SEC rescinds defendant ‘gag rule’ when settling enforcement actions

The US Securities and Exchange Commission has rescinded a long-standing rule that barred settling parties in enforcement actions from denying the agency’s allegations.

The SEC said on Monday it scrapped the rule, adopted in 1972, as it gave the impression that the agency was “trying to shield itself from criticism,” and doing so now aligned it with “the overwhelming majority of federal agencies that do not have a similar rule.”

“For more than 50 years, the Commission has conditioned settlement on a defendant’s promise not to publicly deny the Commission’s allegations. I am pleased that we are rescinding the no-deny policy today,” SEC Chair Paul Atkins said. “This rescission ends the policy prohibiting such criticism by settling defendants.”

With the so-called “gag rule” gone, the SEC said it has “more flexibility in settling enforcement actions.” Under the Trump administration, the SEC has settled or abandoned multiple high-profile crypto enforcement cases it started under the Biden administration, its most notable being its $50 million settlement with Ripple Labs in May 2025.

Paul Atkins, pictured speaking at Bitcoin 2026 last month, said he supported scrapping the SEC’s gag rule. Source: YouTube

According to the rule’s text, the SEC created it because it did not want to give the impression that it was imposing sanctions when alleged conduct did not occur, and it believed that refusing to admit its allegations was equivalent to a denial, unless a settling party stated that they neither admitted nor denied the allegations.

The agency had informed the White House earlier this month that it planned to scrap the rule, submitting a plan to rescind it to the Office of Management and Budget.

The SEC said it won’t enforce existing no-deny provisions, but it may continue to require some defendants to admit to facts or liability when settling.

Dozens of crypto companies have settled lawsuits with the SEC in recent years and have criticized the rule as a restriction on their right to free speech.

SEC Commissioner Hester Peirce said in a statement that she supported scrapping the rule, adding that “settlements shrouded in forced silence by the non-governmental party do not serve either the markets or the Commission’s investor-protection mission.”

Peirce had criticized the rule in early 2024, saying it “undermines regulatory integrity,” amid a slew of crypto-related lawsuits the SEC launched under former chair Gary Gensler.

The agency’s crypto-related enforcement actions hit a 10-year high in 2023, with 46 actions against crypto firms and $281 million in penalties collected from settlements.