Is Trump rigging the markets?

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This is a CBC podcast.

Hi, everyone. I'm Jamie Puston.

Depending on when you're listening to this on Monday,

the big financial markets may not be open.

But regardless,

it's likely that investors across the world

are monitoring Donald Trump's social feeds.

That is because many experts say

the Trump administration

is engaging in market manipulations,

surrounding but not limited to the Iran War.

They've accused him of timing military announcements,

for example,

around market open and closed times.

Last Monday,

a spike of highly suspicious

and extremely lucrative oil futures trades

took place minutes before Trump

posted about the war winding down.

There are also enormous prediction market bets

that many say look to be made

by people with insider information.

And there are similar examples

around terror policy and the attack on Venezuela.

Today,

we're going to parse these accusations

of market manipulation

and insider trading with Mike Bird,

the Wall Street editor of the Economist

and co-host of the Economist Money Talks podcast.

What does he see happening here?

And how different is it

from stuff that we've seen before?

Mike,

it's great to have you on the show.

Thank you very much for having me.

Good to be here.

There are a number of questions being asked right now,

as I mentioned about both market manipulation

on the president's part,

as well as possible insider trading

by those close to him

and also the betting stuff.

But let's start with the accusations

of market manipulation first.

This became a huge story last week

after Trump sent out this post last Monday morning,

rising on tree socials

Trump said he was pleased to report

that the US and Iran over two days

had had in depth detailed

and constructive conversations.

Iran later denied this

and this post actually came after a bunch of Trump comments

over the weekend about escalating things.

And so what did you make of that post last week

and the timing?

Yeah, so it's that move in oil futures

very shortly before the post

that I think got people

most agitated.

Trading volume remained low

until about 6.49 a.m. Eastern

when over just a few minutes,

trading volume jumped almost 10 fold.

That spike went back down

until about 15 minutes later

when President Trump announced he was post-poning strikes

on Iranian power plants

and energy infrastructure

and that caused a surge in the oil markets.

Gotta be careful in what we can say

and what we cannot say

about those sort of things

what we can say is that that was an enormously

fortunate moment for someone

to make a very, very large position

in all futures market.

The oil price move that came after that announcement

was roughly 12% fall

which is enormous, absolutely huge.

We've seen a lot of volatility

but that really is a very, very large move

you usually don't see anything like that

in oil markets.

So there was the potential to make a huge amount of money.

We don't know who made the trade.

It's certainly a pattern

that would suggest that maybe someone

was either very confident

about something about to happen

or was actually informed

that something was about to happen.

I think what it speaks to

is this fascinating

and dangerous area

where politics

and financial investment

and these new investment potential

these new speculation potentials

around prediction markets

all intersect with one another.

Because the prediction markets are very new

that's adding in a new element to it

but I think that the main thing

that comes across

from the Trump administration

and all of the news around this

is both

the administration is making a lot of decisions

that are enormously market moving.

We saw this with Iran,

we saw it with Venezuela,

we saw it with the tariffs,

and you also have an administration

that has lots of people

in and around it,

whose financial interests

are very, very deeply tied up

with things that the administration

has a huge amount of influence on,

whether it's crypto,

whether it's prediction markets,

whether it's all manner

of other business interests.

This is a really sort of new thing

in the US.

It's really not similar

to any administration in modern history.

And I think that's where

a lot of the speculation

and the concern about potential

market manipulation comes from.

On that oil futures trade,

the really big one

that you were talking about,

why do we not know

who would have made that trade?

Can anybody investigate that

considering so many people

think it's so suspicious?

Paul Krugman,

the Nobel-winning economist

called it potentially treason, right?

Yeah, treason in the futures markets

I think was what Paul called it.

The honest answer is the twofold.

The first is that it's not the responsibility

of a futures exchange

to say whether a given trade

is particularly suspicious

or certainly not the whole responsibility.

Those trades are not completely public.

If you once trade in all futures

or I once trade in all futures,

I don't necessarily want people to know

what I'm trading.

So it's not open information.

And unless they have a reason,

a really, really good reason

to reveal who's making certain trades,

I think the general practice

would not be to do it.

Unless there's a sort of legal order

or a subpoena, something like that,

which currently we have nothing like that.

And the second part of the answer

is that these are large global commodities markets.

People operate through dealers

and brokerages and intermediaries.

And even in that case,

it's not always obvious

who's directly responsible.

Even if you were a party to that trade,

it wouldn't necessarily be obvious

who you were making the exchange with.

So you might hear about these things

and think maybe there's some authority,

some individual company,

or agency that has responsibility

over these things.

The answer is that it's always going to be muddier,

a little bit more unclear,

and a lot more private than people would think.

On Trump's part,

these announcements that he's making

sort of time to the opening and closing of markets,

I saw a post that you wrote where you said,

I think the fact that military action

and major announcements

now seem to be coordinating around market,

open and close times,

is going to be one of the most fascinating

and most important things

that we're going to do.

And I think that's one of the most important things

in close times is going to be one of the most fascinating

and telling tidbits about this era,

slash administration,

and just tell me more about what you meant there.

Yeah, I think it's to get back to the fact

that there are so many unusual financial interests

segmented into big market moving events.

Let's start with the fact that the Trump administration

seems to be quite sensitive to market movements.

We saw this during the tariff announcement last April.

We saw a very sharp decline in stock markets,

in a number of other markets as well,

in the value of the dollar,

and we saw reversal about a week later.

And this gave rise the idea

of the TACO trade Trump always check its out.

Oh, and then I check it out.

I've never heard that.

So this idea,

the Trump is quite sensitive to market movements

and the administration is quite sensitive,

is informing things here.

Then again,

with the extraction of President Maduro Venezuela,

you saw this happen over the weekend.

And lots of people talk to the time about the fact

that it was interesting that it seemed to be timed around the fact

that financial markets were closed at the time,

even most futures markets were closed.

And then since the attack on Iran,

you've seen a number of instances in which announcements

are either made immediately before,

immediately after market closes.

There seemed to be quieter events during the week

and things seem to sort of peak

around the beginning and the end of the weekend

when futures markets are just about opening and just about closing.

Again, we don't have administration officials saying

we're deliberately timing this around market events,

but it doesn't seem to be particularly random,

especially when these are really big market moving things.

Is there a more charitable explanation

for why they're doing this than what a lot of people

are jumping towards,

which is personal enrichment?

The charitable explanation,

and it depends on the individual event

that we're talking about,

the charitable interpretation for some of them.

For example, the extraction of Maduro

would be,

if you can get it all done during the weekend,

you don't cause any market disruption.

Market disruption is not good.

The volatility causes all sorts of spillover effects.

If you can do this while markets aren't trading,

it's probably better to do it where markets aren't trading.

With what's been happening in the last few weeks,

that becomes very, very difficult to assemble

as a sort of explanation, as an excuse.

But that would be the most sort of strongman way

of thinking of this.

It strikes me that Iran is like a much different beast here

than the Trump tariff announcements

and even Venezuela.

It just seems like the administration had more control

over those events than their current event,

because it takes two to be able to do this, right?

Absolutely.

I'm thinking about Muhammad Gallybeth,

Iran Speaker of Parliament last week,

who just responded to that post by Trump saying

that they were in talks by being like,

no, we're not in talks.

This is fake news intended to manipulate financial

and oil markets and to escape the quagmire

in which America and Israel are trapped, right?

Yeah, yeah.

I think that's absolutely right.

And I think both in the case that Venezuela

was a military operation that was effectively

over in a matter of hours.

And in the case of the tariffs,

because the administration announced tariffs

and most countries didn't retaliate,

it was really a sort of single-player game.

What Donald Trump decides

and what the administration decides matters

and what anyone else decided was sort of irrelevant.

So you could simply say,

this is on, this is off,

markets move very dramatically in either direction.

But it's extremely telling that the very announcement

we're talking about,

whether it was the suspicious looking oil futures bet,

immediately beforehand.

Or hand, all prices dropped by 12,

13% that day.

By the end of the week,

all prices had come back to exactly

where they started the week, right?

So the impact of that sort of immediate announcement

sort of fades over time.

You can't keep having the same effect

if you keep making these announcements again

because there's multiple players here

and because Donald Trump is the only person

who gets to decide

whether things are being resolved by negotiations.

There is, by definition,

another partner involved it.

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So now let's dig into the predictive markets.

A little bit more here.

The Guardian on Monday reported that

there were a series of bets made last weekend

by eight newly made polymarket accounts

in favor of a U.S. or on ceasefire

before there was any sign of one

on the horizon indicating

possible insider knowledge.

Eight new accounts on the crypto betting platform

polymarkets placed similar bets

totaling about $70,000

on a U.S. around ceasefire within 10 days.

If successful,

does bets could bring in around $820,000?

On top of that bubble maps

of blockchain analytics firm

as reported by CNN's Marshall Cohen,

found that one trader on polymarket

has made almost a million dollars

on the platform since 2024.

On a collection of well-timed five bigger bets,

mostly on U.S. military actions

before they were announced

with a win rate of 93%.

And just, I know that you kind of address this

a little bit already,

but like, talk to me more

about how these prediction markets

present a whole new

profiteering opportunity

for those with privileged information.

Yeah, so think of it this way.

If I'm trying to make a bet

on something happening in oil markets

and I'm thinking about that

from the perspective of

what the U.S. government might announce,

there are a million things

that influence oil markets.

There are any number of things

that could be them at any given time.

What prediction markets offer

is extreme precision

where you can narrow down exactly

what you're betting on.

You can narrow it down

to an extreme sort of binary

yes or no outcome,

which makes it extremely valuable

if you know what that outcome is already.

It's wildly useful for that.

It means there's a proliferation

of the number of things

that you can bet on.

Again, instead of thinking

about it through the perspective

of the normal asset market,

whether it's a few things

that you might wager on,

there are thousands and thousands

of different questions.

You can even start to make your own market

in these things.

Establish your own question

and take a side in it.

It's extremely useful for that reason.

It's also extremely useful

because this stuff is very, very rapidly growing

and it's not regulated

in the way that mainstream

vanilla financial markets would be.

It's partly because, for example,

if you're trading in securities,

you will come under the supervision

of the Securities Exchange Commission

in the U.S.

Most prediction markets

would not be classed as securities.

Even the commodity futures trading commission,

which does have most

of the regulatory responsibility

of prediction markets,

is sort of playing catch-up

because these things have been booming

and it's not been a big area of focus for them.

There's a lag.

There's a huge lag between regulation here

and the activity that's actually happening,

which is uniquely useful to people

who are informed what you might call

insiders legally.

It's not clear that they are insiders

because, again, that really just applies

to securities law

but who are informed traders

who know what's going to happen.

So the opportunities for sort of

avarice and making money on this

with privileged information are enormous.

Do you get the sense that regulators

are trying to catch up here?

I think the American regulators,

whatever you think of the current administration,

none of them want to

look at sort of poorly functioning

winner-takes-all asset markets

or any kind of market

that is becoming sort of distrusted

and aggressively speculated on.

I don't think they do.

Maybe that's naive of me to say.

But I think for the most part,

this is a combination of things.

It's the speed of a growing industry.

It's the fact that because America has

multiple financial regulators,

the emergence of any new asset class,

any new market begins this bon fight

between them over who exactly is in charge of them.

Now, we've already had Paul Atkins

ahead of the SEC saying that,

hey, actually some prediction markets

will come under our jurisdiction.

Prediction markets are exactly one thing

that where there's overlapping

jurisdiction potentially

and you write it's mostly,

at least currently on the CFTC side,

but we need to be harmonized

in the way we're addressing this market.

In the same way that stock futures,

for example, come under the partial jurisdiction,

they say, if you've got a prediction market,

for example, where it's saying,

I bet the S&P 500 will be above or below this level,

that's essentially a future's contract,

and they probably will once have some involvement in this.

I think most of it is just lethargy.

It's just these are slow moving regulatory institutions

and it's tough for them to be across everything all the time.

I think I will say that the Trump administration's

regulatory cast of characters

have a very, very naturally more sympathetic line

to the idea of allowing financial innovation,

even if it means letting regulation fall behind a little bit,

the very, very pro financial innovation,

the people I know these regulators

would not want to slow down the development of prediction markets

by, in their view, over regulating them.

So they're happier playing catch-up than they are trying

to sort of get ahead of things.

In some cases, which when you have problems like these,

I think, yeah, it can exacerbate.

The White House, of course, says that they don't tolerate

any administration official illegally profiting off

of insider knowledge.

But I also want to talk about the Trump family's own ventures

in prediction markets, right?

So I mean, you have people in these positions

that have kind of really an ideological view of regulation,

but like Dawn Jr.

is a strategic advisor to both calcium and polymarket

and an investor in polymarket.

And just what kind of concerns

have those connections raised?

Well, I think those connections are honestly just one

of a number of extremely concerning business,

sort of political nexus links.

The New York Times reported on March 13th

that Jared Kushner is trying to raise $5 billion

from governments in the Middle East for his own private ex-eventures.

He's the president's son-in-law.

He's also peace envoy.

He meets foreign dignitaries on behalf of the president.

The same, more or less, is true of Steve Whitkoff,

who's another peace envoy who co-founder

of World Liberty Financial,

which is the Trump family partially owned crypto company.

It's the issuer of the USD1 stablecoin.

It also took a $500 million investment

from an Emirati royal.

You know, there are enormous,

completely conflicted financial interests

at the very highest levels of the administration.

And prediction markets are one of them now.

And there really is no historical comparison.

I would say for any of this,

at least in modern history,

you know, there's the long-running joke about the fact

that Jimmy Carter was made to give up his peanut farm.

Like, it feels like a very, very long time ago

that that sort of concern about financial impropriety

was so common at the highest levels of the US government.

Yeah. And just like,

some of these bets on January 2nd,

a trader made $400,000 off a $32,000 bet

that Maduro would be taken by the US the night before

it actually happened, right?

February at account trading under the username,

mega, my man made a half a million bucks

placing bets on polymarket about Iran

and its supreme leader just before Israel killed him.

Everyone gets better at spotting suspicious bets.

Also, couldn't America's enemies do so as well?

Yeah, absolutely.

I mean, okay.

So to go to one of the original arguments

around insider trading,

there's always been an argument from people

who have a really free market orientation

that it's better to have insider information traded on

because it means there's a more informed market price, right?

So if you have the CFO company buying stock

in a company because he happens to know the results

that'll be released in two weeks are really, really good,

then that's better because it allows for more efficient market

pricing, reflecting the reality of things.

Now, the last thing you want if you're

a national security official is for the pricing

on prediction markets related to US military action

to reflect the reality of things.

The reality of things is exactly what it is your job

to disguise before they happen.

So I think this will be another big element here

that there is a serious,

there is a serious incentive on the behalf of the US government,

especially in and around diplomacy,

national security defense,

to crack down on employees doing this.

I think the main question is if it's not done

at a sort of central level,

how do you monitor the fact that your employees

aren't doing this at any given time, right?

I think probably treating it as serious

the years you would treat,

making sure that people know that you telling your brother,

oh, you should put a polymarket bet on the US

attacking Iran,

is the same as you like leaking classified information

through high profile cases.

Maybe that will help.

We've had this in Israel recently.

Yes, I was just going to say, yeah.

Yeah, and Israeli reservist officer is suspected

of using classified information

and trading on polymarket in relation to the attacks

on Iran last summer.

And this is going through a court in Tel Aviv.

Now, maybe that sort of thing will make people think,

oh, actually, what I'm doing is flagrantly illegal.

And I wouldn't leak government information.

I wouldn't sell state secrets.

So it shouldn't be doing this.

Maybe that will improve things.

But it's so easy to do this

that I think it's very, very hard to crack down on.

I wanted to ask you about this bill that's going to Congress

that would ban members of Congress,

the president, executive level government employees

and their spouses and dependents from betting on political events.

There's also a Senate bill that goes even further,

seeks to ban prediction market bets on election sports,

government actions, and military moves.

I mean, with the Trump family's close ties to the industry

and the people who are in positions

around regulation, like how likely is it

that Republican lawmakers will actually back it on mass?

I think it's difficult to imagine

a very large majority of US lawmakers signing off

on something that they themselves want to do.

So I think when it comes to, for example,

war-related prediction market betting,

you could quite possibly get a very large majority

of lawmakers to say, yes, absolutely.

You know, nobody should be doing these things.

Because the vast majority of US legislators,

I presume, are not directly corrupt

and do not want trade on national security secrets

to make money.

When it comes to stuff that's a little bit more vague,

like stock trading in general,

where it could be on information

that they've gained in a privileged way,

I'd be a lot more skeptical of the willingness

of lots of legislators to engage in that.

There are a lot of legislators

that trade in stocks very actively.

There are lots of legislators that have become significantly more

wealthy during their time in office

and have made extremely good financial decisions

around their stock trading.

I think there's going to be a lot more resistance

to passing anything that seriously limits that.

You know, we had the stock act,

which has passed in 2012,

which was designed to stop this

to make clear that Congress is subject

to insider trading rules, right,

that privileged political information does apply here.

I think in reality, again,

it's so, so difficult to say that the privileged information

that a Congress person comes across, for example,

is, you know, informing their trading, right?

It's so varied.

There's so much difference.

It's not usually piece of information

like the price of X stock is going to go up 20% tomorrow.

It's vague stuff about the regulation of certain sectors

or the deregulation of certain sectors

that they might hear ahead of time

and be able to trade on.

And it's very difficult to draw a complete through line.

You have, I think, a lot of public distrust

in this area already.

You have ETFs, exchange traded funds,

that tries to replicate the trades

of Republican and Democrat Congress people.

I think that stuff is politically poisonous, right?

But as long as, as long as those people are allowed to trade,

there will be people who want to replicate what they're doing.

I follow one account that just basically replicates

everything Nancy Pelosi does.

It's interesting that Trump, just last month,

pushed for a Congressional stock trading ban.

He shouted out Nancy Pelosi,

the Democratic Congresswoman.

And, like, how are you sort of thinking about the ways

Republicans and Trumps have recently thrown their support

behind banning lawmakers from trading stocks?

And give it everything that we are talking about today.

Yeah, I think it's a,

it's pretty cynical, right?

In the sense that, you know,

if it applies to legislators,

but not to people in the White House,

it's like, you know, that's a pretty easy one to pull.

I think there's probably a lot of

political thinking here.

And you've seen this to some extent

from the other side as well,

you know, Democrat lawmakers,

concerned as they should be about the potential of Congress people,

including some of their own Congress people,

trading on privileged political information

in their own stock portfolios who are now very,

very upset about what's happening in the administration.

There are differences of scale here.

It's important to acknowledge that.

But you're going to see a lot of back and forth

based on where people think the political damage

is going to land.

And I think the administration supporting

bans on stock trading among Congress people

is a judgment on their part that they think most of the damage

is going to fall on Democrat lawmakers.

I would interpret that, yeah, pretty cynically.

Mike, this is really interesting.

Thank you so much.

Thank you very much for having me, Milton.

All right, that's all for today.

I'm Jamie Poisson.

Thanks so much for listening.

Talk to you tomorrow.

For more CBC podcasts, go to cbc.ca slash podcasts.