WallStreetBets founder sues Reddit

The lawsuit said that what Reddit actually prohibits in its policies is users carrying out moderation duties 'in return for any form of compensation or favor from third parties'
The lawsuit said that what Reddit actually prohibits in its policies is users carrying out moderation duties 'in return for any form of compensation or favor from third parties'

Summary

Jaime Rogozinski says site ousted him without claim; Reddit calls suit frivolous

WallStreetBets’ founder is suing the site where it all began.

Jaime Rogozinski, creator of the community that sent untold numbers of individual investors piling into meme stocks two years ago, filed a lawsuit against Reddit. Mr. Rogozinski is accusing the social-media platform of breaching contract by ousting him from his role as a WallStreetBets moderator in 2020 and infringing on his right to trademark the WallStreetBets brand, among other complaints.

“I felt this was personal, and I felt betrayed," Mr. Rogozinski said in an interview with The Wall Street Journal.

A Reddit spokeswoman called Mr. Rogozinski’s lawsuit completely frivolous and said his claims had no basis in reality.

“Jamie was removed as a moderator of r/WallStreetBets by Reddit and banned by the community moderators for attempting to enrich himself. This lawsuit is another transparent attempt to enrich himself," the spokeswoman said. “It’s telling that he is filing this suit three years after he was banned from r/WallStreetBets and long after the community rose in mainstream popularity without his involvement," she said. “We’ll respond directly in court and continue to protect the best interests of the communities and moderators on our platform."

The lawsuit, filed in U.S. District Court for the Northern District of California, is the latest saga tied to the forum that popularized “diamond hands," made Reddit user “DeepF—ingValue" a hero, and wound up being scrutinized by lawmakers in a Congressional hearing.

Mr. Rogozinski created WallStreetBets in 2012, when he found himself bored by the sober analyses that dominated discussion boards like Bogleheads and turned off by the hedge-fund personalities featured on cable news. His goal was to find a more brash, colorful place to talk trading. WallStreetBets’ aim wouldn’t be to break down the merits of contributing to 401(k) plans. It would be to essentially gamble, and to have fun doing so.

Big wins would be celebrated. Big losses would be, too.

For many years, WallStreetBets was a relatively quiet community, Mr. Rogozinski recalled in the interview. Then came 2019. Brokerages like Fidelity Investments, TD Ameritrade Holding Corp. and Charles Schwab Corp. eliminated commissions to trade stocks. Interest in retail trading surged. So did WallStreetBets’ following.

At the start of 2020, Mr. Rogozinski published a book on how many millennials had come to treat the stock market almost as if it were a casino. He included anecdotes drawn from his time on WallStreetBets, and he posted a link to the book’s Amazon listing in the WallStreetBets forum.

He also announced that WallStreetBets would host a live trading competition that would be sponsored by a firm called True Trading Group. Posts promoting the championship, many of which have since been deleted, also appeared on the forum, according to a person close to Reddit.

It was around that time that his relationship with Reddit soured, according to the person close to Reddit. Some WallStreetBets users balked at Mr. Rogozinski’s ventures, seeing them as self-promoting. Others accused him of “selling out."

Mr. Rogozinski said he was “very open" about selling his book and promoting the competition.

Reddit notified Mr. Rogozinski in April 2020 that his account had been suspended because he was “attempting to monetize a community," according to a screenshot Mr. Rogozinski provided that the Journal reviewed. The site added that its policy prohibits moderators from entering “agreements with third parties on behalf of a subreddit." According to Reddit, a week later, it restored Mr. Rogozinski’s account but permanently removed him as moderator for violating those policies. The remaining moderators on WallStreetBets went a step further and banned Mr. Rogozinski from ever participating on the forum, according to the person close to Reddit.

Mr. Rogozinski said he made multiple attempts to appeal Reddit’s decision, arguing that the company didn’t have any language in its policies prohibiting his actions. Even if it did, it was a stretch for Reddit to claim that he had been monetizing a community by posting links to his book, he said in the interview.

Fidelity, for instance, has used its Reddit community to “generate awareness" of their products and services, but that didn’t appear to be an issue for the site, Mr. Rogozinski’s lawsuit said.

The lawsuit said that what Reddit actually prohibits in its policies is users carrying out moderation duties “in return for any form of compensation or favor from third parties." Mr. Rogozinski had never accepted payment for moderating the WallStreetBets forum, according to the lawsuit.

Reddit rejected the appeals. Mr. Rogozinski remains banned from moderating WallStreetBets. The two sides are also at odds over who has the right to control the WallStreetBets brand.

Mr. Rogozinski filed an application to trademark “WALLSTREETBETS" in March 2020, weeks before he was ousted by Reddit. In August of that year, Reddit filed a notice of opposition to the trademark registration, arguing that it would suffer “irreparable damage" if the trademark were granted to Mr. Rogozinski.

The WallStreetBets brand is “a valuable asset of Reddit, and Reddit has amassed tremendous goodwill and rights through Reddit’s widespread and continuous use" of the brand in the U.S., lawyers for Reddit wrote in their filing to the U.S. Patent and Trademark Office opposing Mr. Rogozinski’s effort to register WallStreetBets as his trademark.

Mr. Rogozinski said he disagrees. He is “so entwined with the brand that he sold the rights to his life story to a major production company," Mr. Rogozinski’s lawsuit says. A documentary film featuring Mr. Rogozinski will debut next month at the South by Southwest festival in Austin, Texas.

As of Friday, WallStreetBets counted 13.6 million subscribers, or “degenerates," as users on the forum refer to themselves, according to Reddit. While it remains one of the site’s 50 biggest forums, its influence has waned in recent years.

Markets slumped in 2022 after the Federal Reserve aggressively raised interest rates to rein in inflation. That put a chill on activity among individual investors. The average number of daily trades at major brokerages fell to their lowest level since 2020. Individual investors backed away from bets on highly volatile stocks that had once been favorites among WallStreetBets’ frequent fliers, and the number of daily comments left on the forum fell well below its 2021 peak.

Despite that, Mr. Rogozinski sees the idea behind WallStreetBets as worth fighting for. Mr. Rogozinski said he has tried to continue pursuing projects that he believes will make markets more accessible to individual investors but that it has been an uphill battle, given that WallStreetBets’ current moderators are antagonistic toward him.

“My vision for WSB is not a massive pump group, but a massively empowered group which collectively strengthens the foundation of Wall Street," he said.

In response, Reddit said its goal is to protect the ability of communities such as WallStreetBets to self-govern and decide their own vision as a collective. Individual moderators shouldn’t be allowed to enrich themselves for personal benefit over the interests of the community, the spokeswoman said.

WallStreetBets also maintains that it is better off without Mr. Rogozinski.

“WallStreetBets has become incredibly vibrant and more intelligent since Jartek left," the community’s moderators said in a statement to the Journal, using Mr. Rogozinski’s Reddit username.

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