Kokesh's attorneys argued that law should reduce the recovery of funds to just $5 million in the case brought by the Securities and Exchange Commission.
Salt Lake City attorney Brent Baker, a former SEC attorney who now represents those accused of securities violations, said the ruling was "an important decision that just checks the SEC's vast power."
While it won't impede the SEC's ability to regulate securities, he said, "the SEC has just been too brazen in its use of this loophole."
"This new decision merely puts an appropriate check in place so people being investigated or who are in a compliance capacity in the financial services world can know that after a point, they can have a good night's sleep," Baker said in an email. "It is unfair to require people to remember facts correctly or maintain documents efficiently for more than five years."
Mark Pugsley, a Salt Lake City attorney who also defends those accused of securities law violations, said he sees the biggest impact of the decision on how the SEC investigates cases, which sometime can takes years.
"This will force them to move more quickly because they can only reach back five years on disgorgement and monetary penalties," he said in an email. "So if the SEC takes too long to investigate complex cases the recovery will be limited."
But a third local attorney, Paul Moxley, pointed out that most of those who defraud investors often don't have money left to pay back by the time they're charged in court and their assets frozen. "Generally, those guys never have any money," he said, "and [regulators] never get any anything from them."
Justice Sonia Sotomayor said in her opinion that so-called "disgorgement" actions are the equivalent of penalties, which have long been considered subject to the five-year limit for collection.
Government lawyers had argued that disgorgement was not a punishment because the goal is to prevent those who break the law from being unjustly enriched. But Sotomayor disagreed, saying disgorgement can sometimes exceed the profits gained. She said it could include benefits to third parties or fail to consider expenses that reduce the amount of illegal profits.
Business and securities industry groups had argued that ruling in favor of the government would harm financial markets by creating uncertainty about the limits of potential liability for securities fraud. They said going beyond the five-year window would mean relying on stale evidence and witnesses with faded memories.
SEC spokesman Ryan White declined to comment on the ruling. The agency collected more than $4 billion in disgorgement actions and other penalties in the 2016 fiscal year.
The Associated Press contributed to this report.