The Securities and Exchange Commission has quietly abandoned a policy it enforced for more than half a century, one that barred people and companies from publicly disputing the terms of their own settlements with the agency. The reversal lands while the Supreme Court is actively considering whether that very practice violates the First Amendment.
The SEC disclosed the change in a brief, two-page staff statement released on May 15, 2025. The policy, first adopted in 1972, had required settling parties to agree they would not publicly deny the SEC's allegations or the facts underlying a settlement. For 53 years, anyone who cut a deal with the commission effectively signed away the right to tell their side of the story.
Under the longstanding rule, settling defendants could not deny the SEC's factual allegations or legal conclusions. They could say they neither admitted nor denied the claims, but nothing more. Any public statement contradicting the agency's version of events risked sanctions or a reopened enforcement action, as Just the News reported.
Critics had long argued the arrangement amounted to compelled silence. A defendant who believed the SEC's charges were overblown or flat-out wrong still had to keep quiet, or face consequences. The agency, meanwhile, could trumpet its enforcement wins in press releases without contradiction.
The practical effect was a one-sided public record. The SEC could characterize conduct however it wished at the time of settlement, and the settling party had no sanctioned avenue to push back in public.
The timing of the SEC's reversal is hard to separate from Cognizant Technology Solutions Corp. v. SEC, currently pending before the Supreme Court. Cognizant challenged the gag order provision as a violation of the First Amendment, arguing the government cannot condition a civil settlement on a private party's agreement to surrender its speech rights.
The case put the SEC in an uncomfortable posture. Defending a decades-old speech restriction before a Court that has grown increasingly skeptical of government constraints on expression was never going to be easy. The SEC's decision to scrap the policy before the justices rule could moot at least part of the challenge, though the Court has not yet acted on that question.
SEC Acting Chairman Mark Uyeda framed the reversal as a matter of principle. In a statement accompanying the policy change, Uyeda said the old approach raised "serious First Amendment concerns."
"The Commission's historical practice of restricting the speech of settling parties raises serious First Amendment concerns."
Uyeda added that the agency would no longer require settling parties to agree to gag provisions as a condition of resolving enforcement matters. The new posture applies going forward, though the SEC has not addressed whether parties bound by older settlements can now speak freely.
The SEC's May 15 staff statement is short on operational detail. It confirms that future settlements will not include the traditional no-deny clause. Settling parties will still be free to enter "neither admit nor deny" agreements, but the agency will no longer punish them for publicly contesting the SEC's characterization of the facts.
The statement does not explain how the change will interact with existing consent decrees. Thousands of past settlements contain the old gag language. Whether those provisions remain enforceable is an open legal question the SEC did not address.
The commission also did not say whether the change affects related restrictions, such as provisions limiting what settling parties can say in parallel litigation or to the media. Those details may emerge in future guidance or through the courts.
The gag order policy drew fire from an unusual coalition. Defense attorneys and civil liberties advocates objected that it suppressed legitimate speech. Some judges pushed back, too. In 2011, U.S. District Judge Jed Rakoff refused to approve an SEC settlement with Citigroup, calling the "neither admit nor deny" framework a disservice to the public interest because it left the factual record hollow.
Rakoff's ruling was eventually overturned on appeal, but it spotlighted a tension the SEC never fully resolved. The agency wanted the efficiency of settlements without trials. Defendants wanted to avoid admissions that could fuel private lawsuits. The gag clause served both interests in a narrow sense, but it did so by silencing the people most directly involved.
Conservative legal scholars had increasingly targeted the policy as an example of administrative overreach. The argument was straightforward: a federal agency should not be able to leverage its enforcement power to extract speech concessions that would be unconstitutional if imposed by statute.
Cognizant's petition to the Supreme Court framed the issue in terms the current Court's majority has shown sympathy toward. The company argued that conditioning settlement on a speech waiver is a form of unconstitutional conditions doctrine, the principle that the government cannot require someone to give up a constitutional right as a condition of receiving a government benefit or avoiding a government penalty.
The SEC's decision to abandon the policy before a ruling does not necessarily resolve the case. The justices could still issue an opinion establishing whether such gag provisions are constitutional, which would affect not just the SEC but potentially dozens of other federal agencies that use similar clauses in consent decrees and settlement agreements.
Investigators and enforcement attorneys across the federal government will be watching. If the Court rules broadly that speech-restricting settlement terms trigger First Amendment scrutiny, agencies from the FTC to the EPA may need to revisit their own settlement practices.
For companies and individuals facing SEC enforcement actions, the practical shift is significant. A defendant can now settle a case, pay a fine or accept an injunction, and still tell investors, customers, and the public that it disagrees with the SEC's allegations. That ability matters most in industries where an SEC enforcement action can destroy a reputation even without a trial.
The change also alters the dynamics of settlement negotiations. The old gag clause gave the SEC extra leverage: defendants who wanted to preserve their public narrative had to fight the case in court, which is expensive and uncertain. Removing that leverage may push the agency toward stronger factual records in its settlements, since it can no longer prevent the other side from publicly poking holes in the allegations.
Defense attorneys have noted that the shift could also affect parallel private litigation. Under the old regime, a plaintiff's lawyer suing a company could point to an SEC settlement and note that the defendant never denied the allegations. Without the gag clause, defendants can now publicly dispute those allegations, potentially weakening the inference that silence equals agreement.
The SEC's statement did not acknowledge that the 53-year-old policy was wrong. Uyeda's language pointed to First Amendment "concerns," not violations. The distinction matters. The agency is framing this as a forward-looking improvement, not a confession that it spent decades suppressing constitutionally protected speech.
That framing may not survive contact with the Supreme Court. If the justices take up the merits in Cognizant and rule that the old policy was unconstitutional, the SEC's careful language will look less like prudent reform and more like a last-minute retreat.
The commission's two Democratic members did not issue separate statements on the policy change. Whether the reversal commands bipartisan support within the agency or reflects the current Republican-led leadership's priorities remains unclear.
The SEC's gag order policy was one of the clearest examples of a federal agency using settlement mechanics to achieve results it could not obtain through regulation or legislation. Congress never passed a law authorizing the SEC to silence settling defendants. The agency simply made it a condition of doing business, and courts largely went along.
That model exists across the administrative state. Federal agencies routinely include speech and conduct restrictions in consent decrees that go well beyond the underlying legal violation. The SEC's retreat signals that at least one major agency recognizes the constitutional risks of that approach, whether voluntarily or because the Supreme Court forced its hand.
For conservatives who have long argued that the administrative state operates with too little constitutional accountability, the SEC's reversal is a concrete win. A rule that let a federal agency control the public narrative around its own enforcement actions, unchecked for over five decades, is gone.
Whether the Supreme Court finishes the job by establishing a clear constitutional principle, or lets the SEC's voluntary retreat stand as the final word, will determine how far this moment reaches beyond securities law.
Fifty-three years is a long time for any government agency to tell Americans they cannot speak about their own legal disputes. The fact that it took a Supreme Court case to end the practice says as much about institutional inertia as it does about the First Amendment.
