Why would encouraging non-insider training be desirable in the first place, other than to create a more high-status form of gambling, with higher spouse acceptance factor than smoke-filled room poker games? People with no inside knowledge[0] are just trading on vibes, how is that useful for the economy?

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[0] - Or external knowledge, but actual knowledge - thinking of hedge funds stalking CEOs as they fly in private jets, or counting cars in parking lots from satellite photos, to get some probability estimates on factors actually relevant to the performance of a business and possible future events.

Stock markets also want to keep executives honest. When the insider can affect the outcome, it creates bad motives. They don't want the CEO selling a bunch of puts, then deliberately tanking the stock. Not for the other bettors, but because the institution is about business.

Prediction markets are doing a bit of that. Some won't take bets on an assassination.

>the other states that this discourages non-insider trading, which actually makes the prices worse

This theory is fundamentally not credible, the other side of any trade you make on the stock market is essentially always going to be vastly more sophisticated than you. Insider trading makes zero difference to the end-user.

The credible argument against insider trading is that it's a form of theft. You are making trades based on information which does not belong to you, and which you have an obvious duty to protect. You are essentially stealing from the people you work for.

In the hypothetical Anarcho-Capitalist finance world, the remedy for a breach of fiduciary duty (corporate graft / insider tips) looks more like Jim Bell than Chuck Rhoades.