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Biden administration urges US Supreme Court to reject Musk appeal in SEC dispute

By John Kruzel

WASHINGTON (Reuters) - President Joe Biden's administration on Friday urged the U.S. Supreme Court to turn away billionaire businessman Elon Musk's dispute with the Securities and Exchange Commission.

Musk in December asked the justices to take up his appeal after a lower court upheld his consent decree with the SEC that arose after he posted on Twitter, now called X, in 2018 that he had "funding secured" to take his electric car company Tesla private. The SEC accused Musk of defrauding investors.

Musk's agreement was part of a settlement with the SEC under which he and Tesla each paid $20 million fines, Musk gave up his role as Tesla's chairman and he agreed to let a Tesla lawyer approve some posts on Twitter. Musk bought the social media platform in 2022 and renamed it.

Musk has called the consent decree a "muzzle" on his constitutional free speech rights.

The Justice Department in its filing said that "the settlement term here was reasonably designed to minimize the likelihood that petitioner (Musk) would make future false or misleading statements in violation of the securities laws."

A three-judge panel of the Manhattan-based 2nd U.S. Circuit of Appeals rejected Musk's claim that the SEC exploited the decree to conduct harassing investigations into his use of Twitter.

In its ruling, the 2nd Circuit decided Musk could not revisit the screening of Twitter posts on grounds that he had "changed his mind." The 2nd Circuit in July 2023 denied Musk's request to rehear the case.

Musk's lawyers have said the SEC had no right to impose, as a condition of settling, a "gag rule" that they contend violated the U.S. Constitution's First Amendment constraints on governmental limits on free speech. In his December court filing, Musk's lawyers told the justices that authorizing the SEC to require that Musk gain pre-approval for certain social media posts had handed the agency "intolerable power."

In a separate legal action related to Musk, the New Orleans-based 5th U.S. Circuit Court of Appeals has agreed to reconsider its March decision that Musk violated federal labor law by posting on Twitter in May 2018 that Tesla employees would lose stock options if they joined a union. The 5th Circuit heard arguments in the case in January.

(Reporting by John Kruzel in Washington; Additional reporting by Andrew Chung in New York; Editing by Will Dunham)