The Supreme Court on Thursday dealt a blow to the powers of the Securities and Exchange Commission in a case that challenged the constitutionality of its enforcement proceedings on 7th Amendment grounds.
The 6—3 opinion by Chief Justice John Roberts held that individuals who are facing civil penalties by the SEC can seek to move their case into a federal trial court and be tried by a jury, rather than be forced to have their cases weighed by in-house administrative law judges.
The case, Jarkesy v. SEC, involved a Texas-based hedge fund manager and conservative talk radio host, Jarkesy, who the SEC alleges inflated the value of some of his assets and made false claims, which he denies. The SEC prosecuted him through its internal, juryless adjudication process in which an SEC-appointed administrative law judge weighed the validity of the evidence against him, which Jarkesy said violated his 7th Amendment right to a jury trial.
Jarkesy previously achieved favor from the U.S. 5th Circuit Court of Appeals in a 2022 ruling when the court held that the SEC’s in-house proceedings violated the constitutional right to a jury trial and tore through presidential and constitutional powers.
During oral arguments, Chief Justice John Roberts said he thought it was “curious” that federal agencies such as the SEC appeared to exert more leverage on daily life than in the past, a position that a majority of the court appeared to agree with in some capacity.
“The government is much more likely to affect you or proceed against you in one of its own agencies than it is in court,” he at the time. “It does seem to me to be curious that, and unlike most constitutional rights, that you have that right [to a jury trial] until the government decides it doesn’t want you to have it. That doesn’t seem to me the way the Constitution traditionally works.”
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Justices have already decided one case this year concerning expansive federal regulatory powers in a challenge to the Consumer Financial Protection Bureau‘s funding mechanism, deciding by a 7-2 vote to reject a challenge to the agency’s direct funding from the Federal Reserve.
This is a developing story and will be updated.