Robinhood allows limited buying after lawsuits for restricting GameStop trades

Robinhood, the stock trading and investing app, suspended trades of GameStop on Thursday after about a week of online groups drastically driving up share prices of the failing electronic games shop chain.Class action lawsuits against Robinhood, which is advertised as “democratising finance”, were filed in the US states of New York and Illinois for not letting users trade the stock during market hours on Thursday.The legal challenges, along with swift backlash on social media and from US politicians, were submitted before Robinhood said it would now allow “limited buys”, starting on Friday of this week.The activity, inspired by Reddit users on an r/WallStreetBets forum, boosted GameStop shares by more than 350 per cent and cost hedge funds billions of dollars, as many were “short selling”.This is where hedge funds bet against a stock’s success hoping it will decrease in price. With people driving the stock price up, hedge funds are losing the bet.Before markets opened Thursday, Robinhood blocked trades on GameStop and several other stocks Redditors bought, including the cinema chain AMC and other struggling retailers such as Best Buy and Bed Bath and Beyond.They are also “dead stocks” hedge funds have moved to short sell.Robinhood, after markets closed, said it would allow trading activity Friday.A second lawsuit was filed in Chicago, which said the company’s decision was against financial trading rules and breached its customer agreement.The move by Robinhood has drawn fierce responses from US politicians.Sherrod Brown, a Democratic senator from Ohio, announced he would hold a hearing as the incoming chair of the Senate banking committee on developments in the stock market.There will also be a hearing in the House of Representatives after an announcement by Maxine Waters, a representative from California, who is the chair of the House financial services committee.Before Mr Brown and Ms Waters announced the hearings, Alexandria Ocasio-Cortez, a Democratic representative from New York, and Ted Cruz, a Republican senator, made an unlikely bipartisan show of support.The White House is aware of the activity, and press secretary Jen Psaki on Thursday referred all media questions to the Securities and Exchange Commission.Other trading platforms took steps similar to Robinhood’s. TD Ameritrade confirmed to CNET that it had restricted trades of GameStop.Webull allowed users to trade GameStop after blocking activity for some time on Thursday.