Blab Politics
Supreme Court Set to Hear Challenge to SECs 50-Year Gag Rule
Washington, D.C., June 9, 2026 – The New Civil Liberties Alliance (NCLA) filed a reply brief urging the U.S. Supreme Court to hear the case of Powell, et al. v. Securities and Exchange Commission (SEC). The brief argues that the SEC’s 50‑year “Gag Rule,” which barred anyone who settled a regulatory enforcement case with the agency from publicly criticizing the settlement for life, is unconstitutional. The SEC rescinded the rule last month, but the NCLA says the rescission does not eliminate the rule’s lingering effects or prevent a future agency from reinstating it.
The case centers on Thomas J. Powell, a former executive of Resolute Capital Partners, who was accused in 2021 of misleading investors. After settling with the SEC, Powell was subject to the gag rule, which required him to refrain from speaking publicly about the settlement. The rule was adopted in 1976 and remained in force for five decades, affecting thousands of individuals who entered into settlements with the SEC.
According to the NCLA press release, the agency’s recent decision to rescind the rule was a “voluntary cessation of a government policy adopted on the eve of the Supreme Court’s decision on certiorari to evade review.” The brief contends that the SEC still maintains that the rule was constitutional and that the agency cannot bind future commissions that might revive the policy. The NCLA argues that the Supreme Court must rule that an agency cannot use its enforcement authority to silence critics through mandatory, coercively imposed gags.
NCLA’s co‑counsel, former U.S. Solicitor General Greg Garre of Latham & Watkins, said the Supreme Court should “make clear that agencies cannot force Americans to abandon their First Amendment right to criticize the government as the price of freeing them from the crippling economic and reputational burdens of agency enforcement actions.” Peggy Little, NCLA’s Senior Litigation Counsel, added that the SEC’s claim that its eleventh‑hour repeal “moots” the case is a “transparent ploy to evade review” and that the agency’s simultaneous insistence on the correctness of lower‑court decisions “underscores that the agency wishes to retain absolute power to silence speech critical of the SEC.”
The brief notes that the SEC’s statement that it will not enforce existing gags may not bind future commissions that take a different view, nor does it bind the courts. Thousands of Americans, including several NCLA clients, remain under court orders implementing gag‑rule‑era restrictions and risk punishment if those orders are enforced against their speech. The NCLA says the Supreme Court must eliminate that threat.
The case was filed in the U.S. Court of Appeals for the D.C. Circuit in 2018 and has been the subject of an eight‑year legal battle. In May 2026, the Ninth Circuit failed to overturn the gag rule, prompting the NCLA to petition the Supreme Court. The SEC’s rescission of the rule, announced in a press release on May 19, 2026, was described by the NCLA as a “dirt nap” for the policy, but the brief argues that the policy’s constitutionality remains unresolved.
The gag rule was originally justified by the SEC as a means to preserve the integrity of its enforcement process, but critics argue it suppresses legitimate public debate. The First Amendment, incorporated against federal agencies, protects speech even when tied to regulatory settlements. The Supreme Court has previously addressed similar issues in cases involving administrative gag orders, but Powell has not yet been considered.
If the Supreme Court grants certiorari, it would be the first time the Court has addressed the SEC’s gag rule. A ruling in favor of the NCLA would affirm that the First Amendment protects the right to criticize the government, even when that criticism is tied to a regulatory settlement. A ruling against the NCLA could allow the SEC to continue imposing similar restrictions in future enforcement actions.
The Supreme Court’s decision is pending. The case is scheduled for oral argument in the fall, and the Court’s ruling could have far‑reaching implications for the balance between regulatory enforcement and free speech rights.
The case centers on Thomas J. Powell, a former executive of Resolute Capital Partners, who was accused in 2021 of misleading investors. After settling with the SEC, Powell was subject to the gag rule, which required him to refrain from speaking publicly about the settlement. The rule was adopted in 1976 and remained in force for five decades, affecting thousands of individuals who entered into settlements with the SEC.
According to the NCLA press release, the agency’s recent decision to rescind the rule was a “voluntary cessation of a government policy adopted on the eve of the Supreme Court’s decision on certiorari to evade review.” The brief contends that the SEC still maintains that the rule was constitutional and that the agency cannot bind future commissions that might revive the policy. The NCLA argues that the Supreme Court must rule that an agency cannot use its enforcement authority to silence critics through mandatory, coercively imposed gags.
NCLA’s co‑counsel, former U.S. Solicitor General Greg Garre of Latham & Watkins, said the Supreme Court should “make clear that agencies cannot force Americans to abandon their First Amendment right to criticize the government as the price of freeing them from the crippling economic and reputational burdens of agency enforcement actions.” Peggy Little, NCLA’s Senior Litigation Counsel, added that the SEC’s claim that its eleventh‑hour repeal “moots” the case is a “transparent ploy to evade review” and that the agency’s simultaneous insistence on the correctness of lower‑court decisions “underscores that the agency wishes to retain absolute power to silence speech critical of the SEC.”
The brief notes that the SEC’s statement that it will not enforce existing gags may not bind future commissions that take a different view, nor does it bind the courts. Thousands of Americans, including several NCLA clients, remain under court orders implementing gag‑rule‑era restrictions and risk punishment if those orders are enforced against their speech. The NCLA says the Supreme Court must eliminate that threat.
The case was filed in the U.S. Court of Appeals for the D.C. Circuit in 2018 and has been the subject of an eight‑year legal battle. In May 2026, the Ninth Circuit failed to overturn the gag rule, prompting the NCLA to petition the Supreme Court. The SEC’s rescission of the rule, announced in a press release on May 19, 2026, was described by the NCLA as a “dirt nap” for the policy, but the brief argues that the policy’s constitutionality remains unresolved.
The gag rule was originally justified by the SEC as a means to preserve the integrity of its enforcement process, but critics argue it suppresses legitimate public debate. The First Amendment, incorporated against federal agencies, protects speech even when tied to regulatory settlements. The Supreme Court has previously addressed similar issues in cases involving administrative gag orders, but Powell has not yet been considered.
If the Supreme Court grants certiorari, it would be the first time the Court has addressed the SEC’s gag rule. A ruling in favor of the NCLA would affirm that the First Amendment protects the right to criticize the government, even when that criticism is tied to a regulatory settlement. A ruling against the NCLA could allow the SEC to continue imposing similar restrictions in future enforcement actions.
The Supreme Court’s decision is pending. The case is scheduled for oral argument in the fall, and the Court’s ruling could have far‑reaching implications for the balance between regulatory enforcement and free speech rights.
