The Scandal of Congress Insider Trading

Congress has a long history of being a powerful and influential institution, but recently it has come to light that some members have been engaging in a scandalous practice: insider trading. This type of illegal activity allows those with privileged information to make investments with the assurance of a profitable outcome. Despite the fact that Congress is responsible for making and enforcing the law, many of its members have been found to be involved in this unethical behavior. In this article, we will take a closer look at the scandal of Congress insider trading and explore how it has impacted the public’s trust in our government.

What is insider trading?

Insider trading is the illegal practice of buying or selling stocks, bonds, or other financial instruments with access to information that is not available to the public. In other words, it’s a form of fraud where a person in possession of nonpublic information about a company (such as pending mergers or acquisitions) profits from it by buying or selling shares of that company’s stock. Congress insider trading is illegal under both federal and state securities laws.

The Securities Exchange Act of 1934 made it illegal for individuals in possession of material, non-public information about a company to trade its stock. The act also made it illegal for anyone with such information to provide it to others who then used it to profit. In addition, Congress passed the STOCK Act in 2012, which made it explicit that members of Congress, their families, and their staff are subject to the same insider trading laws as the rest of us. Despite this, Congress insider trading still continues to be a problem.

How does Congress get away with it?

The ability of Congress members to take advantage of their positions is something that the public has become increasingly aware of and outraged by. A major reason why they are able to do so is that they are exempt from insider trading laws that apply to the rest of us. This means that they can legally use nonpublic information obtained through their work in Congress to buy or sell securities, making it difficult to prove any wrongdoing. Furthermore, Congress members are not subject to the same public disclosure requirements as other publicly traded companies, meaning that any transactions they make can remain hidden from the public eye. 

It’s clear that this type of insider trading gives Congress members an unfair advantage over the average citizen and allows them to enrich themselves at the expense of others. The good news is that lawmakers are now working on ways to address this loophole and increase oversight. The STOCK Act, passed in 2012, requires certain members of Congress to disclose their stock transactions and prohibits them from trading on nonpublic information obtained through their work. However, this law only applies to certain officials and does not cover all Congress members, leaving much room for improvement.

Recent Examples of Congressional Insider Trading

The most notorious case of Congress insider trading took place in 2011 when members of Congress were found to be taking advantage of private information to make profitable stock trades. The scandal came to light when an investigation by the Office of Congressional Ethics revealed that several lawmakers had profited from investments based on non-public information they had gained through their positions.

One example was Representative Spencer Bachus, who made a series of stock trades right after he received private briefings about economic stimulus plans during the 2008 financial crisis. He later admitted to making trades that could have resulted in financial benefit from these non-public briefings but denied any wrongdoing.

Other lawmakers, such as Senator Richard Shelby and former Senator Tom Coburn, were also found to have traded stocks in companies that were affected by the laws they had proposed or voted on.

Although it has been illegal for public officials to use non-public information for personal gain since 1934, there have been few consequences for those found guilty of doing so. Congress has only taken action to strengthen penalties for insider trading after the media brought attention to these cases.

Why is This Legal?

However, members of Congress are allowed to participate in insider trading as long as they comply with certain rules and regulations. The logic behind this decision is that members of Congress are not considered “insiders” of any one particular company, so their actions would not be considered insider trading. Furthermore, Congress has exempted itself from other laws that prohibit insider trading.

The reality is that Congress is allowed to use its access to private information in order to make investments. In some cases, this has enabled members of Congress to make large profits while regular citizens are left out of the loop. As long as they comply with the SEC’s rules and regulations, there is nothing illegal about it. It is up to Congress to decide if they want to continue to allow this type of activity or make changes that prevent it.

What Can Be Done About It?

Additionally, Congress should pass legislation prohibiting members of Congress from profiting off of their position. This could be accomplished through stricter penalties and more frequent audits by the Securities and Exchange Commission (SEC) and the Office of Government Ethics (OGE). Moreover, Congress should prohibit members from participating in decisions that directly affect their own finances.

Ultimately, however, a greater sense of public accountability can help ensure that Congress is held accountable for any insider trading activities. By keeping up with news stories on Congress insider trading and actively voicing concerns over this issue, citizens can help send a strong message to their elected officials that this behavior will no longer be tolerated.


Congress insider trading is a serious issue that has been tolerated for far too long. The legal loophole that allows congressional members to participate in this unethical practice needs to be closed immediately. The only way to do this is by introducing stricter rules and regulations that make it illegal for members of Congress to profit from their privileged access to information. As long as Congress continues to be complicit in allowing members to profit from insider trading, the public’s faith in its representatives will continue to decline.

Richard Maxwell

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