The big question at the heart of the insider trading case heading to the Supreme Court this week

On Wednesday the Supreme Court will hear an insider trading case for the first time in two decades, and it will once again have to weigh the issue without a definition of the practice from Congress.

The case involves a grocery wholesaler named Bassam Salman who’s accused of trading on tips from a brother-in-law who worked for Citigroup. Prosecutors accused Salman of making nearly $1 million from trading on information involving Citigroup mergers, and he was sentenced to three years in prison for conspiracy and fraud.

The question the Supreme Court has to decide is this: In order to prove insider trading, is it necessary to show that a tipper like the brother-in-law got cash or something valuable in exchange for the tip — or is it enough to show the tipper and tippee were close family members?

There is another question that the case itself raises, though: Why doesn’t the United States have a specific law on the books to regulate insider trading?

“What there ought to be is a statute on insider trading,” University of Michigan Law School professor Adam Pritchard told Yahoo Finance. “The SEC has resisted that.” The agency has pushed back against an insider-trading statute, in part, because “murky” rules give it more leverage during settlement negotiations, Pritchard contends.

Congress ‘lurking in the background’

In the absence of a specific statute, the SEC can file civil cases involving insider trading under anti-fraud provisions of federal securities laws and the Justice Department can file criminal cases using the same laws — since insider trading can be either a civil or a criminal action. The SEC paved the way for many insider trading cases in 1961, when it ruled that two key fraud provisions of the Securities and Exchange Act of 1934 applied to corporate “outsiders” like Salman.

Following the 1961 ruling by the SEC, lawmakers have introduced laws to ban insider trading but none have passed. Meanwhile, the European Union has a “very clear and a very broad” law banning insider trading, Peter J. Henning, a professor of law at Wayne State University, told Yahoo Finance.

Congress’s own inaction on the issue is “lurking in the background” of the insider trading case the Supreme Court will hear this week, Georgetown Law professor Donald Langevoort said.

“Everybody has said it is something of an embarrassment that in the US, which 50 years ago invented the law of insider trading,” Langevoort said, “we’re now essentially the only country in the world that doesn’t regulate it by statute.”

Without a specific law on the books to regulate insider trading, it’s been largely up to the courts to define what constitutes insider trading, as it must do in the Salman case. The Supreme Court took its first modern-day stab at defining illegal insider trading in a 1983 case called Dirks v. SEC, ruling that insider trading could involve quid pro quo or an insider making “a gift of confidential information to a trading relative or friend.”

More than 30 years after Dirks, the US appeals court in New York shook up the world of insider trading when it ruled that friendship alone between a tipper and tippee wasn’t enough to establish fraud. Some lawyers contended that the New York case, US v. Newman, actually changed the law though others argue the case is consistent with Supreme Court precedent.

In light of the disagreement about Supreme Court case law, one might argue that Congress should step in once and for all to ban — and define — insider trading. But that doesn’t seem likely.

‘A political nightmare’

While the SEC may have resisted an insider trading statute, Wall Street would also likely push back against a law specifically banning the practice. That would make it difficult to pass an insider trading ban, especially in light of the Supreme Court’s 2010 Citizens United decision, which makes it easier for corporations to spend money on political campaigns, Langevoort, the Georgetown professor pointed out.

“It’s a political nightmare, in a post-Citizens United world, especially, where money talks as loudly as it talks, the hedge funds and Wall Street are going to be up there looking out for their own interests,” Langevoort noted. “And their own interests are not in aggressive insider trading enforcement.”

That said, he noted, if the Supreme Court were to issue an opinion that narrowed the definition of insider trading — in favor of Salman, the grocery wholesaler — it could spur Congress to act.

When the Supreme Court hears the Salman case on Wednesday, and when it issues its decision later in the term, it will do so without one of the justices who decided to take it up in the first place: Antonin Scalia.

The late justice was particularly keen on hearing an insider trading case, and he may have used the Salman case as an opportunity to make it harder for prosecutors to bring those charges.

Erin Fuchs is deputy managing editor at Yahoo Finance.