Congress is investigating whether traders on Reddit’s Wallstreetbets colluded to drive up the price of GameStop, possibily illegally. But two major legal precedents are on the side of Wallstreetbets:
In the DRW case, the CFTC argued the defendants’ orders for a swap contract were “inherently manipulative” because the defendants “understood and intended that their bids would affect the settlement price” of that contract. As the court summarized, the CFTC’s position was that the defendants “had intent to affect the prices, and because they had intent to affect the prices, that means [the prices] were illegitimate, which means that the prices were artificial.” The court rejected that logic as “circular,” concluding the government’s “theory, which taken to its logical conclusion would effectively bar market participants with open positions from ever making additional bids to pursue future transactions, finds no basis in law.”
The way I view this is people saying “You should buy GME!” on an online message board are exercising their free speech. Period.
For more on the Wallstreetbets phenomenon, check out these posts:
- Rocket Companies Is One of the Most Active in the Options Market
- Big Profits And Lots of Short Sellers Could Make Rocket Companies a Winner
- Big Loans at Almost No Interest for Sundial Insiders Are a Rip Off For Shareholders
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