Case law milestones in the development of insider trading law are discussed and research on the misappropriation theory is detailed. The misappropriation theory, attributing rule 10b-5 liability to those who make use of another's material nonpublic information for the purpose of purchasing or selling securities, is described as the most rapidly developing theory of liability under rule 10b-5. The author identifies and discusses two opposing theories of insider trading liability deriving from section 10(b) of the Securities Exchange Act of 1934 and rule 10b-5. A liberal interpretation of the statute and the rule would impose liability on anyone who misappropriates inside information and uses it in securities trading. A strict construction of section 10(b) yields a more conservative outcome and suggests that the misappropriation theory lacks support and should not be used as a basis of liability. The author argues that Congress or the Supreme Court should re-examine insider trading and specifically determine what constitutes fraud for the purpose of imposing liability for insider trading under section 10(b) and rule 10b-5. 199 footnotes.