Should insider trading be legalized? Some think so

Insider trading may be involved in 25 percent of public company deals, according to a new study, and that has some arguing that insider trading should be legalized.

Carol Roth, author of "The Entrepreneur Equation," is among those who think so. She told CNBC's "Street Signs" that the average investor would benefit from insider trading because it makes the market more efficient.

"The people who actually benefit from asymmetric information are the big guys. It would benefit the little guys to have more people coming in and putting more information into the market. It would smooth out volatility," said Roth, also a CNBC contributor.

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The study was conducted by two professors at the Stern School of Business at New York University and one professor from McGill University, The New York Times reported. It looked at 1,859 mergers and acquisitions from 1996 through the end of 2012. Of those deals, the Securities and Exchange Commission litigated about 4.7 percent, the study found.

Harvey Pitt, who served as chairman of the SEC from 2001-2003, said there's a simple word to describe insider trading: theft. He thinks those who commit the crime should be punished.

"The notion that somehow this is permissible because it will make markets more efficient flies in the face of established economic thinking and legal thinking," he told CNBC's "Power Lunch."

"There is no justification for anyone misappropriating someone else's information and there are clearly victims."

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Roth, however, said there are no victims—and with no victims, there is no crime. For her, it's about creating an incentive to bring information to market.

"The more that you incentivize more people to go out and seek the information, means that information comes to market more quickly," she said.

Read MoreIt's time to legalize insider trading: Roth

Pitt said the reason for the insider trading laws is simple—so that the marketplace can be run with integrity.

"When people can cheat and steal and lie, markets are not fair and they have no integrity and these laws are designed to protect the average citizen not those who can purloin other people's information," he said.

—By CNBC's Michelle Fox