Most states prohibit insider trading if it is based on "material non-public information" (which is a bit strange, as insiders always have material non-public information).
What would be a libertarian position?
For concreteness, let's say Bill owns significant share of BP, and being also part of the management, knows that there was a spill hours after the fact. This information being not public yet, Bill sells his share of the company, then publicizes the fact of the spill. Share prices plummet, the Bill's buyers are very unhappy.
Is Bill guilty of fraud? Is he guilty at all?
As a variation, let's say Bill short-sold (borrowed some BP shares, then sold them, then publicized the bad news, then bought shares at extremely reduced price, then returned the debt, keeping the difference to himself), Does this change the legal result?
Thanks in advance!
There is nothing wrong with Bill's actions unless he knowingly deceives someone. Withholding information is not the same as deception.
Insider trading occurs regardless of laws, all insider trading laws serve to do is empower regulators to run a racket in the private sector and lull consumers into a false sense of security.
In a libertarian world, one would expect that these firms submit to rigorous external auditing by private sector firms rather than the cozy, revolving door relationships bureaucrats currently enjoy.