An analogy: It'd be like playing online chess for money, without any way to stop your opponent from using a computer to make their moves. Or like the Olympics where some people are allowed to use performance enhancing drugs.
After a very short time, most everyone will have left the market.
There's also no more reason to legalise insider trading than murder or burglary. The prevalence is very likely to be at an all-time low currently, because the statistical methods used to spot insider trading in market data have improved dramatically. Some quant funds also flag suspicious trades as a sort of by-product of their work and share that data with the authorities.
Isn't this legal for members of the United States Congress? I can't recall the specifics, but seem to remember some special exemption for them from insider trading rules.
It seems to create a false sense of security, that people inside the company aren't going to do bad things. Many people have made their fortunes on some degree of insider trading that they wouldn't have made otherwise.
Wouldn't the markets be more efficient without this mirage?