Congressional stock trading law has unintended, but profitable consequence

Public polling shows most Americans don't think much of Congress. But some investors think lawmakers are doing one thing right — picking stocks — and this has prompted a whole new class of products to copy their trades.

Traders and market watchers are using publicly available data to track which lawmakers are reporting big stock market gains. They believe that information provides an edge on the market, and companies are selling access to tools that track those profitable lawmaker trades.

This dynamic demonstrates that the STOCK Act, the law enacted more than a decade ago to tamp down on congressional trading, may be boosting it. Funds marketed by financial services companies model what "political traders" in Congress are doing. Reports by industry analysts in the last few years show that these investment strategies are beating the market. The public disclosures required by the law, for all transactions over $1,000, generated an unintended class of products.

These funds are all legal. But the products underscore that the problem that the law was designed to fix — to eliminate the impression that lawmakers are profiting from information they learn in their official capacities — is still an issue.

The CEO of Unusual Whales, a financial startup that offers investors tools to track market activity, noticed his posts flagging notable stock trades by members of Congress were going viral on social media. "I was just posting what the disclosures were telling me," he told NPR.

He started crunching these numbers about five years ago and said the academic literature largely concluded that Congress had no edge in trading. But his anonymous reports — published under the name Unusual Whales, which is how he refers to himself —