Despite insider trading allegations, Hegseth exit odds fall

A new report published on Monday alleges that Defense Secretary Pete Hegseth and his broker are involved in a major insider trading scandal, but traders believe it won’t affect his chances of losing his cabinet position.

In fact, the odds of Hegseth leaving the Trump administration have actually dropped from nearly 48% on the day the story broke to 42%.

On Monday, the Financial Times reported that a broker linked to Hegseth at Morgan Stanley “attempted to make a big investment in major defense companies in the weeks leading up to the U.S.-Israeli attack on Iran, according to three people familiar with the matter.”

The report adds that the broker, who was not publicly identified, contacted the asset manager BlackRock about a multimillion-dollar investment in its Defense Industrial Active exchange-traded fund (ETF) “shortly before the U.S. launched military action against Tehran.”

So far, BlackRock, Morgan Stanley, and the Pentagon have declined to comment on the allegations.

The allegations come as scrutiny around insider trading in Washington remains high, particularly among members of Congress.

Members with access to private information are still able to trade and profit from stocks. Common Cause reported back in December that 202 Representatives and 56 Senators on both sides of the political aisle own stocks, and made 13,324 trades worth more than $635 million.

Senators and Representatives have talked about reining in the rules to prevent congressional leaders from owning and trading stocks using inside information, but traders are not confident it will do much good.

Traders priced the chance of the House voting to ban members of Congress from trading stocks at 13% before July and 30% before next year.

Legislation such as the Stop Insider Trading Act is Congress’ latest attempt to stop insider trading in the House and Senate. Rep. Bryan Steil (R-Wisconsin) sponsored the bill in January along with 92 other representatives.

Steil said in a statement that the bill “is critical to restoring the public’s trust in their elected officials” by banning House and Senate members, their spouses, and their dependent children from purchasing stock in publicly traded companies.

Some groups such as the Campaign Legal Center don’t think the bill will do much good to regulate insider trading on Capitol Hill. The non-profit group says the bill fails to address the problem and should “focus instead on real solutions that prohibit not only the buying and selling of individual stocks, but also the ownership of such assets.”

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