GameStop and the Stock Market's Hidden Plumbing: Why the Buy Button Went Dark

I'm Andy Temte and welcome to Money Lessons! Join me every Saturday morning for bite-sized lessons that are designed to improve financial literacy around the world. Today is June 20, 2026.

Last week we looked at information asymmetry and insider trading — who in the market knows what, and when acting on that knowledge breaks the law. Before that, we covered short selling, borrowing shares to bet a stock will fall, and leverage, borrowing money to make a bigger bet. And we met the market specialist, the trader on the exchange floor who sees the flow of orders that the rest of us cannot. Today we watch those pieces collide — and then I want to take you into the market plumbing almost nobody thinks about until it reaches up and grabs them. The event is GameStop. The year is 2021.

A Struggling Retailer and the Bet Against It

GameStop is a video-game retailer with stores in shopping malls across the country. Back in 2020, its sales were shrinking and its stock had fallen to around four dollars a share. A lot of professional investors looked at it and saw a company on its way out, so they placed bets that the stock would keep falling — using short selling.

By late January 2021, those bets had piled up to an extreme. So many investors had bet against GameStop that the number of shares sold short reached about 140 percent of the stock's "float" — the shares available to buy and sell in the open market. You might wonder how more than 100 percent of the available shares could be sold short. When you borrow a share and sell it, whoever buys it can turn around and lend it to the next short seller, so the same share gets borrowed and sold short more than once, and every loan gets counted. It is not fraud, and no fake shares are created — it is real shares passing through several hands.

Then something unusual happened. A large group of ordinary investors — many of them gathered in a Reddit forum called WallStreetBets, and rallied by a man who went by the name Roaring Kitty — started buying the stock in huge numbers. Two things pulled them in. Roaring Kitty had argued for months that GameStop was badly undervalued, written off too soon. And for many, the appeal was simpler — a chance to beat Wall Street at its own game by turning the tables on the big funds that had bet so heavily against the stock. At the start of January, a single share cost about seventeen dollars. By January 28th, the price had briefly touched around four hundred eighty-three dollars.

Why did it climb so far, so fast? Part of the answer is the short squeeze we saw on June 6th with Volkswagen: when a heavily bet-against stock starts rising, the people who bet against it are forced to buy shares to limit their losses, and that buying drives the price up even more. The setup for a squeeze was in place — though regulators later found that a wave of everyday buyers drove much of the rise on its own. But one thing is plain: the professional investors who had bet against GameStop lost staggering amounts of money. One large fund, Melvin Capital, lost about half its value that month and needed a rescue of roughly 2.75 billion dollars from other investors just to stay in business.

The Day the Buy Button Went Dark

On the morning of January 28th, with the price still climbing, Robinhood — the commission-free app that had brought millions of first-time investors into the stock market — did something startling. It stopped letting its customers buy GameStop. You could sell shares you already owned. You could not buy any more. Several other brokerages put similar limits in place.

Robinhood had built its whole reputation on opening up the stock market to everyday people. So when the app blocked them from buying at the exact moment they were finally winning, many of its customers were furious. To them, it felt like the rules had been changed the instant they got ahead. Lawsuits were filed within hours.

So why did the buy button go dark?

The Machinery Underneath

The answer lives in a part of the market you never see. When you tap "buy" and the purchase goes through on your screen, you do not own the shares yet. Behind the scenes, the handover — your money going one way, the shares coming back the other, with the transfer officially recorded — still has to be completed. Completing a trade is called settlement, and in January 2021 it took two business days.

During those two days, someone has to stand behind the trade and guarantee it goes through, even if one side fails to deliver. That someone is called a clearinghouse. In the US stock market, it is an organization called the National Securities Clearing Corporation, part of a larger body called the Depository Trust and Clearing Corporation. It sits in the middle of nearly every stock trade and promises each one will be completed.

Standing in the middle like that is risky, so the clearinghouse protects itself the way a careful lender would. It requires every brokerage to put down a deposit — called collateral — and it sizes that deposit to how much the brokerage is trading and how wildly prices are moving. Those wild swings are the key. In the two days before a trade is finished, a sharply swinging price raises the odds that one side won't be able to pay up, leaving the clearinghouse to cover the difference — so the bigger the swings, the bigger the cushion it demands. On an ordinary day, this is routine and invisible. Late January 2021 was not ordinary. Trading volume was enormous and GameStop's price was lurching by the hour, and the deposit Robinhood was required to put down shot up to around 3 billion dollars — many times what a normal day would require.

That was far more than Robinhood could come up with that morning. Unable to pay, the firm cut the one thing that was driving the deposit higher: new buying. Letting customers only sell, not buy, lowered how much Robinhood owed the clearinghouse and bought it time to raise emergency cash. The buy button went dark because the market plumber had handed Robinhood a bill it could not pay in time.

What This Means for You

Step back from GameStop for a moment, because the lesson is bigger than one stock. Beneath the clean, simple surface of a trading app sits a huge and mostly hidden system — the settlement delay, the clearinghouse, the collateral, the guarantee standing behind every single trade. Most of the time, you never think about it. Then a crisis hits, and that machinery suddenly decides what you can and cannot do.

There is a hopeful note here, because the system can learn from its mistakes. The two-day settlement delay that set off the whole collateral problem was one of the first things regulators moved to fix. In May of 2024, the US shortened settlement from two days to one — a change known as T+1 — and the SEC pointed to GameStop directly as one of the reasons for it. A shorter delay means less time for the clearinghouse to be at risk, which means smaller deposits and less of the pressure that froze the buy button. The plumbing that boxed people in back in 2021 was rebuilt, in part, because of what happened to them.

Next week we tackle a phrase we have leaned on all series without ever defining it. We say "the market" went up, or "the market" had a rough day — but what is "the market," exactly? We'll look at where the famous measures of it, like the Dow and the S&P 500, come from, and what they really tell you.

Until next week... Grace. Dignity. Compassion.