For more than four decades, corporate law scholars have debated whether government should prohibit insider trading, commonly defined as stock trading on the basis of material, nonpublic information. Participants in this long-running debate have generally assumed that trading that decreases a stock's price should be treated the same as trading that causes the price to rise: either both forms of trading should be regulated or neither should. I argue for a middle-ground position in which "price-decreasing insider trading" (sales, short sales, and purchases of put options on the basis of negative information) is deregulated, while "price-increasing insider trading" (purchases of stock and call options on the basis of positive information) remains restricted.
Thomas A. Lambert,
A Middle Ground on Insider Trading, 32 Regulation 44
Available at: https://scholarship.law.missouri.edu/facpubs/862