Securities Regulation and Class Warfare

Abstract

This Article examines the regulatory goals of creating “fair, orderly, and efficient” securities markets in light of the recent issues involving trading in the shares of GameStop Corp. (GME) through the broker-dealer firm Robinhood Financial LLC. The GameStop/Robinhood saga casts significant doubt on the notion that the SEC is achieving its goal of maintaining fair, orderly, and efficient markets, and facilitating capital formation. Moreover, the saga provides further support for the view that market forces tend to make securities markets fairer, where fairness is defined as investors “getting what they pay for,” rather than as investors “beating the market” by earning abnormal returns. Further, market processes tend to make markets more efficient, while regulation tends to make markets less efficient. Finally, it appears that regulation tends to further the interests of Wall Street elites over the interests of ordinary investors.