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When imagining a modern David and Goliath story, one would not normally think of a group of Wall Street hedge funds versus individuals on a forum on In January of 2021 though, many headlines made this comparison, as online traders frantically purchased GameStop stock (“GME”) and drove the prices sky-high, while large hedge funds faced up to $19 billion in losses. Throughout January and mid-February, users of the Reddit forum r/WallStreetBets began buying GME for collective entertainment reasons. What began as a “meme stock” that users purchased to comically pump the stock of a chain of mall video-game stores blew up into a frenzy. The fact that GME was massively shorted contributed to the hysteria, with Reddit users deciding to try to punish those who were shorting the stock in a classic underdog manner. On January 26, Elon Musk tweeted about the company with a link to the Reddit forum which only added momentum to the trend. The stock rose 1500% in a manner rarely seen on the stock market, and GameStop grew from one of the most shorted companies valued at under $1.3 billion to a multi-billion dollar corporation valued at $21 billion.

This paper argues that there is a deficiency in the legislation in terms of what constitutes “open market manipulation.” Open market manipulation refers to the act of manipulating the market for intentional price-movement and profit through facially legal means. Contrary to traditional manipulation that is regulated by Section 10b, open market manipulators largely falls through the cracks of SEC enforcement, as it is difficult to prove that the manipulator did “bad acts”, such as nondisclosure or fraud. This is kind of manipulation that the GameStop saga brought to light, with both small-scale and institutional investors partaking in the scheme. Although the GameStop instance is perhaps the first of its kind, without legislative consequences, it is likely that investors will repeat this process of artificial inflation and cause significant economic and social harm.


This paper was written for Independent Study with Prof. Michele Benedetto Neitz.