It was big news in the 1990s when Martha Stewart went to prison for insider trading. Despite that high-profile case, many people still do not understand what this crime is precisely. Even those who work in the financial sector may not fully grasp what it means. However, you do not have to work I this industry, as Martha showed, to get into trouble for this crime, so understanding what it is could help save you from future legal problems if you deal at all with stocks and trading.
MarketWatch explains insider trading is using information not available to the public to make stock market moves. This might include selling shares when you know stocks will lose value or buying before they go up. It is important to note that this consists of any information you receive in any way. Anything that the public does not know is insider information, so acting on that is insider trading.
In addition, you do not have to actually sell or buy anything to commit this crime. Even passing on inside information to someone else who then acts on it will get you in trouble.
The reason this is a crime is that fairness in the markets is essential to maintaining them. If everyone who had insider information acted on it, the market would crash. Nobody would want to buy or sell stocks because it would be an unfair system. If the stock market were to crash, it would have a tremendously negative effect on the economy. This information is for education and is not legal advice.