Court rejects Musk’s free speech appeal
Disagreement with SEC stems from Twitter posts
WASHINGTON – Tesla CEO Elon Musk still needs to be careful about what he posts on X.
The Supreme Court on Monday declined to review the restrictions the Security and Exchange Commission put on Musk’s social media posts and other public communications about Tesla as part of a 2018 settlement agreement.
The billionaire businessman had asked the court to decide if the agreement violates his free speech rights.
By rejecting Musk’s petition, the justices left in place an appeals court’s decision dismissing Musk’s attempt to modify or cancel the 2018 agreement.
“We see no evidence to support Musk’s contention that the SEC has used the consent decree to conduct bad-faith, harassing investigations of his protected speech,” a unanimous three-judge panel of the New Yorkbased 2nd Circuit Court of Appeals wrote last year.
The SEC went after Musk in 2018 when he tweeted that the company had enough funding to go private.
“Am considering taking Tesla private at $420. Funding secured,” Musk posted on the social media platform he purchased in 2022 that is now known as X.
The SEC called Musk’s tweets “false and misleading” statements that boosted Tesla’s stock price and led to significant market disruption.
Musk and Tesla agreed to separate settlements with the commission.
Musk had to pay a $20 million fine and step down as chairman. He also had to get preapproval from a Tesla attorney before publishing written communications about Tesla. Months later, when Musk tweeted about Tesla’s production rate, the SEC accused him of violating the agreement. The commission said the post included misleading information and had not been preapproved.
After negotiations, both sides agreed to revise the terms of the initial settlement. But Musk’s tweets in November 2021 asking people to vote on whether he should sell 10% of his Tesla stock again caused the SEC to step in.
Musk responded by challenging the constitutionality of the settlement agreement. Both the district court and the appeals court rejected his challenge.
Musk unsuccessfully asked the Supreme Court to weigh in to “prevent such egregious agency overreach.” His lawyers said the agreement unjustly restricts what Musk can say even when it’s truthful and won’t affect stocks.
“In effect, the SEC sought contempt sanctions – up to and including imprisonment – for Mr. Musk’s exercise of his First Amendment rights,” his lawyers told the court.
In response, the Justice Department said the lower courts correctly ruled that Musk had voluntarily agreed to the restrictions as part of the settlement.
“This Court has long recognized that individuals may waive their constitutional rights in order to resolve or avoid litigation,” Solicitor General Elizabeth Prelogar told the court.