The Ninth Circuit’s recent decision calls into question the Second Circuit’s definition of “personal benefit” for insider trading liability in criminal prosecutions.

On July 6, 2015, United States District Court Judge Jed S. Rakoff authored a Ninth Circuit opinion that signalled increased skepticism about the weighty “personal benefit” requirement established by the Second Circuit last December in United States v. Newman for “tippee” liability under the insider trading laws. In United States v. Salman, Judge Rakoff — who happened to be sitting on the Ninth Circuit by designation — articulated a narrower definition of the personal benefit requirement for tippee liability than the one adopted by the Second Circuit in Newman. At base, the Ninth Circuit concluded that, if inside confidential information is passed among close friends or family members, the benefit is essentially presumed, and additional evidence beyond the relationship is unnecessary to prove that benefit. By contrast, in Newman, the Second Circuit held that, such an inference is insufficient absent proof of a close personal relationship that generates an exchange that is tangible or has pecuniary value. With his pen, Judge Rakoff may have set up a circuit split ripe for Supreme Court review on an issue of utmost import.