Why Trump's Truth Social Early Access Scheme Is Not Insider Trading
Corrupt but not criminal
The Trump Media and Technology Group recently rolled out a program to sell early access to Trump’s Truth Social posts for up to $100,000 a month. Paid subscribers to the program, called Truth API, receive access to Trump’s posts milliseconds before the rest of the public. That slight advantage allows computerized algorithmic trading programs to buy and sell securities based on the news before the rest of the country even learns about it.
This sale of internal government information for use in trading securities sure looks and smells like insider trading. But although it’s clearly corrupt and unethical, the scheme doesn’t fall neatly within current insider trading law. Responding to it is likely going to take legislation, not prosecutions.
The law never anticipated any public official would dream of launching such a brazenly corrupt scheme. But that was before president Trump, who sees the presidency as a way to line his own pockets and routinely dares the law to stop him.
The Truth API Scheme
Truth API stands for Truth Application Programming Interface. Subscribers to the service pay from $60,000 to $100,000 per month. In exchange they receive early access to Truth Social posts from the platform’s top accounts, not just President Trump’s — although Trump’s posts are no doubt what subscribers are most interested in.
Trump owns about half the stock of the Trump Media and Technology Group, the company selling the subscriptions. TMTG’s stock has dropped more than 80% since it went public in 2024 and it is losing hundreds of millions of dollars each quarter. It sees Truth API as a significant new source of revenue, according to its official announcement. The company also isn’t shy about the purpose of the program, noting in its statement that, “Markets already move on Truth Social posts” and that subscribers will be able to capitalize on those movements through early access to information.
Most of the subscribers so far are high-frequency securities trading firms. There have been repeated examples of Trump’s Truth Social posts on issues such as tariffs or the Iran war causing markets to move in response. Subscribers to Truth API are able to rely on their early access to the posts to trade in anticipation of those market moves before other investors and the general public have seen them.
The time difference between when a Truth API subscriber gets the information and when it is available to the general public is only milliseconds. But that tiny advantage can mean millions in the world of computerized high-frequency trading. And the information comes as a data feed directly into the subscriber’s computer; it does not require a human being to notice and read the post before reacting. That also allows the computerized traders to act more quickly.
As the Trump organization has pointed out, other companies such as Elon Musk’s X and Bloomberg News also offer paid API services where subscribers receive faster access to information. The difference, of course, is that those are private companies selling faster access to information generated by private parties. They do not involve a government official profiting from his public office by selling early access to inside government information.
The Law of Insider Trading
Insider trading is defined as using material, nonpublic information for the purchase or sale of securities, in violation of a duty of trust and confidence owed to the source of that information. It is a species of securities fraud, which prohibits the use of any “manipulative or deceptive device” in violation of the rules of the Securities Exchange Commission. SEC Rule 10b-5, in turn, prohibits any “device, scheme, or artifice to defraud” in connection with the purchase or sale of a security.
Insider trading has long been held to be securities fraud in violation of Rule 10b-5. The classic example is a CEO who buys his own company’s stock because he knows they are about to launch a big new product, in violation of his duty to shareholders not to use confidential company information for his own benefit. Another example is an attorney in a law firm working on a big merger deal who buys stock in the companies involved before the merger becomes public, in violation of her duty to her client not to use confidential information acquired in the attorney-client relationship for her personal gain.
I’ve written a few posts about the law of insider trading in the past. If you’re interested in a deeper dive, you can find examples here and here.
When it comes to subscribers to Truth API, potential insider trading would be analyzed under what’s known as “tipper-tippee” liability. A person who is not an insider themselves but receives a tip from an insider and trades on that tip can be prosecuted for insider trading as a tippee. For the tippee to be liable, the tipper must be violating a duty of trust and confidence by disclosing the information and the tippee must know of that violation.
Whether the tipper is violating their duty turns on whether they are receiving some personal benefit by making the tip, rather than acting for some legitimate corporate purpose. That benefit can be something tangible, such as money received in exchange for the tip, or intangible, such as the personal satisfaction gained by helping out a relative who will trade on and profit from the tip.
Both the tipper — in this case, Trump and those working with him — and the tippee — the Truth API subscribers — are potentially liable. The Supreme Court discussed tipper-tippee liability most recently in Salman v. United States. You can find more analysis here:
One final key point: merely trading based on confidential, non-public information is not insider trading. There must be an accompanying breach of a special duty of trust and confidence that resulted in the disclosure of that information. In the absence of a breach of a duty to the source of the information, there is no violation.
For example, suppose I’m on the Amtrak train to New York and hear a CEO loudly talking on his cell phone about an upcoming merger. If I buy stock based on what I overheard, that’s not insider trading. It may have been material, non-public information, but I have no relationship to, and owe no duty to, anyone involved that would require me not to act on the information for my own benefit. I’m just an outsider who got lucky and overheard something. (Next time take the quiet car, buddy.)
Is Truth API Insider Trading?
In light of these legal standards, does the Truth API program constitute insider trading? Democrats certainly think so. Senate Minority leader Chuck Schumer has claimed that Truth API “is the definition of insider trading.” Representative Jamie Raskin, ranking Member of the House Judiciary Committee, has launched an investigation of the scheme, saying: “This White House-Wall Street-Trump-Business feedback loop represents the depraved essence of insider trading,”
The scheme definitely feels and smells like insider trading. It raises many of the same concerns underlying the ban on insider trading about the fairness of markets and the ability of a few to exploit information not available to others. But I think any attempted criminal prosecution or civil suit claiming that the Truth API scheme is insider trading would likely fail.
(A prosecution of Trump himself, of course, would likely be barred by the Supreme Court’s awful decision on presidential immunity. But that would not protect his company, others in the company who carried out the scheme, or the purchasers of the Truth API service who could be considered tippees.)
Some elements of insider trading are met. The information is material and is being used in the purchase and sale of securities. Trump, as the major shareholder of his media company, is receiving a personal benefit by disclosing the information, and the purchasers of the information know of that benefit (as required for tipper-tippee liability). But charging Truth API as insider trading would still face some major hurdles.
1: The Absence of a Relevant Duty
The first problem is the lack of a relevant underlying duty of trust and confidence that is violated by disclosing the information. Remember that merely trading based on confidential information is not enough; there has to be an accompanying violation of a duty owed to the source of the information. Here, the source of most of the information in Trump’s posts about things like tariffs or the Iran war is his own administration. If that same administration decides that using the information for something like Truth API is okay, there’s no trust or promise of confidentiality breached by that use.
For posts that contain only Trump’s personal opinions about current events, the source of the information is simply the deranged workings of Trump’s own mind. Again, there is no duty to the source of the information that he violates when he chooses to disclose his own fever dreams. There is no relationship that gives rise to a duty when the source of the information is Trump himself. (Any relationship with the little voices in his head doesn’t count.)
You might argue that Trump has a fiduciary duty to the public not to profit personally from selling government information — and I’d agree with you. But that duty is not one that will support an insider trading charge. The general public is not the source of any information that was expected to be confidential. Breach of Trump’s ethical and fiduciary duty to the public makes the scheme sleazy and corrupt, but does not make it insider trading.
2: The Information Is Arguably Public
Another issue is whether the information is truly nonpublic for purposes of insider trading. The way Truth API works is that when Trump posts something to Truth Social, subscribers get computerized access to that post slightly faster than the rest of the public. But as soon as Trump hits “post” with his latest rant, that rant has now been released to the public — and that happens before even the Truth API subscribers see the post. Subscribers can see it (or, more accurately, their high-speed computers can see it) slightly earlier than others. But the information itself has been made public through submission of a post to be published on a social media platform. And if it’s public information, it can’t be the basis for insider trading.
To clarify this point, imagine that a few hours before posting something on Truth Social about the Strait of Hormuz that is likely to affect the price of oil, Trump calls a few friends and tells them the post is coming. That allows them to trade in oil futures prior to the post and take advantage of the anticipated market move. In that case, the friends do have advance access to material non-public information about the content of a post that has not yet been made. But that’s not what’s happening with Truth API.
(There actually are suspicions that something like this has been going on, based on unusually large movements in oil futures or prediction markets just before Trump posted something that moved those markets. But again, that kind of advance notice raised a different issue from the faster access to already public information provided by Truth API.)
The Trump organization’s response to allegations of insider trading has been that this is public information. Because subscribers are not getting advance notice of posts but are merely getting the posts faster once they are published (and therefore public), this appears to be a strong defense.
3: The Absence of Deception
Finally, as a species of securities fraud, insider trading requires that there in fact be fraud. Rule 10b-5 prohibits only schemes to defraud, and fraud requires deception. In insider trading, the fraud and deception consist of the secret and unauthorized use of inside information for personal benefit, in violation of the duty of trust and confidence owed to the source of the information.
Here, Trump and his company have been open about what they are doing. They haven’t merely disclosed it, they are trumpeting it. There is no deception or concealment involved. Once again, the scheme is sleazy and corrupt, but in the absence of any deception or concealment it can’t be characterized as fraud.
Other Legal Remedies Are Needed
The Truth API scheme feels like it must be criminal, as do so many of Trump’s actions. It’s mind-boggling because the only reason it exists is to allow certain traders to benefit from early access to information about government policy and plans, and to allow the president and his business to profit from sale of that information. There is no legitimate government purpose for the program; it’s simply to allow Trump to exploit his public office to make money.
But I think this is yet another area where our current laws simply never contemplated someone as brazenly corrupt as Trump. There are gaps in the law because we always assumed that no president would do the kinds of things Trump is doing. There were certain norms that were understood and rarely violated – until Trump arrived and blew up those norms.
This reminds me of the scandal surrounding Trump’s acceptance of the jet from Qatar that he turned into the new Air Force One. Accepting such a massive gift from a foreign government seeking favors from the United States certainly looked and smelled like a bribe. But thanks to decades of the Supreme Court cutting back on the scope of federal corruption law, it was not. The corruption laws don’t cover such a transaction, in part because no one ever contemplated that any president would engage in such a transaction.
Truth API is currently the subject of other challenges. Members of Congress are demanding investigations. In addition, Intercept Media and the Freedom of the Press Foundation have filed a civil lawsuit arguing that Truth API violates the Constitution. They claim the First and Fifth amendments require that the press and all people have equal access to government information at the same time. The lawsuit is useful for calling attention to the corrupt nature of the scheme, but I’m not convinced they will succeed in proving the press is unconstitutionally harmed by receiving public information milliseconds later than the paid Truth API subscribers. It’s also noteworthy that the plaintiffs did not even allege a civil insider trading violation.
New legislation will likely be required to ban this kind of scheme in the future. Senator Mark Warner of Virginia has already introduced proposed legislation, called the “No Profit Act,” in response to the rollout of Truth API. It would make it a crime for social media companies to sell prioritized access to information from government accounts that disclose material information, and for anyone to purchase or sell securities based on information received from such prioritized access. The legislation is also a tacit recognition that Truth API scheme is not prohibited by existing law.
Such legislation, of course, stands little chance of passing during the current administration. But it’s an example of the type of reforms that are going to be needed once a new administration is in office, to prevent anything like the Trump administration from ever happening again.
This scheme to profit off the sale of government information is outrageous, corrupt, and unethical. It’s the latest example of Trump using the office of the presidency to enrich himself and his family, through actions that would have been unthinkable in any prior administration. It deserves to be condemned. But it’s not insider trading.
Thanks for the insights. We'll get him on his other evil deeds.
You're full of shite