The Securities and Exchange Commission said Thursday it will challenge a federal judge’s rejection of the agency’s $285 million fraud settlement with Citigroup.

The agency is asking an appeals court to overturn the decision by U.S. District Court Judge Jed S. Rakoff in Manhattan.

In rejecting the deal, Rakoff argued that the penalty amounted to mere pocket change for Citigroup and that he had no basis to assess whether it was appropriate because the firm neither admitted nor denied wrongdoing.

The SEC routinely settles cases on that basis, and the judge’s refusal to accept the Citigroup settlement threatened this standard way of doing business.

In a statement Thursday, SEC enforcement director Robert Khuzami said Rakoff’s position was “at odds with decades of court decisions that have upheld similar settlements by federal and state agencies across the country.”

Requiring an admission of guilt from defendants “could in practical terms press the SEC to trial in many more instances, likely resulting in fewer cases overall and less money being returned to investors,” Khuzami said.

The decision to appeal is a gamble for the SEC. If the agency loses, what is now one judge’s position would become the legal standard for other judges in the judicial circuit that encompasses Manhattan and much of the regulatory agency’s corporate and Wall Street litigation.

Citigroup was accused of misleading clients about a 2007 investment tied to subprime mortgages.

Some “apologists” may favor “suppressing or obscuring the truth,” Rakoff wrote in his November ruling. “But the S.E.C., of all agencies, has a duty . . . to see that the truth emerges; and if it fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency’s contrivances.”

The judge ordered the two sides to be ready for a July trial.

Khuzami countered Thursday that the settlement would put money back in the pockets of harmed investors “without years of courtroom delay and without the twin risks of losing at trial or winning but recovering less than the settlement amount.”