It's not automatically insider trading for a person involved with a company to trade in its stock. This law has a lot of subjective leeway. But it IS true that it is HARDER for people in these positions to trade stock in their company without risk.

Oversimplified, you break the law if you have information that is not yet public that would likely affect other traders' opinions of whether to buy or sell stock. But it's sort of time-sensitive and it's easier to get in trouble for short-term decisions than long-term ones.

So a CEO who sells their stock immediately before a bad quarterly earnings report? They'll likely get in trouble. A bad earnings report usually motivates people to sell. However, even if they sell 10 seconds after that report goes public, THAT is fine because now the information is public.

What if the CEO knows that next year a super-secret project is going to release and starts buying in advance? This falls much more on the subjective side of the law. It's harder to argue that if it were known a super-secret project will happen next year that investors in general would invest in the stock today. And there are still chances that between today and next year, things happen that cause the project to be canceled. So this scenario is much more grey area.

So people have a lot of strategies to avoid this. One is to announce projects to reduce how much "secret" knowledge you're leaning on. Another is to buy and sell large amounts of stock on a schedule, so you can argue you're following a pattern and not basing the decision on product announcements.

A problem with it being so subjective is it can look like a lot of times rich people get away with something that less rich people might get busted for. It's a different discussion entirely, but it's more likely that very rich people will employ lawyers and accountants who work together to assess their risk of insider trading charges whereas less wealthy people are more likely to go on their own thoughts.