US Appeals Court Upholds SEC Settlement, Requiring Musk’s Compliance with Tweet Approval

Elon Musk is bound by a settlement with the Securities and Exchange Commission (SEC) following an appeals court ruling, preventing him from withdrawing from the agreement reached after his 2018 tweets about securing funding to take Tesla private. The United States Second Circuit Court of Appeals in Manhattan released a summary order on Monday, confirming that Musk must seek prior approval from a Tesla lawyer for certain tweets. The court also mandated Musk and Tesla to pay civil fines related to the tweets, in which Musk falsely claimed to have “funding secured” for Tesla’s privatization at $420 per share.

The SEC settlement, stemming from Musk’s misleading tweets, aimed to prevent market disruption caused by false information. Musk challenged the lower court’s ruling, arguing that circumstances had changed and contending that the pre-approval requirement constituted a violation of the First Amendment. Musk’s legal team referred to the restriction as a “government-imposed muzzle.”

The appeals court rejected Musk’s challenge, emphasizing that he had the option to negotiate a settlement that preserved his unrestricted tweeting rights but chose not to pursue that path. The court ruled that Musk had no grounds to revisit the matter as he had changed his stance.

The court’s decision highlighted the absence of evidence supporting Musk’s claim that the SEC used the consent decree to conduct bad-faith investigations into his protected speech. The court stated that the SEC had initiated only three inquiries into Musk’s tweets since 2018, and each challenged tweet plausibly violated the terms of the consent decree.

The SEC had been investigating Musk’s November 2021 tweets, in which he asked Twitter followers if he should sell 10 percent of his Tesla stock. The regulator was examining whether these tweets violated the earlier settlement, which Musk signed after the SEC alleged that his tweets about taking Tesla private violated anti-fraud provisions of securities laws.

This latest ruling reinforces the regulatory framework in place to ensure accuracy and reliability in corporate communications, particularly on social media platforms, where influential figures can significantly impact financial markets.

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