A U.S. appeals court has given the Securities and Exchange Commission a green light to keep its long-standing “gag rule” intact, despite protests that it tramples on free speech.
In a unanimous 3-0 ruling, the 9th Circuit Court of Appeals said the SEC’s policy—which forces those settling enforcement cases to bite their tongues—doesn’t violate the Constitution outright. That said, the court acknowledged it could become a First Amendment issue depending on how it’s enforced.
The rule, which dates back to 1972, compels defendants to agree they “neither admit nor deny” wrongdoing as a condition of settlement—and not to trash talk the SEC afterwards. Critics say that’s not just a deal, it’s a gag order dressed in regulatory robes.
Among those challenging the policy were a dozen petitioners, including eight individuals who’d already been silenced by their own settlements. One of them, former Xerox CFO Barry Romeril, tried to take the fight to the Supreme Court in 2022—with the backing of Elon Musk, no less—but was turned away.
Judge Daniel Bress, writing for the court, said no one’s forcing these defendants to settle. “You want to speak freely? Then go to trial,” was the court’s unspoken message. Bress emphasized that the SEC has a legitimate interest in offering speech restrictions as part of its negotiation toolbox—essentially, it’s the price of peace.
Still, the decision wasn’t exactly celebratory. The court hinted at unease with its own conclusions, and left the door cracked open for future challenges.
The New Civil Liberties Alliance, one of the petitioners, called the decision troubling. “That the SEC has been silencing Americans for decades isn’t a justification—it’s an outrage,” said Peggy Little, senior litigation counsel. “We’ll keep fighting.”
The SEC, meanwhile, had no comment.
Notably, SEC Commissioner Hester Peirce has publicly opposed the gag rule, calling it flimsy in rationale and a disservice to the public. She argues it shields the government from scrutiny and leaves the truth gagged in perpetuity.
The appeal was heard in Honolulu—a picturesque backdrop for a case that’s anything but quiet.
**Case name:** *Powell et al v SEC*, 9th U.S. Circuit Court of Appeals, No. 24-1899.
