From 1972 until last month, settlement agreements with the Securities and Exchange Commission included a unique condition: Defendants had to agree not to publicly deny the SEC’s allegations against them. If they broke this “no-deny provision,” as the SEC called it (critics preferred “gag rule”), the commission could go back to the court that oversaw the settlement agreement and reopen the case.
In 2018, the New Civil Liberties Alliance, which describes itself as “a nonpartisan, nonprofit civil rights group founded … to protect constitutional freedoms from violations by the Administrative State,” petitioned the SEC to amend the provision, contending that it violated the First Amendment’s guarantee of free speech. Five years later, and without a response from the commission, the NCLA renewed its petition, this time alongside several more challengers.
In January 2024, the SEC responded, denying the petition to amend the rule. Although one commissioner dissented, a majority concluded that the no-deny provision was both necessary and constitutional. “There is a large body of precedent confirming that a defendant can waive constitutional rights as part of a civil settlement, just as a criminal defendant can waive constitutional rights as part of a plea bargain,” they said.
The challengers appealed the SEC’s denial to the U.S. Court of Appeals for the 9th Circuit, which has the authority to consider an SEC order so long as one of the challengers lives in the region it oversees. They asserted that the no-deny rule was unconstitutional on its face and that the SEC had violated the law governing administrative procedure when it put the rule in place.
In August 2025, the 9th Circuit denied this petition for review. It echoed the SEC’s conclusion, holding that “[t]he law has long regarded the voluntary relinquishment of constitutional rights as permissible, so long as appropriate safeguards are attached.” However, it added that it did not seek to “minimize petitioners’ concerns,” and suggested that their First Amendment questions would be “properly addressed in as-applied challenges” (that is, in specific circumstances) rather than the current facial-type one.
In March, the challengers filed a petition for review with the Supreme Court, in which they urge the justices to take up the case and hold that the provision violates the First Amendment. “This ban requires Americans to take their unspoken grievances against the agency to their graves. The First Amendment prohibits that most un-American result,” they write.
The challengers describe the policy as “virtually unprecedented” and say it’s especially troubling given how common settlements are in SEC proceedings. “[T]he SEC’s enforcement actions often drag on for years. Running this gauntlet inflicts an enormous personal, financial, and reputational toll on the SEC’s targets. … The burdens are so great that 98% of those charged by the SEC—often despite vigorously asserting their innocence and objecting to the agency’s actions—are ultimately forced to capitulate through settlement.”
In May, two months after the petition for review was filed, the SEC rescinded the challenged rule, acknowledging that the policy “may have created an incorrect impression that the Commission is trying to shield itself from criticism.” U.S. Solicitor General D. John Sauer highlights this development in the SEC’s brief responding to the petition, arguing that the case is now moot. While he acknowledges that “a party cannot ‘automatically moot a case’” with a policy change, he writes that “such cessation does moot a case if the relevant practice ‘cannot reasonably be expected to recur,’” which he claims is true of the SEC’s decision.
Sauer adds that, even before the rescission of the rule, the case was not worthy of the court’s attention, because it does “not satisfy the court’s usual criteria.” Among other things, the 9th Circuit’s decision “does not conflict with any decision of this Court or another court of appeals.”
In their reply brief, the challengers contend that the rescission of the rule “tells the Court everything it needs to know about the certworthiness of the question presented. Agencies do not vacate longstanding rules the moment litigation arrives at this Court (and the Solicitor General assumes the lead), unless the government is gravely concerned about the likelihood of this Court’s review and its ability to defend those rules on the merits.” They further argue that the case is not moot, because the “government provides no meaningful assurance that a future SEC will not revive the Gag Rule.”
Powell v. Securities and Exchange Commission is expected to be considered by the justices for the first time at their private conference on Thursday.
