Episode 25: Powell, et al. v. United States Securities and Exchange Commission

Powell, et al. v. United States Securities and Exchange Commission, argued before Circuit Judges Sidney R. Thomas, Daniel A. Bress, and Ana de Alba in the U.S. Court of Appeals for the Ninth Circuit on February 13, 2025. Argued by Margaret A. Little of the New Civil Liberties Alliance (NCLA) (on behalf of Powell, et al.) and Archith Ramkumar (on behalf of the United States Securities and Exchange Commission).

Background of the case, from the Institute for Free Speech amicus brief:

For more than fifty years, the Securities and Exchange Commission (SEC) has used the threat of debilitatingly expensive litigation to coerce defendants into accepting a lifetime ban on speech. The SEC’s Gag Rule commands that, once defendants have settled, they can never publicly challenge—or even permit others to undermine—the truth of the SEC’s factual allegations, even if those allegations are indisputably false.

The SEC’s Gag Rule is a ban not just on speech but a ban on true political speech. It imposes an eternal, viewpoint-discriminatory prior restraint on speech critical of the SEC’s enforcement regime. For a country with “a profound national commitment to the principle that debate on public issues should be uninhibited, robust, and wide-open, and that it may well include vehement, caustic, and sometimes unpleasantly sharp attacks on government and public officials,” the unconstitutionality of this policy is clear. New York Times Co. v. Sullivan, 376 U.S. 254, 270 (1964). Nonetheless, the SEC refuses to initiate a rulemaking to amend its Gag Rule.

Statement of Issues Presented, from the Petitioner’s Opening Brief:

1. Whether the Commission acted contrary to constitutional right by refusing to amend 17 C.F.R. § 202.5(e) because the rule violates First Amendment and due process rights and is against public policy.
2. Whether the Commission acted in excess of statutory authority and without observance of procedure required by law by refusing to amend 17 C.F.R. § 202.5(e), which improperly binds individuals outside of SEC.
3. Whether the Commission acted arbitrarily and capriciously when it failed to provide a reasoned explanation for denying the petition to amend 17 C.F.R. § 202.5(e).

Resources:

• CourtListener docket page for Powell, et al. v. SEC
• NCLA case page
• Petitioners’ Opening Brief
• Brief for Respondent
• Petitioners’ Reply Brief
• Institute for Free Speech amicus brief

Listen to the argument here:

The Institute for Free Speech promotes and defends the political speech rights to freely speak, assemble, publish, and petition the government guaranteed by the First Amendment. If you’re enjoying the Free Speech Arguments podcast, please subscribe and leave a review on your preferred podcast platform.