Instagram backing Robinhood in lawsuit that hinges on stock trading apps

The Instagram post and viral links that became international headlines this week don’t have much legal standing, even though Instagram gave support to the plaintiffs when they sued the popular stock trading app Robinhood.

“It’s unfortunate that Snapchat is representing as if it has a firm support for the class in its headline,” a lawyer for Robinhood said in court on Thursday, The Verge reported. The lawsuit filed earlier this week seeks a class action on behalf of anyone who uses Robinhood to trade stocks and would block a “forced arbitration,” a process in which a company dictates how disputes are resolved instead of giving anyone a chance to present their case.

The Instagram posting, which Robinhood describes as a “a satirical criticism of Robinhood’s uninformed business model that was run by a parody user,” led to headlines saying that the Instagram community would band together to enforce a ban against users who changed their social media profile pictures to the Robinhood hashtag.

The meme inspired social media backlash, but gained more traction after Robinhood removed the photo from Instagram. The lawsuit, filed by a Wayne, Michigan woman under a pseudonym, was reportedly inspired by the posting.

“This seems like a clever idea,” Robinhood wrote in a Thursday blog post. “There is no need for a legal basis.” The Instagram post was a satirical account that followed Robinhood’s digital humor, according to the blog post.

Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York dismissed the lawsuit, even though Robinhood had submitted a sworn declaration from Instagram saying that the social media giant would support the lawsuit, according to Bloomberg.

“We will continue to emphasize that the posts are not in compliance with the Instagram Platform Policy,” Instagram said in the statement.

The debate over stock trading apps is intensifying. Investors are abandoning online brokerages to trade stocks directly on stock exchanges, which have raised significant concerns about increasing transaction costs. Robinhood is one of the most well-known of the so-called “dark pools” that make this possible.

Yet the case still hasn’t been completely resolved. Because of the Twitter and Instagram responses, the post quickly gained legal relevance across the internet, and spurred a barrage of new lawsuits claiming that companies are failing to keep stock market information on social media properly disclosed. Related: How the Robinhood lawsuit can end in a settlement or comeback

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