Money and knowledge have very large effects in the market, so manipulation of money, as the government likes to do, is very detrimental, but less obvious is the damage of knowledge control. If an insider has knowledge and makes a trade based on that knowledge he provides the rest of us with new information to go on. Current government regulation does not allow this, and we have also seen various less permanent bans on short selling. Policies of this nature slow the release of knowledge to the general public and further exacerbate the general murkiness politicians like us to operate in.
Yes, these sorts of traders can make a lot of money for little to no effort, but we should see the money that they make as representative of the value of the knowledge, and not as an indicator of moral failing. Once the knowledge is acted upon, other market participants see it and begin acting upon it. Subsequent trades are therefore more accurate than they would have been if we were in our previous, less knowledgeable state. The monies saved because of this accuracy more than outweigh any 'windfall' profit an insider might make on a trade.