The Second Circuit's landmark opinion in U.S. v. Newman has been a thorn in the DOJ and the SEC's side since it was handed down in December 2014. Today, the U.S. Supreme Court officially refused to accept the government's appeal in the case, meaning that the case will stand as the law of the land--or at least the law of the Second Circuit, which is the home of Wall Street and the very active U.S. Attorney's Office for the Southern District of New York.
The Newman case has made it very difficult for the government to bring cases against many tippees in insider trading cases--cases that it previously brought and prevailed in regularly. The Department of Justice appealed to the Supreme Court in late July 2015, and was hopeful that the Court would take the case. The case did not appear in a list of cases that the Court agreed to hear that was published on Thursday, however, and today the case was specifically included in a lengthy list of cases in which the Court denied certiorari. In other words: Game Over.
The U.S. had argued that the Supreme Court should take the case because the Second Circuit's opinion requiring an "exchange" to show that a tipper personally benefited (and therefore may have violated the insider trading laws) conflicted with the long-standing precedent in Dirks v. SEC. Under Dirks, the U.S. contended, a tipper's mere “gift” of inside information can be sufficient for liability.
Barring new insider trading legislation by Congress, the Newman case will continue to pose a major, often insurmountable obstacle to the government's efforts to pursue "tippees" in insider trading cases (and perhaps tippers, as well).