Lawmakers Are Playing the Markets They Regulate

Happy Sunday

While most of us scrutinize fees and agonize over each investment choice in our retirement and trading accounts, members of Congress are playing an entirely different game. They're not just investors—they're referees who change the rules mid-match, legislators who shape entire industries by day and trade those same companies' stocks by night.

This isn't conspiracy theory. It's documented reality—a pattern of privileged trading that would trigger SEC investigations if you or I attempted it.

Their secret advantage? They don't just predict the market's future. They create it.

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Lets dig in…

Congressional portfolios consistently outperform the market:

• Democratic lawmakers’ portfolios avg. 31% in 2024, beating the S&P 500

• Republican portfolios grew by 26%, also outpacing market benchmarks

• Most trading Congress members hold big tech stocks—the same companies they regulate

When ordinary Americans struggle to match market returns, how do our elected officials consistently beat Wall Street professionals?

2024 Examples That Raise Questions

Legislative actions and personal portfolios often align:

♦️ Representative Michael McCaul authored the TikTok ban-or-divestment bill while owning substantial META stock. His portfolio reached all-time highs as META benefited from TikTok’s potential restrictions.

🔹 Senator Tina Smith purchased up to $100,000 in Tactile Systems, a medical device company discussed directly in the Senate Committee on Health—where she serves as a member.

♦️ Representative Dan Crenshaw purchased $15,000 in Wynn Resorts just days before a major investment in the company became public, resulting in a 56% gain.

🔹 The Pelosi family has demonstrated remarkable timing with options trades, including a 273% gain on NVIDIA calls and investments in Databricks just before a major Amazon partnership announcement.

These aren’t isolated incidents but part of a bipartisan pattern persisting despite public scrutiny.

Rules Written in Pencil, Not Ink

The Stop Trading on Congressional Knowledge Act (STOCK Act) of 2012 requires lawmakers to disclose trades over $1,000 within 45 days. But the consequences for violations are minimal—often just a few hundred dollars in fines.

As Texas Representative Dan Crenshaw bluntly defended congressional trading: “Ya don’t let us trade stocks. Don’t let us make any money either… we haven’t gotten a pay raise since 2008.” He suggested that without trading stocks, members of Congress would have “no way to better yourself.”

While it’s true that salary hasn’t changed since 2009 Dan - it’s still a whopping 174k a year.

3x the avg U.S. salary

This sentiment reveals a fundamental misunderstanding of public service. Elected officials aren’t in Washington to “better themselves” financially but to serve their constituents (and get paid a nice salary to do it).

Reform Stalled at the Starting Gate

The system resists change by design:

• Ten different bills to ban or restrict congressional stock trading have been introduced since 2021

• None has reached the floor for a vote in either Republican or Democratic-controlled House

• Even with President Biden’s support for reform, no concrete action followed

From the “PELOSI Act” to the bipartisan “Restoring Faith in Government Act” co-sponsored by Representatives Alexandria Ocasio-Cortez and Matt Gaetz, every attempt at reform has been quietly blocked before reaching a vote.

Trust: Democracy’s Most Valuable Currency

When lawmakers consistently beat the market while controlling legislation that affects those same markets, public trust erodes. A 2022 Pew Research survey found that just 20% of Americans trust the government to do what’s right “most of the time.”

The stock market is already challenging for ordinary investors. When Congress members consistently outperform benchmarks like the S&P 500, it raises fundamental questions about fairness in both markets and governance.