By: Katie Gomez 

Donald Trump has declared an all-out offensive against naked short selling aligning his resources to ensure the outcome favors his interests. Naked short selling is the illegal practice of shorting shares without first borrowing them. In a dramatic escalation of its battle against short sellers, Trump Media & Technology Group (TMTG) has formally petitioned the Securities and Exchange Commission to investigate “suspicious” trading activity that it claims is driving down its stock price illegally.

Despite a 12% rally following this announcement, TMTG shares have plummeted nearly 45% since Inauguration Day (Kilgore, 2025), prompting CEO Devin Nunes to specifically target UK-based Qube Research & Technologies for allegedly engaging in naked short selling. That said, this is not the first time controversial stocks have waged war against short sellers; the GameStop saga of 2021 similarly cast Wall Street’s bearish bets as villains in a David versus Goliath narrative that captivated retail investors. However, what makes TMTG’s case particularly significant is Trump’s unique position to potentially reshape the regulatory landscape through his upcoming appointment to the SEC. After years of complaints about short-selling practices, the rules of engagement between companies and their critics could be fundamentally transformed.

Understanding the Allegations

TMTG’s formal SEC complaint against naked short selling specifically targets UK-based Qube Research & Technologies, which disclosed in Germany that it had sold approximately 6 million DJT shares short, valued at approximately $105 million (Ehsan, 2025). What raised TMTG’s suspicions was the discrepancy between Qube’s disclosure and market data: according to the company’s SEC filing, “the total number of ‘DJT’ shares shorted has remained at around 11 million since the end of March” (Kilgore, 2025), despite Qube’s substantial position.

This is also not TMTG’s first battle against alleged market manipulation. Last year, Nunes escalated concerns to the Nasdaq Exchange, requesting a formal investigation into potential market manipulation. When his allegations previously implicated Citadel Securities, the firm responded dismissively, poking fun at Nunes’s lack of credibility, claiming he would’ve been the first fired on “The Apprentice” (Trump’s former reality show). The campaign against short sellers has since expanded, with Nunes advocating for congressional committees to scrutinize the activities of multiple financial institutions suspected of improper trading practices.

The Gamestop Connection 

TMTG’s battle against short sellers echoes the seismic market events of January 2021, when GameStop’s historic short squeeze demonstrated the potential power of coordinated retail investors against institutional short positions. Before GameStop, most retail investors paid little attention to short selling; afterward, terms like “short interest” and “days to cover” became part of the mainstream investing lexicon. The GameStop saga has fundamentally transformed how many view market dynamics, casting short sellers as potential antagonists rather than necessary market participants that provide liquidity and facilitate price discovery.

This changing sentiment has fueled the rise of “meme stocks”—companies whose share prices are driven more by social media sentiment and retail investor coordination than by fundamental business metrics. TMTG also exhibits all the characteristics of a meme stock: a passionate retail investor base, a controversial public profile, and significant short interest, which creates the conditions for potential volatility. The regulatory implications of these movements have been substantial, with Congressional hearings, SEC investigations, and renewed debates about market structure following the GameStop event. TMTG’s complaints against short sellers are part of an evolving landscape where retail investors are increasingly questioning traditional market practices and power structures.

The Regulatory Landscape 

The SEC’s current approach to combating naked short selling primarily relies on Regulation SHO, which requires brokers to locate shares before executing short sales and mandates that failures to deliver be promptly closed out. However, critics argue that enforcement has been inconsistent, with violations often resulting in relatively minor penalties compared to potential profits. The appearance of TMTG on Nasdaq’s Regulation SHO Threshold Security List for over two months in 2024 suggests persistent delivery failures despite these regulations. Trump’s impending appointment of a new SEC commissioner could dramatically reshape this regulatory landscape, given his stake in TMTG and his administration’s broader skepticism toward financial regulations that do not align with its priorities.

Historically, SEC leadership changes have significantly impacted enforcement priorities. During Gary Gensler’s tenure, the Commission pursued aggressive enforcement across multiple fronts, whereas previous administrations varied in their approach to short-selling issues. Should Trump’s appointee crack down on short selling, potential regulatory changes might include more aggressive enforcement actions with higher penalties, increased transparency requirements for short positions, and even an uptick rule similar to the one eliminated in 2007. Such changes would represent a significant shift in market structure, substantially impacting trading strategies for hedge funds and institutional investors who rely on short positions as part of their investment approach.

Market Impact and Investor Implications

TMTG’s allegations against short sellers have already demonstrated their market-moving potential, with the stock surging nearly 12% following the filing of the formal SEC complaint. This volatility pattern in response to accusations of short-selling creates opportunities and significant risks for investors. While short-squeeze potential may tempt traders seeking quick gains, Trump Media’s fundamental performance raises serious concerns about its long-term viability. The company remains unprofitable, with recent quarters showing year-over-year declines in revenue.

Truth Social is also underperforming, with a user base that remains a fraction of mainstream social media platforms. Despite expanding into streaming with Truth+ and financial services with Truth.Fi, there is little evidence that these initiatives will reverse the company’s financial trajectory. TMTG’s performance pattern mirrors that of other politically connected stocks, which often trade more on sentiment and loyalty than on fundamentals, experiencing dramatic swings based on political developments rather than business results. This disconnect between price action and fundamentals creates a treacherous environment where trading decisions based on technical factors or short-squeeze potential may deliver short-term profits but evoke substantial risk when market attention inevitably shifts.

The Broader Debate 

The debate surrounding short-selling regulation extends far beyond TMTG’s specific allegations, touching on fundamental questions about market structure and fairness. Proponents of stricter regulations argue that naked short selling allows manipulative actors to artificially depress stock prices, harming companies and retail investors alike. They point to instances where excessive short interest has led to disorderly markets and potential manipulation. Defenders of current regulations argue that short sellers play a crucial role in maintaining market efficiency by identifying overvalued companies and preventing bubbles. This is evidenced by the fact that markets with robust short selling tend to be more efficient and less prone to extreme valuations. 

The battle between Trump Media and short sellers exemplifies how social media has fundamentally altered market dynamics, empowering retail investors while creating new regulatory challenges. As a Trump-appointed SEC likely shifts toward stricter enforcement against naked short selling, investors face unprecedented territory where political connections and potential conflicts of interest cloud regulatory independence. While legitimate concerns about market manipulation warrant investigation, the potential consequences of overly restricting short selling—namely, reduced liquidity, less efficient price discovery, and the migration of bearish activity to less regulated spaces—must be carefully weighed.

Beyond regulatory debates, DJT stock’s fundamental challenges remain significant, with Truth Social’s limited user growth and ongoing financial losses starkly contrasting its politically driven valuation. As this saga unfolds through 2026, it will likely establish precedents that affect all markets, requiring investors to separate legitimate regulatory concerns from political narratives while navigating a company whose fortunes remain inextricably tied to its founder’s political capital, rather than traditional business metrics. Like Gamestop, Trump’s stock is not going down without a fight, and the vultures might be circling, but these stocks are here to stay.