Because an equity stake is a huge percentage of compensation for a company, and it's much easier to give shares of the company rather than cash. And those receiving shares should be able to sell it.

I agree that the strictest regulations against insider trading would effectively make equity compensation impossible. But you're basically saying that it shouldn't be outlawed because it's currently legal, and currently practiced. If either of those were not true, then outlawing it couldn't be on the table to begin with.

This feels like you're begging the question, or that you left off a step or two at the end and stopped a bit short of a complete argument. Maybe something about equity compensation being a valuable tool that can provide a beneficial incentive structure that is not easily achieved through other means?