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Pressed by House Committee on Buy-Side Restrictions, Robinhood CEO Says, ‘Look, I’m Sorry!’

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Screenshot of Robinhood CEO Vladimir Tenev

February 21, 2021 – “Look, I’m sorry.”

That’s what Robinhood CEO Vladimir Tenev said to those who lost money in the stock frenzy surrounding GameStop that began in late January. The virtual hearing got off to a tense start.

House Financial Services Committee Chairman  Maxine Waters, D-Calif., grilled Tenev and other chief executives involved in stock spectacle.

Both Democrats and Republicans on the committee pressed Tenev to explain why he authorized Robinhood to prevent its users from buying into GameStop stock and other popular meme stocks.

The actions, causing outrage for allegedly protecting large hedge funds against small investors, were probed throughout the hearing titled “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide.”

Robinhood’s explanation

Rep. Patrick McHenry, R-N.C., asked Robinhood why it restricted the buying but not the selling of GameStop. Further, he said, why did traders get locked out of the buy side only?

Tenev replied that restricting GameStop and other securities was driven purely by depositing collateral requirements imposed by its clearing houses.

Tenev said there was no other choice but to impose restrictions. He said he sympathized with investors who lost money after GameStop stock fell from its record highs once the buying frenzy ended.

He warned that it would have been “significantly worse” if Robinhood equally prevented its users from selling the stock as well after a frenzy that began on the social media site Reddit.

Rep. Carolyn Maloney

Rep. Carolyn Maloney, D-N.Y., said that Robinhood’s actions to halt buying of certain stocks didn’t just cause confusion and anger, but undermined investor confidence in fundamental fairness.

She asked if Robinhood owed users more disclosure and transparency, and if Robinhood’s “lack of candor” with its customers may have led to wild speculation In reply, Tenev said, ”Look, I’m sorry for what happened.”

While Robinhood did not do everything perfect, it commits to improve and learn from this to prevent similar mistakes in the future, said Tenev.

In particular, she targeted Robinhood’s customer agreement, noting the vague wording regarding when the company can restrict trades.

She said that there was no language whatsoever that mentions clearing house deposit requirements Robinhood is allegedly obligated to meet, other than “volatility” being mentioned.

Citadel

Citadel CEO Kenneth Griffin, said that his company had no role in Robinhood’s decision to limit trading in GameStop or any other stock. He only became aware of Robinhood’s trading restrictions the same time the public was made aware, he said.

Citadel bet GameStop shares would fall but suffered when the shares rose because millions of small investors began buying up the stock. Citadel’s losses were not nearly as badly as another hedge fund, Melvin Capital, which took a $2 billion investment from Citadel and some of its employees to shore up its finances.

Melvin Capital

Echoing Citadel, Melvin Capital also pleaded innocence from placing pressure on Robinhood to restrict trades. Melvin Capital Management CEO Gabriel Plotkin, said he was “humbled by these unprecedented events,” and expressed regret for those who lost money.

He also said that Melvin Capital played no role in these trading decisions! Melvin closed out its positions in GameStop days before the trading restrictions went into effect.

Reddit

There was no evidence of market manipulation in this specific case surrounding GameStop, said Reddit CEO Steve Huffman. He defended Reddit moderators, who are not paid employees.

He said Reddit had an “anti-evil” team composed of engineers, data scientists, and other specialists whose focus is to ensure site integrity and protect against manipulation and spam, among other things.

Huffman did say that the popular thread called WallStreetBets, responsible for fueling the GameStop frenzy, was indeed a real community of users that supports its members who lose money as fast as it congratulates them for their successes in the stock market.

Roaring Kitty relishes the attention

Keith Gill, one of the most influential voices that pushed GameStop on the WallStreetBets Reddit forum, also testified and said he was happy to talk about his GameStop stock purchases. He is believed to have made millions as a result of his investment in GameStop which has enraged others who believe he deceptively manipulated the market in his favor with GameStop via Reddit.

Gill clarified that he was first and foremost “not a cat, not an institutional investor, and not a hedge fund.” He maintained he has no clients and does not provide any personalized investment advice for fees or commissions.

“I’m just an individual whose investment in GameStop and post on social media were based upon my own research and analysis,” he said. He worked for Mass Mutual in the past.

Stocks often trade higher or lower, said Cato Institute

Stocks often trade at higher or lower levels than what formal analysis or fundamentals may claim is best, said Jennifer Schulp, director of financial regulation studies at the Cato Institute. Even as GameStop might still be trading at a higher than fair valuation, it is no cause for concern as “markets are no strangers to bubbles.”

“I cannot opine on whether any regulatory changes are warranted on this incomplete record,” she said. “By no means, though, should these events lead to restrictions on retail investors’ access to the markets.”

Social Media

Americans Should Look to Filtration Software to Block Harmful Content from View, Event Hears

One professor said it is the only way to solve the harmful content problem without encroaching on free speech rights.

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Photo of Adam Neufeld of Anti-Defamation League, Steve Delbianco of NetChoice, Barak Richman of Duke University, Shannon McGregor of University of North Carolina (left to right)

WASHINGTON, July 21, 2022 – Researchers at an Internet Governance Forum event Thursday recommended the use of third-party software that filters out harmful content on the internet, in an effort to combat what they say are social media algorithms that feed them content they don’t want to see.

Users of social media sites often don’t know what algorithms are filtering the information they consume, said Steve DelBianco, CEO of NetChoice, a trade association that represents the technology industry. Most algorithms function to maximize user engagement by manipulating their emotions, which is particularly worrisome, he said.

But third-party software, such as Sightengine and Amazon’s Rekognition – which moderate what users see by bypassing images and videos that the user selects as objectionable – could act in place of other solutions to tackle disinformation and hate speech, said Barak Richman, professor of law and business at Duke University.

Richman argued that this “middleware technology” is the only way to solve this universal problem without encroaching on free speech rights. He suggested Americans in these technologies – that would be supported by popular platforms including Facebook, Google, and TikTok – to create the buffer between harmful algorithms and the user.

Such technologies already exist in limited applications that offer less personalization and accuracy in filtering, said Richman. But the market demand needs to increase to support innovation and expansion in this area.

Americans across party lines believe that there is a problem with disinformation and hate speech, but disagree on the solution, added fellow panelist Shannon McGregor, senior researcher at the Center for Information, Technology, and Public Life at the University of North Carolina.

The conversation comes as debate continues regarding Section 230, a provision in the Communications Decency Act that protects technology platforms from being liable for content their users post. Some say Section 230 only protects “neutral platforms,” while others claim it allows powerful companies to ignore user harm. Experts in the space disagree on the responsibility of tech companies to moderate content on their platforms.

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Free Speech

Experts Reflect on Supreme Court Decision to Block Texas Social Media Bill

Observers on a Broadband Breakfast panel offered differing perspectives on the high court’s decision.

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Parler CPO Amy Peikoff

WASHINGTON, June 2, 2022 – Experts hosted by Broadband Breakfast Wednesday were split on what to make of  the Supreme Court’s 5-4 decision to reverse a lower court order lifting a ban on a Texas social media law that would have made it illegal for certain large platforms to crack down on speech they deem reprehensible.

The decision keeps the law from taking affect until a full determination is made by a lower court.

Parler CPO Amy Peikoff

During a Broadband Live Online event on Wednesday, Ari Cohn, free speech counsel for tech lobbyist TechFreedom, argued that the bill “undermines the First Amendment to protect the values of free speech.

“We have seen time and again over the course of history that when you give the government power to start encroaching on editorial decisions [it will] never go away, it will only grow stronger,” he cautioned. “It will inevitably be abused by whoever is in power.”

Nora Benavidez, senior counsel and director of digital justice and civil rights for advocate Free Press, agreed with Cohn. “This is a state effort to control what private entities do,” she said Wednesday. “That is unconstitutional.

“When government attempts to invade into private action that is deeply problematic,” Benavidez continued. “We can see hundreds and hundreds of years of examples of where various countries have inserted themselves into private actions – that leads to authoritarianism, that leads to censorship.”

Different perspectives

Principal at McCollough Law Firm Scott McCollough said Wednesday  that he believed the law should have been allowed to stand.

“I agree the government should not be picking and choosing who gets to speak and who does not,” he said. “The intent behind the Texas statute was to prevent anyone from being censored – regardless of viewpoint, no matter what [the viewpoint] is.”

McCollough argued that this case was about which free speech values supersede the other – “those of the platforms, or those of the people who feel that they are being shut out from what is today the public square.

“In the end it will be a court that acts, and the court is also the state,” McCollough added. “So, in that respect, the state would still be weighing in on who wins and who loses – who gets to speak and who does not.”

Chief policy officer of social media platform Parler Amy Peikoff said Wednesday that her primary concern was “viewpoint discrimination in favor of the ruling elite.”

Peikoff was particularly concerned about coordination between state agencies and social media platforms to “squelch certain viewpoints.”

Peikoff clarified that she did not believe that the Texas law was the best vehicle to address these concerns, however, stating instead that lawsuits – preferably private ones – be used to remove the “censorious cancer,” rather than entangling a government entity in the matter.

“This cancer grows out of a partnership between government and social media to squelch discussion about certain viewpoints and perspectives.”

Our Broadband Breakfast Live Online events take place on Wednesday at 12 Noon ET. Watch the event on Broadband Breakfast, or REGISTER HERE to join the conversation.

Wednesday, June 1, 2022, 12 Noon ET – BREAKING NEWS EVENT! – The Supreme Court, Social Media and the Culture Wars

The Supreme Court on Tuesday blocked a Texas law that would ban large social media companies from removing posts based on the views they express. Join us for this breaking news event of Broadband Breakfast Live Online in which we discuss the Supreme Court, social media and the culture wars.

Panelists:

  • Scott McCollough, Attorney, McCollough Law Firm
  • Amy Peikoff, Chief Policy Officer, Parler
  • Ari Cohn, Free Speech Counsel, TechFreedom
  • Nora Benavidez, Senior Counsel and Director of Digital Justice and Civil Rights at Free Press
  • Drew Clark (presenter and host), Editor and Publisher, Broadband Breakfast

Panelist resources:

W. Scott McCollough has practiced communications and Internet law for 38 years, with a specialization in regulatory issues confronting the industry.  Clients include competitive communications companies, Internet service and application providers, public interest organizations and consumers.

Amy Peikoff is the Chief Policy Officer of Parler. After completing her Ph.D., she taught at universities (University of Texas, Austin, University of North Carolina, Chapel Hill, United States Air Force Academy) and law schools (Chapman, Southwestern), publishing frequently cited academic articles on privacy law, as well as op-eds in leading newspapers across the country on a range of issues. Just prior to joining Parler, she founded and was President of the Center for the Legalization of Privacy, which submitted an amicus brief in United States v. Facebook in 2019.

Ari Cohn is Free Speech Counsel at TechFreedom. A nationally recognized expert in First Amendment law, he was previously the Director of the Individual Rights Defense Program at the Foundation for Individual Rights in Education (FIRE), and has worked in private practice at Mayer Brown LLP and as a solo practitioner, and was an attorney with the U.S. Department of Education’s Office for Civil Rights. Ari graduated cum laude from Cornell Law School, and earned his Bachelor of Arts degree from the University of Illinois at Urbana-Champaign.

Nora Benavidez manages Free Press’s efforts around platform and media accountability to defend against digital threats to democracy. She previously served as the director of PEN America’s U.S. Free Expression Programs, where she guided the organization’s national advocacy agenda on First Amendment and free-expression issues, including press freedom, disinformation defense and protest rights. Nora launched and led PEN America’s media-literacy and disinformation-defense program. She also led the organization’s groundbreaking First Amendment lawsuit, PEN America v. Donald Trump, to hold the former president accountable for his retaliation against and censorship of journalists he disliked.

Drew Clark is the Editor and Publisher of BroadbandBreakfast.com and a nationally-respected telecommunications attorney. Drew brings experts and practitioners together to advance the benefits provided by broadband. Under the American Recovery and Reinvestment Act of 2009, he served as head of a State Broadband Initiative, the Partnership for a Connected Illinois. He is also the President of the Rural Telecommunications Congress.

Photo of the Supreme Court from September 2020 by Aiva.

WATCH HERE, or on YouTubeTwitter and Facebook.

As with all Broadband Breakfast Live Online events, the FREE webcasts will take place at 12 Noon ET on Wednesday.

SUBSCRIBE to the Broadband Breakfast YouTube channel. That way, you will be notified when events go live. Watch on YouTubeTwitter and Facebook

See a complete list of upcoming and past Broadband Breakfast Live Online events.

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Section 230

Narrow Majority of Supreme Court Blocks Texas Law Regulating Social Media Platforms

The decision resulted in an unusual court split. Justice Kagan sided with Justice Alito but refused to sign his dissent.

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Caricature of Samuel Alito by Donkey Hotey used with permission

WASHINGTON, May 31, 2022 – On a narrow 5-4 vote, the Supreme Court of the United States on Tuesday blocked a Texas law that Republicans had argued would address the “censorship” of conservative voices on social media platforms.

Texas H.B. 20 was written by Texas Republicans to combat perceived bias against conservative viewpoints voiced on Facebook, Twitter, and other social media platforms with at least 50 million active monthly users.

Watch Broadband Breakfast Live Online on Wednesday, June 1, 2022

Broadband Breakfast on June 1, 2022 — The Supreme Court, Social Media and the Culture Wars

The bill was drafted at least in part as a reaction to President Donald Trump’s ban from social media. Immediately following the January 6 riots at the United States Capitol, Trump was simultaneously banned on several platforms and online retailers, including Amazon, Facebook, Twitter, Reddit, and myriad other websites.

See also Explainer: With Florida Social Media Law, Section 230 Now Positioned In Legal Spotlight, Broadband Breakfast, May 25, 2021

Close decision on First Amendment principles

A brief six-page dissent on the matter was released on Tuesday. Conservative Justices Samuel Alito, Neil Gorsuch, and Clarence Thomas dissented, arguing that the law should have been allowed to stand. Justice Elena Kagan also agreed that the law should be allowed to stand, though she did not join Alito’s penned dissent and did not elaborate further.

The decision was on an emergency action to vacate a one-sentence decision of the Fifth Circuit Court of Appeals. The appeals court had reversed a prior stay by a federal district court. In other words, the, the law passed by the Texas legislature and signed by Gov. Greg Abbott is precluded from going into effect.

Tech lobbying group NetChoice – in addition to many entities in Silicon Valley – argued that the law would prevent social media platforms from moderating and addressing hateful and potentially inflammatory content.

In a statement, Computer & Communications Industry Association President Matt Schruers said, “We are encouraged that this attack on First Amendment rights has been halted until a court can fully evaluate the repercussions of Texas’s ill-conceived statute.”

“This ruling means that private American companies will have an opportunity to be heard in court before they are forced to disseminate vile, abusive or extremist content under this Texas law. We appreciate the Supreme Court ensuring First Amendment protections, including the right not to be compelled to speak, will be upheld during the legal challenge to Texas’s social media law.”

In a statement, Public Knowledge Legal Director John Bergmayer said, “It is good that the Supreme Court blocked HB 20, the Texas online speech regulation law. But it should have been unanimous. It is alarming that so many policymakers, and even Supreme Court justices, are willing to throw out basic principles of free speech to try to control the power of Big Tech for their own purposes, instead of trying to limit that power through antitrust and other competition policies. Reining in the power of tech giants does not require abandoning the First Amendment.”

In his dissent, Alito pointed out that the plaintiffs argued “HB 20 interferes with their exercise of ‘editorial discretion,’ and they maintain that this interference violates their right ‘not to disseminate speech generated by others.’”

“Under some circumstances, we have recognized the right of organizations to refuse to host the speech of others,” he said, referencing Hurley v. Irish-American Gay, Lesbian and Bisexual Group of Boston, Inc.

“But we have rejected such claims in other circumstances,” he continued, pointing to PruneYard Shopping Center v. Robins.

Will Section 230 be revamped on a full hearing by the Supreme Court?

“It is not at all obvious how our existing precedents, which predate the age of the internet, should apply to large social media companies, but Texas argues that its law is permissible under our case law,” Alito said.

Alito argued that there is a distinction between compelling a platform to host a message and refraining from discriminating against a user’s speech “on the basis of viewpoint.” He said that H.B. 20 adopted the latter approach.

Alito went on, arguing that the bill only applied to “platforms that hold themselves out as ‘open to the public,’” and “neutral forums for the speech of others,” and thus, the targeting platforms are not spreading messages they endorse.

Alito added that because the bill only targets platforms with more than 50 million users, it only targets entities with “some measure of common carrier-like market power and that this power gives them an ‘opportunity to shut out [disfavored] speakers.’”

Justices John Roberts, Stephen Breyer, Sonya Sotomayor, Brett Kavanaugh, and Amy Coney Barrett all voted affirmatively – siding with NetChoice LLC’s emergency application – to block H.B. 20 from being enforced.

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