Legalize It: Insider Trading Is a Victimless Crime, Says James Altucher

If James Altucher had his way, it would still be business as usual at Galleon Group. Instead, the hedge fund is embroiled in one of the largest insider trading scandals in history; the company's head, billionaire Raj Rajaratnam, has posted $100 million bail and the firm is essentially ruined.

So why does Altucher, managing director at Formula Capital, think the Feds should lay off Rajaratnam? Simply put, he thinks insider trading should be legal.

Altucher says it's a matter of pragmatism, suggesting insider trading is:

1. A victimless crime
2. Almost impossible to prosecute
3. A big waste of taxpayer money

If insider trading were legal, Altucher says, the SEC would spend their money on tracking down fraud and uncovering "the next Madoff or Enron."

He also believes there's an actual market benefit to insider trading. "If insiders, the ones with privileged information, are throwing that information into the stock price everyone benefits with a more accurate price."

But of course, there's a reason why it's not legal. Allowing insider trading would annihilate the concept of a level playing field in the market. Altucher says hogwash. That's just an illusion. "There's already no level playing field," he says. This problem of insider trading is "so widespread" retail investors are already at a disadvantage.

Interesting arguments, but I doubt they'd make it very far on Capitol Hill.

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