That turned out to be especially true in the cases of Mr. Chiasson and Mr. Newman. To prove fraud, the appeals court ruled that prosecutors had to show that both men knew that the original source of the inside information had breached a fiduciary duty and had received a personal benefit in return.

Both men were far down the chain of information, and as so-called remote tippees, were less likely to know the circumstances of the original leak. The case was complicated by the fact that the original sources inside Dell and Nvidia were never prosecuted (though the S.E.C. filed civil charges against one of them), and the appeals court had trouble figuring out how a remote tippee could be guilty of a crime if the original tipper wasn’t.

Image Todd Newman, whom a jury had convicted for insider trading, had his conviction reversed. Credit... Brendan Mcdermid/Reuters

But that’s not to say Mr. Bharara and his prosecutors were on some kind of reckless rampage, as the appeals court seemed to suggest. The appellate court for the Second Circuit itself, in a prominent 1993 case, suggested that the personal benefit requirement could be satisfied with the most perfunctory evidence. In omitting the requirement entirely from his instructions to the jury before it began to deliberate, Judge Sullivan had plenty of precedents, although many other cases went the other way.

Other remote tippees have been successfully prosecuted. Given the nature of much of the trading on Wall Street today, especially by sophisticated hedge funds with access to so-called expert networks, more and more trading is being done by remote tippees. Mr. Bharara seems to have been well within the bounds of prosecutorial discretion in deciding to bring the case, and a jury obviously agreed. “It was hypocritical of the court to suggest this was some kind of novel approach,” Professor Coffee said.

At the same time, the appeals court wasn’t necessarily wrong. “This is a very strict interpretation,” Professor Coffee said. ”But the precedents were inconsistent. Some limiting principle is probably welcome.”

The best limiting principle might well be a statute. “I think the law should be clear rather than vague,” Professor Bainbridge said. “The law ought to put you on notice what you can and cannot legally do.” This seems especially true when a person convicted of violating it faces jail time.