Supreme Court Upholds Elon Musk's SEC Settlement Requiring Lawyer Approval for Tesla Tweets

The U.S. Supreme Court has rejected Elon Musk's appeal to overturn a 2018 settlement with the Securities and Exchange Commission (SEC) that requires him to have a lawyer approve some of his Tesla-related tweets before posting them. The high court's decision supports a lower court ruling that found no evidence of bad-faith investigations by the SEC into Musk's speech.

The settlement, reached in 2018, resolved an SEC lawsuit accusing Musk of defrauding investors by falsely claiming on social media that he had secured funding to take Tesla private. As part of the agreement, Musk and Tesla each paid $20 million fines, and Musk gave up his role as the company's chairman. Importantly, the settlement also mandated that Musk obtain preapproval from a Tesla lawyer for any tweets that could potentially contain material information about the company.

Why this matters: The Supreme Court's decision has significant implications for corporate executives' use of social media and the SEC's ability to enforce securities laws. It highlights the importance of responsible and accurate communication from company leaders, especially when their statements can impact stock prices and investor decisions.

Musk has been a vocal critic of the settlement, arguing that it violates his First Amendment right to free speech and that the SEC has used the consent decree to conduct bad-faith, harassing investigations. However, the U.S. District Court and the 2nd U.S. Circuit Court of Appeals rejected Musk's efforts to terminate the preapproval requirement, finding that he had voluntarily agreed to the terms.

The SEC has also alleged that Musk violated the settlement in 2021 when he posted a Twitter poll asking followers if he should sell 10% of his Tesla stock without obtaining the required preapproval. The agency has separately opened a new investigation into Tesla's claims about its self-driving technology, which has come under scrutiny from federal regulators.

The Supreme Court's rejection of Musk's appeal puts an end to his lengthy battle to overturn the SEC settlement. In a brief order, the court declined to hear the case, leaving in place the lower court decisions upholding the agreement.

Key Takeaways

• Supreme Court rejected Musk's appeal to overturn SEC settlement on Tesla tweets.
• Settlement required Musk to get lawyer approval for Tesla-related tweets.
• Musk argued settlement violated his free speech, but courts rejected his claims.
• SEC alleged Musk violated settlement by posting Tesla stock poll without approval.
• Ruling upholds SEC's ability to enforce securities laws on corporate executives' social media use.