Musk loses SEC appeal in ‘Twitter sitter’ dispute

By Bob Van Voris | Bloomberg

A federal appeals court rejected Elon Musk’s challenge to his 2018 agreement with the US Securities and Exchange Commission that requires him to have his Twitter posts about Tesla screened.

The Manhattan court on Monday ruled against Musk’s free speech claims just days after a three-judge panel heard arguments in the case on Thursday.

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Musk, Tesla’s chief executive officer and now the owner of Twitter, had claimed that the agreement with the SEC violated the First Amendment to the US Constitution and that the agency was harassing him. The court quickly rejected those arguments in a seven-page order.

“We see no evidence to support Musk’s contention that the SEC has used the consent decree to conduct bad-faith, harassing investigations of his protected speech,” the panel said, upholding a lower-court ruling from last year.

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Musk may ask for a review of the case by the full appeals court or ask the US Supreme Court to take up the case.

“We will seek further review and continue to bring attention to the important issue of the government constraint on speech,” Alex Spiro, a lawyer for Musk, said in an email.

Musk has been battling with the SEC over his social media posts since he tweeted in 2018 that he had “funding secured” to take Tesla private, sending shares of the electric car maker surging. The regulator sued, claiming Musk and Tesla had misled shareholders.

The two settled with the SEC, each paying $20 million and agreeing to a consent decree providing that Musk’s Tesla-related tweets would be reviewed by an in-house lawyer before he posts them.

The SEC has inquired three times about Musk’s Twitter posts, including the 2018 tweet, the court said. The regulator also sought documents related to a 2019 tweet misstating Tesla production figures and a 2021 Twitter poll in which Musk proposed selling 10% of his Tesla stock.

“Each tweet plausibly violated the terms of the consent decree,” the court said in its ruling Monday.

Last year US District Judge Lewis Liman refused to release Musk from the deal and end his “Twitter sitter” requirement, saying the CEO was “simply bemoaning that he felt like he had to agree to it at the time” and now “wishes that he had not.” Liman also denied Musk’s effort to block an SEC subpoena seeking information on his tweets.

The case is US Securities and Exchange Commission v. Musk, 22-1291, 2nd US Circuit Court of Appeals (Manhattan).

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