Understanding Elon Musk's Long, Fraught Relationship With Regulators
Recently, Tesla CEO Elon Musk said it would be "awesome" if the Securities and Exchange Commission investigated his tweets promoting the meme-based cryptocurrency Dogecoin for possible issues.
"I hope they do! It would be awesome," tweeted Musk in late February. He was replying to unconfirmed reports that he might be facing regulatory scrutiny for his ongoing praise of the digital coin.
If this sounds familiar, it should. Elon Musk has a long, fraught history with regulators, on nearly every front of his multi-industry empire.
Elon Musk's long, fraught relationship with regulators
Musk's Dogecoin tweets on January 28 caused the price to surge four-fold in four hours, and later tweets — with one saying "on the actual moon," caused Dogecoin to jump 25%.
The billionaire even bought some for his young son, X Æ A-Xii, and then tweeted about it.
"Bought some Dogecoin for lil X, so he can be a toddler hodler," tweeted the tech CEO. It's difficult to underestimate how baffling this would have been just a few years ago, but Elon Musk's bold and public commentary — in seeming defiance of the idea of regulation — goes back years.
Way back in 2018, before Musk gained and lost the title of the richest person in the world, he liked to tweet about Tesla stocks. "Am considering taking Tesla private at $420. Funding secured," tweeted the billionaire before making a formal statement on the all-electric automaker's website. In the following statement, Musk said a tally of the shareholder vote was needed before a final decision could be reached. Yet he tweeted the opposite, claiming investor support was confirmed.
'I do not respect the SEC,' said Elon Musk
Suffice to say it's not completely bizarre for the SEC to take interest in Musk's tweets. In 2018, the agency sued him after he said he'd amassed sufficient funding to take Tesla private — arguing that the tech CEO wasn't as close to financing the deal as he claimed.
Specifically, the lawsuit said Musk made "false and misleading statements" in August, and the SEC sought to bar Musk from being a director or officer of a public company. He replied that he was "deeply saddened and disappointed" by the agency's lawsuit, which he said was "unjustified," according to a Business Insider report.
The schism ended with both parties reaching a settlement in September of 2019, according to which the Tesla CEO had to leave his position as chairman of Tesla's board of directors for three years — in addition to paying a $20 million fine.
Musk neither confessed nor denied the allegations of the lawsuit, opting instead to make fun of the agency. "Just want to [say] that the Shortseller Enrichment Commission is doing incredible work," tweeted Musk, nicknaming the agency. "And the name change is so on point!"
Months after the settlement, Musk revived the issue during an interview with 60 Minutes: "I wanna be clear," said Musk to the show's correspondent Lesley Stahl, "I do not respect the SEC. I do not respect them."
Then in February of 2019, Musk tweeted a projection about Tesla's vehicle production — saying the company would make roughly 500,000 all-electric cars in 2019, after a fourth-quarter earnings letter from Tesla that said it foresaw the delivery of roughly 360,000 and 400,000 vehicles that year.
Musk and SEC arguments circle around 'free speech,' and 'market regulation,' respectively
Musk then corrected the earlier projection with another tweet, claiming Tesla would finish 2019 with a rate of production that would reach roughly 500,000 — if the new rate happened, and continued.
The SEC said this was a violation of the terms of Musk's settlement with the agency — since he hadn't received approval from Tesla before tweeting about vehicle production. The agency then asked a judge to hold Musk in contempt of the court that had approved the two-party settlement.
This led to a legal battle between the SEC and Musk's attorneys — the latter of whom said of the agency's limits on Musk's Tesla tweets: "Such a broad restraint would violate the First Amendment," according to a Business Insider report. Regardless, the SEC maintained the tweet was a "blatant violation" of the previous settlement.
Needless to say, Elon Musk's fraught relationship with the SEC didn't improve in the intervening years. In July 2020, Musk tweeted that the middle initial of "SEC" stands for "Elon's."
Musk has also criticized the FAA, saying it's essentially obsolete in the era of private aerospace companies like SpaceX. "[T]he FAA space division has a fundamentally broken regulatory structure," tweeted Elon Musk about the agency's oversight of SpaceX Starship tests. "Their rules are meant for a handful of expendable launches per year from a few government facilities. Under those rules, humanity will never get to Mars."
And, judging from Musk's enthusiastically "free market" approach to comments surrounding the GameStop stock squeeze saga, we almost certainly haven't seen the last of Musk, the SEC, and other regulators butting virtual heads about where the market begins, and free speech ends.
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