Robinhood Halts GameStop Buys Again – Market Manipulation or Bad Tech?

No, Robinhood did not impose GameStop ($GME) restrictions again; it's just a bad trading and investing app.

The sudden spike of 94.68% in $GME value, led by crypto whale Keith Gill, highlights Robinhood's shortcomings as the crypto platform was forced to halt trades during high market activity.

Robinhood restricted $GME purchasesafter the trader behind the 2021 GameStop trading frenzy disclosed a $175M bet on the video gaming retailer.

Tracking the $GME Hype

Late last night, Gill, aka Roaring Kitty or DFV on Reddit, claimed he bought 5M $GME shares for $115.7M, $65.7M of which was allocated to call options.Additionally, his screenshot indicates that $GME would hit $20 per share by June 21.

The total gain from his $GME holding surpassed $9.3M. Still, the investor lost $2.5M on his call options.

Showing the weight of influencers, $GME became the second-most actively traded stockafterthe screenshot's unveiling, with a whopping 4.4M shares switching hands by 04:30 (EST).

As per Robinhood, the price of $GME has risen by 94.68% over the past day, from roughly $23 to $45.

Following the hype, AMC Entertainment witnessed a 25% increase in trading, despite no social media posting from Gill highlighting it as a worthwhile investment.

It's also worth noting that $GME spiked a few weeks back, spurred by a few tweets from Gill.

Robinhood's Sudden $GME RestrictionsRobinhood imposed buying restrictions for $GME at the same time as the buzz.

The brokerage announced that Blue Ocean ATS - its 24-hour venue for facilitating certain stocks - now accepts trades in a range of 20% above or below today's GME reference price of $22.99.' It also added that orders out of that range may be rejected.

Although Robinhood intended to allow limited trading during extended hours, many Robinhood users reported on X that they had beenblocked from acquiring $GME since early morning.

ROBINHOOD $HOOD already blocking $GME buys after hours!!!! pic.twitter.com/x2SUUgh0ij

- SexyStockSlayer (@SexyStockSlayer) June 3, 2024

Robinhood's redo of 2021's $GME restriction raises concerns about the platform's fairness, transparency, and market efficiency - again.

Repeating Past Mistakes?This isn't the first time Robinhood has restricted $GME trading.

Blue Laine-Beveridge investors sued the platform for halting the trading of certain meme stocks between January 28 and February 4, 2024. The filing cited manipulating market prices, causing tremendous losses.

The affected stocks included GameStop, AMC, BlackBerry, Nokia, Koss, Express Inc, trivago, Bed Bath & Beyond, and more.

On May 28, in a filing to the Miami Federal Court, Robinhood's lawyer voiced a refusal within two weeks. However, this is yet to be disclosed.

What Are the Implications?

Despite suspicions about Robinhood deliberately manipulating $GME stock, the company might be ill-equipped to deal with rapid fluctuations in market volume, hinting at technical constraints or bad risk-management protocols.

This is especially true considering its current court filing is poised to come to a close in the coming weeks.

Addressing such issues requires a broader review of the platform's infrastructure and compliance management to ensure a more accessible and fairer trading environment for investors.

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