The Supreme Court is Answering Easy Questions

The Supreme Court’s case selection reveals a hesitancy to tackle major securities law issues.

“Counsel, assume you’re losing … you’re really quite wrong about the first principles.” These comments were among the nicer reflections about Ongkaruck Sripetch’s case during oral argument. Thus, it did not surprise anyone, even Daniel Geyser, Sripetch’s counsel before the Court, that the justices unanimously ruled against Sripetch in Sripetch v. Securities & Exchange Commission. The outcome was a foregone conclusion from the very first question asked by the Court’s most reluctant question-asker, Justice Clarence Thomas, and it all went downhill from there for Sripetch.

As the Court recounted in its opinion, Mr. Sripetch ran at least 20 classic pump-and-dump schemes in which he acquired shares in penny-stock companies, promoted them, and finally sold his shares to unwitting investors at artificially inflated prices. This is a federal crime, for which he was sentenced to serve 21 months in prison. When the U.S. Securities and Exchange Commission also sued him seeking more than $4.1 million in disgorgement of his ill-gotten gain, Sripetch argued that the Court’s decision in Liu v. Securities & Exchange Commission barred the Commission from ordering him to pay disgorgement unless it proved that investors suffered financial losses.

There is indeed a strained reading of Liu that supports Sripetch’s argument; the U.S. Court of Appeals for the Second Circuit actually held that showing pecuniary harm to victims was a prerequisite for ordering disgorgement. But the U.S. Courts of Appeals for the First and the Ninth Circuits disagreed, reasoning that disgorgement is a profit-based measure of unjust enrichment. The purpose of disgorgement is to prevent wrongdoers from profiting from their wrongdoing, not to compensate harm, so long as there are victims whose legally protected interests were violated.

Circuit splits are not ideal, but there are numerous circuit splits that remain unaddressed for years, and people learn to live with them. The Second Circuit decision was pretty obviously wrong, so the risk was low that other circuits would follow that court’s incorrect analysis instead of the appropriate understanding of equity law adopted by the First and the Ninth Circuits.

Unlike other appellate courts, which must hear all appeals within their jurisdiction, the U.S. Supreme Court chooses which cases to hear. In October 2025 term, during which Sripetch was argued, it was one of only 68 cases that the Court chose to hear on the merits. So why did the Court decide to hear this one rather inconsequential case instead of any of the thousands that it did not? There are two reasons, one narrower and one broader, that explain the Court’s strange decision to hear Sripetch.

First, the Court’s opinion in Liu created unnecessary confusion by employing loose language. Sripetch was an opportunity to explain without ambiguity what the Court had meant in Liu and thus signal to the legal profession that the Court understands the law of equitable remedies and unjust enrichment. In recent terms, the Court has been pushed to make consequential, precedent-changing decisions, including Dobbs v. Jackson Women’s Health Organization, Loper Bright Enterprises v. Raimondo, and most recently, Trump v. Slaughter. The final arbiter of American law should, at a minimum, get the law right. Obvious legal errors in securities law and equity jurisprudence risk undermining the Court’s more consequential decisions. So the Court had to return to the question of disgorgement and speak clearly.

Second, Sripetch is a case so straightforward that the Court was going to decide it correctly despite its lack of subject matter expertise. In A History of Securities Law in the Supreme Court, Adam Pritchard and Bob Thompson observe that the Court’s securities docket in recent decades lacks engagement and expertise. They observe that the questions the Court has selected for review in recent decades have been “generally of less significance, sometimes bordering on trivial.” They highlight the remarkable number of cases resolving statute of limitations issues related to SEC civil penalties and disgorgement orders, instead of meatier securities law matters. The Court’s more successful recent securities decisions have been unanimous but exceedingly narrow, such as Macquarie Infrastructure v. Moab, where the Court assumed away more difficult questions. But even nominally straightforward decisions, such as Liu and Kokesh v. Securities and Exchange Commission, both introduced genuine questions of securities law via careless dicta. Kokesh, another unanimous decision in 2017, included a footnote that was not necessary to decide the case but generated a lively discussion about the legality of disgorgement and produced significant uncertainty until it was finally resolved by Congress four years later.

Understanding that it lacks relevant subject matter expertise, the Court has agreed to take only the easy securities cases it believes it can decide correctly. It decides them narrowly and, if possible, unanimously. It decides issues that most reasonable and well-informed securities lawyers do not perceive as significant, consequential, and deserving of the Court’s attention. Thus understood, hearing Sripetch makes perfect sense. But parties who hope that the Court might resolve important securities law questions should prepare for a long wait.