SKN | SEC Ends Decades-Old ‘Gag Rule’ in Major Shift for Enforcement Settlements

Key Points

• The US Securities and Exchange Commission has officially rescinded its long-standing “no-deny” settlement policy that had been in place since 1972.
• The decision allows defendants settling enforcement actions to publicly deny SEC allegations without violating settlement terms.
• The move could significantly impact future crypto-related enforcement actions and settlement negotiations under the Trump administration.

The US Securities and Exchange Commission has formally ended a controversial enforcement policy that prevented defendants from publicly denying allegations after settling cases with the agency.

The rule, commonly referred to as the SEC’s “gag rule” or “no-deny policy,” had remained in place for more than five decades since its adoption in 1972.

Under the policy, companies and individuals settling with the SEC were typically required to neither admit nor deny wrongdoing while also being prohibited from publicly challenging the agency’s claims.

The SEC announced Monday that it would rescind the rule, stating that the policy created the impression that the agency was attempting to shield itself from criticism.

SEC Chair Paul Atkins Supports Change

SEC Chair Paul Atkins welcomed the decision, describing it as an important shift toward greater openness and flexibility in enforcement settlements.

“For more than 50 years, the Commission has conditioned settlement on a defendant’s promise not to publicly deny the Commission’s allegations,” Atkins said in a statement. “I am pleased that we are rescinding the no-deny policy today.”

He added that ending the restriction removes barriers preventing settling defendants from publicly criticizing the agency or disputing allegations.

The SEC also noted that most federal agencies do not operate under a similar policy, making the change more consistent with broader federal enforcement practices.

Crypto Industry Likely to Benefit

The decision could have significant implications for the cryptocurrency industry, where many companies have previously criticized the SEC’s enforcement tactics and settlement requirements.

Numerous crypto firms settled investigations or lawsuits over recent years while simultaneously arguing that the agency’s no-deny provisions restricted their free speech rights and damaged public perception.

The change arrives as the SEC under the Trump administration has already softened or withdrawn several major crypto enforcement cases launched during former Chair Gary Gensler’s tenure.

One of the most notable examples was the SEC’s May 2025 settlement with Ripple Labs, which resolved a years-long legal battle tied to XRP sales.

Hester Peirce Praises Policy Reversal

SEC Commissioner Hester Peirce, widely viewed as one of the agency’s most crypto-friendly commissioners, also publicly supported rescinding the rule.

Peirce argued that settlements enforced through compelled silence did not support investor protection or market transparency.

She previously criticized the policy in 2024, claiming it undermined regulatory integrity during a period when the SEC dramatically increased crypto-related enforcement actions.

Under Gary Gensler’s leadership, the SEC reached a 10-year high for crypto enforcement activity in 2023, filing 46 separate actions against crypto companies and collecting approximately $281 million in settlement penalties.

Existing Agreements Will Not Be Enforced

The SEC clarified that it will no longer enforce existing no-deny provisions tied to previous settlements.

However, the agency added that it may still require certain defendants to admit liability or specific facts in some future settlements depending on the nature of the case.

The agency had already signaled plans to eliminate the policy earlier this month when it submitted its rescission proposal to the White House Office of Management and Budget.

Broader Regulatory Shift Emerging

The removal of the no-deny rule reflects a broader shift underway within the SEC under the current administration.

In recent months, the agency has increasingly emphasized regulatory flexibility, settlement efficiency and reevaluating controversial enforcement approaches tied to the crypto sector.

The policy reversal may also encourage more companies to settle investigations if they no longer face restrictions on publicly disputing allegations afterward.

For the crypto industry, the move is likely to be viewed as another sign that the regulatory climate in Washington is gradually becoming more accommodating toward digital assets and blockchain companies after years of aggressive enforcement battles.