In early 2021, shares of GameStop (GME) spiked, jumping nearly 1000% amid weeks of volatile trading. The rally was initially spurred by discussions of shorting the stock in the Reddit subreddit r/wallstreetbets, and many of those traders flocked to Robinhood, an online broker-dealer known for its commission-free trades. At the height of activity, Robinhood temporarily restricted trading of GME and other similar stocks. In the aftermath, several players, including Robinhood, Redditors, and market makers like Citadel face increased risk of liability and regulatory scrutiny. Corporate and securities law professor James Cox discusses the conditions that created the GameStop saga, its potential impact on the capital markets, and how regulators may review the trading frenzy.
Watch Who's Liable After GameStop: Litigators' Take.