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Abstract

For decades, legal scholars have evaluated the law and practice of insider trading through a property lens. Some have debated whether a property rationale is useful for explaining past cases or might make a useful framework for deciding tough cases in the future. Others have explored which market actors should be allocated property rights in inside information in order to increase the efficiency or liquidity of U.S. securities markets. Yet scholars seem to have missed the fact that officials have consistently relied on the violation of some party’s property rights to justify imposing liability for insider trading—including in classical theory of liability cases.

Missing the role that property principles continually play in the doctrine has undermined the quality of the policy and doctrinal debate surrounding insider trading. Because there are costs associated with changing the current state of affairs, a discussion of how to allocate rights in inside information is incomplete without recognizing which parties currently hold title to the information. In addition, while many scholars are correct to reject a property rationale as useful for explaining the majority of past insider trading cases, it would be a mistake to dismiss the explanatory power of property principles entirely. If officials consistently rely on the violation of property rights in inside information to justify imposing liability, then property and related doctrines may help scholars and policy makers to understand what changes would be required to bring the regulation of insider trading into greater harmony with its doctrinal and statutory roots.

With these opportunities in mind, this article identifies several ways that property principles motivate the U.S. insider trading regime. It concludes by highlighting some considerations that scholars and policy makers should take into account in future analysis.

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