U.S. Congress Passes Historic Bill: Full Ban on Congressional Stock Trading, Market Sell-Off Pressure Looms?

TradingKey - On Wednesday, bipartisan lawmakers in the U.S. House of Representatives announced an agreement on the "Restoring Confidence in Congress Act", a landmark piece of legislation that would ban members of Congress, along with their spouses and dependent children, from buying or trading individual stocks. This rare instance of cross-party cooperation marks a significant step forward in addressing conflicts of interest in Washington.

The bill, led by Democratic Representative Seth Magaziner and Republican Chip Roy, aims to end long-standing controversy over lawmakers profiting from stock trades based on non-public information. It requires sitting members of Congress to sell all personally held stocks within 180 days of the law’s enactment (90 days for newly elected members) and prohibits holding stocks — even through blind trusts — during their term in office. Violators would face a 10% fine and forfeiture of any profits.

Supporters argue that public service should not be a path to personal wealth accumulation.

However, the implementation of this ban could trigger short-term structural impacts on financial markets. Given that many lawmakers hold concentrated positions in technology, healthcare, and financial sectors, the mandated “prompt” divestment may lead to unplanned, concentrated sell-offs, creating passive downward pressure on certain stocks. This could emerge as a notable source of liquidity shock in the near term.

Despite opposition citing concerns over discouraging business leaders from entering public service, strong public demand for political integrity has become a powerful driving force. The bill’s passage is not only a victory for political ethics, but could also reshape the relationship between power and capital in the financial system.

If lawmakers can no longer directly benefit from market movements, their policy decisions may become more neutral and public-interest-driven — potentially enhancing long-term market fairness. Yet, the short-term volatility and broader implications will require careful navigation by investors and institutions alike.