The US Securities and Exchange Commission filed civil charges in a federal court in Dallas yesterday accusing Cuban, who is reportedly worth close to $3bn (£2bn), of selling 600,000 shares in the internet search engine after learning privately that the business was planning a stock offering.
The SEC said that by disposing of the shares ahead of a public announcement, he avoided paper losses of $750,000.
Cuban disputes the SEC allegations and said he would contest them.
He wrote on his : "I am disappointed that the commission chose to bring this case based on upon its enforcement staff's win-at-any-cost ambitions.
"The staff's process was result-oriented, facts be damned. The government's claims are false and they will be proven to be so."
The incident allegedly occurred in 2004, however, the SEC reportedly did not learn about the details until 2007.
Scott Friestad, the SEC's deputy enforcement director, said in a statement: "It is fundamentally unfair for someone to use access to non-public information to improperly gain an edge on the market."
Cuban is chairman and a co-founder of US home shopping channel HDNet, as well as an investor in several technology firms.
He sold his website to in 1999 at the height of the dotcom boom.
Cuban, who also owns the Dallas Mavericks basketball team, is well known in the US for his verbal outbursts at referees, National Basketball Association officials and sports reporters.
These have cost him more than $1m in fines and suspension from a several games.