Imagine a federal agency accuses you of something you didn’t do. The agency has unlimited money, unlimited time, and runs a courtroom with its own judge. Defending yourself costs millions and the odds are stacked against you. So, you settle. You pay. And in exchange, the government demands that you sign away your right — forever — to tell your clients, your partners, or anyone else what actually happened. Welcome to SEC enforcement, where the process is the punishment and the gag order is the price of making it stop.
That is why the American Securities Association, which I lead, filed an amicus brief this week with the Supreme Court asking it to hear Powell v. SEC. The SEC's Gag Rule requires every defendant who settles to promise they will never deny the agency's allegations — not for a year, not until the next administration, but forever. It doesn't even matter if what they want to say is true. Truth, as one court put it, “is no defense”.
The SEC claims defendants ‘voluntarily agree’ to these terms. But as Justice Gorsuch observed in Axon Enterprises, a government agency is well “aware” that few defendants can ‘outlast or outspend’ it and uses that reality as “leverage to extract settlement terms it could not lawfully obtain any other way.” That’s not negotiation. That’s a menu with one item.
The SEC knows how to pick its targets. Empirical evidence suggests the agency gravitates toward defendants with deep enough pockets to absorb large fines without going insolvent — and toward cases that generate favorable headlines. The result is an enforcement program shaped as much by visibility and ability to pay as the severity of the alleged violation. The SEC then pockets the settlement, issues a press release declaring victory, and ensures the defendant can never publicly offer a different account. That doesn’t protect investors. It protects the SEC.
Nobody is arguing the SEC shouldn’t enforce the securities laws. Fraud is bad. Markets need oversight. But there is a meaningful difference between punishing people who break the law and stripping them of their constitutional right to speak about it afterward. The SEC does both — and the speech ban comes on top of whatever fines have already been paid.
A settling defendant may not deny the SEC’s allegations, give the ‘impression’ of denying them, or make any statement to anyone that even indirectly questions the charges. Yet a defendant who fights to trial and loses can write a memoir, give interviews, and tell their story in full. It takes a special kind of regulatory logic to conclude that settling a civil case should cost you more speech rights than being convicted of a crime.
The Gag Rule doesn’t just harm defendants. It harms the public. The most informed critics of SEC enforcement are, by design, the ones it has silenced. The Gag Rule ensures those voices stay silent, leaving the public with one perspective: the agency’s own press releases, declared as victories, with the other side contractually forbidden from disagreeing. Between 2017 and 2023, the SEC silenced an estimated 2,700 individuals and businesses this way.
The SEC is one of only two federal agencies with a blanket gag rule for settling defendants. The DOJ doesn’t do it. The FTC doesn’t do it. So, when your speech restrictions are more severe than the Department of Justice’s, investor protection isn’t the reason.
The Supreme Court should take this case because the Constitution does not have a settlement exception. The government may enforce the law, but it cannot use enforcement as a mechanism to permanently extinguish the First Amendment rights of everyone who finds it cheaper to settle than to fight.
