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.

Chastain and Wahi are developing cases. The defense in Chastain recently asked the court to dismiss the charges, arguing that the prosecution's theory fails because the NFTs at issue are not securities. The prosecutors responded that wire fraud does not require proving a connection with the purchase or sale of securities. The defendant's motion to dismiss was quickly followed by a motion to strike all mentions of "insider trading" from the indictment as prejudicial and impermissible surplusage. As of the time of this article, the government had not yet answered the motion to strike. In Wahi, however, prosecutors already have seen some success. One of the defendants, who received tips from his brother regarding which cryptocurrency assets would be listed on a marketplace, pled guilty to conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison. His sentencing is currently scheduled for Dec. 13, 2022. The case is ongoing as to the other two defendants, one of whom remains at large. The Securities and Exchange Commission filed a parallel complaint in Wahi, alleging that some of the cryptocurrency assets at issue are securities.