Why Everyone is Suing the SEC Now — SEC Roundup
Welcome to SEC Roundup, a bimonthly video series by former Securities and Exchange Commission senior trial counsels Nick Morgan and Tom Zaccaro, founders of the nonprofit advocacy group Investor Choice Advocates Network.
Market participants are increasingly abandoning the decades-old "settle-and-move-on" playbook in favor of high-stakes litigation against the SEC.
This shift is driven by a new cost-benefit reality where the probability of judicial victory is rising and the traditional reputational risks of fighting the regulator are reaching historic lows.
For most of its history, the SEC operated with what Vanderbilt Law Professor Amanda Rose calls "de facto power" — a vast influence built not through formal laws, but through "soft" regulatory levers like no-action letters and safe harbors. These mechanisms allowed the agency to micromanage the capital markets while avoiding the transparency and accountability requirements of the Administrative Procedure Act.
Because the SEC holds immense discretion to help or hinder a firm's business, market participants historically viewed the "reputational cost" of suing the agency as too high to bear. Compliance, even with prescriptive and informal guidance, was simply the rational business choice.
According to Rose's research, that calculation has flipped due to a "perfect storm" of institutional and judicial changes. The most visible driver is a shifting judiciary. Recent Supreme Court precedents — such as the overturning of Chevron deference in Loper Bright Enterprises v. Raimondo and the curbing of the SEC's in-house tribunals in SEC v. Jarkesy — have stripped the agency of its "home court advantage" and significantly increased the "probability of victory" for challengers.
Furthermore, cases like Axon Enterprise Inc. v. FTC and SEC v. Cochran have cleared the path for firms to take constitutional grievances directly to federal court without first enduring years of expensive agency proceedings.
See the video above for the discussion. You can find Vanderbilt Law Professor Amanda Rose's recent paper here: Suing the SEC.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
