The Double Standard of Insider Trading in Washington

Photo by Vlad Tchompalov

In the United States, insider trading is a crime that can land an average investor in prison. Hedge fund managers, executives, and everyday traders are held to strict regulations to prevent them from profiting off non-public information. However, when it comes to Congress and their families, the same rules do not seem to apply. The recent revelation that Nancy Pelosi’s husband, Paul Pelosi, made $38 million in stock trades ahead of the presidential inauguration has reignited the debate over whether lawmakers should be allowed to trade stocks at all.

If a hedge fund manager were to make similar trades based on privileged information, they would face hefty fines, an SEC investigation, and possibly criminal charges. But Congress operates under a different set of rules. Lawmakers and their spouses are legally required to disclose their trades, but the laws stopping them from profiting off insider knowledge remain weak and largely unenforced.

The Pelosi trades are just the latest in a long line of suspicious financial dealings by members of Congress. Reports have consistently shown that lawmakers, on both sides of the aisle, frequently buy and sell stocks in companies they oversee through committee assignments and legislative decisions. This creates an undeniable conflict of interest that erodes public trust in both the government and the financial markets.

The Erosion of Trust in Government and Markets

“The fact that lawmakers and their families can trade on information the public doesn’t have access to is fundamentally at odds with the idea of a fair market,” says George Kailas, CEO at Prospero.AI. “The Pelosi trades are just the latest example of those in power profiting while everyday investors are left in the dark.”

Kailas’ frustration reflects the growing public cynicism toward the political and financial systems. When lawmakers engage in questionable trading activity, it reinforces the perception that the system is rigged for those at the top.

“The most troubling aspect of this is the erosion of trust in both government and financial markets,” Kailas adds. “People are asking themselves—why play by the rules when those at the top don’t? If we don’t address this, it only fuels greater skepticism, cynicism, and a sense that the system is designed to benefit the elite.”

Will Congress Police Itself?

Public pressure has mounted for years to impose stricter rules on congressional stock trading, yet little has changed. The Stock Act of 2012 was intended to prevent insider trading by government officials, but loopholes and lack of enforcement have made it largely ineffective. Even now, bipartisan efforts to ban lawmakers and their spouses from trading individual stocks have stalled in Congress.

While some lawmakers, including former President Joe Biden, have voiced support for banning congressional stock trading, the fact remains that those who benefit from the current system are the ones in charge of regulating it. This is a clear conflict of interest, and unless significant pressure is applied, Congress is unlikely to hold itself accountable.

The Need for Real Consequences

Kailas and other advocates argue that true reform must go beyond performative outrage. Real accountability starts with clear, enforceable rules that prevent politicians and their families from leveraging their positions for financial gain.

“We need more than just talk,” Kailas insists. “There must be tangible reforms—blind trusts, stricter disclosure laws, and real consequences for violations. Without them, we’ll continue to see an environment where political power and financial self-interest go hand in hand.”

A System Designed to Protect the Powerful

As long as lawmakers are allowed to trade stocks, the American public will have little reason to believe that their leaders are working in their best interests. The idea that Congress will willingly regulate itself is, at best, naive. The only way to restore trust in both government and the financial system is through meaningful legislation that ensures politicians play by the same rules as everyone else.

If the U.S. truly values fairness in the markets, then Congress must be held to the same standard as any other investor. Until then, the revolving door of power and profit will continue, and the American people will be left watching from the sidelines as those at the top reap the rewards.