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This week the subreddit WallStreetBets took on hedge funds shorting GameStop stocks. The question today is, if a lot of people on Reddit band together to drive the price of a stock higher, is that illegal?
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Even if the SEC went heavily after some redditors for this, they’d suddenly find themselves up against a new hurdle they aren’t used to: the 1st amendment. Manipulating the market not to make money, but instead to stick it to the man, is a fundamentally expressive act… especially if you willingly ate a loss yourself. I don’t think the SEC really wants to be questioned on those grounds, because a lot of finance law is shaky on constitutional protections in the first place, and I think most federal judges would not be very impressed if they tried to apply it to a small time investor-activist.
As you said, the big initial investors have not dumped, and commited no fraud. I’m sure some randos lied about something, but they wouldn’t have the means to be convicted. If the SEC goes after even a few token redditors, the political pressure will crush them.