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Insider trading: vice or virtue? A legal and behavioural reassessment of the prohibition paradigm

Radosław Potok

Capital Markets Law Journal2026https://doi.org/10.1093/cmlj/kmag013article
ABDC A
Weight
0.50

Abstract

The prohibition of insider trading is one of the foundational dogmas of capital markets regulation. Rooted in moral concerns over fairness and equal access to information, most legal systems take for granted that insider trading harms market integrity and investor confidence. However, this article challenges that assumption by re-evaluating insider trading from a legal-economic and behavioural perspective. Drawing on comparative insights from the USA, European Union, and recent developments in behavioural finance, this article argues that insider trading may in some contexts enhance market efficiency, improve liquidity, and facilitate more accurate pricing of assets. Furthermore, it critiques the psychological underpinnings of investor trust, highlighting that perceived safety—not objective enforcement—often drives market participation. This calls into question whether absolute prohibition is optimal, and opens the door for alternative regulatory designs that balance fairness with functionality. This article concludes by proposing a framework for rethinking insider trading regulation that integrates empirical evidence, behavioural theory, and pragmatic legal design.

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https://doi.org/https://doi.org/10.1093/cmlj/kmag013

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@article{radosław2026,
  title        = {{Insider trading: vice or virtue? A legal and behavioural reassessment of the prohibition paradigm}},
  author       = {Radosław Potok},
  journal      = {Capital Markets Law Journal},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1093/cmlj/kmag013},
}

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Insider trading: vice or virtue? A legal and behavioural reassessment of the prohibition paradigm

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.