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Musk Calls SEC Censorship 'Unconstitutional,' Asks Judge To Dismiss Contempt Charge

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Musk Calls SEC Censorship 'Unconstitutional,' Asks Judge To Dismiss Contempt Charge

Tesla Inc (NASDAQ: TSLA) CEO Elon Musk has never been one to take hits lying down. In response to accusations by the Securities and Exchange Commission that he violated their fraud settlement, Musk cried foul.

"The Securities and Exchange Commission's request that Musk be held in civil contempt for a single, immaterial tweet that dutifully complied with [a court-ordered settlement] is incorrect on the facts and on the law," his lawyers said in a late Monday court filing.

What Happened

In February, the SEC moved to hold Musk in contempt of court. Under their fall settlement, Tesla lawyers were supposed to monitor all Musk’s tweets deemed material to the stock, but they didn’t review a Feb. 19 tweet about production projections. Today, they maintain such oversight was unnecessary.

“The tweet was simply Musk’s shorthand gloss on and entirely consistent with prior public disclosures detailing Tesla’s anticipated production volume,” Tesla lawyers wrote in the court response. “Moreover, it is clear from the context of the tweet that it was celebratory and forward-looking—a type of statement that courts have concluded is immaterial as a matter of law.”

Musk’s team accused the SEC of “trampling” on First Amendment rights in a strategy that “smacks of retaliation and censorship.”

“Undeterred, and perhaps embarrassed by Musk’s criticism of it, the SEC urges the court to read and apply the order in an unconstitutional manner,” they wrote.

Why It’s Important

Tesla traded down 1.5 percent Tuesday morning, although its risks of losing the legal battle are yet unknown. The SEC has not proposed a punishment for Musk, and some say his role as CEO remains secure.

Regardless of the immediate consequences, Musk may remain a subject of SEC scrutiny for some time. The pair have long feuded over their respective boundaries, and Musk continues to provoke the regulator’s ire even after the contempt filing.

U.S. District Judge Alison Nathan will rule on the SEC’s contempt motion, but the stakes for Musk remain unclear.

Tesla's stock closed Monday at $290.92 per share.

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