(Bloomberg) -- Robinhood Markets, the wildly popular app that has lured millions of amateur traders and, in the process, inadvertently unleashed havoc in the stock market, has abruptly changed tack and sided with the Wall Street elite over the mania in GameStop Corp.
Drawing howls from users, Robinhood and other major online brokerages, including Interactive Brokers Group Inc. and Morgan Stanley’s E*Trade, took the highly unusual step of curbing trading Thursday in GameStop and another stock that has shot into the stratosphere, AMC Entertainment Holdings Inc. The restrictions also drew criticism from Barstool Sports founder Dave Portnoy and U.S. Representative Alexandria Ocasio-Cortez.
Read more: E*Trade Restricts Purchases of GameStop, AMC Shares
It was the latest turn in a battle where legions of small investors on Reddit have taken on some of Wall Street’s most sophisticated investors -- and, for now, beaten the pros at their own game. The Reddit horde’s efforts have resulted in billions of dollars of losses for hedge funds that were forced to close out their bets that shares of companies such as GameStop would fall.
See also: GameStop’s Reddit Revolution Echoes Occupy Wall Street Crusade
Following Robinhood’s move, the brokerage was hit by at least two customer lawsuits. Portnoy, a recent participant in the Reddit-fueled rally, was among those who slammed Robinhood for its decision.
“Robinhood is dead,” Portnoy said in a video posted on Twitter. Ocasio-Cortez tweeted that she would welcome a hearing in the House Financial Services Committee, to discuss why hedge funds can freely trade the stocks and retail users are blocked. That garnered a positive response from the world’s richest person Elon Musk.
Read more: Ocasio-Cortez Says Robinhood GameStop Trading Curbs Unacceptable
Shares of GameStop had soared to more than $500 in early trading Thursday from less than $19 at the end of 2020. Trading in the video game retailer was halted repeatedly amid the volatility, with the shares tumbling 27% at 3:03 p.m. in New York. AMC plunged 50%.
Read more: GameStop Briefly Tops $500 as Stock Resumes Momentous Surge
The restrictions also raise questions about what steps, if any, regulators are taking to cope with the wild run-up in corners of the stock market.
Traders were quick to express their frustrations over a platform that touted easy access and the democratization of Wall Street. Robinhood user Justin Foley, 25, of Philadelphia, had put in orders for GameStop, Nokia Oyj and AMC Wednesday night.
“Now it’s just sitting in a queue,” Foley said. “I am scared of pulling out the orders and then Robinhood opening back up and then I miss the opportunity. I will be really upset. It’s supposed to be a free market, and Robinhood taking it into their own hands seems wrong.” He’s considering moving to Webull, a Chinese competitor.
“We’re committed to helping our customers navigate this uncertainty,” Robinhood said in a blog post. Investors looking to move to other venues may not find it easy. Trading 212, another app, said it has temporarily stopped taking new clients.
On Wednesday, Charles Schwab Corp.’s TD Ameritrade also curtailed transactions on GameStop, AMC and other securities. Amid the heightened volatility, trading platforms including TD Ameritrade, Robinhood, Schwab and Fidelity all experienced technical problems.
(Updates with E*Trade curbs in second paragraph, stock price declines in sixth.)
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