Elon Musk loses at Supreme Court in case over “funding secured” tweets

Elon Musk frowns while sitting on stage during a conference interview.
Enlarge / Elon Musk speaks at the Satellite Conference and Exhibition on March 9, 2020 in Washington, DC.

Getty Images | Win McNamee

The US Supreme Court today rejected Elon Musk’s attempt to terminate his settlement with the Securities and Exchange Commission.

Musk appealed to the Supreme Court in December 2023, claiming the settlement he agreed to in 2018 forced him to “waive his First Amendment rights to speak on matters ranging far beyond the charged violations.” The SEC settlement requires Musk to get pre-approval from a Tesla securities lawyer for tweets or other social media posts that may contain information material to the company or its shareholders.

The Supreme Court decided not to hear the case, leaving an appeals court ruling against Musk intact. The top court denied Musk’s petition without comment Monday morning in a list of orders.

The SEC brought a securities fraud charge against Musk after his August 2018 tweets stating, “Am considering taking Tesla private at $420. Funding secured” and “Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote.”

The SEC said the tweets were false and misleading because “Musk had not even discussed, much less confirmed, key deal terms, including price, with any potential funding source,” and he “knew that he had not satisfied numerous additional contingencies.” Musk’s tweets caused Tesla’s stock price to jump by over 6 percent and harmed investors by causing “significant confusion and disruption in the market for Tesla’s stock,” the SEC alleged.

Musk claimed “economic duress”

Musk claimed he was the victim of “economic duress” when he agreed to the settlement and that the SEC “weaponized” the deal in order to “muzzle and harass Mr. Musk and Tesla.” In addition to the clause requiring pre-approval of tweets, the settlement required Musk and Tesla to each pay $20 million in penalties and forced Musk to step down from his board chairman post.

A US District Court judge rejected Musk’s attempt to get out of the settlement in April 2022. A three-judge panel at the US Court of Appeals for the 2nd Circuit unanimously ruled against Musk in May 2023. The appeals court later denied Musk’s request for an en banc rehearing in front of all the court’s judges.

The 2nd Circuit panel ruling dismissed Musk’s argument that the settlement is a “prior restraint” on his speech, writing, “Parties entering into consent decrees may voluntarily waive their First Amendment and other rights.” The judges also saw “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.”

Musk’s petition to the Supreme Court said the case presents the constitutional question of whether “a party’s acceptance of a benefit prevents that party from contending that the government violated the unconstitutional conditions doctrine in requiring a waiver of constitutional rights in exchange for that benefit.

SEC: Settlement designed to prevent securities violations

The SEC urged the Supreme Court to reject Musk’s petition in a March 2024 filing. The Supreme Court “has consistently held that, in resolving litigation, parties may choose to waive even fundamental constitutional rights,” the SEC said.

The Musk settlement “was reasonably designed to minimize the likelihood that petitioner would make future false or misleading statements in violation of the securities laws,” the SEC wrote. Musk’s reply brief filed a few weeks ago claimed that the agency’s “arguments highlight the need for review. In effect, the SEC argues that the Constitution imposes no limits on its authority to extract demands in its settlements.”

Although Musk lost all attempts to terminate the settlement, he persuaded a jury in February 2023 to reject a class-action lawsuit filed by Tesla investors who claimed the tweets caused $12 billion in losses.

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