Supreme Court Unanimously Expands SEC Disgorgement Power

The U.S. Supreme Court unanimously upheld the SEC's authority to seek disgorgement of ill-gotten gains without proving investors suffered pecuniary loss, resolving a three-year circuit split in JD Supra a June 4, 2026 decision written by Justice Neil Gorsuch in *Sripetch v. Securities and Exchange Commission* (No. 25-466).

What Changed

The 9–0 ruling clarified that disgorgement is a remedy focused on stripping unjust enrichment from wrongdoers, not compensating victims for measurable harm. The Court rejected the Second Circuit's 2023 *Govil* standard, which had required proof that victims suffered quantifiable losses. Under the new standard, the SEC need only demonstrate that a defendant obtained illegal gains—regardless of whether any particular investor can document a dollar-for-dollar loss Angel Investors Network.

The decision resolved a split between the First and Ninth Circuits (which required no proof of loss) and the Second Circuit (which did), creating nationwide uniformity in how federal courts handle SEC disgorgement actions JD Supra.

Regulatory Impact

SEC General Counsel Russel McGranahan stated: "Disgorgement will remain an important part of the commission's renewed emphasis on combating fraud." The agency must still calculate net profits correctly and direct funds toward victims, but no longer needs a "victim-by-victim loss ledger" to proceed LaVelle Law.

The ruling applies immediately. On June 18, 2026—two weeks after *Sripetch*—a federal judge ordered a defendant charged with scalping and market manipulation to disgorge $1.26 million in trading profits, citing the Supreme Court's new standard Holland & Knight.

Unresolved Questions

Justice Thomas issued a concurring opinion laying groundwork for future litigation over whether disgorgement orders require a jury trial under the Seventh Amendment, signaling that another constitutional challenge may be coming PBWT.

Scope for Enforcement

The ruling applies broadly to securities fraud schemes and illegal securities conduct. While the Court did not address AI-specific fraud in the decision, the strengthened authority over unjust gains removal expands SEC leverage in any enforcement action involving digital or automated misconduct that generates illegal proceeds.