Court Tells Musk: SEC "Muzzle" Over His Tweets Stays On

A federal appeals court has rejected Elon Musk's bid to modify or end his 2018 securities fraud settlement with the US Securities and Exchange Commission that required a Tesla Inc. lawyer to approve some of his tweets in advance, Jonathan Stempel reported for Reuters.

Photo Insert: The 2nd US Circuit Court of Appeals in Manhattan rejected Musk's claim that the SEC exploited his consent decree to conduct bad-faith, harassing investigations that violated his First Amendment free speech rights under the US Constitution.

The 2nd US Circuit Court of Appeals in Manhattan rejected Musk's claim that the SEC exploited his consent decree to conduct bad-faith, harassing investigations that violated his First Amendment free speech rights under the US Constitution.

Musk's decree resolved an SEC lawsuit accusing him of defrauding investors with an Aug. 7, 2018, tweet that he had "funding secured" to take his electric car company private.

It required an advanced review of tweets that might contain material information about Tesla. Musk and Tesla each also paid $20 million in civil fines, and Musk gave up his role as chairman.

In the appeal, Musk's lawyers called the pre-approval mandate a "government-imposed muzzle" that amounted to an illegal prior restraint on his speech.

But the three-judge appeals court said SEC had opened just two subsequent inquiries into Musk's tweets, and those tweets "plausibly violated" the decree's terms. It added the SEC's "limited, appropriate inquiries, in this case, have not made compliance with the consent decree 'substantially more onerous'" for Musk.

It also said Musk chose to allow screening of his tweets, and had no right to revisit the matter "because he has now changed his mind."

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