Elon Musk Asks Appeals Court to End 2018 SEC Deal & Restore His Constitutional Right to Freedom of Speech

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Elon Musk asked a federal appeals court to throw out a deal he made with the U.S. Securities and Exchange Commission in 2018. The head of Tesla is seeking to regain his constitutional right to freedom of speech.

A 2018 deal with SEC required a Tesla lawyer to review all of Elon Musk's company-related tweets before they are posted. He has already applied to the court with a request to terminate the deal and return to him his legal right to freedom of speech, which was violated by the agreement. However, US District Judge Lewis Liman in April refused to release Musk from the deal and lift the requirement that his tweets be reviewed by a lawyer before being posted.

“The pre-approval provision is a classic prior restraint that the Constitution forbids: a government-imposed muzzle on Mr. Musk’s speech before it is made,” Musk’s lawyers said in papers to the 2nd US Circuit Court of Appeals in Manhattan, according to BNN Bloomberg. “The effect of the provision is to inhibit and chill Mr. Musk's lawful speech.”

The 2018 deal, was following an investigation into Musk's tweets, over a Tesla buyout. In April 2022, during his talk at Technology Entertainment and Design (TED) in Vancouver, he gave some details of the case. The head of Tesla said that funding for his company's privatization was actually secured at the time he posted his tweets in the summer of 2018. However, the SEC continued an active public investigation, which harmed the company significantly. Thus, under pressure, Musk was forced to give in to the SEC.

The complexity of the situation was that the banks began to threaten to stop providing capital to Tesla if Musk did not agree to the SEC settlement, which would immediately make the company bankrupt. Creating a company from scratch, investing so much time and effort into it, and completely sacrificing personal life for this, it was unacceptable. Musk raised Tesla like a child, because the company had an important mission ahead. Under such tremendous psychological pressure, he felt compelled to settle with the SEC.

“So that's like having a gun to your child's head,” Musk said. “I was forced to admit that I lied to save Tesla’s life and that’s the only reason,” he added.

The deal was that Musk and Tesla each had to pay $20 million, and the CEO agreed that all of his Tesla-related tweets would be cheked before he published them.

In his April decision, Liman ruled that Musk waived his constitutional right to free speech enshrined in the first amendment. Musk's lawyers denied this in their appeal brief.

“Mr. Musk could not possibly have known the circumstances and consequences of the pre-approval provision because the provision applies to future speech about circumstances no one could anticipate in advance,” his lawyers wrote. But even if he did waive his rights, such a waiver is invalid and unenforceable they said.

© 2022, Eva Fox | Tesmanian. All rights reserved.

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