The Free Speech Defense Act prohibits federal agencies from directing or encouraging social media companies to remove users, label content as true or false, or share user data, except when acting pursuant to a court warrant or investigating serious crimes like child exploitation or terrorism. The bill also bans agencies from entering into partnerships with social media platforms to monitor content and prohibits federal funding for entities that classify communications as misinformation or pressure private companies to censor lawful speech. Additionally, the legislation prevents federal employees and senior officials from soliciting or accepting free or reduced-cost advertising on social media platforms, with exceptions only for natural disasters and immediate public safety threats (excluding public health emergencies). Violations by agency employees or senior officials can result in fines up to $5,000 and imprisonment up to two years, and individuals harmed by violations can sue in federal court for damages and attorney's fees. The Attorney General must report annually to Congress on agency compliance with the law for ten years following enactment.