Politicians have long been suspected of trading on the information they hold. In Britain, political insider trading goes back at least to the South Sea Bubble of 1720, when the Chancellor of the Exchequer, John Aislabie, used his knowledge of the timing of government debt transactions to profit from the market; he ended up in the Tower of London. In the US, the history of insider dealing by politicians goes back to the 1860s, when politicians got rich using shares in the Union Pacific Railroad Company. In the wrong hands, facts are as good as coins.
The greatest temptation arises at times of greatest volatility, when a political event can have the greatest market-moving power. In 2008, during the financial crisis, in 2016, after the EU referendum, and in 2020, with the advent of the coronavirus, people with non-public knowledge of politics made significant trades in the financial markets. The same concerns have been raised, on a much larger scale, about the war in Iran.
Yesterday, Financial Times reported that a broker working for Pete Hegseth, the US secretary of war, allegedly approached a major asset manager to invest millions of dollars in a fund holding shares in defense companies before America and Israel began their war against Iran. The investment did not go ahead and the Pentagon has called the story “completely false and fabricated”. However, the story is broken in the context of other notable trades that have taken place in recent weeks.
On Monday, March 23, shortly before 7 a.m. in New York, there was a very large increase in trading volumes in futures contracts — bets, in effect, on the price of oil and the value of the S&P 500 index. At 7:04 a.m., Donald Trump posed on his Truth Social account that he had held “productive talks” with Iran, which caused these securities to suddenly change in price. The White House has denied that any official may have been connected to such activity, but the timing was certainly telling.
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The temptation for those in the know to place bets ahead of everyone else has been exacerbated by the rise of universal gambling tools – euphemistically known as “prediction markets” – such as Polymarket and Kalshi. These platforms allow betting on almost anything, including outcomes that politicians can personally control, such as whether they will use a particular word in a speech. On Polymarket alone, more than half a billion dollars in war-related bets were traded as the war in Iran began in February. The biggest winners were new accounts, or wallets, that were created in the same month.
The widespread suspicion of such trades is exacerbated by the fact that we recently saw a clear example of insider information being passed on by a politician to someone who could use it for profit. The third act of Peter Mandelson’s political career ended with the emails he sent in 2009 and 2010, in which he wrote very little but conveyed knowledge that could easily be traded by his friend, financier and pedophile Jeffrey Epstein.
Politicians themselves are not particularly shy about deliberately moving markets either. Donald Trump, hours before making a sweeping U-turn on tariffs last year, tweeted: “This is a great time to buy!!!”. Shares in his company, Trump Media and Technology Group, rose 8 percent after the post. Last month, Trump’s commerce secretary, Howard Lutnick, told Fox News that investors should “buy Tesla” because it was “unbelievable that this guy’s stock is so cheap … who wouldn’t invest in Elon Musk?”
Musk himself has a long history of tweets that have moved financial markets. On March 20, a US federal jury in San Francisco found that Musk had made misleading statements that caused Twitter’s stock price to fall in 2022, before he took over the company. But it is Musk’s power over financial markets that has allowed him to rise to political prominence as the owner of a major social media platform and a supporter of Trump’s re-election in 2024; the lesson learned, especially by those on the right, is that aggressive market participation is a path to power.
The problem of market seduction could be dealt with transparently if politicians were really keen to drain the swamp of corruption. Previous laws such as the Stocks Act 2012 in the US (which stands for “Stop Trading on Congressional Knowledge”) and requirements for parliamentarians in the UK to disclose their financial interests were written to address the problem. But technology has gone in the opposite direction: social media makes it possible for powerful people to move markets instantly, while cryptocurrency markets and predictions allow irresponsible betting. If those in power trade their decisions, this leads to a disturbing conclusion: the more volatility is introduced, the more room there is for enrichment. The financial market dictatorship has little interest in peace.
(Further reading: Trump’s Roadless War)
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