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"Robinhood clearly seems to be in the pockets of Wall Street": Financial experts weigh in on Wall Street battle

Financial experts say what Reddit users did to drive up GameStop's stock isn't illegal. So why were transactions blocked by some websites like Robinhood?

"This is absolutely David vs Goliath," said Dr. Jeffrey Podoshen of Franklin and Marshall College as he reflected on the battle unfolding on Wall Street pitting Reddit users against hedge fund managers and now websites like Robinhood that have restricted transactions. 

"Robinhood clearly seems to be in the pockets of Wall Street," Dr. Podoshen said. "Maybe they're feeling pressure from these hedge fund managers."

Critics are accusing websites like Robinhood of manipulating the free market by blocking transactions after Reddit users were able to get rich off a plan to drive up stock value on businesses such as GameStop and AMC. That plan wasn't such good business for hedge fund managers who had bet against those same businesses. 

RELATED: Robinhood hit with class-action lawsuit after restricting GameStop trades

Associate Professor of Finance Dwayne Safer of Messiah University notes the action that Reddit users have taken haven't shown to be illegal. So the fact that websites like Robinhood blocked transactions on certain securities left both Safer and Podoshen scratching their heads.

"From what I've seen Robinhood is getting a lot of blowback as a result of that. Frankly I don't understand how a company like Robinhood that has benefitted from the investing frenzy that we've seen this year... if you look at Robinhood they've gained about 5-10 million accounts since March," said Safer, "...and now for Robinhood to come out and take the keys away so to speak to their investors and the people who are on their app who want to invest it's not only GameStop now I'm hearing it's AMC, it's American Airlines, so for them to restrict trading is unprecedented."

Listen to both financial experts talk about the move by Robinhood and other websites to stop transactions on certain securities

As for how ethical these types of transactions are Safer said, "ethics matter on Wall Street. The question is do ethics matter among some investors like those related to the sub-Reddit community? I would relate it to, is it ethical to gamble?"

Both financial experts warned people who invest in these transactions that it could also lead to a loss of money as at some point the 'bubble' will burst.

Listen as Podoshen and Safer discuss the Reddit Wall Street move:

Meantime, Dr. Podoshen sees the Reddit action as part of larger social problem, as he noted many younger people are feeling financial constraints and roadblocks to finding a job during the COVID-19 pandemic.

"This is really part of the result of frustrations with mostly younger people who are using Reddit as a community to get their piece of the pie," he said, "...these hedge fund managers and these people who have been manipulating the market, you know, for decades if not centuries are kind of in a situation where the chickens have come home to roost."

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