The US Securities and Exchange Commission appears to be circumventing the federal rule-making process by asking the Eighth Circuit court to rule whether the regulator had the authority to issue its climate disclosure rules, even as the current commissioners have made it clear they do not intend to defend the court’s ruling.
“The SEC seems to want to just put their head in the sand and ignore [the financial risk of climate change], to the point where they don’t even want to deal with the rulemaking process and engage with the public on these types of issues,” said Hana Vizcarra, a senior attorney at Earth Justice.
The climate disclosure rules were passed by the previous commission and would have required publicly traded companies to release information about their emissions. The rules were paused after being challenged in court on the grounds that the regulator acted outside of its authority. Under US President Donald Trump, the SEC moved to freeze the rule.
In response, the court asked the SEC to state whether it would consider reviewing or reissuing the rules or if it would still uphold the disclosure rules if upheld in court.
In a filing on 23 June, the SEC said it did not intend to review or reconsider the rules and instead asked the court to make a ruling, “including providing insights as to the Commission’s jurisdiction and authority” as such a decision “would promote an efficient resolution to the dispute”, and did not directly answer if it would uphold the rules.
Unusual legal situation
Legal experts say this is an unusual situation.
“The SEC seems to want the court to do their work for them,” said Vizcarra.
While it’s normal for regulators to change action or review rules under a change in administration, normally agencies need to go through the rulemaking process again “to make sure that it’s not illogical political whiplash,” she said. The argument that the SEC wants to avoid going back to court and save resources is moot because “that’s the procedure”.
“You don’t get to avoid having that public engagement process just because you don’t want to do it”.
The SEC went through a multi-year process with thousands of stakeholder statements on the climate disclosure rules. If the current commission wants to change the rules, it needs to go through an equally rigorous process, Vizcarra said.
Cynthia Hanawalt, head of the Sabin Center for Climate Change Law’s financial regulation practice, said it was hard to predict what the court would do in response, but doubted it would be pleased that the SEC did not respond to its questions.
“I can’t overstate how unusual it is for a federal agency to invite a court to limit its own authority,” said Hanawalt.
Under federal law, regulators must follow a specific rulemaking process and under those laws, “this is clearly the agency’s responsibility,” she added.
SEC’s lone Democrat calls out other commissioners
Caroline Crenshaw, the only Democratic SEC commissioner, objected to the SEC’s response, calling it unresponsive and saying that there is an “unspoken truth” that the current commission will not uphold its own climate disclosure rules.
“The commission simply does not want to say what we all know to be true by now — it has no intention of allowing the climate related disclosure rules to go into effect,” she wrote in her dissent.
Instead, it’s clear that the SEC is trying “to avoid its legal obligations” at the expense of court resources and “the court should decline to play [the commission’s] games,” she added.
“If this commission wants to rescind, repeal or modify the rules, which were promulgated by the book, then it must do the statutorily required work. It cannot take the easy way out,” Crenshaw said.
The SEC wrote in its response to the court that a court decision would help it decide if a reconsideration of the rules but and “the commission cannot prejudget that action” and it would demand largely on the decision of the court.
A majority of commissioners believe that the SEC did not have the auortity to issue the climate change rules and “ the court’s decision on the legal issues in the case would help determine the scope and need for further rulemaking,” the SEC wrote to the court.
Potential legal impact on future SEC commissions
At the heart of the debate is whether the SEC had the legal authority to issue the climate change rules in the first place or if it’s simply a legal ruling under the Administrative Procedure Act, which governs how agencies make rules.
The impact would depend on how the court rules. If the court makes a decision on constitutional claims, it “would probably impact the agency’s broader authority, and could limit the SEC’s ability to issue other rules. This might not even be limited to climate risk. It depends how the court frames its opinion,” said Hanawalt.
Vizcarra said if the court issued a ruling on the commission’s authority to issue a rule of this kind, it wouldn’t just be binding on the current commission, but “would be binding on any commission moving forward”.
“Exactly how much of the long-term impact will be really depends on the way they rule, how specific it is,” she said.
Although it’s clear that the US and global economies face financial risk from climate change, how those risks are accounted for in a regulatory structure depends on the interpretation of the law, Vizcarra added.
“Regardless of what happens with the rulemaking, these risks do exist, and … [if] they don’t have good exposure requirements in place, it’ll be harder for investors to manage and see those risks and detrimental to the economy overall,” she said.
This page was last updated August 11, 2025