Congress considers ban on member stock trades, going beyond transparency
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Caitlin Babcock Staff writer
| Washington
On April 8, during a dip in the stock market after President Donald Trump had announced sweeping tariffs the previous week, Republican Rep. Marjorie Taylor Greene bought thousands of dollars鈥� worth of stocks. Many of those stocks soared in value after the president paused most tariffs the following day.
Rep. Greene was one of the earliest members to file a mandatory disclosure report about her trades. After the time requirement for disclosure lapsed, Newsweek that at least 25 members from both parties made trades between Trump鈥檚 tariff announcement and the subsequent pause.
The public disclosure of the transaction highlighted an issue that鈥檚 long been a source of public cynicism about Congress: whether members use confidential information about significant political events, or perhaps pending legislation or agency regulation, to make money in the stock market. Unlike the general public, lawmakers often have access to privileged information and decision-making that can impact the profitability of industries and specific companies, which can significantly raise or lower their their stock prices.
Why We Wrote This
Members of Congress have access to information they could use to make money in the stock market. There鈥檚 a new push to ban members from buying and selling stocks, with the goal of countering possible insider trading.
To date, no direct evidence has emerged that Ms. Greene or other members of Congress benefited from insider trading in this case. But the attention on stock trading comes as Mr. Trump faces scrutiny over whether he and his family are making money off the presidency. Watchdog groups point to loosening oversight on possible conflicts of interest, even as many private-sector financial institutions, for example, have limited the trading of individual stocks by employees.
In Congress, the highest-profile effort to curtail insider trading is a measure that would ban House members and senators from owning individual stocks altogether. Republican Rep. Anna Paulina Luna of Florida filed a discharge petition last week that would force the House to vote on the ban if she can get enough signatures. A few high-profile members are among the 16 who have signed on so far, well short of the 218 it would need to bring the measure to a vote.
Proponents say the ban would restore accountability and bolster public trust in Congress.聽House Speaker Mike Johnson told Punchbowl News it would be a disincentive for people to run for Congress.
What laws exist regarding members of Congress trading stocks?
In 1978, Congress passed the Ethics in Government Act, designed to promote government transparency and prevent conflicts of interest in the wake of the Watergate scandal. The act required senior officials in the three branches of government 鈥� including all members of Congress 鈥� to make annual disclosures of their sources of income, liabilities, gifts, and stock sales and purchases.
In 2012, President Barack Obama signed the Stop Trading on Congressional Knowledge Act, or STOCK Act. The measure, which passed overwhelmingly in Congress, reinforced the Ethics in Government Act by placing additional restrictions on congressional members鈥� financial transactions.
Under the STOCK Act, which made it clear that government officials are subject to the same federal insider trading laws as regular citizens, members must disclose any stock sales or purchases over $1,000 within 30 to 45 days, not just once a year. The act imposed new penalties for failing to disclose transactions on time 鈥� generally a $200 fee for a first-time offense.
However, many members of Congress, as well as of voters, according to a 2024 YouGov poll, don鈥檛 think these laws go far enough.
What issues have been raised recently regarding stock trading among congressional lawmakers?
Since the STOCK Act鈥檚 passage, no members of Congress have been prosecuted for violating it. But there鈥檚 been plenty of public scrutiny over trades from members of both parties that seem auspiciously timed.
For example, the buying and selling of stocks by members of Congress soared to more than 700, according to the Wall Street Journal, in the seven days between President Trump鈥檚 tariff announcement on April 2 and his subsequent pause on most of them. Recently, NBC News that Republican Rep. Rob Bresnahan of Pennsylvania had offloaded hundreds of thousands of dollars鈥� worth of stock in companies that manage Medicaid enrollees, a week before voting for a bill that slashed Medicaid funding.
Insider trading is notoriously difficult to enforce, says Donald Langevoort, a law professor at Georgetown University. One reason is that it鈥檚 tricky to prove.
To do so, under current insider-trading law, there must be evidence that the member of Congress knew something the public didn鈥檛, and that knowledge was important enough to alter their financial decisions.
But there are plenty of loopholes.
鈥淢ost of what Congress learns is speculative,鈥� says Mr. Langevoort. And if a public news report or a social media post speculates about the same information, it鈥檚 no longer 鈥渘on-public.鈥�
Jeffrey Miron, a senior lecturer at Harvard University and vice president for research at the libertarian-leaning Cato Institute, says even a law banning members and their immediate families from owning individual stocks would leave wide loopholes. For example, he posits, members could still trade stocks in a friend鈥檚 or relative鈥檚 portfolio.
鈥淎nyone who wants to circumvent these rules will find legal and probably illegal ways to do so,鈥� he says.
Mr. Miron says it鈥檚 better to have disclosure rules so voters know what鈥檚 happening rather than to try to stop insider trading altogether.
鈥淚 think it鈥檚 all just for show, to pretend that people are not influenced by the desire to earn money on information they may receive,鈥� he says of a proposed ban. 鈥淏ut, of course, they are 鈥� and voters have to recognize that it might be happening.鈥�
What is the path forward in Congress?
Already, in the 119th Congress, more than 25 bills or resolutions have been introduced that would impose further restrictions on members鈥� financial transactions.
Rep. Luna鈥檚 discharge petition would force a vote on the Restore Trust in Congress Act. This bipartisan bill, which has more than 100 co-sponsors, would ban members of Congress, their spouses, and their dependent children from owning or trading individual stocks.
House Speaker Mike Johnson has signaled openness to stricter measures to prevent insider trading 鈥� though he has walked back his earlier support for a full ban on members owning stocks.
President Trump said in a this year that he would sign a ban on congressional stock trading if it came to his desk. He referred to former House Speaker Nancy Pelosi, whose activity in the stock market has also come under scrutiny.
鈥淲ell, I watched Nancy Pelosi get rich through insider information, and I would be okay with it,鈥� he said. 鈥淚f they send that to me, I would do it.鈥�
How would this ban compare with rules already in place for the executive and judicial branches?聽All three branches are subject to laws that prohibit certain types of insider trading, as well as the 1978 Ethics in Government Act.
Other disclosure laws apply to specific branches. Judges, for example, must recuse themselves from participating in legal cases that could be tied to their personal stock holdings. Under a 2022 law, they must also promptly disclose any new stock purchases and sales in a publicly accessible database.
Executive branch officials must recuse themselves from any duties in which their stock ownership might create a conflict of interest. Under current law, most can still own and trade stocks, though legislation has been floated in recent years to ban this exception as well.
