A ruling by the court could clarify one of the most hotly debated issues on Wall Street: what prosecutors must prove to secure insider trading convictions based on confidential tips.

In their questioning, the justices grappled with where to draw the line. Even as they appeared sympathetic to the government’s interpretation of the high court’s past insider trading decisions, the justices were wary of radically expanding the government’s power and affording prosecutors too much of a free hand in these cases.

The case now before the court, Salman v. United States, No. 15-628, comes from California and centers on the insider trading conviction of Bassam Salman in 2013. According to prosecutors, Mr. Salman placed profitable stock trades based on confidential information leaked by his future brother-in-law, Maher Kara, who had advance knowledge of corporate mergers because of his job in Citigroup’s health care investment banking group.

For decades, courts have held that it is not inherently illegal to trade stocks based on material, nonpublic information like a merger or acquisition. For an insider to be guilty of sharing inside information, his leak must breach a duty to keep the information confidential and he must receive a personal benefit in exchange for the leak. By extension, the person who receives the information must generally know of that breach and benefit.

The Salman case presents a question that has vexed federal appeals courts and left prosecutors and traders alike seeking clarity: What exactly amounts to a “personal benefit”?

Prosecutors hope the court will afford them leeway in defining the benefit, arguing that if an insider provides a gift of information, that should count as a benefit. In the Salman case, Maher Kara did not receive any financial benefit, but arguably leaked the information as a gift.

Mr. Salman’s lawyer, Alexandra Shapiro, argued on Wednesday that the benefit must be more “tangible” — like cash or something that eventually can be monetized.

Several of the justices, citing one of the court’s seminal insider trading decisions from three decades ago, seemed skeptical of her argument and poised to uphold Mr. Salman’s conviction.

After all, as Justice Stephen Breyer noted, “to help a close family member is like helping yourself.”

Yet the court, often skeptical of prosecutors in white-collar crime cases, also questioned the government’s lawyer, Michael Dreeben, about where to draw the line. The justices seemed hesitant to afford prosecutors broad authority to apply the so-called gift test to situations in which the insider and recipient are not family or close friends.

The issue gained prominence after a 2014 decision from the United States Court of Appeals for the Second Circuit in Manhattan, United States v. Newman, that upended the Justice Department’s sweeping crackdown on insider trading. Mr. Salman’s argument for overturning his conviction hinges on the Newman decision, which tightened the standard for what constitutes a personal benefit by requiring prosecutors to show a tangible benefit rather than mere friendship between the tipper and recipient.

The Second Circuit, in that 2014 decision, overturned the insider trading convictions of the hedge fund managers Todd Newman and Anthony Chiasson, who were at the end of a long chain of information being passed along. In the aftermath, federal prosecutors in New York tossed out the convictions of nearly a dozen other traders and industry consultants.

Preet Bharara, the United States attorney in Manhattan, whose office secured insider trading convictions against dozens of people in the nearly $3 trillion hedge fund industry, has been an outspoken critic of the Second Circuit ruling. Mr. Bharara, who attended Wednesday’s argument, has argued that the Second Circuit’s decision could create “a potential bonanza for friends and family of rich people with material nonpublic information.”

The Supreme Court denied the Justice Department’s request that it review that ruling, though the justices could indirectly rebuke it in deciding Mr. Salman’s case.

In Mr. Salman’s case, the United States Court of Appeals for the Ninth Circuit in San Francisco took a different approach. The Ninth Circuit upheld Mr. Salman’s conviction and adopted the view that giving inside information to a family member qualified as a benefit, creating what some legal observers saw as a split that only the Supreme Court could reconcile.

Both the Newman and Salman appeals court decisions hinged on a 33-year-old Supreme Court case, Dirks v. Securities and Exchange Commission, that has long been the cornerstone of insider trading law.

That decision directed courts to focus on “whether the insider receives a direct or indirect personal benefit from the disclosure, such as a pecuniary gain or a reputational benefit that will translate into future earnings.”

In overturning Mr. Newman’s conviction, the Second Circuit seized on that financial element.

But when the Ninth Circuit upheld Mr. Salman’s conviction, it focused on another passage in the Dirks decision that allowed liability “when an insider makes a gift of confidential information to a trading relative or friend.”

That excerpt strikes at the heart of Mr. Salman’s case. Maher Kara passed the inside information, arguably as a gift, to his brother, Michael Kara, who in turn shared it with Mr. Salman. The two families were close; Maher Kara was engaged to Mr. Salman’s sister. (While Maher Kara struck a plea deal and was sentenced to three months of home confinement, Mr. Salman was sentenced to three years in prison.)

Some of the justices, appearing skeptical of Mr. Salman’s argument, highlighted the passage within the Dirks ruling that references gifts to family members.

“You’re asking us to cut back significantly from something that we said several decades ago,” Justice Elena Kagan told Ms. Shapiro, adding that “the integrity of the markets are a very important thing for this country. And you’re asking us essentially to change the rules in a way that threatens that integrity.”

But a decision that just upholds Mr. Salman’s conviction — and reaffirms the Dirks decision with some clarity — would disappoint some prosecutors who argue that the current unsettled nature of the law has had a chilling effect on cases. The Justice Department’s ideal ruling would uphold the conviction of Mr. Salman and then take the Ninth Circuit’s ruling further so that the gift rule would not be limited to just family and close friends.

Mr. Dreeben mentioned the case of a barber who could slip through the cracks.

He also proposed an even looser standard that would allow charges whenever information is shared for a noncorporate purpose and the insider knows that the recipient will place trades based on the leak.

The justices appeared to balk at that extension of prosecutorial power.

“It doesn’t seem to me that your argument is much more consistent with Dirks than Ms. Shapiro’s,” Justice Samuel Alito told Mr. Dreeben.

Justice Alito then proposed a hypothetical: “Now suppose someone, the insider is walking down the street and sees someone who has a really unhappy look on his face and says, I want to do something to make this person’s day. And so he provides the inside information” and allows the recipient to trade.

Mr. Dreeben replied that such a case was indeed a violation. Later in the argument, however, as other justices expressed skepticism about the Justice Department’s position, Mr. Dreeben conceded that “if the court feels more comfortable given the facts of this case of reaffirming Dirks and saying that was the law in 1983, it remains the law today, that is completely fine with the government.”

Daniel Richman, a former federal prosecutor and now a professor at Columbia Law School, predicted that because insider trading law was almost entirely judge-made, rather than set by Congress, the Supreme Court might be reluctant to radically revisit its Dirks ruling from three decades ago. It would be simpler to draw distinctions between cases involving family members and business associates.

“If you were going to be a minimalist, this little bit of family relationship could be elaborated on without wholesale redevelopment,” he said.

One of the most prominent critics of judges determining what constitutes insider trading was Justice Antonin Scalia, whose death earlier this year created the vacancy on the bench. Justice Scalia argued that only Congress — rather than agencies, prosecutors or judges — may define what conduct amounts to insider trading.

Although Ms. Shapiro made a similar argument, the remaining eight justices seemed to be unswayed. They also seemed skeptical of her argument that Maher Kara turned over the information to Michael Kara for “the scant benefit of getting his brother off his back.”

Justice Ruth Bader Ginsburg, for whom Ms. Shapiro was once a law clerk, remarked: “He’s no longer being pestered. Isn’t that a benefit?”

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