The ruling, written by Justice Anthony Kennedy, ordered that the conviction be thrown out.
"Though few might find respondent's statements anything but contemptible, his right to make those statements is protected by the Constitution's guarantee of freedom of speech and expression. The Stolen Valor Act infringes upon speech protected by the First Amendment," Kennedy said.
The high court has in recent years rejected limits on speech. The justices struck down a federal ban on videos showing graphic violence against animals and rejected a state law intended to keep violent video games away from children. The court also turned aside the attempt by the father of a dead Marine to sue fundamentalist church members who staged a mocking protest at his son's funeral. In 1989, the court said the Constitution protects the burning of the American flag.
Justices Samuel Alito, Antonin Scalia, and Clarence Thomas dissented in the Alvarez case.
"These lies have no value in and of themselves, and proscribing them does not chill any valuable speech," Alito said. "By holding that the First Amendment nevertheless shields these lies, the court breaks sharply from a long line of cases recognizing that the right to free speech does not protect false statements that inflict real harm and serve no legitimate interest."
Alvarez made his claims by way of introducing himself as an elected member of the Three Valleys Municipal Water District in Pomona, Calif. There is nothing to suggest that he received anything in exchange or that listeners especially believed him.
The government had defended the law as necessary to punish impostors to protect the integrity of military medals.
"It kind of blows my mind," said B.G. "Jug" Burkett, the Vietnam veteran whose 1998 book, Stolen Valor, inspired the law. "The Medal of Honor! The vast majority of the people who were awarded that were killed in action in the service of their country, and we can't protect that decoration from disrespect?"
But Justices Stephen Breyer and Elena Kagan said in a separate opinion that there were ways for the government to stop liars "in less restrictive ways." One possibility would be to "insist upon a showing that the false statement caused a specific harm or at least was material, or focus its coverage on lies most likely to be harmful or on contexts where such lies are most likely to cause harm," Breyer said.
Civil liberties groups, writers, publishers, and news media outlets, including the Associated Press, told the justices they worried that the law, and especially the administration's defense of it, could lead to more attempts by government to regulate speech.
Gen. George Washington established military decorations in 1782, seven years before he was elected the first president.
It long has been a federal crime to wear unearned medals, but mere claims of being decorated were beyond the reach of law enforcement. The Stolen Valor Act aimed to solve that problem, and won significant support in Congress during a time of war.