Robinhood wins GameStop meme stock lawsuit against investors appeals
By: Michael Wilson
August 11, 2023 5:04 AM
The judge on the appeals panel ruled that Robinhood could limit meme trading purchases since it was within its rights to do so.
An investor class action lawsuit filed against Robinhood Markets, a popular online brokerage, after its meme stock trading crisis in early 2021 has been dismissed by a United States federal appeals court.
In September 2021, 16 investors filed a class action lawsuit suing→ the trading platform, claiming the company had prevented them from buying 13 "meme stocks" during the January 2021 short squeeze of hedge funds.
They said that because of this, not only were they unable to cash in on the profits, but the stock values of the affected companies also plummeted.
After Robinhood successfully moved to dismiss the case in January 2022 on the grounds that the plaintiffs had failed to articulate a claim, the plaintiffs appealed the ruling in March 2023.
U.S. Appellate Court Judge Britt Grant ruled→ that the investors' claims lacked legal merit and affirmed the lower court's dismissal of the case, thus dealing a new blow to the group.
She clarified that Robinhood "had the right to do exactly what they did" in this situation because the company was under no obligation to insulate these customers from purely financial loss.
According to Judge Grant, this is because Robinhood has always had the right to limit its users' access to the securities market and refuse to process any transactions it deems suspicious.
The final thoughts of the United States Court of Appeals, which upheld the lower court's
dismissal of the plaintiff's lawsuit.
The investors may take their case all the way to the highest court in the land, the United States Supreme Court, if they so choose. A petition for a "writ of certiorari," requesting a review of the case by the Supreme Court, must be filed.
The Supreme Court only accepts roughly 100–150 cases per year for review out of more than 7,000 total appeals, thus the plaintiff likely has a little chance of having its case reviewed again.
Users of the Reddit community /wallstreetbets first caused the GameStop short squeeze, which took place in January 2021.
The short squeeze plan intended to inflict large losses for Wall Street businesses shorting certain specific stocks while benefitting themselves.
Another 12 stocks, notably AMC Entertainment, American Airlines Group, Blackberry, Bed, Bath & Beyond, and Trivago joined the frenzy.
However, Macrotrends.net reports→ that GameStop was among the top gainers during the Reddit-fueled price pump, with shares jumping by more than 9,900% from $0.86 to well over $86 from April 2020 and January 2021.