Powell v. U.S. Securities and Exchange Commission

When a federal agency uses its power to silence critics and control the narrative, it strikes at the heart of the First Amendment. The Liberty Justice Center has filed two amicus brief in Powell v. United States Securities and Exchange Commission, urging the U.S. Supreme Court to rule that the U.S. Securities and Exchange Commission’s (SEC) “gag rule” violates the First Amendment.

The case challenges SEC Rule 202.5(e), a policy dating back to 1972. Under this rule, the SEC will not settle a civil enforcement action unless the defendant agrees not to publicly deny the SEC’s allegations. If the defendant makes a public statement denying said allegations, the SEC can reopen the case.

The Liberty Justice Center first filed an amicus brief in support of the petitioners when the case was before the U.S. Court of Appeals for the Ninth Circuit in June 2024. On August 6, 2025, the Ninth Circuit rejected the challenge, but did so “on necessarily narrow grounds.” The Liberty Justice Center’s Supreme Court brief urges the Court to grant review because the Ninth Circuit failed to properly analyze the SEC’s rule under core First Amendment principles. Specifically, the brief argues that this gag rule is an unconstitutional prior restraint on free speech, prohibiting freedom of expression before it is has even taken place. Supreme Court precedent confirms this and speaks to the dangers of prior restraint. This gag rule is not a voluntary waiver of First Amendment rights like lower courts have treated it.

Beyond prior restraint, the rule burdens several other First Amendment rights:

• It interferes with the right to petition by preventing these individuals from speaking to elected officials or advocating for legal reform based on their own experiences.
• It harms freedom of the press by denying reporters and the public access to the perspectives of people who have firsthand knowledge of SEC enforcement actions.
• It can amount to compelled speech by forcing individuals to frame their public statements in government-approved terms.

“The federal government has criminal law enforcement authority to punish criminals,” said Reilly Stephens, Senior Counsel and Director of Amicus Practice for the Liberty Justice Center. “This is not meant to be a point of leverage for the government to strip citizens of their first amendment rights. And if ruling for the plaintiff here means that some federal enforcement actions might fall under public scrutiny, that’s how democracy is supposed to work.”

The government cannot suppress speech simply to avoid criticism. The SEC’s rule ultimately prevents criticism, but this is not a legitimate government interest under the First Amendment. By discriminating based on content and viewpoint, the SEC’s rule singles out a specific subject (SEC allegations and settlements) to restrict the speech of the individuals on the other side of the dispute.

The Liberty Justice Center asks the Supreme Court to grant the petition and make clear that the government cannot coerce Americans into restricting their right to speak.