Trump’s Truth Social posts move markets. Is selling early access to them legal?
Wall Street firms will soon have the ability to see the president’s social media posts before most. Some of those announcements move major markets.
Truth Social now plans to sell those firms early access to those market-moving posts, according to Trump Media and Technology Group.
That first-look access raises several questions about the legality and ethics of this decision.
Selling posts
The group behind Truth Social announced a new data feed, which is known as an application programming interface (API).
Trump Media hopes it will create a new source of income for the firm, which has steadily lost money.
The offering will soon be available to those Wall Street firms, starting Aug. 1.
Wall Street firms have always monitored these posts because the president often announces policy shifts that move markets.
With this new program, the API will send the most influential posts directly to those paying clients.
Oftentimes, those clients can set up algorithms to make buys and sells depending on what those posts say. High-frequency trading done on these markets can earn or lose millions based on the speed of a firm’s internet connection.
Trump Media says that part of the reason for this is that these firms have already been illegally copying Truth Social data, something that will soon be blocked.
Legality
Is this legal? The answer to that is complicated.
Experts Straight Arrow spoke with agreed that this will undoubtedly face legal challenges, but those challenges are going to struggle for numerous reasons.
“I think there’s going to be tremendous legal challenges,” James Cox, professor of corporate and securities law at Duke University School of Law, told Straight Arrow.
Most people might think this sounds like a classic case of insider trading.
That is one of the arguments likely to be made.
“Selling access to United States government information to people trading in securities markets, I think, is an invitation to a criminal insider trading investigation and civil suits under the contemporary traders’ provision,” Richard Painter, law professor and former chief White House ethics lawyer under former President George W. Bush, told Straight Arrow.
Where the gray area really comes in here is what exactly is being sold?
Not every Trump post on Truth Social is government policy or moves markets.
However, that’s where the gray area kicks in. Many of the president’s posts are just his opinion, even if they move certain stock prices.
“He wants to say Dell Computer is good or this company sucks, so long as he’s not disclosing any U.S. government business, I guess he could say that to some people before he [posts it],” Painter said.
The Securities and Exchange Commission (SEC) oversees the sale of information in the U.S. and could investigate this setup.
“Who’s giving authority to release this information that is material and non-public?” Cox said. “Who’s receiving that authority to sell it? And then who sets the price and where does that money go?”
When it comes to legal challenges, the president is unlikely to face much legal blowback from this, especially with agencies like the SEC under his control.
Where some real pushback could come is from Congress.
“If there’s going to be a blowback, it will be the fear of God that struck into the Congress, Democrats and Republicans, about how this appears, particularly with the midterm elections coming up,” Cox said.
However, Republicans in Congress have been extremely hesitant to push back on the president.
“They won’t do diddly squat because the members of Congress protect the president of their own political party,” Painter said.
Ethics
While the legality may be questionable, the ethics are not.
“It’s terrible,” Painter said.
Some of the media coverage has painted this as blatant market manipulation. That’s because those who pay to play will get first crack at making money off whatever the president has to say online.
“When news is released to the markets, the first people trade are the ones that get the profit,” Painter said.
While Painter worked under Bush, he also ran for office as a Democrat.
Painter told Straight Arrow that the current Trump administration, the first Trump administration and the Biden administration have all crossed several lines ethically.
“The first Trump administration was ethically, I think, a disaster,” he said. “The Biden administration was a marginal improvement, but very problematic. The second Trump administration is even worse than the first Trump administration.”
Painter praised the Obama administration as “pretty good on ethics,” but this latest move from the Trump administration is another example of the president blurring the lines between his presidency and his businesses.
That includes members of the Trump family who’ve faced their own ethics questions.
On Aug. 9, 1974, former President Richard Nixon resigned the presidency over an ethical issue.
America has come a long way from that moment.
“What Nixon did was bad, but it was nothing like this,” Painter said.
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Ella Rae Greene, Editor In Chief
