Why Is It Unlikely for the SEC to Exploit Legal Loopholes to Target the Roaring Cat?
Keith Gill, better known by his online nickname “Roaring Kitty,” is back in the spotlight for his trading activities involving GameStop Corp. (GME). However, Gill reportedly exploited a loophole in market regulations, which has raised concerns among market experts. However, legal experts stated that the SEC could not target Roaring Kitty due to a ‘gap in the rules’.
Legal Experts on the SEC and Roaring Kitty
Daniel Hawke, partner at Arnold & Porter Kaye Scholer and former head of the SEC’s market abuse unit, commented on the matter. “What he’s doing is exploiting a loophole in the rules,” he said. This revelation underscores the complexity of Roaring Kitty’s actions, which, although controversial, exploit regulatory gray areas rather than outright breaking the law.
Gill’s influence on retail investors is significant. He is using his online presence and celebrity status to draw attention to GameStop, encouraging an increase in trading activity. But as Hawke notes, “Current rules do not allow the SEC to prosecute this conduct unless there is an element of deception.”
Unlike traditional pump-and-dump schemes, Gill does not publicly support investing in GameStop or make false claims about GameStop’s financial health. Instead, his posts are often cryptic memes or updates on his trading position. This complicates the SEC’s ability to file a lawsuit against him.
Moreover, the uncertainty surrounding Roaring Kitty’s actions leaves a significant gray area in market regulations. Additionally, some market watchers accused Gill of manipulating the market. On the contrary, others argue that his behavior is not significantly different from that of Wall Street fund managers who publicly discuss their holdings.
Steve Sosnick of Interactive Brokers stated that Gill’s actions resemble those of an activist investor. This situation calls into question the fine line between market manipulation and advocacy. Meanwhile, Matt Stoller of the American Economic Liberties Project took a tougher stance. “This is clearly market manipulation,” he said.
The flurry of ideas highlights the controversy and complexity of Gill’s situation. The SEC’s challenge now is to determine whether Roaring Kitty’s influence and trading activity amount to deception, a key element necessary for any potential investigation.
Also Read: GameStop Price Prediction While Roaring Kitty Schedules Livestream
Discussion Increases as Option Data is Announced
Meanwhile, Roaring Kitty’s trading position in GameStop is still significant. According to a post on his Reddit account, he holds $557 million in stock and option contracts. But questions remain about his trading activities, such as whether he was backed by other investors and how he financed his GameStop purchases.
The scale of Roaring Kitty’s position and the scrutiny it attracts adds another layer of complexity to its trading strategy and its potential consequences. The controversy intensified after famous investor Ross Gerber warned Gill about his short position in GameStop.
Additionally, Gerber highlighted the risks Gill faces; specifically its $115.7 million stake in GameStop, including $65.7 million in call options expiring June 21. In a post on X (formerly Twitter), Gerber said, “Kitty better be careful revealing something like this.” a short-term position with a lot of enemies. “Where will he get this much money… He’ll have to sell the options soon.”
Additionally, SEC Chairman Gary Gensler answered questions about Gill’s activities. He also emphasizes that disclosure is crucial, but that “it won’t necessarily protect a bad actor.” This stance reflects regulators’ broader concern about the need for transparency without providing a shield against potentially harmful market behavior.
Experts also noted the difficulties Roaring Kitty may face in cashing out its GameStop options. The number of open contracts on GameStop rose to 145,000 at the end of May, a significant increase from the 15,000 recorded at the beginning of the month. Therefore, the size of Gill’s position and increased interest in GameStop could make it more difficult to sell options or take delivery of the underlying shares, reducing their value.
Also Read: Meme Coin GameStop ($GME) Soars 118%, Roaring Kitty Eyes Billionaire Status
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