In 2013 the SEC brought action against Jarkesy and Patriot28 alleging that the firm had committed fraud under the Securities Act of 1933, the Securities Exchange Act, and the Investment Advisers Act of 1940. The SEC ordered Jarkesy and his company Patriot28 pay a $300,000 civil penalty, and ordered Patriot28 to disgorge $685,000 in “ill-gotten gains.”

Jarkesy and Patriot28 appealed to the U.S. Court of Appeals for the Fifth Circuit, in New Orleans. The Fifth Circuit ruled in favor of Jarkesy and Patriot28, emphasizing the right to trial by jury as, in John Adam’s words, “the heart and lungs of liberty.” The SEC appealed the decision to the Supreme Court and asked it to review the three constitutional issues in late November.

The Supreme Court majority opinion held that “when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial.​” In the opinion, Chief Justice John G. Roberts Jr. describes the decision as “straightforward” and writes, “A defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator.” The argument had additional issues, but because the answer to the Seventh Amendment question resolves the case, the Court said it did not have to address the remaining issues.

In dissent, Justice Sonia Sotomayor stated, “The majority did not need to break any new ground to resolve respondents’ Seventh Amendment challenge. This Court’s longstanding precedent and established government practice uniformly support the constitutionality of administrative schemes like the SEC’s: agency adjudications of statutory claims for civil penalties brought by the Government in its sovereign capacity.”

In response to the ruling, SEC Enforcement Director, Gurbir Grewal, stated, “The SEC will continue to protect investors and enforce the federal securities laws, including by filing actions in federal court. Indeed, during the last several years, the SEC has successfully enforced the federal securities laws in federal court, obtaining favorable jury verdicts and dispositive motion rulings in highly contested matters with industry-wide implications. We are reviewing today’s ruling and its impact on the SEC’s administrative proceedings.”

In favor of the ruling, Peggy Little, with the New Civil Liberties Alliance, stated, “This is a day to rejoice!The Supreme Court’s restoration of Americans’ constitutional guarantee of a right to be tried by a jury of their peers marks a historic declaration of independence from decades of encroachments by the Administrative State.”