{"id":194979,"date":"2021-03-05T18:36:11","date_gmt":"2021-03-05T15:36:11","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/gamestop-tale-exposes-regulatory-paternalism-and-defis-true-value\/"},"modified":"2021-03-05T18:36:11","modified_gmt":"2021-03-05T15:36:11","slug":"gamestop-tale-exposes-regulatory-paternalism-and-defis-true-value","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/gamestop-tale-exposes-regulatory-paternalism-and-defis-true-value\/","title":{"rendered":"# GameStop tale exposes regulatory paternalism and DeFi\u2019s true value"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a283ebe08720\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a283ebe08720\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/gamestop-tale-exposes-regulatory-paternalism-and-defis-true-value\/#The_regulatory_paternalism\" >The regulatory paternalism<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/gamestop-tale-exposes-regulatory-paternalism-and-defis-true-value\/#A_paradigm_shift\" >A paradigm shift<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/game\/\" data-internallinksmanager029f6b8e52c=\"7\" title=\"Game\" target=\"_blank\" rel=\"noopener\">Game<\/a>Stop tale exposes regulatory paternalism and DeFi\u2019s true value <\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDIvMzA2NzNiYTQtYTQ0NS00YmU4LTk2YWYtNDdlNDdlMjZiNGRkLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-5a136f3a>Though seemingly coming from nowhere for many, the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">theme<\/a>s behind the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">Reddit<\/a>-fueled r\/Wallstreetbets\u00a0pump\u00a0of GameStop feel familiar. Watching it unfold, I tried to figure out just why it had captured my interest to such a degree, and, to me, it was a spillover into the traditional markets of some pervasive themes driving crypto.<\/p>\n<p>Despite some competition in the narrative, I view the motivating force \u2014 and by it, I mean the social media-fueled spread of the message that drew enough widespread interest to have an impact in the market \u2014 behind the GME pump as analogous with what, at one point, was an impetus behind Bitcoin (BTC). It is a driver for (depending on your level of cynicism) the crypto markets more broadly and the decentralized finance movement \u2014 a desire for the \u201cdemocratization of finance.\u201d Behind that movement is the view that finance and financial products should be open-sourced, accessible to all, as opposed to hinging on whether you are an accredited (read: high-net-worth) or an institutional player.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Time to shine? Crypto should be given a chance after GameStop drama<\/em><\/strong><\/p>\n<p>Accredited investor rules, long the subject of critique, were recently expanded in 2020. Far short of a revolution, the amendment allowed additional classes of investors with certain financial credentials, like a <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/watch-movies-tv-seriess\/\" data-internallinksmanager029f6b8e52c=\"8\" title=\"Watch Movies &amp; TV Series\" target=\"_blank\" rel=\"noopener\">Series<\/a> 7 and knowledgeable employees of PE funds, to meet the definition among other changes that did not amount to anything meaningful. See the Securities and Exchange Commission\u2019s press release <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/news\/press-release\/2020-191\">describing<\/a> the recent amendments to the definition.<\/p>\n<p>There was a folkloric element to the narrative, a David and Goliath tale of sorts, where the everyday man was able to pull off a coup in inspiring a sizable crowdfunded movement in the market. Yet, while it evoked some degree of euphoria, the episode also brings to the forefront some of the simmering underlying tensions in U.S. society, including a strong sense of paternalism toward the poor, in this case, the retail investor, and mounting generational tensions.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>GameStop saga reveals legacy finance is rigged, and DeFi is the answer<\/em><\/strong><\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_regulatory_paternalism\"><\/span>The regulatory paternalism<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In the United States, as a somewhat toxic offshoot of self-determination, there is the underlying bias or presupposition that those who are wealthy became so because of their personal attributes and, likewise, those who are poor will remain poor as a result of some personal failing on their part. Outside the academic setting, policy toward retail hasn\u2019t reflected much exploration into the social and economic factors that allow people to accumulate wealth and the feeling that \u201cthe game is rigged\u201d through increasing barriers to achieving upward mobility in the United States. <\/p>\n<p>This manifests itself in regulatory paternalism, the government imposing limitations on who it deems able to afford to make investments or has access to certain financial products. Most visibly, this has left those who are non-accredited without access to early-stage investments. Many have argued that the wealth test systematically disenfranchises any and all investors capable of understanding risk despite their income level, making an <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.marketwatch.com\/story\/lets-not-backtrack-on-loosening-accredited-investor-rules-11611936391\">argument<\/a> that I agree with, that \u201cbeing wealthy is no proxy for financial sophistication.\u201d<\/p>\n<p>But at the same time, this allows access to casinos and lottery tickets, payday loans and other predatory financial instruments, such as reverse mortgages, presumably where a competing interest, such as <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.ncsl.org\/research\/fiscal-policy\/keeping-state-lottery-revenue-alive.aspx\">state budgetary<\/a> shortfalls or effective <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.nytimes.com\/2018\/02\/02\/us\/politics\/payday-lenders-lobbying-regulations.html\">lobbying<\/a> on the part of industry, won out.<\/p>\n<p>What you end up with is a system that seems engineered to reinforce class-based barriers \u2014 where the wealthy get to shape law and dictate the narrative as well. This is most starkly evidenced by the Melvin Capital sympathetic <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cnbc.com\/2021\/02\/19\/citadel-billionaire-ken-griffin-defends-melvin-stake-against-what-he-calls-an-insane-conspiracy-theory.html\">content<\/a> that ran on CNBC <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.washingtonpost.com\/business\/2021\/01\/29\/leon-cooperman-gamestop\/\">portraying<\/a> the hedge funds as the protagonists, leveraging the dogmatic network-wide belief system that, somehow, Melvin\u2019s actions were good for society and universally just. <\/p>\n<p>This was juxtaposed against a characterization of the Redditors as huddled, unwashed masses who, through chaos and destruction, embarked like lemmings on a path toward personal financial ruin and created a situation where there was some sort of systemic risk created by touting a random low volume stock. Not to put too fine a point on it, but while rich people lost some money here, among others, it is not exactly the financial apocalypse it was portrayed to be.<\/p>\n<p>To me, putting aside the unending joy of having mainstream finance publications quote Reddit netizens like u\/DadBod39 and prompting untold memes around Robinhood changing its name to Prince John\u2019s Trading or RobingtheHood, this episode in the stock market captured my attention by highlighting the above-described tension, as well as a generational shift to social-media-based messaging, where the internet can be leveraged widely to produce decentralized market forces. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_paradigm_shift\"><\/span>A paradigm shift<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Fueled by (semi)-anonymous decentralized actors, this episode brings forward one of my core fascinations with crypto: the prospect of a paradigm shift that challenges existing regulations. Much like the regulatory challenges applicable to decentralized finance, how do you address a movement of the masses when law presupposes there is a central figure with more culpability than Keith Gill, to which you can attach liability? Addressing this poses a conundrum, as regulators are increasingly faced with cutting heads off hydras with the prospect of more growing back.<\/p>\n<p>Most recently, the House Committee on Financial Services had a post-mortem <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/financialservices.house.gov\/calendar\/eventsingle.aspx?EventID=407107\">hearing<\/a> on GameStop and the surrounding market volatility, and while I always go into these with the lowest of expectations, I come out each time with a sense of renewed nihilism and hopelessness. While the recent House hearing on Feb. 18, 2021, provided an opportunity for a rehashing of the r\/Wallstreetbets pump from those with a first-row view of the events that transpired and gave legislators the opportunity to saber rattle and virtue signal to their respective constituents, there were no clear signs of a path forward.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>Twitter, GameStop\u2026 enough! The world needs true decentralization<\/em><\/strong><\/p>\n<p>There was a cursory discussion of the merits of reducing settlement time (and yes, blockchain), the downsides of relying on high-growth fintech startups to provide market infrastructure type services, and the balancing act, as Sean Casten <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/thehill.com\/homenews\/house\/539576-illinois-lawmaker-calls-robinhood-helpline-during-hearing-gets-voicemail\">put<\/a> it, of trying to democratize finance while not \u201cbeing a conduit to feed fish to sharks.\u201d<\/p>\n<p>It was also an opportunity for legislators to play \u201cwho can be the most tone-deaf to the underlying market incentives\u201d that fuel today\u2019s ad tech and surveillance-driven economy, questioning whether this was indeed a free service for consumers \u2014 in this case, retail investors (breaking <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a>, it isn\u2019t) while remaining a for-profit institution. One House member <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cnbc.com\/2021\/02\/19\/aoc-wants-robinhood-to-return-payment-for-order-flow-profits.html\">asked<\/a> if Robinhood would stop the practice of earning revenue by allowing Citadel to \u201cpay for order flow\u201d and <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.institutionalinvestor.com\/article\/b1m2p1cv68bx56\/Twitter-Freaked-Out-Over-Robinhood-Selling-Its-Trade-Flow-But-the-App-and-Others-Have-Been-Doing-It-for-Years\">allowing<\/a> for the institutional players to front-run retail, pointing out that the practices that Robinhood engages in are legal, with disclosure, and certainly not unique, and are used by Fidelity, E-Trade, Charles Schwab and TD Ameritrade, among others, according to SEC <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/rules\/final\/2018\/34-84528.pdf\">Rule 606<\/a> disclosures. The answer was clearly and universally no, or, as Casten, cited earlier, put it: \u201cThere is a tension in [Robinhood\u2019s] business model.\u201d <\/p>\n<p>This is the same legislature that has <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.rollcall.com\/2020\/02\/19\/as-congress-stalls-on-data-privacy-big-tech-tangles-with-states\/\">stalled<\/a> in an attempt to stem consumer data from being bought and sold as a business model, thereby achieving peak-level hypocrisy in the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/trip-and-travel\/\" data-internallinksmanager029f6b8e52c=\"10\" title=\"Trip &amp; Travel\" target=\"_blank\" rel=\"noopener\">trip<\/a>le threat of: (1) allowing the monetization of violations of privacy and somehow both; (2) blaming free-market actors for making money off acts that are legal; and (3) also suggesting at times that regulation was the cause of the harm that was done. <\/p>\n<p>In a particularly depressing segment of the hearing, Robinhood was all at once villainized for not providing the committee with disclosure forms that are publicly available; for not foreseeing a <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cnbc.com\/2021\/01\/30\/robinhood-says-restrictions-on-gamestop-due-to-tenfold-increase-in-deposit-requirements.html\">tenfold<\/a> spike in the capital it would need; and for taking emergency steps to meet capital requirements, which involved some degree of discretion in how to address but not as much as House members insinuated.<\/p>\n<p>Others suggested that Robinhood should be responsible for the relative gains in its users\u2019 portfolios, and still, others decried that there were capital requirements for Robinhood in the first place, suggesting that regulations were the root cause of the capital crunch. Altogether, the hearing left no discernable path forward except that we should expect more hearings.<\/p>\n<p>In all, the fallout continues, with a couple of indications that there is certainly more to come. Maxine Waters has <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2021-02-17\/-roaring-kitty-sued-for-securities-fraud-over-gamestop-rise\">stated<\/a> that regulators will be present to testify at additional hearings of the House Financial Services Committee, and class actions have been filed naming Keith Gill. <\/p>\n<p>I view this as likely a beginning rather than a one-off, where we can look forward to additional skirmishes breaking out with increasing frequency as well as corresponding pressure on regulators to address them. Though I am not hopeful there will be any more movement in the accredited investor definition, maybe it is an opportunity for market regulators to reexamine underlying regulatory bias, as this has shone a spotlight on the need to create new opportunities for younger generations to build wealth.<\/p>\n<p class=\"post-content__disclaimer\"><em>This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.<\/em><\/p>\n<p class=\"post-content__disclaimer\"><em>The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Sarah H. Brennan<\/strong> is counsel and leader of the digital assets and disruptive technologies practice at Harter Secrest &amp; Emery LLP. Sarah has a broad range of experience in corporate and transactional matters. She focuses primarily on corporate and securities law, representing public and private companies, venture capital and private equity firms, investors, and clients in every stage of the corporate life cycle.<\/div>\n<\/div>\n<p><template data-name=\"subscription_form\" data-type=\"law_decoded\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/gamestop-tale-exposes-regulatory-paternalism-and-defi-s-true-value\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# GameStop tale exposes regulatory paternalism and DeFi\u2019s true value &#8221; Though seemingly coming from nowhere for many, the themes behind the Reddit-fueled r\/Wallstreetbets\u00a0pump\u00a0of GameStop feel familiar. Watching it unfold, I tried to figure out just why it had captured my interest to such a degree, and, to me, it was a spillover into the&#8230;<\/p>\n","protected":false},"author":1,"featured_media":194980,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDIvMzA2NzNiYTQtYTQ0NS00YmU4LTk2YWYtNDdlNDdlMjZiNGRkLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74894,74983,74868,86706,74898,70610,71511,48,4965],"class_list":["post-194979","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-blockchain","tag-decentralization","tag-defi","tag-robinhood","tag-sec","tag-finance","tag-government","tag-internet","tag-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/194979","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=194979"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/194979\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/194980"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=194979"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=194979"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=194979"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}