House Passes Bill on Lawmakers Using Insider Information for Stock Trading

The US House of Representatives has passed a bill that would ostensibly prohibit members of Congress, their spouses and dependent children from purchasing publicly traded stocks.

In a 232-198 vote in the House on Wednesday, lawmakers approved the Stop Insider Trading Act, sending the bill to the Senate for consideration. Representative Bryan Steil, the Wisconsin lawmaker who sponsored the bill, said that the legislation “ensures no lawmaker can profit off of insider information” and “institutes strict penalties for any violation.” 

“We have not had a bill on the House floor on this topic with this opportunity before,” said Steil from the House floor on Wednesday, describing the penalties:

“A fine equal to $2,000 or 10% of the transaction, as well as a disgorgement of profits. Violators would be forfeiting any gain realized if they failed to comply with this legislation.” 

Some Democrats are saying that the bill does not go far enough to address potential conflicts of interest, because it allows lawmakers to keep and sell stocks they already own. According to Steil, the bill would require members of Congress to provide seven days’ notice before selling stocks if they already hold assets, creating a deterrent for insider trading.

Related: Only KYC can stop insider trading on prediction markets, Messari says

“[The] bill has major loopholes,” said Senator Elizabeth Warren on Thursday. “Lawmakers can continue owning and selling stocks — so it won’t solve the problem. Not gonna fly in the Senate. Members of Congress should not own, buy, or sell stocks.”

The Stop Insider Trading Act was received in the US Senate for consideration on Thursday after passage in the House.

Unlike the proposed text for the Digital Asset Market Clarity Act, a cryptocurrency market structure bill under consideration in the Senate, Steil’s bill was limited to restricting investments for members of Congress and not the president or vice president and their families. Under CLARITY’s proposed text, all US public officials could be barred from issuing or sponsoring tokens until 2029.

Prediction markets bill also under consideration

House approval of the Stop Insider Trading Act followed Steil’s sponsorship of a similar bill targeting members of Congress trading on prediction market platforms like Kalshi and Polymarket. The Wisconsin lawmaker introduced the Stop Lawmakers from Predicting Act in June to prevent certain public officials, their spouses and children from “wagering on public policy issues and political outcomes.”

Prediction markets drew attention from the public after an incident involving a soldier who allegedly made more than $400,000 betting on Venezuela President Nicolás Maduro, who was removed by US forces in January. Donald Trump’s teleprompter operator also reportedly made more than $100,000 betting on Kalshi event contracts tied to words and phrases in the president’s speeches.

Like the stock trading bill, the prediction markets legislation proposed that violators pay a $2,000 fee or 10% of the value of the prohibited bets on the platforms.

Magazine: Why Wall Street values some crypto firms for AI power, not just crypto