I'd argue that the "purpose" of the stock market is matching investors with companies that want liquidity. Allowing insider trading hurts the purpose by driving away non-insider trading participants, and it does not really help in any way.

With prediction markets, the "purpose" is information discovery, and "insider trading" actually helps (=> via information from insiders).

Disclaimer: I'm somewhat playing devils advocate here, I personally think that prediction markets are for now mostly an ineffective zero-sum game (and legalized gambling with all the drawbacks that brings).