> Does anyone have a good argument for why one should be illegal while the other is legal?

I don't care either way but for the sake of argument:

Stock market is something you can't avoid (ignoring hermits), so an insider trade can ruin your pension fund or other financial wellbeing with you having no way to opt out of the risk, so the government protects you. (This is good!)

Polymarket is more like a bet between friends. You don't have to play but if you do understand it's unregulated and someone can cheat.