Aside satisfying your dogmatic belief about the role "central government", what benefit is there to be gained by legalizing insider trading (never minding the absurdity of the notion to begin with)?
I am thinking allowing the info revealed by insider trading would provide more data to long term investors. The Raj Rajaratnam case was all about his hedge fund getting whatever info it could about the businesses he was investing in. I don't see where you draw the line on what info you can gather and what you cannot. But info that Raj got from his IBM VP source would leak out to the broader market and might help someone make a long term decision on whether to buy IBM stock or not.