June 28, 2012  -- The Supreme Court struck down the Stolen Valor Act today, saying that the First Amendment defends a person's right to lie -- even if that person is lying about awards and medals won through military service.

The case started in 2007 when California man Xavier Alvarez was convicted under the Stolen Valor Act of 2006 -- federal legislation that made it illegal for people to claim to have won or to wear military medals or ribbons they did not earn. Alvarez had publicly claimed to have won the country's highest military award, the Medal of Honor, but was later revealed to have never served in the military at all.

WATCH: Supreme Court Looks at Stolen Valor Act

Alvarez was sentenced to three years probation, a $5,000 fine and community service, but he and his lawyer appealed the decision, saying that the Stolen Valor Act is unconstitutional -- essentially that it violates a person's right to lie.

"The Stolen Valor Act criminalizes pure speech in the form of bare falsity, a mere telling of a lie," Alvarez's attorney, Jonathan Libby said in February. "It doesn't matter whether the lie was told in a public meeting or in a private conversation with a friend or family member."

An appeals court agreed and called the Stolen Valor Act "facially unconstitutional."

In its argument before the Supreme Court, the government said that such specific lies fall under a special category of speech that is not protected by the First Amendment -- when the speech could do harm.

"False claims make the public skeptical of all claims to have received awards, and they inhibit the government's efforts to ensure that the armed services and the public perceive awards as going only to the most deserving few," the government said.

VOTE: Protecting Medal of Honor Imposters, What's Your Verdict?

In its 6-3 decision, the Supreme Court justices said today that as written, the act is too broad and ignores whether the liar is trying to materially gain anything through his or her false statement, which would be more akin to fraud.

"The Act by its plain terms applies to a false statement made at any time, in any place, to any person," Justice Anthony Kennedy said in his written opinion. "… [T]he sweeping, quite unprecedented reach of the statute puts it in conflict with the First Amendment. Here the lie was made in a public meeting, but the statute would apply with equal force to personal, whispered con¬versations within a home."

"Permitting the government to decree this speech to be a criminal offense, whether shouted from the rooftops or made in a barely audible whisper, would endorse govern¬ment authority to compile a list of subjects about which false statements are punishable," he said.

According to several veterans well acquainted with false war stories, claiming you're a medal-winner can be "more than just lying."

"It's not the barroom loudmouth that anyone is interested in," said Don Shipley, a former SEAL who has been given unique access to the SEAL personnel database so he can root out fakers. "People tend to believe what they're told, they use that... They do an awful lot of damage."

Brandon Webb, another former SEAL and founder of the special operations website SOFREP.com, agreed with Shipley that the law was important for going after more than the occasional barstool liar.

Webb told ABC News in February it especially angered him "seeing people take advantage of unknowing good people who are trusting in their story, [people who] use people to get money out of them, get positions."

"Nothing fires me up more than running into these phony Navy SEALs and knowing that I lost over a dozen friends that sacrificed for their country and now these guys are out there trying to take credit," Webb said.

READ: Stolen Valor 'More Than Just Lying,' SEAL Watchdog Says

ABC News' Ariane de Vogue contributed to this report.

Click here to return to The Blotter homepage.