Elon Musk and Mark Cuban’s Legal Challenge to SEC Trials – Supreme Court to Examine SEC’s In-House Trials

In a significant legal development, high-profile individuals Elon Musk and Mark Cuban have joined forces to file an amicus brief in support of George Jarkesy in the case of SEC v. Jarkesy.

Their legal representatives submitted the brief to the Supreme Court, contending that the current administrative proceedings at the Securities and Exchange Commission (SEC) yield unequal results for SEC defendants and infringe upon their right to jury trials as outlined in the Seventh Amendment of the Constitution.

The crux of the matter revolves around the use of in-house judges in cases brought by the SEC, raising constitutional concerns. George Jarkesy, the plaintiff in this case, alleges that the SEC’s internal, juryless adjudication procedure, overseen by commission-appointed administrative law judges, violates his rights under the Seventh Amendment, effectively leading to a trial by judge, jury, and executioner.

Elon Musk, the CEO of X (formerly known as Twitter), finds himself embroiled in his third significant case against the financial regulator, with this one centering on his purchase of Twitter and the public statements and disclosures made in connection with the acquisition.

The amicus brief, notably on page 10, highlights a recurring pattern between 2013 and 2014 when the SEC shifted more cases from federal courts to internal proceedings. This shift occurred as a response to a series of jury trial losses in insider trading cases.

The Supreme Court is set to hear the Biden administration’s appeal on November 29, contending that if the Jarkesy decision is not overturned, it could have “massive” repercussions across the federal government.

This follows the admission by the SEC in April 2022 that its employees had improper access to privileged materials meant for the Commissioners but inaccessible to enforcement staff in administrative proceedings.

The appeals court subsequently ruled in May 2022 that Jarkesy’s right to a jury trial was indeed infringed, marking a notable development in this legal saga.

The amicus brief submitted by Musk and Cuban highlights the SEC’s recent admission of improper access by its enforcement personnel to privileged documents, which were intended solely for the Commissioners.

Elizabeth Prelogar of the Justice Department argues that the 5th Circuit’s decision erred in its assertion that Congress violated the Seventh Amendment by authorizing the SEC to initiate administrative proceedings seeking civil penalties.

Musk and Cuban are now urging the Supreme Court to support the 5th Circuit’s decision and reverse its order of remand to the Commission. This high-stakes legal battle is poised to shape the landscape of SEC enforcement and the rights of defendants in administrative proceedings.