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How Phil Mickelson Got a Mulligan on His Insider Trading Scandal

Phil Mickelson should be headed to jail or at least under arrest and to trial, if insider trading laws were still working like they should.

But they clearly are not. Instead, Mickelson has not been directly charged with any wrongdoing at all.

On Thursday, the SEC issued a statement that alleged the famous golfer had netted $931,000 in stock-trading profits related to an insider trading case that the SEC was unveiling. Mickelson is not admitting he did anything wrong. Mickelson’s lawyer says the golfer is an “innocent bystander” and the undeserving focus of “false finger pointing.”

The two other men involved in the SEC case as well as a parallel criminal case from the Justice Department, a professional gambler and a former board member of Dean Foods (DF), are facing potential jail time as part of the separate criminal case, which has typically been the punishment for insider trading ever since the government began pursuing these cases decades ago.

Mickelson’s punishment: Nada, or at least not much more than a slap on the wrist.

Read: Here’s How Golf Star Phil Mickelson Got Caught in an Insider Trading Case

Mickelson has agreed to pay back the money he made plus another $100,000 or so in interest. But, according to the SEC, it’s not money he should have had anyway. Mickelson faces no criminal investigation or jail time.

And while Mickelson’s lawyer contends the golfer hasn’t done anything wrong, it’s fair to question how many truly innocent people voluntarily hand over a million dollars of their money to the government, even rich people. Mickelson didn’t have to even promise he wouldn’t engage in similar behavior again, as happens in some of these cases, or be bared from serving on the board of a publicly traded company, which is also a common SEC insider trading punishment.

In golf terms, Mickelson just got the legal equivalent of mulligan: Refresh your brokerage account, and trade again.

Insider trading laws were always murky. Just take look at Fortune’s cover story from a few years ago, The Gray Art of Not-Quite Insider Trading. And remember Martha Stewart went to jail for lying to prosecutors, not for her actual insider trading.

But in the past year or so the situation has gotten worse. Insider trading laws have become so bungled that it’s hard to tell, even for prosecutors, whether someone who netted nearly $1 million trading on a stock tip truly is guilty of insider trading. That’s a problem.

Consider the evidence presented in the SEC complaint in the Mickelson case. According to the SEC complaint, the golfer got a tip from a professional gambler William Walters that went something along the lines of, “Now would be a good moment to buy shares of Dean Foods.” It’s not clear exactly what, if anything, Walters told Mickelson. But what the SEC says in the complaint is that Mickelson owed Walters money—the SEC complaint for the case doesn’t say how much—when he made his bet on Dean Foods in July 2012. The SEC says that Michelson is not a big stock market investor. He doesn’t trade very often, according to the SEC, and has a very small percentage of his assets in his personal brokerage accounts.

Nonetheless, according to the SEC’s complaint, the day after talking to Walters, Mickelson allegedly bought over 200,000 shares of Dean Foods or $2.4 million worth, according to the SEC complaint. Some of the shares were bought with margin—or money borrowed from the broker—and spread among three different accounts. A week later, Dean Foods announced it was doing a spin-off and that earnings were better than expected. Dean Foods’ shares spiked and Mickelson allegedly immediately sold, according to the SEC, pocketing nearly $1 million in roughly a week. Mickelson later allegedly used some of the money he made to pay back what he owed to the Walters, according to the SEC. Mickelson’s lawyer says the SEC has its facts wrong, but didn’t say which ones.

This is not the investing behavior of someone who say buys Amazon because they are told generally it’s going to take over retail. Normally, after someone buys a stock and it goes up, one tends to hold onto those shares, or even buy more. Confirmation bias is a very powerful force in investing. Selling immediately is something you might do when you are tipped off to some specific news in advance and it happens, though there is no evidence that’s what happened in the Mickelson case.

It wasn’t too long ago that insider trading laws seemed to be working pretty well, at least for the prosecutors. In mid-2014, Preet Bharara, the U.S. District Attorney in Manhattan, and the lead Justice official on financial fraud cases, had a 80-0 batting average on insider trading convictions.

Then came what has become to be known as the Newman case. In December 2014, a judge in U.S. Second Circuit Court of Appeals overturned an insider trading conviction against two former hedge fund traders Todd Newman and Anthony Chiasson on the basis that it wasn’t clear the defendants in the case made any payment to the person who allegedly gave them the insider information. No “tip” money for stock tips based on insider trading, the judge ruled, and you could not deem the activity insider trading.

Here’s my best attempt interpreting the judges thinking: No one in their right mind would pass along insider information, and all the risks that go along with that, without getting paid. That would be insane. So any one who passes along insider information and doesn’t get paid for that information clearly must not have realized what they were passing along was insider information, and therefore there’s no insider trading.

At least, that is how the judge’s ruling has been interpreted.

This, of course, is ridiculous. Bharara tried to appeal the case up to the Supreme Court, which this past October decided not to take the case. So the Newman precedent stands, at least for now. The Supreme Court earlier this year did decide to take another insider trading case, but that case is the exact opposite. In that case, the defendant was found guilty and the government is the one saying the rule should stand. Nonetheless, for now, Newman is the rule of the land, basically sucking the air out of any new insider trading cases. Seven insider trading cases Bharara previously won have been overturned since the Newman ruling and he hadn’t brought a new high-profile one since 2014, until the case against Mickelson’s cohorts was levied this week.

But here’s the thing. That shouldn’t have stopped the Mickelson case. The prosecutors could have argued Mickelson did “tip” Walters gave him insider information when he paid back his gambling debts. The real problem with Newman is it has basically made prosecutors gun shy, even in case that has a good shot under Newman.

This also highlights a bigger problem, and it is one that Bharara created. Rather than focusing on financial crisis cases, Bharara has used most of his resources on insider trading cases. But if Bharara hadn’t spend as much effort on insider trading, then Newman may never have happened. The 72 or so insider convictions that have stuck might not have happened either. But perhaps the Justice Department may have actually had the resources to pursue some cases against major Wall Street figures related to the financial crisis. There’s evidence the Justice Department’s criminal division didn’t even try to make those cases, even when they were urged to. What’s more, all of these insider trading convictions have done little to convince the public in general that Wall Street is fair.

The lack of any real punishment against Mickelson will make it worse. The federal sentencing guidelines for someone who robs a bank and no one is hurt is 10 years in jail. Grand larceny of up to $1,000,000 will get you five-to-15 years in jail. Even someone who steals less than $4,999 from the food stamp program on their second offense gets a mandatory sentence of six months in the slammer. There are no get out of jail free cards. You can’t just give the money back, say sorry, and move on.

And yet that’s the pass that Mickelson is getting. Mickelson may be getting a mulligan, but for Bharara and the system in general, the case is at the very least a double bogey, and really more likely a snowman.

Indeed, what the case really shows is that these days when it comes to going after insider trading, prosecutors are saddled with a very, very high handicap.