GOP Rep. Chris Collins' insider trading arrest puts a deep-red seat on the House battlefield

Key Points
  • GOP Rep. Chris Collins' arrest on insider trading charges makes his deep-red New York district more competitive in November's House elections.
  • Supporters of his Democratic opponent, Nate McMurray, have already started to raise money on Collins' indictment.
  • Still, the 27th District favors Republicans, as it voted overwhelmingly for both Collins and President Donald Trump in 2016.
New York GOP Rep. Chris Collins was arrested on insider trading charges
New York GOP Rep. Chris Collins was arrested on insider trading charges

Republican Rep. Chris Collins' arrest and indictment on insider trading charges Wednesday suddenly makes his safe red congressional district a lot more interesting in November's midterm elections.

The New York 27th District, lodged between Buffalo and Rochester in the western part of the state, has grown more Republican since Collins first won it narrowly in 2012. The area backed President Donald Trump by nearly 25 percentage points in 2016, while Collins breezed to re-election with about 67 percent of the vote.

The stain of the insider trading accusations quickly makes the district more competitive — although it still favors Republicans. Regardless, the GOP cannot afford another contested seat in the state as it fights to stop Democrats from winning the 23 Republican-held seats the party needs to take a House majority.

Nonpartisan election analysis sites Cook Political Report and Sabato's Crystal Ball moved their ratings for the district to "likely" Republican from "solid" "safe" Republican, respectively, on Wednesday. A scandal can cause a 10- to 12-percentage-point swing and Collins' arrest is "perhaps on the more severe side," tweeted Nate Silver, data guru and editor in chief of analytics site FiveThirtyEight.

Silver tweet

Collins pleaded not guilty to the charges on Wednesday. In an email to supporters earlier in the day, the representative said his "focus is to defeat these charges in court" and that he will "not address any issues related" to the accusations outside of the courtroom, according to New York Times reporter Shane Goldmacher. Collins stressed that he does not plan to abandon his re-election bid as of now.

"As I fight to clear my name, rest assured that I will continue to work hard for the people of the 27th Congressional District of New York while remaining on the ballot for reelection this November," he wrote.

Goldmacher tweet

Collins appears likely to stay on the ballot: relevant periods to give up a party nomination have passed, according to the New York State Board of Elections. The deadline for a special election under New York law has also passed. 

Liberals seized on the news of Collins' arrest almost immediately. The New York Working Families Party started to raise money for the Democratic candidate in the race, Grand Island Town Supervisor Nate McMurray. The party said, "We can defeat this corrupt Trump Republican and win this seat in November." Collins was Trump's first supporter in Congress during the 2016 campaign.

Working Families tweet

The Democratic Congressional Campaign Committee also contended that "this seat is firmly in play for Democrats."

On the other side of the aisle, the GOP indicated that it was taking the matter seriously. House Speaker Paul Ryan, R-Wis., called for a "prompt and thorough" investigation into the allegations and removed Collins from the House Energy and Commerce Committee.

"Insider trading is a clear violation of the public trust," Ryan said in a statement.

Rep. Chris Collins facing insider trading charges
Rep. Chris Collins facing insider trading charges

The National Republican Congressional Committee, which is dedicated to electing GOP House candidates, considers the charges against Collins "very serious," according to spokesman Matt Gorman.

"We will let the facts come to light and trust the judicial system as we continue to assess his reelection campaign," he said in a statement.

New York Republican Party Chairman Ed Cox said the party is "disappointed with the news." He added: "No one is above the law, but Chris deserves his day in court and we will wait to see what unfolds."

The Collins campaign did not immediately respond to CNBC's request to comment on how the representative's arrest could affect the race.

In an earlier statement, Collins' attorneys said he will "mount a vigorous defense to clear his good name." They added: "We are confident he will be completely vindicated and exonerated."

The fate of the campaign

Still, the case will hang over Collins' head if he continues to run for re-election.

Collins already won the primary for New York's 27th Congressional District in June. It is unclear now whether he could be removed from or replaced on the ballot in November.

Nick Gravante, a white-collar defense attorney at Boies Schiller Flexner in New York, said he thinks Collins will not leave the House while the case proceeds.

"I think that if he's going to mount a defense that he did nothing wrong I expect him to stay in office," he said.

The GOP would have a "crisis" on its hands if Collins gets convicted this year while running for re-election, and the representative will likely face pressure to resign, said John Coffee, a professor at Columbia Law School.

As of the end of June, Collins had easily raised and spent more money than McMurray in his re-election campaign. The Democrat had less than $100,000 on hand at the time.

McMurray has hardly run as a centrist in trying to win the 27th District, which is a strategy other Democratic candidates have pursued as they try to flip GOP-held seats. He has run on Medicare for all, free and reduced college tuition, and marijuana legalization, among other proposals.