I don’t wish bad on SecondMarket and other secondary stock markets and in fact I think they bring many positives to the ecosystem, letting founders take some money off the table without selling out and without having the burden of being a public company. Certainly its fun to watch some of these hot young companies fly in their SecondMarket valuations. However, it seems that all this massive trading with little information is going to inevitably lead to a lawsuit. In general I am a free marketeer and support lean government but there is a reason there are stringent rules for public companies. While this may not work perfectly, the idea is everyone is trading based on the same information and that they are trading with some consistent metrics used across all companies. With these private company stock auctions where lots of people are trading on little information it seems the risk is high that someone is trading with less information than others and trading with insufficient information. When a private investor makes an investment they go through a due diligence process and take a calculated risk based on that research. With these auctions, investors don’t have that opportunity and so are trading blind. This is a case where the government oversight and stringent rules makes sense. I hope that Facebook goes public both because they are becoming so important in the Internet ecosystem that it will be useful to know their financials with certainty and also to avoid a legal mess with these private sales which I fear is inevitable.