2/15 Roundtable: Regulating Social Media [Info Sheet]

Regulating Social Media: Talking Points and Important Information

Questions About Regulating Social Media

• Should social media companies be considered publishers of the content users post?
  • If yes, this would hold them liable for user-posted content, all but requiring them to censor content
  • If no, there is no legal obligation to filter any content
• How should social media companies decide what content to restrict or users to ban?
• Should social media companies refrain from restricting content coming from public figures, like politicians?
• How does misinformation (eg, regarding elections or Covid) factor into this discussion? Is it their responsibility (or right) to restrict this content?

Some Arguments about Social Media Companies

• The government should not be involved in deciding what content should be restricted, that is a violation of First Amendment rights.
  • Furthermore, social media companies are private companies, and they have an absolute right to determine what content they want or don’t want on their platform
• Social media regulation would not be a violation of the First Amendment, because the First Amendment defines your rights against the government; it doesn’t define rights against a private company
• Social media companies cannot be trusted to treat all users equally (particularly with regards to political orientation), so the government should step in to ensure all citizens are able to speak freely
• Social media platforms are no longer just a consumer product, they are the forum of public discourse, and is not entitled to the same rights as a normal privately produced product would be
• The FCC should be able to regulate social media platforms, just like TV and Radio
• Apple, Amazon, Google, and Facebook have used their monopoly power to act as gatekeepers to the marketplace and undermine potential competition
• Social media companies should not be allowed to profit off of hate speech and disinformation campaigns
• Conservatives have agreed with Democratic counterparts that there must be change in the way social media and tech giants are regulated. Yet their goals seem to be the opposite of eachother. According to the Wall Street Journal article, “Democrats seek… more aggressive content moderation and the GOP push(es) for fewer bans and takedowns.” This divide is the central issue
• A Pew Research study found “seven-in-ten Americans think it likely that social media companies intentionally censor political views they find objectionable.” (link)
  • Project Veritas has also accused Twitter of shadow banning conservative profiles, as well as “blatant censorship, systematic bias, and political targeting.” (link)
• If social media companies will ban the President, there is nothing they won’t do
• Social media companies are in a weird middle ground where they actively censor some content, but don’t fully filter their platforms. They either need to fully filter (like a publisher) or do (almost) no censoring at all.
• Big Tech companies have legal protections that other industries don’t have, and those protections should be removed so they can be opened up to more litigation

Trump Twitter Ban

Arguments:

• Trump obviously has a huge following on Twitter, and anything he says reaches millions of people. Constantly tweeting lies about election fraud, etc. is dangerous, and perhaps Twitter users with a following that large should be held to a higher standard because their Tweets have greater consequences 
• Ultimately, Twitter is a private company and has the right to enforce its own policies as it sees fit 
• Keeping him on Twitter allowed the public to see his true thoughts and feelings, not just heavily edited speeches and press conferences; in public interest for people to be able to see his thoughts firsthand 
• Sets a dangerous precedent for a few reasons:
  • There is not a uniform, transparent standard as to what kinds of speech may lead to a ban
  • Censoring political speech may be dangerous in that either side could simply try to ban those on the opposite side 
  • Mr. Trump has first amendment rights, which are potentially being violated

Twitter’s Justification:

• Twitter CEO Jack Dorsey tweeted on January 13:
  • “I do not celebrate or feel pride in our having to ban @realDonaldTrump from Twitter, or how we got here. After a clear warning we’d take this action, we made a decision with the best information we had based on threats to physical safety both on and off Twitter.”
  • In the same thread he said, “Having to take these actions fragment the public conversation. They divide us. They limit the potential for clarification, redemption, and learning. And sets a precedent I feel is dangerous: the power an individual or corporation has over a part of the global public conversation.”
  • Essentially, Dorsey stands by his decision based on the events of January 6 and the claims of election fraud, but fears the precedent being set

Section 230 of the Communications Decency Act

What is Section 230 and what is the debate surrounding it?

• “No provider or user of an interactive computer service shall be treated as the publisher of any information provided by another information content provider.”
• It protects social media companies from being sued for what users post on their platforms, so legally, Facebook and Twitter are under no obligation to filter anything from their websites
• Many argue this shield is necessary for freedom of expression on the internet, as well as for social media as we know it to continue to exist. Some also argue that without Section 230, there is no hope for new social media companies companies to compete with existing ones, as only large companies would have the resources to do the content moderation required
• Other argue that Section 230 provides an unreasonably broad liability shield that allows companies to selectively edit content, so as to push their political agenda
• Some tech CEOs have signaled an openness to modifying but not eliminating Section 230, although agreement on exactly how is yet to be found

Robinhood and GME

Information

• 1/8/2021: GameStop stock was around $18;  1/28/21: up 928% from that day
• r/WallStreetBets: retail investors discuss the next big trade to jump on, encouraged each other to keep buying GameStop and push it ‘to the moon’ after hedge funds and professional investors on Wall Street were betting on this stock to fail by shorting it
  • ‘Short’: a short sale where investors borrow and then sell a share of GameStop so later, if the stock price performs as expected, they can buy the stock at this lower price and make money by keeping the difference
  • ‘Short squeeze’: what happened with GameStop’s stock; a heavily shorted stock’s dramatic rise in price have forced short sellers to get out of their bets by buying the stock, which pushes the stock price even higher and create a feedback loop
• These retail investors don’t necessarily believe in GameStop’s business, but they are rather “evening the ledger with the financial elite, who benefited from years of gains as other people fell further behind”
• On 1/27, Melvin Capital was forced to close out of its GME short position, losing ~$300B, but not going bankrupt
• Robinhood: stock-trading app “aiming to democratize the financial system” by allowing people to make fee-free investments. The app makes money through “payment for order flow”
  • PFOF works like this: When you sell a stock on Robinhood, they take that order and go to a clearinghouse or market maker (ie, Citadel or Virtue). That clearinghouse then takes the order and finds someone to buy the stock from you at that price. However, they don’t sell it for the exact same price you receive — they sell it for just a little bit more. That spread is how the clearinghouse makes money, and they actually pay Robinhood for each order Robinhood sends them — that is how Robinhood makes money. This whole process, however, takes time, and both the clearinghouse and Robinhood need to put up capital for collateral while it is happening. When GME orders shot up, so too did the amount of capital Citadel asked Robinhood for — by a lot. Citadel is one of the companies that infused cash into Melvin to keep it solvent. 
  • Robinhood has been in trouble for this model before: instead of finding users the absolute best price for their orders, they are incentivized to find the clearinghouse that will pay them the most for their orders, and the SEC has opened charges for this practice. 
• Robinhood posted a blog on 1/28 saying that they restricted GameStop transactions because of “recent volatility”
  • They explained have stated that these capital requirements are 100% of the reason they blocked GME trades
  • Southern District of New York filed a class-action lawsuit against Robinhood for “purposefully, willfully and knowingly” removing GameStop which “deprived retail investors of the ability to invest in the open market”

Arguments

• Politicians across the aisle (Ted Cruz to AOC) are accusing Robinhood of depriving the majority of the population from access to markets and of trying to protect hedge funds and large investors
• Robinhood’s decision to stop trades of Gamestop occurred after Melvin Capital had closed its short position on Gamestop, and was done because they were running out of cash to fulfill the rapid increase in trades; this was a defensible decision
• Robinhood’s customer base — the entities they actually get money from, since traders on the app don’t pay for the service — consists of hedge funds and other financial services firms, who may have influenced their decision to stop trades; this needs to be investigated by Congress and the SEC
• Imposing regulations on companies like Robinhood — as populist voices on the left and right are proposing to prevent them from restricting trading — would push those companies out of business and end up effectively closing the stock market to retail investors, the opposite effect of the one intended
• Robinhood has been under fire before all this for treating the stock market like a casino and encouraging users to make investments without contemplating the seriousness of the risk
• Other trading services, like CashApp, WeBull, TDAmeritrade, Charles Schwab, and E-Trade also restricted stock purchases and must be included in this conversation
• To what extent does Reddit factor into this conversation?