I'm sure people like Warren Buffett, and John Paulson and the numerous others who predicted the financial crisis, are not too worried about that.
In any case the Chicago efficient market mafia proved it years ago, based on their assumptions about how the market works. Proving something with a model doesn't make it true in the real world. Even in physics you have to do the experiment to show the model matches reality. Of course, in finance and economics, it's usually quite difficult to do a repeatable experiment.
But more profoundly, the markets are not really suited for retail customers. These people are drawn in by the promise (often lie) that investing is easy and it is possible to make a hobby out of it. What happens is these amateurs are losing money, which are gained by the real professionals.
Rules against insider trading are directed at making the markets a fairer place and especially so for the retail customers. In reality, these rules create the illusion that it's possible to make it as an amateur with little money and no connections. As we've seen, the promise is often illusory.
Would this completely destabilize markets or would it find some new stability as people got used to it.
The more insidious effect is that liquidity goes down (transaction costs are higher for everyone), since one always has to be wary that the person selling to you knows more than you do.
From an economics point of view, regulating (or not regulating) insider trading are both valid options. But the liquidity argument is the swing vote.
Or suppose it's a car mechanic that wants to unload a car cheaply?
His fund had a bunch of redemptions and is now mostly his own money.
A little surprised you were downvoted. Here's a "frase para el bronze" (phrase that will be set in bronze, repeated possibly forever).