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Senate Committee to Meet on GameStop ‘Meme Stock’ Surge

The meteoric rise of GameStop (EMG) – Get the Class A report from GameStop Corp. demonstrates how technology and social media “combined to push the boundaries of market regulation,” a witness told a Senate committee on Tuesday.

The U.S. Senate Banking, Housing, and Urban Affairs Committee hearing titled “Who’s Winning on Wall Street? GameStop, Robinhood, and the State of Retail Investing” will feature testimony from a number of industry experts. legal and financial sector.

The hearing, which is expected to start at 10 a.m. ET, comes in response to the surge earlier this year from GameStop and other so-called “meme stocks” such as AMC Entertainment. (CMA) – Get the Class A report from AMC Entertainment Holdings, Inc.bed, bath and beyond (BBBY) – Get the report from Bed Bath & Beyond Inc. and Kohl’s (KSS) – Get the Kohl’s Corporation report.

GameStop climbed 15.5% to $224.55 in premarket trading on Tuesday. Stocks jumped on Monday following reports which the video game retailer will ask Chewy.com (CHWY) – Get the Class A report from Chewy, Inc. founder Ryan Cohen to lead his e-commerce strategy.

The GameStop incident “highlights how social media and technology have combined to push the boundaries of market regulation,” according to written testimony from Gina-Gail S. Fletcher, a law professor at the Duke University.

“Congress and regulators should hold merchants accountable for their words and actions, even in the absence of explicit fraud, Fletcher said.

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Fletcher also criticized the Securities & Exchange Commission’s response to the stock surge, saying “arguably, the SEC’s inability to act has created an authority vacuum, which has resulted in a haphazard and uneven response from market players”.

GameStop shares have soared more than 590% since Jan. 12, when the company reached an agreement with Cohen’s RC Ventures LLC to restructure its board of directors and focus on digital sales and not just “remain a retailer of video games that prioritizes its physical products. footprint and stumble around the online ecosystem.”

“When fast, high-risk speculators dominate, we have a classic recipe for market disruption,” said Rachel Robasciotti, founder and CEO of Adasina Social Capital, in her prepared remarks. “What we saw in January with GameStop and Robinhood is what we saw during the Great Recession with Wall Street churning out subprime mortgage securities.”

Financial app Robinhood has been heavily criticized for its decision to limit trading in highly leveraged stocks.

“Events surrounding GameStop’s price changes and issues on the Robinhood trading platform have so far not revealed the type of issue that would warrant further legal restrictions or regulations,” according to written testimony by Andrew Vollmer , Senior Affiliate Researcher, George Mason University Mercatus Center.

He added that new regulation “would be appropriate if data and evidence emerged to show serious, sustained and recurring harm to investors that law could prevent or reduce.”

“We haven’t seen such harm yet, but the more detailed investigations underway may yield evidence of misconduct or reason to reconsider the need for further regulation,” Vollmer said.