Recently, Mark Cuban, the entrepreneur and owner of the Dallas Mavericks, offered to finance a Securities and Exchange Commission investigation of his supposed insider trading. The offer drew widespread and somewhat bemused attention, but Cuban was actually raising a very serious point: Has the government gone overboard in its prosecution of insider trading?

A few days after Cuban’s offer, the U.S. Attorney in Manhattan, Preet Bharara, gave a speech in which he said that insider trading is “rampant and may even be on the rise.” He called inside information a “financial steroid”—in the sports-scandal sense, that is. “It is unfair; it is offensive; it is unlawful; and it puts a black mark on the entire enterprise,” said Bharara.

Bharara is right about insider trading—up to a point. His remarks, which received a fair amount of publicity, set forth the traditional case for going after insider traders—a pursuit that famously put one of Bharara’s predecessors, Rudy Giuliani, on the fast track to a political career. Insider trading—in the traditional sense of corporate execs trading ahead of corporate events—certainly puts the public at a disadvantage. Though some libertarian commentators feel otherwise, the general view is that when bankers or corporate insiders sneak out ahead of investors with non-public information, they are cheating other investors.

The problem is that the government’s zeal to prosecute insider-trading cases also snares instances that are hardly clear cut and sometimes don’t seem like anything terribly wrong. Cuban is probably the best example of that.

In March 2004, Cuban bought shares in a small Internet search company called Copernic, which later changed its name to Mamma.com. In June of that year, the CEO called him with confidential information. It seems that the company was about to engage in a PIPE offering—a Private Investment in Public Equity—which threatened to dilute the stock. Cuban sold his shares. The SEC subsequently sued Cuban for insider trading, saying that Cuban had avoided a $750,000 loss. Cuban fought back hard. The charges were dismissed by a federal judge, who ruled that the CEO’s call didn’t disclose inside information because Cuban didn’t agree to use that info for his own benefit. But the SEC disagreed, and so did a federal appellate panel reinstating the case.

Over and above the legal issues is the moral one: What in heaven’s name did Cuban do that was so terrible? All he did was act rationally when, unsolicited, negative information was furnished to him by the CEO of a company. He did what anyone would have done. It is only human to act to avoid substantial financial loss. Yet the SEC argues, and the Fifth Circuit Court of Appeals agrees, that Cuban should have just forgotten this horrible information and watched his holdings decline. It’s ridiculous.

In another recent insider-trading case, there wasn’t even a tip involved. That case involved employees of Florida East Coast Industries, which was being taken over. The SEC accused two employees of a subsidiary of the company, and their relatives, of making over $1 million through insider trading. It seems that the two employee defendants allegedly engaged in some savvy detective work. The SEC complaint says that they saw “an unusual number of daytime tours of [the subsidiary’s] Hialeah Yard involving a tour bus and people dressed in business attire.” Other yard employees noticed that too, and there was scuttlebutt that an acquisition might be in the works. Another yard employee, also charged, was asked by the company’s CFO for a “list of all of the locomotives, freight cars, trailers, and containers owned by [the subsidiary], along with their corresponding valuations, which she had never requested before.”

That’s it. Now, I’m not saying that the employees involved, or their relatives, should get a medal for trading on this information. But this case, as with the Cuban litigation, hardly seems the kind of stuff that really makes one want to cry out with fury. Two blue-collar guys pieced together some information. One of the defendants has settled the case without admitting or denying wrongdoing, but the rest are fighting it out. So we may yet see whether the courts find what these folks did was, in fact, insider trading.

If the SEC achieves another “triumph,” what will it prove? To me, it will indicate that the SEC does not have its priorities straight.

When the SEC reorganized its enforcement division earlier this year in reaction to the Madoff scandal, it set up units to go after “market abuse,” which would include insider trading and other worthy endeavors such as structured and new products. But as I pointed out at the time, omitted entirely from the SEC reorganization was an office devoted entirely to corrupt corporate practices.

The problem is that improper corporate conduct is a huge issue, and it’s not properly addressed. As recent disclosures have made clear, the big banks for years have turned a blind eye toward improper foreclosure practices. Where was the SEC? Prosecuting Mark Cuban, apparently.

Don’t get me wrong: Insider trading is bad. But what has shaken the faith of the public in the markets is not insider trading, but the behavior that gave rise to the bank bailouts. The feds need to focus on that and should not devote scarce resources to stretching the insider-trading laws to the limit.