Elon Musk, CEO and majority shareholder of Tesla, has lost another bid to terminate a 2018 settlement with the U.S. Securities and Exchange Commission (SEC) that imposes oversight on his Tesla-related tweets. The 2nd U.S. Circuit Court of Appeals in Manhattan dismissed Musk’s argument that the consent decree from 2018 amounts to a “prior restraint” on his speech. The court panel, consisting of three judges, ruled on Monday that Musk had the option to challenge the SEC’s charges but chose not to do so.
The settlement agreement, which resulted from Musk’s infamous “funding secured” tweet, included several provisions, one of which required a Tesla lawyer to review some of Musk’s tweets related to the company. In addition to stepping down as chairman of Tesla, Musk agreed to pay a $20 million fine, while Tesla itself was fined $20 million for failing to establish adequate disclosure controls and procedures for Musk’s tweets.
Although the settlement was intended to resolve the issue, Musk’s tweets continued to draw scrutiny from the SEC. A tweet in which Musk inaccurately stated that Tesla would produce around 500,000 cars that year led to a dispute, and the SEC sought to hold Musk in contempt for violating the settlement. Ultimately, an agreement was reached in April 2019, allowing Musk to use Twitter with certain limitations and avoiding further contempt charges.
In 2022, Musk’s legal team sought to end the 2018 consent decree, arguing that the SEC had abused it by launching excessive investigations into Musk’s speech, infringing on his First Amendment right to free speech. However, U.S. District Judge Lewis Liman denied the motion, leading Musk’s lawyers to appeal the ruling, which brought the case to the 2nd U.S. Circuit Court of Appeals.
With this recent decision, the court has upheld the settlement agreement, reinforcing the oversight requirements for Musk’s Tesla-related tweets. Despite the setback, Musk still enjoys the freedom to use Twitter for personal expression, except when it involves certain events or financial milestones, for which he must seek pre-approval from a securities lawyer, as stipulated in the agreement.
