Editing Insider trading (section)

===Arguments for legalizing===
Some economists and legal scholars (such as [[Henry Manne]], [[Milton Friedman]], [[Thomas Sowell]], [[Daniel Fischel]], and [[Frank H. Easterbrook]]) have argued that laws against insider trading should be repealed. They claim that insider trading based on material nonpublic information benefits investors, in general, by more quickly introducing new information into the market.{{Citation needed|date=November 2024}}

Friedman, laureate of the [[Nobel Memorial Prize in Economics]], said: "You want more insider trading, not less. You want to give the people most likely to have knowledge about deficiencies of the company an incentive to make the public aware of that." Friedman did not believe that the trader should be required to make his trade known to the public, because the buying or selling pressure itself is information for the market.<ref name="Harris" />{{rp|591–7}}

Others argue that insider trading is a victimless act: a willing buyer and a willing seller agree to trade property that the seller rightfully owns, with no prior contract (according to this view) having been made between the parties to refrain from trading if there is [[asymmetric information]]. ''[[The Atlantic]]'' has described the process as "arguably the closest thing that modern finance has to a victimless crime".<ref>{{cite magazine |first=Megan |last=McArdle |author-link=Megan McArdle |url=https://www.theatlantic.com/magazine/archive/2011/11/capitol-gains/8692/ |title=Capitol Gains – Magazine |magazine=The Atlantic |date=October 3, 2011 |access-date=December 21, 2011 |archive-date=June 14, 2012 |archive-url=https://web.archive.org/web/20120614135908/http://www.theatlantic.com/magazine/archive/2011/11/capitol-gains/8692/ |url-status=live }}</ref>

Legalization advocates also question why "trading" where one party has more information than the other is legal in other markets, such as [[real estate]], but not in the stock market. For example, if a [[geologist]] knows there is a high likelihood of the discovery of petroleum under Farmer Smith's land, he may be entitled to make Smith an offer for the land, and buy it, without first telling Farmer Smith of the geological data.<ref>{{Cite web|title=18 U.S. Code § 1905 - Disclosure of confidential information generally|url=https://www.law.cornell.edu/uscode/text/18/1905|access-date=2020-11-05|website=LII / Legal Information Institute|language=en|archive-date=2020-11-11|archive-url=https://web.archive.org/web/20201111170229/https://www.law.cornell.edu/uscode/text/18/1905|url-status=live}}</ref>

Advocates of legalization make [[free speech]] arguments. Punishment for communicating about a development pertinent to the next day's stock price might seem an act of censorship.<ref>{{cite web |url=http://www.walterblock.com/wp-content/uploads/publications/information_privilege.pdf |title="Information, Privilege, Opportunity, and Insider Trading" in the Northern Illinois University Law Review |access-date=January 7, 2013 |archive-date=April 12, 2019 |archive-url=https://web.archive.org/web/20190412164119/http://www.walterblock.com/wp-content/uploads/publications/information_privilege.pdf |url-status=live }}</ref>

Some authors have used these arguments to propose legalizing insider trading on negative information (but not on positive information). Since negative information is often withheld from the market, trading on such information has a higher value for the market than trading on positive information.<ref>Kristoffel Grechenig, The Marginal Incentive of Insider Trading: An Economic Reinterpretation of the Case Law, University of Memphis Law Review 2006, vol. 37,  p. 75-148 [https://ssrn.com/abstract=883642 (link)].</ref><ref>Macey, Jonathan. "Getting the word out about fraud: a theoretical analysis of whistleblowing and insider trading." Michigan Law Review (2007): 1899-1940.</ref>