I find it very hard to understand why so many people and institutions are still participating in markets that are obviously full of insider trading. It's basically just giving money away to the insiders. Why do people do this?

Institutions do not stake their own money and are somewhat averse to the direction of the market. As for common people, they're generally not known to do the most rational thing.

There's no alternative

You're a fund manager. What's the alternative? Throw your hands up and tell your customers to take all their money back, you don't want to get paid anymore?