Supreme Court declines SEC gag rule case review

Investing.com -- The US Supreme Court declined on Monday to review a constitutional challenge to a former Securities and Exchange Commission policy that prevented defendants in settlement cases from publicly criticizing or contesting the agency's claims.

The justices turned away the case without comment. The challenge centered on whether the SEC's gag rule violated individuals' First Amendment rights.

The case involved Thomas Powell, who faced SEC accusations in 2021 of making misrepresentations and omissions related to more than a dozen unregistered oil and gas securities offerings. Powell agreed to pay a $75,000 penalty to settle the case, with his firm paying a separate penalty.

The settlement required Powell to neither admit nor deny the SEC's allegations. Under the agreement, he was barred from publicly denying wrongdoing. Powell's attorneys from the New Civil Liberties Alliance called the provision "rank censorship."

The SEC implemented the gag rule in 1972. Critics, including Elon Musk and Mark Cuban, argued the policy violated defendants' First Amendment rights. The SEC rejected a petition to change the policy in 2024.

In May, the SEC reversed course and rescinded the policy. Chairman Paul Atkins said the gag rule suppressed the ability to criticize the government, which he described as a fundamental American right.

The Commodity Futures Trading Commission followed the SEC's action the following month, rescinding its own policy that had been in place since 1998.

The SEC argued that its revocation of the policy made Powell's arguments moot. Powell's attorneys countered that future administrations could easily revive the rule. "Agency rules that can be rescinded overnight can be reinstated overnight. The government provides no meaningful assurance that a future SEC will not revive the Gag Rule," they wrote.

You May Also Be Interested In

• OpenAI revenue chief quits after less than a year
• FingerMotion acquires 9.9% stake in Lyken AI for $500K in stock
• SEALSQ reports 120% revenue growth, signs key quantum deals