors flock to Robinhood? Because they make trading simple. They don’t charge trading fees. So how do they make money? By selling data to the hedge funds that ripped off their customers. And this isn’t the first time they’ve gotten caught with their hands dirty.

The Daily Caller reported “Robinhood’s largest clients for order flow are all hedge funds and other institutional investors according to an SEC filing from 2020.” The SEC also fined Robinhood $65 million in December 2020 for “misleading statements and omissions.” The SEC concluded that Robinhood had “deprived” clients of $34 million dollars by presenting order flows to clients in a way that put revenue over offering the lowest prices for customers.

It should come to no surprise one of Robinhood’s biggest clients is the Citadel (according to an SEC filing), a hedge fund who lost billions in the past few weeks due to the shorting of GameStop. 

So while these few weeks may seem chaotic to someone who doesn’t study markets, it’s pretty simple. The firm who prides itself on being a platform for all kinds of investors, sold out to the people who actually make them money, the Wall Street suits. 

Don’t get me wrong, what the Reddit community did was market manipulation. Legality aside, it was beautiful to watch Wall Street get beat at their own shady game of shorting stocks. But the Redditors who invested their money assumed they lived in a free market society. And that clearly isn’t true, when brokerages are allowed to stop trading when their billionaire buddies are getting beat by guys in their basements. 

This fiasco nonetheless brought millions of new investors into the market. And with what seems to be bipartisan support for the Reddit Community, and Robinhood CEO, Vlad Tenev, set to testify before a house committee on the 18th, we have a chance to make Wall Street a place for every American, and not just for those who have Ivy League finance degrees.