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As class action lawsuits mount over Robinhood’s move to block the trading of GameStop and other stocks on its app, some legal experts say plaintiffs may have their lawsuits blocked as well.
It’s been less than a week since the popular investment app restricted trading of GameStop stock amidst an unprecedented Reddit driven price spike, but the Robinhood app has already accumulated multiple class action lawsuits against it in Texas, California, New York, Connecticut, Florida, and dozens of other states. In fact, there is currently an app investors can use to join a class action lawsuit against the owners of the Robinhood app, according to CNBC’s Make It.
However, some legal experts caution that the plaintiffs in these class action lawsuits may not be able to overcome two hurdles; Robinhood’s Terms of Service and a decades-old federal law called Section 230.
The Robinhood class action lawsuits accuse the retail broker of costing users profit by stopping them from purchasing GameStop stock while it was on the rise. The plaintiffs say that Robinhood breached its contract with users by failing to act on investors’ orders to buy.
Legal experts told Reuters that it may not be so black and white. Reportedly, Robinhood’s user agreement states the broker “may at any time, in its sole discretion and without prior notice to Me, prohibit or restrict My ability to trade securities.”
“The contract says [Robinhood] can do it,” Michigan law professor Adam Pritchard reportedly told Reuters. “That seems to be a big stumbling block to the breach of contract claim.”
In addition, Robinhood class action lawsuit plaintiffs may also struggle to establish damages, with another legal expert pointing out how difficult it would be for would-be GameStop investors to show how much money they lost or did not make due to Robinhood’s restrictions.
If the plaintiffs cannot establish certain elements, then they will not be able to obtain depositions and other evidence from Robinhood – effectively ending their claims, according to Tulane law professor Ann Lipton, who also talked to Reuters.
“No harm, no foul,” Duke law professor James Cox told Reuters, pointing out that, in other legal actions against brokers, plaintiffs have been held to a high standard or face dismissal. Reportedly, plaintiffs faced such a dismissal in a class action lawsuit filed against TD Ameritrade over the alleged mismanagement of a tax feature because they could not show that the broker acted in bad faith.
In addition, the decades old law meant to protect free speech on the internet, Section 230, will likely protect Reddit from claims by investment firms who reportedly took a big hit during the GameStop rally.
“The whole point of section 230 is to enable sites like Reddit to allow conversations to take place,” Eric Goldman law professor at Santa Clara University explained to Reuters. “Knowing that some conversations will be antisocial and in some cases illegal, section 230 says that’s not the responsibility of the service that creates the venue of those conversations.”
Are you a Robinhood user that missed out on GameStop or other stock trades because of the app’s restrictions? Tell us what you think in the comment section below!
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3 thoughts onRobinhood May Be Legally Protected From The Mounting Class Action Lawsuits
Got screenshots of everything that happened with me and Robinhood and def lost a considerable amount of money because of their halt.
Yep I got my screenshots to prove it. Mine was with AMC, Nokia and had trading halted from buying and selling, like I said I got the screenshots to prove mine. So what happens they get a class action and I get a nickel. These brokers pay fines and never get what they deserve. But count me in.
I don’t have a Robinhood account but their actions affected other stock buyers in the market with GME stonk throughout their account manipulation. This is the angle lawyers need to use to sue Robinhood. Their actions affected the overall market for investor outside of their app. Pass the information on.