Robinhood and other major trading platforms on Thursday restricted trading of GameStop and other popular stocks that havethis week and triggered anxiety on Wall Street. The decision sparked fierce backlash from smaller investors and lawmakers, questioning the legality of the restrictions.
In a statement, Robinhood said it was "restricting transactions for certain securities to position closing only." Other trading platforms, including Investment Brokers and Charles Schwab, took similar steps to restrict trading. It's unclear how long the restrictions on each platform will last.
Smaller investors flocked to a Reddit discussion board, called Wallstreetbets, to encourage users to buy GameStop and other stocks to push prices up higher. In the past month, GameStop shares rose nearly 2,000%. Hours after the Robinhood announcement, GameStop's shares were down 44%.
Robinhood said other popular stocks would be affected, including American Airlines, AMC Entertainment, Bed Bath & Beyond, Blackberry, Nokia, Express Inc., Koss Corp., Tootsie Roll and Naked Brand Group.
Later Thursday, Robinhood said it would begin allowing "limited buys of these securities" starting Friday. "We'll continue to monitor the situation and may make adjustments as needed," the company said in a statement. "To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to."
Interactive Brokers said it had placed AMC, GameStop and other popular stocks into "liquidation only due to the extraordinary volatility in the markets."
"We do not believe this situation will subside until the exchanges and regulators halt or put certain symbols into liquidation only," the firm said in a statement. "We will continue to monitor market conditions and may add or remove symbols as may be warranted."
The decision sparked immediate criticism by lawmakers — both Democrats and Republicans. Representative Alexandria Ocasio-Cortez called on the House Financial Services Committee to investigate the restrictions placed by Robinhood and other trading platforms.
"This is unacceptable," Ocasio-Cortez tweeted Thursday. "We now need to know more about @RobinhoodApp's decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit."
Senator Ted Cruz retweeted her, saying, "Fully agree."
Representative Ro Khanna, a Democrat from Silicon Valley, said there needs to be "more regulation and equality in the markets."
"While retail trading in some cases, like on Robinhood, blocked the purchasing of GameStop, hedge funds were still allowed to trade the stock," Khanna said in a statement. "Instead of investing in future technologies to help America win the 21st Century, Wall Street poured billions into shorting this stock to crush this company and put workers out of business. The future of this country lies in that access and equality across every sector of our economy."