Could the Government Sue Wallstreetbets Over GameStop?

Traders on Reddit’s Wallstreetbets who are pumping GameStop stock could get in trouble with the law. From Lawyer Monthly:

There’s no clear indicator that what occurred is illegal, but it certainly falls within a shady area.

A large number of the investors who joined in, certainly in the later stages, were just jumping on a trend that could earn them money. That’s not the case for those who kicked things off, and that’s where there may be problems. However, even then, it’s not clear because “pumping” a stock for fun, provided that you’re not releasing misleading information, doesn’t technically fall foul of the law. There’s a strong argument that the subreddit thread didn’t have the capacity on their own to change the market substantially. In addition, they didn’t release misleading information to induce others to buy. For these reasons, the SEC and FCA may well decide that although dubious, there were no illegal manoeuvres.

I would expect the most at risk posters to be people with large positions who were early to a campaign to lift a stock like GameStop. Others have been successfully sued by the SEC for buying a stock and promoting it online message boards. However, there are two significant legal precedents in the US that may protect the Reddit traders.

If you want to participate in these runs on meme stocks, the safest way to do so is quietly. Let others do the talking and, if necessary, take the hit.

Nonetheless, if you want to participate in these runs on meme stocks, the safest way to do so is quietly. Let others do the talking and, if necessary, take the hit.

For more on GameStop, check out these posts:

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Photo: “Retail GameStop” by ccPixs.com is licensed under CC BY 2.0

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