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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.”

Free Speech

Former GOP Congressman and UK MP Highlight Dangers of Disinformation and Urge Regulation

Will Hurd and Member of Parliament Damien Collins say disinformation on social media platforms a worry in midterm elections.

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Photo of Will Hurd from March 2016 by Paul Morigi used with permission

WASHINGTON, January 11, 2022 – Former Republican Rep. Will Hurd said that disinformation campaigns could have a very concerning effect on the upcoming midterm elections.

He and the United Kingdom’s Member of Parliament Damien Collins  urged new measures to hold tech and social media companies accountable for disinformation.

Hurd particularly expressed concern about how disinformation sows doubts about the legitimacy of the elections and effective treatments to the COVID-19 virus. The consequences of being misinformed on these topics is quite significant, he and Collins said Tuesday during a webinar hosted by the Washington Post.

The Texan Hurd said that the American 2020 election was the most secure the nation has ever had, and yet disinformation around it led to the insurrection at the Capitol.

The British Collins agreed that democratic elections are particularly at risk. Some increased risk comes from ever-present disinformation around COVID and its effects on public health and politics. “A lack of regulation online has left too many people vulnerable to abuse, fraud, violence, and in some cases even loss of life,” he said.

In regulating tech and media companies, Collins said citizens are reliant on whistleblowers, investigative journalists, and self-serving reports from companies that manipulate their data.

Unless government gets involved, they said, the nation will remain ignorant of the spread of disinformation.

Tech companies need to increase their transparency, even though that is something they are struggling to do.

Yet big tech companies are constantly conducting research and surveillance on their audience, the performance of their services, and the effect of their platforms. Yet they fail to share this information with the public, and he said that the public has a right to know the conclusions of these companies’ research.

In addition to increasing transparency and accountability, many lawmakers are attempting to grapple with the spread of disinformation. Some propose various changes to Section 230 of the Telecom Act of 1996.

Hurd said that the issues surrounding Section 230 will not be resolved before the midterm elections, and he recommended that policy-makers take steps outside of new legislation.

For example, the administration of President Joe Biden could lead its own federal reaction to misinformation to help citizens differentiate between fact and fiction, said Hurd.

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Section 230

Greene, Paul Social Media Developments Resurface Section 230 Debate

Five days into the new year and two developments bring Section 230 protections back into focus.

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Georgia Republican Representative Marjorie Taylor Greene

WASHINGTON, January 5, 2022 – The departure of Republican Kentucky Senator Rand Paul from YouTube and the banning of Georgia Republican Representative Marjorie Taylor Greene from Twitter at the beginning of a new year has rekindled a still lit flame of what lawmakers will do about Section 230 protections for Big Tech.

Paul removed himself Monday from the video-sharing platform after getting two strikes on his channel for violating the platform’s rules on Covid-19 misinformation, saying he is “[denying] my content to Big Tech…About half of the public leans right. If we all took our messaging to outlets of free exchange, we could cripple Big Tech in a heartbeat.”

Meanwhile, Greene has been permanently suspended from Twitter following repeated violations of Twitter’s terms of service. She has previously been rebuked by both her political opponents and allies for spreading fake news and mis/disinformation since she was elected in 2020. Her rap sheet includes being accused of spreading conspiracy theories promoting white supremacy and antisemitism.

It was ultimately the spreading of Covid-19 misinformation that got Greene permanently banned from Twitter on Sunday. She had received at least three previous “strikes” related to Covid-19 misinformation, according to New York Times. Greene received a fifth strike on Sunday, which resulted in her account’s permanent suspension.

Just five days into the new year, Greene’s situation – and the quickly-followed move by Paul – has reignited the tinderbox that is Section 230 of the Communications Decency Act, which shields big technology platforms from any liability from posts by their users.

As it stands now, Twitter is well within its rights to delete or suspend the accounts of any person who violates its terms of service. The right to free speech that is protected by the First Amendment does not prevent a private corporation, such as Twitter, from enforcing their rules.

In response to her Tweets, Texas Republican Congressman Dan Crenshaw called Greene a “liar and an idiot.” His comments notwithstanding, Crenshaw, like many conservative legislators, has argued that social media companies have become an integral part of the public forum and thus should not have the authority to unilaterally ban or censor voices on their platforms.

Some states, such as Texas and Florida, have gone as far as making it illegal for companies to ban political figures. Though Florida’s bill was quickly halted in the courts, that did not stop Texas from trying to enact similar laws (though they were met with similar results).

Crenshaw himself has proposed federal amendments to Section 230 for any “interactive computer service” that generates $3 billion or more in annual revenue or has 300 million or more monthly users.

The bill – which is still being drafted and does not have an official designation – would allow users to sue social media platforms for the removal of legal content based on political views, gender, ethnicity, and race. It would also make it illegal for these companies to remove any legal, user generated content from their website.

Under Crenshaw’s bill, a company such as Facebook or Twitter could be compelled to host any legal speech – objectionable or otherwise – at the risk of being sued. This includes overtly racist, sexist, or xenophobic slurs and rhetoric. While a hosting website might be morally opposed to being party to such kinds of speech, if said speech is not explicitly illegal, it would thus be protected from removal.

While Crenshaw would amend Section 230, other conservatives have advocated for its wholesale repeal. Sen. Lindsey Graham, R-South Carolina, put forward Senate Bill 2972 which would do just that. If passed, the law would go into effect on the first day of 2024, with no replacement or protections in place to replace it.

Consequences of such legislation

This is a nightmare scenario for every company with an online presence that can host user generate content. If a repeal bill were to pass with no replacement legislation in place, every online company would suddenly become directly responsible for all user content hosted on their platforms.

With the repeal of Section 230, websites would default to being treated as publishers. If users upload illegal content to a website, it would be as if the company published the illegal content themselves.

This would likely exacerbate the issue of alleged censorship that Republicans are concerned about. The sheer volume of content generated on platforms like Reddit and YouTube would be too massive for a human moderating team to play a role in.

Companies would likely be forced to rely on heavier handed algorithms and bots to censor anything that could open them to legal liability.

Democratic views

Republicans are not alone in their criticism of Section 230, however. Democrats have also flirted with amending or abolishing Section 230, albeit for very different reasons.

Many Democrats believe that Big Tech uses Section 230 to deflect responsibility, and that if they are afforded protections by it, they will not adjust their content moderation policies to mitigate allegedly dangerous or hateful speech posted online by users with real-world consequences.

Some Democrats have written bills that would carve out numerous exemptions to Section 230. Some seek to address the sale of firearms online, others focus on the spread of Covid-19 misinformation.

Some Democrats have also introduced the Safe Tech Act, which would hold companies accountable for failing to “remove, restrict access to or availability of, or prevent dissemination of material that is likely to cause irreparable harm.”

The reality right now is that two parties are diametrically opposed on the issue of Section 230.

While Republicans believe there is unfair content moderation that disproportionately censors conservative voices, Democrats believe that Big Tech is not doing enough to moderate their content and keep users safe.

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Section 230

Experts Warn Against Total Repeal of Section 230

Panelists note shifting definition of offensive content.

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WASHINGTON, November 22, 2021 – Communications experts say action by Congress to essentially gut Section 230 would not truly solve any problems with social media.

Experts emphasized that it is not possible for platforms to remove from their site all content that people may believe to be dangerous. They argue that Section 230 of the Communications Decency Act, which shields platforms from legal liability with respect to what their users post, is necessary in at least some capacity.

During discussion between these experts at Broadband Breakfast’s Live Online Event on Wednesday, Alex Feerst, the co-founder of the Digital Trust and Safety Partnership, who used to work as a content moderator, said that to a certain extent it is impossible for platforms to moderate speech that is “dangerous” because every person has differing opinions about what speech they consider to be dangerous. He says it is this ambiguity that Section 230 protects companies from.

Still, Feerst believes that platforms should hold some degree of liability for the content of their sites as harm mitigation with regards to dangerous speech is necessary where possible. He believes that the effects of artificial intelligence’s use by platforms makes some degree of liability even more essential.

Particularly with the amount of online speech to be reviewed by moderators in the internet age, Feerst says the clear-cut moderation standards are too messy and expensive to be viable options.

Matt Gerst, vice president for legal and policy affairs at the Internet Association, and Shane Tews, nonresident senior fellow at the American Enterprise Institute, also say that while content moderation is complex, it is necessary. Scott McCollough, attorney at McCollough Law Firm, says large social media companies like Facebook are not the causes of all the problems with social media that are in the national spotlight right now, but rather that social features of today’s society, such as the extreme prevalence of conflict, are to blame for this focus on social media.

Proposals for change

Rick Lane, CEO of Iggy Ventures, proposes that reform of Section 230 should include a requirement for social media platforms to make very clear what content is and is not allowed on their sites. McCullough echoed this concern, saying that many moderation actions platforms take presently do not seem to be consistent with those platforms’ stated terms and conditions, and that individual states across the nation should be able to look at these instances on a case-by-case basis to determine whether platforms fairly apply their terms and conditions.

Feerst highlighted the nuance of this issue by saying that people’s definitions of “consistent” are naturally subjective, but agrees with McCullough that users who have content removed should be notified of such, as well as the reasoning for moderators’ action.

Lane also believes that rightfully included in the product of Section 230 reform will be a requirement for platforms to demonstrate a reasonable standard of care and moderate illegal and other extremely dangerous content on their sites. Tews generally agreed with Lane that such content moderation is complex, as she sees a separation between freedom of speech and illegal activity.

Gerst highlighted concerns from companies the Internet Association represents that government regulation coming from Section 230 reform will require widely varied platforms to standardize their operation approaches, diminishing innovation on the internet.

Our Broadband Breakfast Live Online events take place on Wednesday at 12 Noon ET. You can watch the November 17, 2021, event on this page. You can also PARTICIPATE in the current Broadband Breakfast Live Online event. REGISTER HERE.

Wednesday, November 17, 2021, 12 Noon ET — The Changing Nature of the Debate About Social Media and Section 230

Facebook is under fire as never before. In response, the social-networking giant has gone so far as to change its official name, to Meta (as in the “metaverse”). What are the broader concerns about social media beyond Facebook? How will concerns about Facebook’s practices spill over into other social media networks, and to debate about Section 230 of the Communications Act?

Panelists for this Broadband Breakfast Live Online session:

  • Scott McCullough, Attorney, McCullough Law Firm
  • Shane Tews, Nonresident Senior Fellow, American Enterprise Institute
  • Alex Feerst, Co-founder, Digital Trust & Safety Partnership
  • Rick Lane, CEO, Iggy Ventures
  • Matt Gerst, VP for Legal & Policy Affairs, Internet Association
  • Drew Clark (moderator), 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.

Shane Tews is a nonresident senior fellow at the American Enterprise Institute (AEI), where she works on international communications, technology and cybersecurity issues, including privacy, internet governance, data protection, 5G networks, the Internet of Things, machine learning, and artificial intelligence. She is also president of Logan Circle Strategies.

Alex Feerst is a lawyer and technologist focused on building systems that foster trust, community, and privacy. He leads Murmuration Labs, which helps tech companies address the risks and human impact of innovative products, and co-founded the Digital Trust & Safety Partnership, the first industry-led initiative to establish best practices for online trust and safety. He was previously Head of Legal and Head of Trust and Safety at Medium, General Counsel at Neuralink, and currently serves on the editorial board of the Journal of Online Trust & Safety, and as a fellow at Stanford University’s Center for Internet and Society.

Rick Lane is a tech policy expert, child safety advocate, and the founder and CEO of Iggy Ventures. Iggy advises and invests in companies and projects that can have a positive social impact. Prior to starting Iggy, Rick served for 15 years as the Senior Vice President of Government Affairs of 21st Century Fox.

Matt Gerst is the Vice President for Legal & Policy Affairs and Associate General Counsel at Internet Association, where he builds consensus on policy positions among IA’s diverse membership of companies that lead the internet industry. Most recently, Matt served as Vice President of Regulatory Affairs at CTIA, where he managed a diverse range of issues including consumer protection, public safety, network resiliency, and universal service. Matt received his J.D. from New York Law School, and he served as an adjunct professor of law in the scholarly writing program at the George Washington University School of Law.

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.

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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