What the SEC Gave Up to Win Its Supreme Court Disgorgement Case

The US Supreme Court’s decision in Sripetch v. SEC might read like a clean government win. All nine justices held that the Securities and Exchange Commission need not prove investors lost money before it strips a wrongdoer of his profits.

But disgorgement, which brought the SEC more than $6 billion in fiscal 2024, is now firmly tied to the law of equity, and the opinion twice flags limits worth pressing. Defense counsel who treat the decision as the last word on investor harm will miss the more important point.

The opinion lays out, in some detail, where the SEC is now exposed.

Built for Narrowness

What the Supreme Court refused to decide is telling. The question was whether the SEC must show pecuniary loss to obtain disgorgement. Justice Neil Gorsuch, writing for the court, said no and went no further, leaving for another day the larger question of what Congress’s 2021 codification of disgorgement did to the remedy’s scope.

That reservation matters, because the SEC had asked for a great deal more. The agency argued that the new statute frees it from Liu v. SEC’s rule that disgorged funds be “awarded for victims” and lets the government “resume its former practice of keeping disgorgement awards for itself.”

The court wouldn’t go there. Instead, it issued a warning that defense counsel should keep close at hand. If the government tries to “use §78u(d)(7) to secure penalties,” Gorsuch wrote, “it would of course proceed beyond what Liu held §78u(d)(5) tolerates,” and “it would invite other questions too. See, e.g., SEC v. Jarkesy.”

That citation was no throwaway. Jarkesy held that when the SEC seeks penalties, the Seventh Amendment guarantees a jury trial. The justice who wrote Sripetch is the same one who, concurring in Jarkesy, drew the line between equity and the jury right. He carried that line into the disgorgement context and invited the agency to test it.

The Next Case

Justice Clarence Thomas said outright at what Gorsuch only hinted: “In a future case, we should recognize that disgorgement is now a legal remedy for which the Seventh Amendment requires a jury trial.”

His argument is textual, and it’s not easy to answer. Since 2021, he noted, the Exchange Act “twice distinguishes between disgorgement and equitable remedies.” It places disgorgement in its own subsection, separate from §78u(d)(5)’s equitable relief, with its own statute of limitations. If disgorgement were just a form of equitable relief, those provisions wouldn’t do anything.

The SEC’s own figures point the same way. In 2024, Thomas wrote, the SEC “obtained orders to disgorge $6.1 billion, while it returned only $345 million to victims.” A remedy that takes in roughly $18 for every dollar it gives back is, in his words, “difficult to see … as anything other than a fines regime.”

This isn’t a lone view. US courts of appeals have divided over whether statutory disgorgement is legal or equitable, with the Fifth Circuit on one side in SEC v. Hallam and the Second Circuit on the other in SEC v. Ahmed. “We will soon need to address” the question, Thomas wrote.

SEC’s Own Problem

This is where the decision turns in the defense’s favor. The SEC won by insisting that disgorgement is equitable. Equity, though, comes with conditions, and the first of them is that the money goes back to the people who were wronged.

A court, Gorsuch wrote, “must choose between two status quos,” and “equity traditionally prefers” stripping the wrongdoer over letting him keep his gains. An agency that sweeps nine-figure sums into the US Treasury and calls it restitution isn’t doing equity any favors.

That leaves the SEC with a problem it created. Every dollar it collects and doesn’t return to investors becomes evidence that the remedy is really a penalty, and a penalty carries the jury-trial and procedural protections the agency has spent roughly 50 years avoiding.

The SEC’s own lawyer all but admitted the bind at argument, saying the government “would rather be in a situation where we can get disgorgement but may have to go through a jury trial to get it than … can’t get it at all.” The SEC already has priced in the loss it’s trying to forestall.

Defense Counsel Actions

The loss for the defense bar isn’t the end of the conversation—it moves it. Four actions follow from the opinion:

Preserve the Seventh Amendment. In any matter where the SEC seeks disgorgement that it won’t return to investors, demand a jury trial and put Thomas’s argument on the record. A jury cuts both ways, but the right to demand one is leverage the SEC never has had to account for, and the objection is gone if you don’t raise it.

Litigate the distribution plan. Liu’s “for victims” requirement came through Sripetch untouched. Make the SEC show how, and to whom, it intends to distribute. When it can’t, you have the record you need to recast an equitable remedy as a legal one.

Contest the question the Supreme Court left open. Sripetch rested on the defendant’s concession that his victims’ “legally protected interests” had been invaded. In a books-and-records or registration-only case—where no investor’s “legally protected interest” was invaded—the court left the SEC’s authority unsettled. It reserved whether the agency can disgorge for violations that invade no investor’s protected interest at all, such as internal-controls or reporting-only counts. In a genuinely victimless case, that is the place to fight.

Discipline the number. The SEC conceded that disgorgement reaches only the net profits causally connected to the violation. That concession outlives the win. Press the causal connection and the profit calculation, because the ceiling is lower than the SEC’s opening demand suggests.

The SEC kept its most valuable remedy by embracing the one area of law that limits it. Equity handed the SEC its victory and a set of obligations to go with it. As Gorsuch put to the agency’s lawyer at argument: If you want the equitable remedy, “you’ve got to behave.” The numbers—roughly 18 to one—suggest the SEC hasn’t been behaving. The work for defense counsel over the next few terms is to hold the agency to the bargain it just made.

The case is Sripetch v. Securities and Exchange Commission, U.S., No. 25-466, 6/4/26.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Ashwin J. Ram is a partner and co-chair of Buchalter’s white collar and investigations practice, and a former assistant US attorney in the Major Frauds Section.

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