CFTC scraps 30-year gag rule in free speech shift

The derivatives regulator, the Commodity Futures Trading Commission, is rescinding a 30-year rule that stopped settled parties from defending themselves publicly. According to agency announcement on Wednesday, the 1998 gag rule will be abolished immediately upon its Federal Register publication. 

Earlier criticism from conservatives centered on claims that the rule undermined defendants’ freedom of speech, a view that the CFTC appears to share. In explaining its position, the agency stated that, “The Rule directly infringes upon the First Amendment rights of Americans and works to conceal the operations of agency enforcement from the American people.”

Supporters of the rollback argue that the previous policy blurred the line between legal accountability and reputational control, effectively preventing settled parties from offering their own version of events. Moreover, critics of gag clauses have long argued that they created an imbalance in enforcement settlements, where defendants paid penalties but were also restricted from defending their reputations in public.

The New Civil Liberties Alliance had petitioned against the CFTC gag rule in 2019

Rescinding the provision harmonizes the CFTC practice with the federal majority, enhancing enforcement flexibility to preserve administrative resources, establish certainty, and accelerate victim restitution.

Director of the Division of Enforcement David Miller, noted, “Today’s action harmonizes the Commission’s settlement approach with those taken by other agencies and ensures fairer resolutions in enforcement matters.” 

CFTC Chairman Michael S. Selig, also remarked, “I am pleased that we are rescinding the no-deny policy consistent with regulators throughout the government.” 

The CFTC policy had faced no formal opposition until 2019, when the New Civil Liberties Alliance, a nonprofit legal group, petitioned to end it. The group had claimed that the rule restricts truthful expression and fails to serve the public good. It further claimed that the CFTC had no legal basis for issuing the Gag Rule. 

More recently, the group asserted that the commission had shelved their petition for months, keeping countless targets gagged during that time. It hoped that the agency would provide relief to the affected individuals.

Nevertheless, the CFTC announced Wednesday that it will not enforce no-deny clauses already embedded in existing settlements, and said it would take no action if parties violate them. 

The SEC earlier removed its 50-year-old gag rule

In May, the Securities and Exchange Commission (SEC) ended its gag rule. At the time, the agency’s Chair, Paul Atkins, stated, “Speech critical of the government is ​an important part of the American tradition,” adding that the change would allow settling defendants to publicly criticize the agency. 

The American Securities Association’s president, Chris Iacovella, applauded the shift, contending that the SEC’s former policy had undermined free expression by discouraging defendants from speaking out after settling. 

For more than five decades, the rule has prohibited settling defendants from denying allegations they chose not to admit. Reportedly, the rule was instituted to discourage any perception that the agency’s allegations were unfounded. 

However, Ben Schiffrin of the financial advocacy group Better Markets called out the SEC for implementing the rule change without public consultation. “The ​SEC should want the public to have no doubt that its sanctions are based on violations of the securities laws,” ​he said in a statement.

Prior to the rescission, the agency had resisted policy amendments. In 2024, Commissioner Hester Peirce stated that the rule was an outlier among regulators and that public denials didn’t actually cause problems. In 2017, James Valvo, Counsel & Senior Policy Advisor at Cause of Action Institute, had written a paper addressing concerns about both the SEC and CFTC gag rules. At the time, he had called for judicial intervention on the policies, though no meaningful action was taken.

In its last announcement on the rule change, the SEC stated that it does not intend to revisit prior enforcement actions if defendants breach their original no-deny provisions, even after rescission.

If you're reading this, you’re already ahead. Stay there with our newsletter.