In court papers filed in Texas, the SEC contests that in June 2004, Mr Cuban was asked to participate in the stock offering by Mamma.com after agreeing to keep the matter confidential.
The commission adds that Mr Cuban knew the offering would be carried out at a discounted price and would therefore be dilutive to existing shareholders.
It alleges that "less than four hours" after being told of the impending offering, Mr Cuban ordered his broker to sell his entire holding of 600,000 shares in Mamma.com
When the offering was made public, Mamma.com's stock dropped 9.3 per cent from the previous day's close. Mr Cuban avoided losses of approximately $750,000 by selling his shares early, the SEC said.
SEC division of enforcement deputy director Scott W Friestad said: "It is fundamentally unfair for someone to use access to non-public information to improperly gain an edge on the market."
A lawyer for Mr Cuban told the Associated Press that the government's case has "no merit".