Testifying before Congress on Thursday, Reddit CEO Steve Huffman defended the role Reddit played in the January rise in GameStop shares.
Huffman told members of the House Financial Services Committee at a meeting Thursday that Reddit did not detect any significant activity led by robots or foreign actors on the WallStreetBets subreddit. Users in the online community helped trigger a buying frenzy last month for very short stocks, such as GameStop and AMC.
While retailers continued to buy unwanted shares once, lawmakers and media observers raised questions about who really was behind the trading posts and how such a mechanism could be manipulated.
Huffman testified that Reddit’s moderation mechanism makes it particularly good at removing bad information. The site allows users to rate comments up or down to increase or decrease their visibility. Moderators from different communities help enforce the rules in their corners of the platform. Huffman said Reddit had invested heavily in the voting system and that WallStreetBets moderators had done an “excellent job.”
“Our user base is extremely good at sniffing out untruths, misinformation, false stories, both in this community and on Reddit in general,” Huffman said. “For any content to be successful on Reddit, it must be accepted by that community and receive the same amount of votes as anything else.”
While users do not need to use their real identities, Huffman said their request does not necessarily make the site more secure.
“Other platforms have a real identity and do nothing to improve their behavior,” he said.
The financial advice of Reddit users may actually be more reliable than the advice of traditional media, Huffman suggested.
“People can say, in fact, they do it all the time on TV, encouraging people to make what I would call bad investment decisions,” Huffman said. “On Reddit, I think investment advice is actually one of the best, because it has to be accepted by many thousands of people before it gets that kind of visibility.”
Reddit is largely protected from legal liability for their users’ posts by a law known as Section 230 of the Communications Decency Act. The legislation protects online platforms from liability for user posts and also allows them to freely moderate or remove content as they see fit. The law has attracted the control of parliamentarians on both sides of the aisle, who I believe are unfairly protecting them from liability for their products.
However, Huffman suggested that his company could be held accountable for things happening on its platform. Huffman later mentioned that Reddit could still be subject to civil litigation.
“Reddit can be held accountable and we take our responsibilities here incredibly seriously,” he said.
Look: retail investors are driving GameStop’s explosive growth despite fundamentals