The law of insider trading demonstrates the doctrinal relevance of the concept of moral wrongfulness. The question of whether and how insider trading wrongs its victims bears directly on the scope of the doctrine. In the United States, the dominant, Supreme Court-formulated theory has been that insider trading is wrongful because it involves a breach of fiduciary duty. This chapter argues that rather than thinking of insider trading as involving a breach of fiduciary duty, we would do better to think of it in terms of cheating. Confidence in the stock market depends on investors feeling that the highly formalized, rule-governed game is being played fairly. The fact that some investors have better information than others is not viewed as unfair. What is viewed as unfair is the possibility that some investors might have access to information to which other investors do not. Market participants who trade on undisclosed inside information in these circumstances are viewed as cheaters, and punishment is viewed as warranted.
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