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[00:00:09]From Predictions to Elite Trading: How Trump Revitalized Crony Capitalism in America - A Special Report by Saleh Ibrahim.

[00:00:21]Since Trump's return to the White House, with his controversial statements and provocative personality, fears have escalated within regulatory, media, and legislative institutions regarding suspicions of conflicts of interest and insider trading. These fears were amplified by trading activity undertaken by a large number of administration officials in the stock market, coinciding with significant economic decisions. The most prominent of these trades was linked to the tariff war launched on Liberation Day. At that time, more than 12 American officials sold off shares they had owned before the tariffs were announced and the markets crashed, while some repurchased them before the tariffs were suspended, according to the Probably platform.

[00:01:09]The trades included prominent names in the administration, most notably Barbondi, who served as US Attorney General at the time, and current Secretary of Transportation Sean Duffy. With the outbreak of the Iran-Iraq War, the pace of these opaque trading activities increased, thanks to the widespread popularity of prediction platforms, most notably Calci and Polymarket. Two companies backed by President Donald Trump's son, Donald Trump Jr., made profits of approximately $1.2 million through anonymous bets on the timing of the start of the Iranian war. These bets were preceded by similar actions on the same platforms regarding the arrest of former Venezuelan President Nicolás Maduro. The matter didn't end there. Oil markets experienced sharp fluctuations since the start of the Iranian war, according to Bloomberg, due to suspicious transactions that took place minutes before a post by the US president containing major political signals about the course of the war. Furthermore, a financial intermediary working for Secretary of Defense Pete Hesseth attempted to make a large investment in a fund of shares of major arms manufacturers in the weeks leading up to the US-Israeli attack on Iran, according to the Financial Times. However, the Pentagon immediately denied that Hesseth had made any purchases. This was n't limited to federal officials alone; it extended to members of Congress. Slag, a platform that tracks political finance, indicates that at least 50 members of Congress or their family members own shares in contracting companies. With ethics experts increasingly concerned about the growing suspicion of conflicts of interest, Congress is currently intensifying its efforts to pass new and stricter laws that address the shortcomings of current legislation and place real restrictions on officials' dealings, thus preventing the expansion of illicit gains.

[00:03:16]Joining us from Virginia is Karen Woody, a law professor at the University of Washington Law School.

[00:03:22]Welcome, Karen. So, we listened together to this report. When the US president or one of his close associates speaks about tariffs, war, negotiations, or even cryptocurrencies, the markets move immediately. Where does legitimate political influence end, and where does legal accountability begin? That's an excellent question, Maya, and one that Congress and many others are trying to address. The short answer is that there are significant gaps and loopholes in the law on this specific issue.

[00:04:05]If the Trump administration or members of the Trump family are not necessarily officers or executives at the stock companies they trade, they are simply able to make statements that move the markets. Traditional insider trading views insiders as being within the company whose shares are traded. This is somewhat different because it involves knowledge of market movements, regardless of the specific stock being traded. It's a broader theory of insider trading, but it addresses the same issues: the presence of individuals in the market who can either influence the market with their statements or are aware of market movements. Therefore, they can profit from these shifts without other market participants being aware of this information.

[00:05:05]The trick here is that there are no laws covering this type of trading yet, and this is what many have reacted to in previous years. We're not saying this behavior hasn't happened, but the ability to track and predict markets is now evident. Everything we've seen seems to indicate an increase in deals for those who may have access to confidential market information. For example, I remember Martha Stewart spending eight months in jail because she suspected insider trading. But we won't compare this to that.

[00:05:54]We'll compare the current US president to a former president, Harriet Romanov, when he left the White House. The White House in 1953 didn't own a car and refused to work in the private sector so people wouldn't say the former US president was working for them. By comparison, President Donald Trump came to the White House as a businessman.

[00:06:18]How can we compare them? Does he approach the presidency as a businessman, not a politician? Perhaps things aren't clear to him.

[00:06:35]Yes, I think this is a logical and fair assessment.

[00:06:41]His mindset is focused on deals, business, and making money. He wasn't trained or experienced in politics before assuming the presidency, and perhaps he didn't come to be described that way in an environment with political ethics and traditions. He probably sees it as a business opportunity, in addition to being a statesman.

[00:07:13]So, a fair assessment is that it depends on his background and the experience he brings to the position.

[00:07:23]Legally speaking, are current US laws sufficient to deal with a president who uses social media and direct statements to manipulate markets, whether intentionally or unintentionally?

[00:07:45]The answer is no, we don't see it that way. Clearly, isn't that so?

[00:07:49]Even the Congressional Stock Exchange Act, which prohibited members of Congress from trading in certain classified information and was passed almost a decade ago, does n't apply to the vice president or the president. So, there was indeed a significant gap.

[00:08:10]What's new here, perhaps due to the different backgrounds we've seen with this president, is that there was a general rule or tradition of not engaging in business activities openly while in the White House. After seeing this again, it seems there's a culture of maximizing potential value while in office, and there appears to be a real demand or protest from the public and members of Congress to close this loophole and ensure that the presidency doesn't become a position for significant personal gain.

[00:09:02]Therefore, the few existing rules are very old and were not contemporary enough for this environment, and certainly not commensurate with the space we see in the prediction markets today. These markets may not necessarily mean anything specific, but rather a potential event from which profits can be made through the development of certain political events. So, this is a completely new field, and a lot of misconduct can occur in it. It's good that you pointed this out. The issue is that American institutions haven't evolved since the Nixon era, and even today, the current US president is making many changes. However, the environment has also changed. There's openness and exposure to social media; everything is exposed and clear. It's no longer difficult to say, "I'm on Insider today," or "So-and-so has information." Everything is out in the open. If there's a need to change the laws, whether to monitor and track what happens on social media and through new artificial intelligence, or simply to develop it, what's required? What kind of laws are needed to at least make it happen?

[00:10:24]Even if it does happen, it should be within the law. This is an excellent question, and the assumption is that members of Congress are already dealing with it extensively. Perhaps the cleanest, or perhaps somewhat extreme, way is to prevent any trading in the markets while holding any government position that grants access to confidential information about specific events capable of moving the market.

[00:11:03]This authority should be withdrawn from members and given, for example, to a third party or entity, so that the person themselves doesn't control the deals. Perhaps this is the cleanest way, perhaps a bit harsh, perhaps an exaggerated reaction, but without a doubt, it will put an end to such practices.

[00:11:27]Ultimately, when we start talking about allowing it on some occasions and not allowing it on others, that's another way of dealing with the issue. But it also opens the door to dealing with insiders and companies that set up trading plans in advance, as well as allowing insiders who have inside information, such as the CEO of the company, to have specific, predetermined trading windows. This prevents them from being accused, for example, if they have time windows in which they can trade regardless of the information they hold.

[00:12:12]This somewhat mitigates the idea that they are exploiting a specific time period to trade with inside information that is not available to others. So, this is one of the solutions that will be difficult to implement, but it may be a good example of trying to deal with this issue going forward. It will be interesting to follow and see where the laws can go and where they can end up.

[00:12:39]Thank you very much, Karen Woody, Professor of Law at the University of Washington Law School in Andly. You were with us in Virginia. Welcome, and thank you very much, Tak.