[names_are_hard]

In the long run, if participants feel they can't ever win because there's always an insider taking advantage, then participants might leave and that's to the detriment of the market. So it might be in the interest of the market to make sure everyone has a fair enough chance. Finding the right balance here is somewhat of an art.

This is similar to the way all football teams benefit from fair referees and even matches, even if sometimes it means they lose.

Also: the point of an exchange is to make money. Different types of exchanges have different fee structures, but generally their profit is a function of volume, so there primary objective is to attract volume. Since every trade / bet requires two participants, they need to balance the needs of both participants to make it work. Price discovery is a positive side effect of efficient and fair markets, which is why as a society we like them and encourage them, but it isn't what they are trying to achieve except inasmuch as it encourages participation.

[eru]

> In the long run, if participants feel they can't ever win because there's always an insider taking advantage, then participants might leave and that's to the detriment of the market.

In the US, there's no general rule that protects you against trading against someone with insider information. Mostly what's forbidden is an employee X of company Y trading on her own account; but if X acts on behalf of Y, they can go crazy.

For you on the other side of the trade, it doesn't really matter whether you sell your Standard Oil stock to someone officially acting on behalf of Berkshire Hathaway who knows that next week Warren Buffett will announce that they are going to buy Standard Oil, or whether you are selling your stock to someone who has the same information, but is not officially authorised by Berkshire Hathaway.

Yet, people still trade in the stock market just fine.

I would suggest as a retail investor you shouldn't buy individual stocks anyway: just buy an index fund.

Until fairly recently, there was no rule against insider trading in commodities in the US, and people still traded them.

In any case, your arguments suggest that exchanges should be able to decide whether they want to allow insider trading, and companies should be allowed to decide which exchange they want to list at (so they can indirectly decide whether to allow insider trading). No need for a blanket one-size-fits-none rule.