The U.S. House Financial Services and Senate Banking committees said on Thursday they will hold hearings on the stock market after users of investment apps faced trading limits following the “Reddit rally” that put a charge into GameStop and other volatile stocks that were touted in online forums.
Democrat Representative Maxine Waters said the hearing will focus on “short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors.”
An army of retail investors routed Wall Street professionals this week, placing hedge funds in a costly “short squeeze” after the funds had bet on future declines in GameStop and other out-of-favor stocks.
But on Thursday, brokerages Robinhood Markets Inc and Interactive Brokers restricted buying shares in red-hot GameStop and several other stocks that soared after being shorted by professionals. Late Thursday, Robinhood said it will allow limited buying on Friday.
Democrat Alexandria Ocasio-Cortez and Republican Ted Cruz were among a growing number of lawmakers who agreed Congress needed more information.
Ocasio-Cortez, a member of the U.S. House of Representatives, tweeted that the restriction was “unacceptable,” adding Congress needed to know more about the move “to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.”
Senator Ted Cruz, a Republican, took to Twitter retweeting Ocasio-Cortez with rare words of agreement, writing “Fully agree.”
Tesla Chief Executive Elon Musk backed Ocasio-Cortez’s criticism of Robinhood on Twitter responding “absolutely.”
Senator Sherrod Brown, the incoming Banking committee, chair, said “People on Wall Street only care about the rules when they’re the ones getting hurt.”
A Robinhood spokeswoman declined to comment on the lawmakers’ criticism.
Republican Senators Mike Lee and Patrick Toomey also joined the critics of Robinhood as did Khanna, a Democrat.
U.S. Representative Rashida Tlaib, a Democrat, called the restriction “beyond absurd.”
Tlaib urged on Twitter that Congress “have a hearing 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.”