More than 20 years after it was first introduced, and 14 years since former President Barack Obama signed legislation to curb congressional stock trading, the issue — along with growing concern over prediction markets — has once again reached a crescendo.
Momentum to restrict, or outright ban, congressional stock trading has steadily grown during the 119th Congress, culminating in the House Administration Committee passing a bipartisan bill that would prohibit congressmen, spouses, and dependent children from buying individual stocks.
Chairman Bryan Steil (R-WI) told the Washington Examiner in March that he believes there is a “huge opportunity in front of us to make real, substantive progress on congressional ethics.
“I think this will be the most transformational ethics reform we’ve seen in well over a decade,” Steil said. “We have commitments from leadership that will come to the floor, so I remain optimistic, and we’re gonna see it on the floor. It’ll pass overwhelmingly, and it’ll ultimately be signed into law.”
However, the committee’s bill, which was passed on partisan lines earlier this year, has not been scheduled for a floor vote yet, as House Speaker Mike Johnson (R-LA) tries to balance several competing priorities, including ending a record-long partial government shutdown and a second massive tax and spending bill.
“Obviously, there’s been other serious bills on the floor, but I still think there’ll be a vote on member stock trading in the near future,” one GOP source told the Washington Examiner.
The committee-passed bill appeases some concerns about congressional stock trading, but it would still allow lawmakers to retain their existing stock holdings, a provision that has been forcefully rebuked by Democrats.
According to the Pew Research Center, public trust in Washington is at a mere 17%, marking a near seven-decade low since polling began. In 1958, public trust sat at 73%, marking an over 50% shift. Lawmakers who have pushed for a stock trade ban hope to reinstate some of that trust.
“We have a lot of people who have a lot of wealth who don’t want to give it up, that’s just the honest truth of who’s in Congress and so people don’t want to have that restriction,” Rep. Pramila Jayapal (D-WA) told the Washington Examiner.
2006 — The introduction
The Stop Trading on Congressional Knowledge Act was introduced in January 2006 by former Rep. Louise Slaughter (D-NY) and was then repeatedly reintroduced in 2007, 2009, and 2011, before its eventual passage in 2012.
“Six years,” Slaughter said at the time to NPR. “A lot of hard work.”
Slaughter spent much of her political career advocating this legislation after she found members of Congress had been “abusing their status for private gain.”
The late congresswoman said the bill never gained more than 14 cosponsors in the first five years, arguing that stock trading has given the public the “very worst impression” of those in Congress.
But everything changed after a 60 Minutes report that helped the issue blow up, leading to 171 cosponsors.
“There are 535 of us privileged enough to serve in this Congress, and the fact that any one of us would think to personally profit off the information that’s shared with us upsets me greatly,” Slaughter said in a 2011 hearing before the House Committee on Financial Services.
The fight has continued for some of those original supporters of the legislation.
Former congressman, chief of staff to former President Barack Obama, and Mayor of Chicago Rahm Emanuel was an original cosponsor and has continued his call for Congress to get it done.
“The fish rocks from the head down, so somebody has to be in the Oval Office and make clear to the Congress that this is a priority, not just for Congress, as you notice in all my approaches, all three branches,” Emanuel told the Washington Examiner in an interview.
Obama signs STOCK Act into law in 2012
On April 4, 2012, Obama signed the Stop Trading on Congressional Knowledge Act, the most significant legislation enacted on the issue.
The 2012 bill aimed at halting insider trading for government officials through prohibiting members of Congress, staff, and executive branch officials from using nonpublic information to trade, requires trade disclosures to be made within 45 days as well as an online publication of financial disclosures.
Aside from aiming to ban insider trading, this bill largely pushed transparency for government officials, but part of the transparency aspect was rolled back just a year later, in which Open Secrets then deemed the legislation “toothless.”
The bill originally required officials to post financial disclosures to a searchable public database, but after the rollback, the bill requires only trades to be disclosed publicly.
STOCK Act criticism
Criticism has mounted since the passage of the STOCK Act that the legislation doesn’t go far enough to restrict or prohibit insider trading.
While the legislation increased transparency into lawmakers’ stock portfolios, critics say the transparency shows how serious the issue of inside trading is in Congress, and that punishments for violating the act are not harsh enough.
First-time offenders of insider trading only receive a $200 fine, and even if a member is found to have violated the act, no public record exists to verify that lawmakers pay that fee.
In the days leading up to the COVID-19 pandemic and lockdowns, dozens of lawmakers made investments into industries that were boosted by the shutdowns, while also divesting from sectors that were hit hard, such as restaurants and hotels.
The movement from lawmakers sparked public outcry, and kick-started conversations over whether more reform was needed.
Over a decade since last reform
The partisan bill passed out of the House Administration Committee after several individual bills to ban congressional stock trading entirely were introduced by members in both parties.
That includes one from a group of bipartisan lawmakers that met multiple times to craft a bill that could gain enough support on both sides of the aisle. That group, which included Reps. Alexandria Ocasio-Cortez (D-NY), Chip Roy (R-TX), Seth Magaziner (D-RI), Brian Fitzpatrick (R-PA), Tim Burchett (R-TN), and Jayapal, who worked together over the last year to combine their priorities into one cohesive piece of legislation.
“We’ve made enormous progress, just even from when I first introduced my bill in 2019 to now,” Jayapal said. “Instead of having, like, five different bills, we have one bill, that’s a bipartisan bill, that’s really all we need.”
She continued, “I think we will have enough Republicans to pass it, it would be primarily Democratic votes, but it would, but we would need some Republican votes, because we have some people on our side who don’t want it either, so I do feel very positive that we can get it done.”
Jayapal went on to say Democrats would just need a few dozen Republicans to pass through a simple majority in the House.
“If someone wants to trade stocks, they should go to Wall Street—not Washington,” Rep. Young Kim (R-CA) wrote on X Wednesday. “Members of Congress should be focused on the American People. I’ve supported multiple bills banning congressional stock trading & will keep working night & day to ensure Congress works for YOU.”
Democrats argued that the partisan bill “falls far, far too short,” as it does not address the conflict of interest that can arise from owning or selling existing stocks, as well as leaves out a ban on stock trading for the president, vice president, federal judges, and senior congressional staff.
Jayapal said the House administration’s version worried her at first but has since lost the momentum it had earlier this year.
Part of the debate over congressional stock trading is whether lawmakers should have to divest or enter into a blind trust upon entering Congress.
Rep. Rob Bresnahan (R-PA) told the Washington Examiner that an individual’s stock holdings should not “be a precursor to prevent people from considering a life of public service.”
Bresnahan, who has faced scrutiny over his stock trades since entering Congress but has maintained his stock holdings are handled by financial advisers, also said the process of entering into a blind trust was “extremely frustrating to work through.”
“If you were to go into a blind trust, you could not remove foreign adversaries,” Bresnahan said. “You couldn’t advise them. … last thing I want to do is have my investments inside of, you know, a Chinese-based company. So by going to the blind trust process, you’re not able to establish those guide rails.”
Are prediction markets the next obstacle?
While a ban on stock trade remains mostly at a standstill, a new obstacle has reached Capitol Hill — prediction markets.
Congress has moved in recent weeks to rein in insider trading and certain types of wagers on prediction markets as the fight to ban stock trading continues.
“All Washington needs a good power washer,” Emanuel said. “And I would expand this beyond not just stock trading, because now people are doing predictive markets.”
Emanuel, who is a possible 2028 presidential candidate, has taken a more extreme stance than those on Capitol Hill by calling for a ban on all federal employees and their families from betting on prediction markets.
In a handful of interviews with the Washington Examiner, lawmakers said it would be better to keep the issues separate in hopes of getting both across the finish line.
BONDI’S EPSTEIN HEADACHE WITH CONGRESS MAY NOT BE GOING AWAY DESPITE OUSTER
Prediction markets have begun rapidly evolving from a niche corner of the online betting space to a high-stakes arena where traders can profit from political events, government actions, military conflicts, and even which words President Donald Trump will mention in any given speech. These markets operate with far less federal oversight than traditional, regulated industries such as gambling and the stock market.
“The emerging nature of this whole market certainly begs a lot of questions and obviously, serving the American people is a privilege and not a pathway to profit, and it’s really a preventive measure,” Rep. Adrian Smith (R-NE), a cosponsor of Preventing Real-time Exploitation and Deceptive Insider Congressional Trading Act, told the Washington Examiner.