"When should knowing lies be restrictable on the ground that they cause emotional distress?"

Eugene Volokh paraphrases the question the Supreme Court Justices were asking yesterday, as they considered whether the Stolen Valor Act violates the First Amendment. Volokh opines:

[T]he potential chilling effect on true speech of punishing the lies about oneself (a matter on which one should rarely fear an honest mistake that could be misinterpreted as a deliberate lie) is less than the potential chilling effect on true speech of punishing lies about others. So this is one of the things that leads me to think that the Stolen Valor Act should be upheld....