Elon Musk Takes SEC Case to US Supreme Court, Citing Free Speech Rights Violation

Elon Musk Seeks Supreme Court Help Over Free Speech Fight With SEC

Tech mogul Elon Musk has called on the U.S. Supreme Court to overturn a part of a settlement deal he made with the Securities and Exchange Commission (SEC) that required the review of his online posts, claiming it violates his right to free speech. Musk’s attorney, Ellyde Thompson, confirmed the move on Thursday.

The billionaire entrepreneur petitioned the high court on Dec. 7 to hear his appeal of a lower court’s decision in May, which upheld a 2018 consent decree he negotiated with the SEC. The deal marked a major escalation in the ongoing feud between Musk and the powerful regulatory agency.

The consent decree stemmed from the settlement of a 2018 lawsuit filed by the SEC against Musk, who was accused of making “false and misleading” statements to investors on Twitter regarding the privatization of his electric car company, Tesla.

The terms of the consent decree included Musk stepping down as Tesla’s chairman, him and the company each paying a $20 million civil penalty, and Musk obtaining pre-approval from a securities lawyer before making written statements about Tesla or its shareholders.

In February 2019, the SEC alleged Musk violated the deal when he tweeted that “Tesla made 0 cars in 2011, but will make around 500k in 2019,” leading to contempt sanctions being sought, including fines and potential imprisonment.

After several court proceedings, the two parties resolved the contempt sanctions, but Musk is now trying to eradicate the SEC’s consent decree, arguing that the agency exploited the decree to “punish protected speech” because he is an outspoken critic of the government and the SEC.

Both a federal district court in Manhattan and later a federal appeals court ruled in favor of the SEC, stating that Musk could not challenge the speech-vetting deal because he had previously agreed to it in the settlement.

In his filing on Thursday, Musk took issue with this point of law, stating that the SEC had no right to impose a “gag rule” as a condition of settling the lawsuit. He asked the court to rule that “government settlements are not immune from constitutional scrutiny.”

According to Musk’s lawyer, this decision would benefit “the hundreds of defendants who settle cases with the SEC each year” because they cannot afford to fight back.

The SEC’s consent decree “restricts Mr. Musk’s speech even when truthful and accurate,” stated Musk’s lawyers. They argued that it extends to speech not covered by the securities laws and has no relation to the issues underlying the SEC’s civil action against Musk.

The Supreme Court may now decide whether to hear the case and potentially advance it to oral arguments if four out of the nine justices agree.

Separately, the Fifth U.S. Circuit Court of Appeals has agreed to revisit its decision that Musk violated federal labor law with a tweet in 2018. The SEC has yet to respond to a request for comment.

This report includes information from Reuters.

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