No federal statute defines “insider trading.” Instead, the common law crime of securities “insider trading” has evolved from a convoluted collection of fact-specific court decisions, leaving significant uncertainty regarding the line between permissible and prohibited conduct across the constantly developing contexts to which the doctrine has been applied. Insider trading generally encompasses corporate insiders, or those who receive information from corporate insiders, trading securities on material non-public information. Historically, prosecutors have most often brought insider trading cases under §10(b) of the Securities Exchange Act. Increasingly, however, insider trading also is charged under the broader, more general fraud statutes contained in Title 18. Now, prosecutors have undertaken a further evolutionary step: the application of “insider trading” theories in cases that do not necessarily involve securities.
In two recent notable cases involving NFTs and cryptocurrency markets—United States v. Chastain and United States v. Wahi—the Department of Justice has brought insider trading charges under the wire fraud statute without claiming that any securities were involved. These cases demonstrate the substantial flexibility federal prosecutors have—or at least believe they have—in charging insider trading and underscore the oft-recognized need for a federal statute expressly addressing insider trading.
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