The Securities Exchange Commission (SEC) defines insider trading as “buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security. Insider trading violations may also include ‘tipping’ such information, securities trading by the person ‘tipped,’ and securities trading by those who misappropriate such information.”
The social media platform Truth Social, which is owned by Trump, just launched Truth Social API which allows businesses and trading companies early access to the President’s posts for a fee of up to $100,000 per month. The early access is extremely brief, just a few milliseconds, but it’s designed for trading firms with automated financial trading systems. These automated systems have the potential for significant profit with just a few milliseconds of lead-time on presidential announcements. It’s the latest move blending Trump’s personal and official affairs, since his social media feed is a mix of artificially-generated memes and official announcements which often move markets.
We don’t know who has signed up yet, and companies aren’t admitting to it, potentially because they fear future investigations by the SEC after Trump leaves office. Indeed, some lawmakers are asking the SEC to investigate the potential abuse of presidential power, and insider trading. The SEC has made no comment about the request to investigate and shows no sign of doing so.
A spokesperson for Truth Social said that because the posts are public, there could be no insider trading even with the limited early access. But trades predicated on even brief access to nonpublic information might meet the definition as defined by the SEC. While it is extremely unlikely that Trump will be convicted of insider trading, it’s still worth noting that the President stands to benefit personally and financially from the sale of official announcements on social media.
It could serve as a way for Trump to use his office to boost his unprofitable business. Truth Social has been hemorrhaging money for years. In the first three months of this year alone, quarterly filings showed a loss of more than $400 million. The new paid version of the platform introduces a new revenue stream, and the company says customers had signed up in advance of the launch on August 1. With this development, Trump has a new financial incentive to make even more market-moving posts on his social media platform, which could amount to numerous conflicts of interest as he continues to make official announcements via Truth Social.
