Elon Musk and Mark Cuban have joined forces to challenge the U.S. Securities and Exchange Commission’s (SEC) practice of conducting in-house trials without juries.
The duo has presented a joint amicus brief to the Supreme Court, raising questions about the legitimacy of the SEC’s administrative proceedings and their implications for the Seventh Amendment right to a jury trial.
Musk and Cuban Challenge SEC
At the core of this challenge is the case of SEC vs. Jarkesy. Plaintiff George Jarkesy argues that his Seventh Amendment rights were violated when the agency used an internal adjudication process led by an administrative law judge appointed by the commission.
Musk and Cuban claim that this creates a scenario where a single entity acts as judge, jury, and executioner, raising concerns about impartiality and due process.
🚨NEW: Billionaires @elonmusk and @mcuban are teaming up to stand up to the @SECGov. In a joint amicus brief filed today, the pair voiced their support for the overhaul of current agency administrative proceedings that allow for the use of in-house judges to preside over cases…
— Eleanor Terrett (@EleanorTerrett) October 18, 2023
According to the brief, between 2013 and 2014, the SEC began handling more cases in-house, diverting from federal courts. This shift was prompted by unsuccessful insider trading cases before juries, signaling a change in the regulatory body’s tactics.
In April 2022, the SEC admitted to personnel wrongly accessing files in various cases, including Jarkesy’s, casting doubts on the fairness of these in-house trials.
Moreover, in July 2023, the SEC implemented new regulations requiring public companies to disclose major data breaches promptly within four days. This obligation remains even though internal control deficiencies relating to file sharing were identified in 2021 and reported one year later.
Musk and Cuban’s Appeal to the Justices
The Justice Department’s Solicitor General, Elizabeth Prelogar, argues that the 5th Circuit’s decision favoring Jarkesy was mistaken. She claims that Congress did not breach the Seventh Amendment by granting the SEC the authority to commence administrative proceedings for civil penalties.
Prelogar is urging the Supreme Court to overturn its previous ruling. On Nov. 29, the Supreme Court will review an appeal from the Biden administration, contesting the 5th U.S. Circuit Court of Appeals’ ruling in support of George Jarkesy.
Musk currently faces a lawsuit with the SEC. The regulator is seeking court involvement to demand Musk’s testimony about his takeover of Twitter, specifically focusing on his public declarations associated with the deal.
Musk and Cuban are appealing to the justices to maintain the decision of the 5th Circuit and “overturn its directive of sending back to the commission.” Their attorneys contend that opting for administrative proceedings instead of available federal court juries goes against the SEC’s mandate. Furthermore, they suggest that these choices pose a risk to investors and the markets the agency is committed to protecting.