Dismissal of SEC's Insider Trading Case Against Mark Cuban Makes New Law

On Friday, July 17, 2009, the District Court for the Northern District of Texas dismissed the SEC’s insider trading complaint against Mark Cuban, based on an interesting and novel analysis of the duty required to support insider-trading liability under the so-called “misappropriation theory.” SEC v. Cuban, No. 08-CV-2050 (N.D. Tex. July 17, 2009). In dismissing this much-watched case, the court held that, under the misappropriation theory, it is insufficient for the SEC to allege that a defendant traded stock based on information that he had agreed to maintain in confidence. To state its case, the SEC must also allege that the defendant breached an agreement not to trade.