Disgorgement Secured: How SCOTUS’s SEC Ruling Reshapes Enforcement Strategy and Settlement Leverage

The Supreme Court Hands the SEC a Critical Victory on Its Most Potent Remedy

In a decision that will reverberate through every securities enforcement action for the foreseeable future, the U.S. Supreme Court on June 4, 2026, rejected a constitutional challenge to the Securities and Exchange Commission’s broad authority to recover illegal profits through disgorgement. The ruling, reported by Reuters, reinforces what has long been the agency’s most powerful—and most feared—remedial weapon.

For practitioners who have watched the Court methodically constrain the administrative state over the past several terms—from West Virginia v. EPA to Loper Bright Enterprises v. Raimondo—this decision lands as something of a surprise. It suggests that whatever appetite the Roberts Court has for curbing agency power, it draws a line at remedies that look like traditional equitable relief. That distinction matters enormously for how defense counsel should be advising clients right now.

The Road to This Moment: From Kokesh to Liu to Today

To understand why this ruling is significant, you have to trace the doctrinal arc. In Kokesh v. SEC, 581 U.S. 455 (2017), the Court held that SEC disgorgement constitutes a “penalty” for purposes of the five-year statute of limitations under 28 U.S.C. § 2462. That decision sent shockwaves through the enforcement bar because it implicitly questioned whether disgorgement—long understood as an equitable remedy rooted in the court’s inherent authority—was actually something else entirely.

Then came Liu v. SEC, 591 U.S. 71 (2020), where the Court affirmed that disgorgement is permissible equitable relief under 15 U.S.C. § 78u(d)(5), but only when it does not exceed a wrongdoer’s net profits and is awarded for victims. Justice Sotomayor’s opinion imposed meaningful constraints: the SEC had to deduct legitimate business expenses and could not simply order wrongdoers to pay over gross receipts.

The 2026 ruling builds on—and arguably strengthens—the Liu framework. By rejecting the latest constitutional challenge, the Court has effectively closed the door on arguments that disgorgement exceeds the SEC’s statutory authority or violates separation-of-powers principles. The practical result? The SEC’s Division of Enforcement just got a green light to continue seeking—and courts will continue awarding—substantial monetary relief in virtually every enforcement action.

Why This Matters for Your Practice

First, settlement leverage just shifted decisively toward the government. Defense counsel who have been counseling clients to hold out on the theory that disgorgement might be constitutionally vulnerable need to recalibrate. That argument is dead. The SEC knows it, and your adversaries at the Division of Enforcement will price their settlement demands accordingly. Expect disgorgement figures in settlement offers to remain aggressive, particularly in cases involving offering fraud, insider trading, and Ponzi schemes where the “net profits” calculation from Liu still leaves plenty of room for eye-popping numbers.

Second, the interplay with the SEC’s new settlement policy on denials creates a genuinely new negotiating dynamic. As Reuters reported on May 18, 2026, the SEC ended its longstanding practice of requiring settling parties to stay silent about the agency’s allegations, now permitting public denials of wrongdoing in settled matters. Read together with the disgorgement ruling, this creates an interesting calculus: defendants may be more willing to write large checks if they can simultaneously tell the world—and their investors, their boards, their customers—that they did nothing wrong. The SEC gets its money; the defendant gets to fight another day in the court of public opinion. Whether this trade-off actually benefits defendants in the long run is debatable, but it unquestionably changes the texture of settlement negotiations.

Third, expect the SEC to deploy disgorgement more aggressively in its newly announced examination priority areas. The agency’s October 2026 announcement that artificial intelligence, private assets, and tokenized securities would be key examination focuses for the current fiscal year takes on added significance when paired with a secure disgorgement remedy. Cases involving AI-washing—where companies overstate their artificial intelligence capabilities to attract investors—are particularly well-suited to disgorgement claims, as are enforcement actions targeting undisclosed conflicts in private fund management. The tokenized securities space, where Wells Fargo, Intuit, and others have already objected to their shares being tokenized without authorization, presents fertile ground for the SEC to test the outer limits of its disgorgement authority in novel contexts.

The Broader Constitutional Context: An Agency Power Anomaly?

Here’s what makes this ruling genuinely puzzling from a doctrinal perspective: it arrives at a moment when the Supreme Court has been systematically dismantling the administrative state’s foundations. The same Court that ended Chevron deference in Loper Bright, that embraced the major questions doctrine in West Virginia v. EPA, and that has shown deep skepticism toward agency adjudication in cases like SEC v. Jarkesy, 603 U.S. 109 (2024)—which held that the Seventh Amendment requires jury trials for SEC civil penalty actions—has now turned around and fortified the agency’s ability to extract massive monetary recoveries through equitable channels.

The apparent inconsistency resolves itself if you understand the Court’s project not as anti-regulatory but as formalist. Disgorgement, properly cabined within Liu’s constraints, looks like traditional equity. Civil penalties imposed by administrative law judges without juries do not. The Court is not shrinking the SEC’s power so much as channeling it into forms that have historical analogues. For practitioners, this means the fight over SEC enforcement has shifted from whether the agency can extract money to how it must go about doing so—and the answer, increasingly, is through federal court actions where equitable remedies remain robust.

What Comes Next

Watch for three developments in the coming months. First, expect an uptick in SEC enforcement actions filed in federal district court rather than through administrative proceedings—a trend that Jarkesy accelerated and this ruling will cement. Second, look for creative arguments from defense counsel about what constitutes “net profits” under Liu, particularly in cases involving complex financial instruments or digital assets where the line between legitimate business expenses and ill-gotten gains is genuinely blurry. Third, monitor whether Congress responds. The disgorgement authority upheld here rests on judicial interpretation of statutory text; a motivated Congress could expand or contract it, and in the current political environment, neither outcome would be surprising.

The bottom line for practitioners: the SEC’s enforcement arsenal remains formidable, and the constitutional challenges that once offered a glimmer of hope have been extinguished. Advise your clients accordingly.