Richard Manfredi, Author at Gibson Dunn

Europe

28/05/2025

European Data Protection Board | Agenda | GDPR Simplification

The European Data Protection Board (EDPB) has published the agenda of its 106th plenary session, including discussions on a request for a joint opinion with the European Data Protection Supervisor (EDPS) on the European Commission’s draft proposal for the simplification of record-keeping obligations under Article 30(5) of the GDPR.

This follows a letter addressed by the EDPB and the EDPS to the European Commission on the upcoming proposal, expressing preliminary support for the proposed simplification. However, the EDPB and EDPS asked the Commission to better assess the impact on affected organizations and to ensure a fair balance between data protection and business interests.

For more information: Agenda of the 106th EDPB Meeting, Joint Letter

19/05/2025

European Digital Rights | Open Letter | Reopening of GDPR

The European Digital Rights (“EDRi”) and 107 other civil society organisations published an open letter calling on the European Commission not to reopen the GDPR.

The EDRi expresses concerns about ongoing efforts to reopen the GDPR, considering that this could make the regulation more vulnerable to broader deregulatory demands. It also points to the geopolitical context and the influence of foreign commercial and political actors on the EU digital regulatory landscape.

For more information: EDRi Website

16/05/2025

European Data Protection Board | Letter | In-Car Video Cameras and Dashcams

The European Data Protection Board (“EDPB”) published a letter in response to an inquiry from a member of the European Parliament outlining concerns on the growing use of in-car video cameras and dashcams.

The EDPB recalled that it has already issued relevant guidelines, in particular guidelines on processing of personal data through video devices, which are complemented by guidance and communication adopted by national data protection authorities.

For more information: EDPB Website

16/05/2025

European Supervisory Authorities | DORA | Registers of Information

The European Supervisory Authorities (“ESAs”) updated the Observations from reporting of Registers of Information (“ROI”) under the Digital Operational Resilience Act (DORA).

Originally published on April 16, 2025, the observations provide an overview of common issues identified in the reporting of the ROI and provide explanations of the most common errors.

For more information: EBA Website

07/05/2025

European Commission | Formal Requests | NIS 2 Directive

The European Commission has issued formal requests to 19 Member States to fully transpose the NIS2 Directive into national law.

As a reminder, the deadline for transposition was October 17, 2024. Member States – such as France, Germany, the Netherlands – now have two months to take the necessary measures. Failure to comply may result in referral to the Court of Justice of the European Union.

For more information: European Commission Website

06/05/2025

European Data Protection Board | Opinion | UK Adequacy Decisions

The European Data Protection Board (“EDPB”) adopted an opinion on the European Commission’s proposal to extend the validity of the UK adequacy decisions under the GDPR and the Law Enforcement Directive, which will expire on June 27, 2025.

The EDPB opinion acknowledges the need for an extension due to the ongoing data protection reform in the UK. However, it does not address the level of protection in the UK, which will be evaluated by the EDPB if new draft adequacy decisions are proposed.

For more information: EDPB Website

Denmark

15/05/2025

Danish Supervisory Authority | Guidance | Cookies

The Danish Supervisory Authority (“Datatilsynet”) and the Danish Agency for Digital Government have issued joint guidelines on cookies and similar technologies.

The guidelines are intended to help website and app providers comply with both the Danish Cookie Order and the GDPR. They clarify consent requirements, highlight common compliance pitfalls, and provide practical recommendations for implementing compliant practices.

For more information: Datatilsynet Website [DA]

France

22/05/2025

French Supervisory Authority | Fines | Simplified Procedure

The French Supervisory Authority (“CNIL”) announced ten new sanctions issued under its simplified procedure, totaling €104,000.

The majority of the cases involved employee monitoring, specifically through video surveillance and the geolocation of company vehicles. The CNIL found various breaches, including failure to comply with the principles of data minimization and storage limitation. In one instance, a company was fined for insufficient password policy and poor management of access rights to its video surveillance system.

For more information: CNIL Website [FR]

06/05/2025

French Supervisory Authority | Guidance | Augmented Cameras at Self-checkouts

The French Supervisory Authority (“CNIL”) published guidance on the use of augmented cameras at self-checkouts.

The CNIL explains how augmented cameras function, and clarifies that the data processed cannot be considered anonymous since individuals can be re-identified. In addition, it considers that legitimate interest is a possible legal basis, provided that the use of such cameras is necessary for the intended purpose and does not disproportionately infringe on individuals’ rights.

For more information: CNIL Website [FR]

05/05/2025

French Council of State | CJEU Referral | Consent and Direct Marketing

A French media and entertainment company has appealed to the French Council of State (“Conseil d’Etat”) to annul a fine of €60,000 imposed by the French Supervisory Authority (“CNIL”) for conducting marketing campaigns without valid consent.

In 2023, the CNIL found that the company had run marketing campaigns using personal data obtained from internet service providers, which had collected such data via consent forms referring vaguely to “partners” without naming them. The CNIL concluded the company processed this data without obtaining an informed consent, which the company challenged before the Conseil d’Etat. To resolve the dispute, the Council has referred to the Court of Justice of the European Union the question of whether a data subject’s consent – given to a primary collector for use by unnamed “partners” – constitutes valid consent, or whether each recipient, if not identified at the time of collection, must obtain separate consent before using the data for marketing purposes.

For more information: Conseil d’Etat Website [FR]

02/05/2025

French Parliament | Transposition | Representative Actions Directive

France has transposed the EU Directive 2020/1828 on representative actions for the protection of collective interests of consumers through Law No. 2025-391 of 30 April 2025, published in the Official Journal on May 2, 2025.

The new framework strengthens consumers’ ability to seek collective redress by establishing a unified regime for representative actions, replacing the previous sector-specific approach.

For further information: Official Journal [FR]

Germany

05/20/2025

Federal Commissioner for Data Protection and Freedom of Information | AI Questionnaire

The Federal Commissioner for Data Protection and Freedom of Information (BfDI) has published a questionnaire providing guidance on the data protection-compliant implementation of AI.

The questionnaire is intended to help controllers assess data protection-related topics when implementing AI-systems. It includes core questions companies should evaluate when operating AI systems including on the legal basis for data processing, the differentiation between controller and processor, and the general compliance with principles relating to processing of personal data.

For more information: BfDI Website [DE]

05/20/2025

Hesse and Brandenburg Supervisory Authorities | Annual Activity Reports

The Hesse as well as the Brandenburg supervisory authorities (HBDI and LDA) published their annual activity reports.

The reports include assessments regarding the lawfulness of advertising practices, in particular on the practice that web shops send out electronic reminders to consumers whether they would like to finish their purchase. When visitors to a web shop select one or more goods, start the ordering process, including entering their e-mail address, and then cancel the order during the process and leave the web store without concluding a purchase then advertising (such as a reminder about their purchase) may only be sent to these persons under certain conditions. The HBDI concludes that such an electronic reminder constitutes advertising and is generally only permitted with express consent within the meaning of Article 6(1)(a) GDPR in conjunction with Section 7 of the Federal Act against Unfair Competition (UWG).

For more information: HBDI Website [DE]

03/19/2025

Administrative Court of Hannover | Judgement | Cookie Banners

In a recently published decision, the Administrative Court of Hannover (VG Hannover) stated again that a cookie consent banner must contain the option to reject all cookies.

According to the court, websites must include a clearly visible “Reject All” button on the first level of cookie consent banners if they offer an “Accept All” option, reinforcing users’ data protection rights. The court found that manipulative banner designs using misleading labels, and hiding key information, violate the GDPR and the Telecommunications-Digital Services Data Protection Act (TDDDG).

For more information: LfD Website [DE]

Italy

19/05/2025

Italian Supervisory Authorities | Fine | AI Chatbot

The Italian Supervisory Authority (“Garante”) fined a company operating an AI-powered chatbot €5 million for multiple GDPR violations.

The Garante found that the company had not identified a valid legal basis for processing, failed to provide sufficient information in its privacy policy, and did not implement effective age verification mechanisms.

For more information: Garante Website

07/05/2025

Italian Supervisory Authority | Fine | Telemarketing

The Italian Supervisory Authority (“Garante”) imposed a €3 million fine on a gas and electricity provider and €850,000 on other companies for unlawful telemarketing practices.

The Garante noted that the companies operated within a network of procurement of energy supply contracts. It concluded that they engaged in promotional phone calls without individuals’ consent, and did not implement adequate security measures to ensure that such activities complied with data protection regulations.

For more information: Garante Website [IT]

05/05/2025

Italian Supervisory Authority | Public Consultation | Consent or Pay Model

The Italian Supervisory Authority (“Garante”) launched a public consultation to assess the lawfulness of “Consent or Pay” model.

As a reminder, the “Consent or Pay” model requires users whether to consent to the processing of their personal data or to agree to paid subscription in order to access online content, services or features. The consultation more specifically focuses on newspaper publishers. Stakeholders can contribute until June 28, 2025.

For more information: Garante Website [IT]

Spain

26/05/2025

Spanish Supervisory Authority | Annual Report | 2024

The Spanish Supervisory Authority (“AEPD”) published its 2024 annual report.

The AEPD received 18,855 complaints in 2024, primarily concerning video surveillance, online services, commerce, transport and hospitality. The authority issued 281 resolutions, which included administrative fines totaling over €35,5 million. Data breaches accounted for 37% of the total fines (€13.18 million).

For more information: AEPD Website [ES]

07/05/2025

Spanish Supervisory Authority | FAQs | Chatbot

The Spanish Supervisory Authority (“AEPD”) has implemented a virtual assistant on its website to facilitate the quick resolution of common questions related to data protection and privacy.

According to the AEPD, the chatbot handles more than 3,000 questions per month and maintains a user satisfaction rate of nearly 80%.

For more information: AEPD Website [ES]

Sweden

19/05/2025

Swedish Supervisory Authority | Guidance | Customer Data Sharing Between Banks

The Swedish Supervisory Authority (“IMY”) published a report on the sharing of customer data between banks in order to combat money laundering, terrorist financing and fraud.

The report was prepared in collaboration with Swedish banks as part of IMY’s regulatory sandbox initiative. The IMY highlights the need for a legislative change to enable effective data sharing in the sector.

For more information: IMY Website [SW]

United Kingdom

19/05/2025

National Cyber Security Centre | Guidance | Cybersecurity for Organizations

The National Cyber Security Centre (“NCSC”) has released “Top Tips for Staff”, an e-learning package to help organizations address common cybersecurity challenges.

The training covers essential topics such as using strong passwords, securing devices, recognizing phishing attempts, and reporting security incidents. It is particularly aimed at supporting SMEs, charities and the voluntary sector.

For more information: NCSC Website

13/05/2025

Information Commissioner’s Office | Consultation | Encryption

The Information Commissioner’s Office (“ICO”) has opened a consultation on its draft updated guidance on encryption.

The draft guidance focuses on the relationship between encryption and data protection and concentrates on data storage and data transfer as the primary use cases for encryption. The consultation remains open until June 24, 2025.

For more information: ICO Website

07/05/2025

National Cyber Security Centre | Code of Practice | Software Security

The National Cyber Security Centre (“NCSC”) and the Department for Science, Innovation and Technology (“DSIT”) have published the Software Security Code of Practice, a voluntary framework for technology providers.

The code establishes a baseline for cybersecurity expectations across the software industry. It provides a framework to help organizations to measure their progress and includes practical guidance for software vendors.

For more information: NCSC Website

02/05/2025

Information Commissioner’s Office & National Cyber Security Centre | Statement | Cyber Incidents Impacting Retailers

The Information Commissioner’s Office (“ICO”) and the National Cyber Security Centre (“NCSC”) have issued statements on recent cyber incidents impacting retailers.

The ICO confirmed that it has received reports from impacted retailers and sent enquiries to these organizations. Meanwhile, the NSCS stated that it is working closely with them to provide support and mitigate the impact of the incidents.

For more information: ICO Website and NSCS Website

The following Gibson Dunn lawyers prepared this update: Ahmed Baladi, Vera Lukic, Kai Gesing, Joel Harrison, Thomas Baculard, Ioana Burtea, Billur Cinar, Hermine Hubert, Christoph Jacob, Yannick Oberacker, Clémence Pugnet, and Phoebe Rowson-Stevens.

Gibson Dunn lawyers are available to assist in addressing any questions you may have about these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Privacy, Cybersecurity & Data Innovation practice group:

Privacy, Cybersecurity, and Data Innovation:

United States:
Abbey A. Barrera – San Francisco (+1 415.393.8262, abarrera@gibsondunn.com)
Ashlie Beringer – Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)
Ryan T. Bergsieker – Denver (+1 303.298.5774, rbergsieker@gibsondunn.com)
Keith Enright – Palo Alto (+1 650.849.5386, kenright@gibsondunn.com)
Gustav W. Eyler – Washington, D.C. (+1 202.955.8610, geyler@gibsondunn.com)
Cassandra L. Gaedt-Sheckter – Palo Alto (+1 650.849.5203, cgaedt-sheckter@gibsondunn.com)
Svetlana S. Gans – Washington, D.C. (+1 202.955.8657, sgans@gibsondunn.com)
Lauren R. Goldman – New York (+1 212.351.2375, lgoldman@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Natalie J. Hausknecht – Denver (+1 303.298.5783, nhausknecht@gibsondunn.com)
Jane C. Horvath – Washington, D.C. (+1 202.955.8505, jhorvath@gibsondunn.com)
Martie Kutscher Clark – Palo Alto (+1 650.849.5348, mkutscherclark@gibsondunn.com)
Kristin A. Linsley – San Francisco (+1 415.393.8395, klinsley@gibsondunn.com)
Timothy W. Loose – Los Angeles (+1 213.229.7746, tloose@gibsondunn.com)
Vivek Mohan – Palo Alto (+1 650.849.5345, vmohan@gibsondunn.com)
Rosemarie T. Ring – San Francisco (+1 415.393.8247, rring@gibsondunn.com)
Ashley Rogers – Dallas (+1 214.698.3316, arogers@gibsondunn.com)
Sophie C. Rohnke – Dallas (+1 214.698.3344, srohnke@gibsondunn.com)
Eric D. Vandevelde – Los Angeles (+1 213.229.7186, evandevelde@gibsondunn.com)
Benjamin B. Wagner – Palo Alto (+1 650.849.5395, bwagner@gibsondunn.com)
Frances A. Waldmann – Los Angeles (+1 213.229.7914,fwaldmann@gibsondunn.com)
Debra Wong Yang – Los Angeles (+1 213.229.7472, dwongyang@gibsondunn.com)

Europe:
Ahmed Baladi – Paris (+33 1 56 43 13 00, abaladi@gibsondunn.com)
Patrick Doris – London (+44 20 7071 4276, pdoris@gibsondunn.com)
Kai Gesing – Munich (+49 89 189 33-180, kgesing@gibsondunn.com)
Joel Harrison – London (+44 20 7071 4289, jharrison@gibsondunn.com)
Lore Leitner – London (+44 20 7071 4987, lleitner@gibsondunn.com)
Vera Lukic – Paris (+33 1 56 43 13 00, vlukic@gibsondunn.com)
Lars Petersen – Frankfurt/Riyadh (+49 69 247 411 525, lpetersen@gibsondunn.com)
Christian Riis-Madsen – Brussels (+32 2 554 72 05, criis@gibsondunn.com)
Robert Spano – London/Paris (+44 20 7071 4000, rspano@gibsondunn.com)

Asia:
Connell O’Neill – Hong Kong (+852 2214 3812, coneill@gibsondunn.com)
Jai S. Pathak – Singapore (+65 6507 3683, jpathak@gibsondunn.com)

Attorney Advertising: These materials were prepared for general informational purposes only based on information available at the time of publication and are not intended as, do not constitute, and should not be relied upon as, legal advice or a legal opinion on any specific facts or circumstances. Gibson Dunn (and its affiliates, attorneys, and employees) shall not have any liability in connection with any use of these materials. The sharing of these materials does not establish an attorney-client relationship with the recipient and should not be relied upon as an alternative for advice from qualified counsel. Please note that facts and circumstances may vary, and prior results do not guarantee a similar outcome.

A recent decision of the Delaware Court of Chancery addressed complex issues that often recur in purchase price adjustment disputes.

In a June 2, 2025 decision, Northern Data AG v. Riot Platforms, Inc.,[1] the Delaware Court of Chancery addressed points of contractual tension that tend to arise when purchase price adjustment provisions are tested in litigation.

Background:

Riot Platforms, Inc., a Bitcoin mining company (Buyer), acquired Whinstone US, Inc., a data center company, from Northern Data AG (Seller), for a mix of stock and cash, with the cash portion subject to a purchase price adjustment (PPA) under the Stock Purchase Agreement (SPA). The SPA provided that any disputes regarding the PPA would be resolved by an independent “Accounting Expert.” The SPA further required that the Accounting Expert’s decisions be rendered “in accordance with GAAP, in a manner and in accordance and consistent with the Illustrative Closing Statement and pursuant to the terms of this Agreement.” Separately, the SPA provided for indemnification as the exclusive remedy for breaches of representations and warranties (with limited exceptions), subject to a cap on indemnifiable damages.

After closing, the parties submitted four main disputed PPA items to the Accounting Expert, who sided with Buyer on all counts. Seller sued to vacate the Accounting Expert’s determinations, arguing that (i) in the case of two items, the Accounting Expert failed to comply with the SPA by applying solely a GAAP standard to the exclusion of Seller’s historical accounting practices as reflected in the Illustrative Closing Statement, and (ii) in the case of the other two items, the Accounting Expert exceeded his authority by resolving claims that should properly be considered indemnification claims for breaches of representations and warranties, rather than PPA matters.

Key Holdings and Implications:

Hierarchy of GAAP and Illustrative Statement

The Court found that the SPA created a hierarchy whereby the Accounting Expert was obligated to apply GAAP as the primary standard. If GAAP allowed for multiple approaches, the Accounting Expert was required to determine the GAAP-compliant approach most consistent with the Illustrative Closing Statement. However, if GAAP allowed for only one approach and the Illustrative Closing Statement was noncompliant with the permitted methodology, the Accounting Expert had to apply the approach that complied with GAAP for PPA purposes. The Court agreed with the Accounting Expert that GAAP only allowed for a single approach with respect to the accounting items at issue, which approach was not compatible with the Illustrative Closing Statement. The Court upheld the Accounting Expert’s determination, as the SPA provided that his resolution would be final and binding absent manifest error, and he had not committed such error in his assessment under GAAP.

Two additional points are worthy of note. First, the SPA contained a definition of “Closing Target Company Indebtedness,” which was relevant to the disputed items. “Closing Target Company Indebtedness” was defined as Target Company Indebtedness as of closing “as determined in a manner in accordance and consistent with the Illustrative Closing Statement.” The relevant definition did not incorporate GAAP, thus creating a potential internal discrepancy with the Accounting Expert’s review standard. Second, the Court noted via dicta in a footnote that requiring the PPA to comply with GAAP “can protect the buyer by providing ‘a contractual basis to challenge [an] additional payment’ where the seller’s historical practices were noncompliant with GAAP and such information is revealed after closing.”[2] This statement should presumably be read in the context of the Court’s holding that some accounting-related claims are correctly treated as indemnification claims based on a breach of representation rather than as PPA claims, as discussed below.

Role of PPA as Compared to Indemnification

The second two disputed PPA items pertained to the validity of an account receivable and an account payable reflected in net working capital. In both cases, there were factual questions about whether the receivable and payable had already been paid, and the Court addressed how the validity of such items interacted with Seller’s representations regarding the target’s accounts receivable and indebtedness. The Court emphasized that the PPA true-up process had a “limited” role that was intended only to account for changes in the target’s business between signing and closing.[3] The goal of the PPA was to keep all measures other than such changes consistent, “to prevent parties from extracting value for which they did not bargain.” The Court determined that the validity of the two payments, however, turned on events that occurred prior to the relevant period and did not reflect changes in the target’s business during such period.

By contrast, the Court indicated that indemnification was the correct avenue for pursuing claims that, while they may implicate accounting matters, actually pertain to the accuracy of Seller’s representations and warranties. Unlike PPA processes, indemnification claims required interpretation of the SPA’s contractual language, which was a legal matter. Legal indemnification claims exceeded the scope of the Accounting Expert’s mandate under the SPA. Furthermore, allowing representations and warranties claims to proceed under the PPA mechanism would provide an avenue to evade the SPA’s negotiated exclusive remedy provision and indemnity cap, rendering the cap “meaningless.” Based on this analysis, the Court vacated the Accounting Expert’s determination on the two disputed items at issue.

Practical Considerations:

In light of the Court’s opinion, practitioners should consider the following when drafting PPA provisions:

The acquisition agreement should avoid any ambiguity relating to how GAAP, illustrative closing statements, and historical accounting practices interact, and provide expressly for any hierarchy that should control in the event of a conflict between these parameters. Phrases such as “GAAP consistent with the Illustrative Closing Statement” can lead to disputes where a buyer may claim post-closing that a seller’s historical methodology should not be permitted as a basis for the PPA because it did not comport with GAAP. If the agreement is silent or ambiguous on whether GAAP or historical practice prevails in such a case, Delaware courts may be inclined to apply GAAP as the default, with historical practices or illustrative statements serving only to narrow the range of GAAP-compliant options.

Internal consistency in the SPA is critical: closing account definitions, expert review standards, and dispute resolution mechanisms must align to avoid inviting conflict among interpretive paths. For example, if an accounting methodology for calculating a particular item (such as debt or cash) is to differ from the accounting methodology otherwise applicable to items subject to the PPA (such as net working capital), deal participants should avoid using over-inclusive language that applies net working capital accounting methodology to items such as debt and cash because such language could be read to override the different treatment for debt and cash.

PPA disputes may involve questions regarding the validity of specific items included in the accounting process, where the seller has made representations and warranties that touch on those same matters. In such a case, courts may be inclined to categorize the dispute as an indemnification claim due to wariness of attempts to recharacterize indemnification claims as PPA disputes to circumvent indemnity caps or exclusive remedy provisions. The issue of temporality – whether the disputed item relates to periods prior to the relevant measure date – may be significant this regard.

[1] Northern Data AG v. Riot Platforms, Inc., C.A. No. 2023‑0650‑LWW (Del. Ch. June 2, 2025).

[2] Quoting ArchKey Intermediate Holdings Inc. v. Mona, C.A. No. 2021-0383-JTL (Del. Ch. Oct. 3, 2023).

[3] The Court described the purpose of the PPA as addressing changes occurring between signing and closing. However, the PPA in the SPA measured changes between the estimated closing statement (delivered a few business days before closing and which estimated working capital, cash, debt, and other adjustment items as of the projected closing date), and the final closing statement (which was delivered after closing but measured the relevant items as of the closing). In other words, the PPA in the SPA was designed to true-up the estimated closing amounts presented in the estimated closing statement to the actual closing amounts and did not measure changes between signing and closing.

The following Gibson Dunn lawyers prepared this update: Robert Little, Marina Szteinbok, and Josh Barringer.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. For further information, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the leaders or members of the firm’s Mergers & Acquisitions or Private Equity practice groups:

Mergers & Acquisitions:
Robert B. Little – Dallas (+1 214.698.3260, rlittle@gibsondunn.com)
Saee Muzumdar – New York (+1 212.351.3966, smuzumdar@gibsondunn.com)
George Sampas – New York (+1 212.351.6300, gsampas@gibsondunn.com)

Private Equity:
Richard J. Birns – New York (+1 212.351.4032, rbirns@gibsondunn.com)
Ari Lanin – Los Angeles (+1 310.552.8581, alanin@gibsondunn.com)
Michael Piazza – Houston (+1 346.718.6670, mpiazza@gibsondunn.com)
John M. Pollack – New York (+1 212.351.3903, jpollack@gibsondunn.com)

From the Derivatives Practice Group: This week, the CFTC and the SEC announced further extensions to Form PF Amendments compliance dates.

New Developments

CFTC, SEC Further Extend Form PF Amendments Compliance Date. On June 11, the CFTC, together with the SEC, extended the compliance date for the amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisers to private funds, including those that also are registered with the CFTC as commodity pool operators or commodity trading advisers, that were adopted February 8, 2024. The compliance date for these amendments, which was June 12, 2025, has been extended to October 1, 2025. The release provides that Form PF filers should continue to file the current version of Form PF until the date the release is published in the Federal Register. In connection with the extension, Commissioner Johnson released a statement indicating that the extension was due to “technology-based concerns as well as challenges with validation, testing, and ensuring effective capabilities for timely and accurate reporting of requested information.” [NEW]
GENIUS Act. On June 11, the U.S. Senate advanced the Guiding and Establishing National Innovation for US Stablecoins Act, or GENIUS Act, which will now progress to debate and a full floor vote before the Senate determines whether to send it to the House of Representatives for further consideration. The GENIUS Act seeks to establish a federal regulatory framework for payment stablecoins, including definitions, registration requirements, and oversight mechanisms. It aims to provide legal certainty and consumer protections while fostering innovation by placing regulatory authority with federal agencies like the OCC and offering a path for nonbank entities to issue stablecoins under a national standard. [NEW]
Senate Agriculture Committee Holds Hearing on Quintenz Nomination. On June 10, the Senate Agriculture Committee considered Brian Quintenz’s nomination for Chairman and Commissioner of the CFTC. In his opening remarks, he states that his goals for the agency will include risk management, fostering innovation, and facilitating reciprocity with foreign jurisdictions. The hearing also focused on several core issues including event contracts, resource allocation within the CFTC, and 24/7 trading. Quintenz states that, in his view, all event contracts are permissible under the Commodity Exchange Act, though he highlighted that the statute should be clarified with respect to its “gaming” provision. Quintenz also maintained that the CFTC should have more resources to allocate for digital asset oversight. Finally, with respect to 24/7 trading, Quintenz stated that he intends to listen to all stakeholders in determining which markets may allow for longer trading hours. Quintenz previously served as a CFTC commissioner from 2017 to 2021. [NEW]
CLARITY Act. On June 10, the CLARITY Act, which seeks to establish a regulatory framework for digital assets in the U.S. and would give the CFTC authority over crypto spot markets, advanced to the full U.S. House of Representatives after passing in the House Committee on Financial Services (32 to 19), and the House Agriculture Committee (47 to 6). [NEW]
SEC to Resume Processing of Registration Applications From Swiss-Based Investment Advisers. On June 10, the SEC announced that it will immediately resume processing new and pending registration applications of investment advisers with their principal office and place of business in Switzerland. [NEW]
SEC Selects Jamie Selway to Run Trading and Markets Division. On June 5, Jamie Selway was selected to head the SEC’s Trading and Markets division. He previously withdrew his name from consideration when he was nominated for this role during the first Trump administration. Currently, Selway is a partner at Sophron Advisors.
SEC Solicits Public Comment on the Foreign Private Issuer Definition. On June 4, the SEC issued a concept release soliciting public comment on the definition of foreign private issuer. The concept release solicits public input on whether the definition of foreign private issuer should be amended in light of significant changes in the population of foreign private issuers since 2003.
CFTC Alerts Traders Domain Customers to July 28 Claim Deadline. On June 3, the CFTC alerted customers that the Traders Domain claims process will end July 28. Customers who believe they may be victims in this alleged fraud scheme are urged to complete the claims process by this date to be eligible for any future judgment.
Natalia Díez Riggin Named Senior Advisor and Director of Legislative and Intergovernmental Affairs. On June 2, the SEC announced that Natalia Díez Riggin has been named Senior Advisor and Director of the agency’s Office of Legislative and Intergovernmental Affairs. Ms. Riggin has been serving as Acting Director since joining the SEC in January.
CFTC Names Paul Hayeck as Acting Director of Division of Enforcement. On June 2, CFTC Acting Chairman Caroline D. Pham announced Paul G. Hayeck as the Acting Director of the Division of Enforcement. Hayeck has served at the CFTC for 25 years and has been a deputy director in the Division of Enforcement since 2013. He will continue to serve as the acting chief of the Division’s Complex Fraud Task Force.
CFTC Adds 43 Unregistered Foreign Entities to RED List. On May 29, as part of the CFTC’s ongoing efforts to help protect Americans from fraud, the CFTC added 43 unregistered foreign entities to its Red List, a tool that provides information to U.S. market participants about foreign entities that are acting in an unregistered capacity and to help them make more informed decisions about trading. The Red List, which stands for Registration Deficient List, launched in 2015, and now contains almost 300 entities.
CFTC Awards Approximately $700,000 to Whistleblower. On May 29, the CFTC announced a whistleblower award of approximately $700,000. The whistleblower information prompted the CFTC to open the investigation and described the misconduct that ultimately appeared in the order. The whistleblower also provided substantial assistance and helped the Commission conserve resources during the investigation.
SEC Publishes Data on Regulation A, Crowdfunding Offerings, and Private Fund Beneficial Ownership Concentration. On May 28, the SEC published three new reports that provide the public with information on capital formation and beneficial ownership of qualifying private funds. The first two papers—analyses of the Regulations A and Crowdfunding markets—provide valuable information on how capital is being raised in the United States particularly by smaller issuers. The third paper on Qualifying Hedge Funds provides information on the interaction of beneficial ownership concentration, portfolio liquidity, investor liquidity, fund leverage, performance, and margins.

New Developments Outside the U.S.

ESMA Publishes Principles for Third-party Risk Supervision. On June 12, ESMA published its newly developed Principles on third-party risks supervision. ESMA said that the principles aim at supporting a common and effective EU-wide supervisory culture. According to ESMA, the 14 principles on third-party risks were developed to address the growing risks observed over recent years in the use of outsourcing, delegation, or other types of third-party services by supervised firms and that they are intended to provide a common supervisory basis to National Competent Authorities and ESMA, enhance the robustness of supervisory frameworks and help supervised entities understand and manage third-party risks. [NEW]
ESMA Urges Social Media Companies to Tackle Unauthorized Financial Ads. On May 28, ESMA wrote to several social media and platform companies encouraging them to take proactive steps to prevent the promotion of unauthorized financial services. This approach complements last week’s initiative launched by IOSCO, highlighting the global nature of doing online harm linked to financial misconduct.
ESMA Renews the Mandate of the Chair and the Two Independent Members of the CCP Supervisory Committee. On May 28, ESMA renewed the mandates of Klaus Löber as Chair of the Central Counterparties (“CCP”) Supervisory Committee and Nicoletta Giusto and Froukelien Wendt as Independent Members. The renewed mandates will be effective as of December 1, 2025 for a 5-year period.

New Industry-Led Developments

ISDA Launches Pre-adherence Period for Notices Hub. On June 12, ISDA began a pre-adherence process for the ISDA Notices Hub. The new protocol will change all agreements between adhering firms to allow them to use the ISDA Notices Hub – a secure online platform managed by S&P Global Market Intelligence that will enable the instantaneous delivery and receipt of termination notices and waivers ISDA has begun a pre-adherence process for the ISDA Notices Hub, enabling firms to sign up to a free protocol that will allow them to use the new platform when it launches on July 15. [NEW]
ISDA Publishes “Creating Value – IQ” June 2025. On June 10, ISDA published ISDA Quarterly, which explored how and why different types of firms use derivatives and the value they bring to individual companies and the broader economy. The report was published to coincide with ISDA’s 40th anniversary, and continue ISDA’s IQ anniversary series by looking at how ISDA and its members have worked to address some of the biggest challenges ever to face derivatives markets – from the rollout of margin requirements for non-cleared derivatives to the transition from LIBOR. [NEW]
ISDA Publishes Paper on the EC’s Sustainability Omnibus Proposal. On June 9, ISDA published a position paper setting out its views on the European Commission’s (EC) Sustainability Omnibus Package. In the paper, ISDA urges European authorities to, among other things, ensure a proportionate, harmonized and symmetrical approach to the use of derivatives across the EU’s sustainable finance framework in line with the EU’s Platform on Sustainable Finance derivatives recommendations. [NEW]
ISDA Responds to HMT SI on Digital Assets. On May 23, ISDA sent a comment letter in response to a draft statutory instrument (“SI”) from His Majesty’s Treasury (“HMT”) that establishes a new regulatory framework for digital assets. In the letter, ISDA recommended a review of the proposed “safeguarding” activity, noting that the current definition and scope, particularly on “control” and acting “on behalf of another,” could unintentionally capture standard collateral arrangements in the derivatives market, including both security interest and title transfer structures.
ISDA Provides Guidance for EU Model Application for ISDA SIMM®. On May 29, ISDA provided guidance to ISDA Standard Initial Margin Model (“SIMM”) users to promote awareness and facilitate a consistent approach to preparing data for the initial application. ISDA SIMM v2.7+2412 goes into effect on July 12, 2025, triggering the initial application requirement for its continued use by all financial and non-financial EU counterparties exchanging IM calculated using ISDA SIMM®.
ISDA Publishes SwapsInfo for First Quarter of 2025. On May 27, ISDA published its SwapsInfo Quarterly Review. The review noted that interest rate derivatives trading activity increased in the first quarter of 2025, driven by elevated interest rate volatility, shifting central bank policy expectations and evolving inflation and growth outlooks. Trading in index credit derivatives also rose, as market participants responded to a changing macroeconomic environment and sought to manage credit exposure.
IOSCO Issues Final Report on Updated Liquidity Risk Management Recommendations for Collective Investment Schemes. On May 26, IOSCO published its Final Report on Revised Recommendations for Liquidity Risk Management for Collective Investment Schemes (“CIS”), alongside its Implementation Guidance. The Final Report includes 17 recommendations across six sections: CIS Design Process, Liquidity Management Tools and Measures, Day-to-Day Liquidity Management Practices, Stress Testing, Governance and Disclosures to Investors and Authorities.

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, Karin Thrasher, and Alice Wang.

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Darius Mehraban, New York (212.351.2428, dmehraban@gibsondunn.com)

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Adam Lapidus, New York (212.351.3869, alapidus@gibsondunn.com )

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

William R. Hallatt, Hong Kong (+852 2214 3836, whallatt@gibsondunn.com )

David P. Burns, Washington, D.C. (202.887.3786, dburns@gibsondunn.com)

Marc Aaron Takagaki, New York (212.351.4028, mtakagaki@gibsondunn.com )

Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

Commissioner of Internal Revenue v. Zuch, No. 24-416 – Decided June 12, 2025

Today, the Supreme Court held 8-1 that the Tax Court loses jurisdiction in a proceeding under 26 U.S.C. § 6330 when the IRS ceases to pursue a levy.

“Because there was no longer a proposed levy, the Tax Court properly concluded that it lacked jurisdiction to resolve questions about Zuch’s disputed tax liability.”

Justice Barrett, writing for the Court

Background:

In order to collect previously assessed tax liabilities, the IRS may seek to levy—i.e., to seize and sell—a taxpayer’s assets. In such cases, the taxpayer may request an administrative pre-levy hearing with the IRS’s Independent Office of Appeals. An adverse “determination” in that proceeding may then be petitioned to the United States Tax Court under 26 U.S.C. § 6330.

In 2013, the IRS sent Jennifer Zuch a notice of intent to levy her property to collect unpaid taxes from 2010. Zuch requested a pre-levy hearing, claiming that a payment from her former husband should have been applied to offset her tax liabilities for the year at issue. The IRS’s Office of Appeals sustained the proposed levy, and Zuch petitioned the U.S. Tax Court. The U.S. Tax Court remanded for clarification, and, in 2017, the IRS’s Office of Appeals once again sustained the proposed levy.

Meanwhile, Zuch overpaid her annual taxes in certain years. Instead of issuing Zuch a refund in each of those years, the IRS applied the overpayments against her 2010 outstanding tax liability. By April 2019, the entire amount of Zuch’s alleged federal tax liability subject to the levy action had been paid.

The IRS then moved to dismiss the levy case as moot, and the Tax Court granted that motion. The Third Circuit reversed, holding that the Tax Court still had jurisdiction to determine Zuch’s underlying tax liability under 26 U.S.C. § 6330 and Zuch did not need to file a separate refund suit in district court.

Issue:

Does a proceeding under 26 U.S.C. § 6330 become moot when the IRS no longer seeks the proposed levy that gave rise to the proceeding?

Court’s Holding:

Yes. The IRS’s decision to stop seeking to levy a taxpayer’s property deprives the Tax Court of jurisdiction in a proceeding under 26 U.S.C. § 6330.

What It Means:

Today’s decision ties a taxpayer’s ability to pursue a pre-levy challenge to the IRS’s decision to continue seeking to levy the taxpayer’s property. If the IRS ceases to pursue a levy and the taxpayer believes they overpaid, the taxpayer must file a new administrative action before the IRS claiming a refund (the precursor to a refund suit in the U.S. District Court of the U.S. Court of Federal Claims).
An administrative action before the IRS seeking a refund must be filed within two years of any potential overpayment. For this reason, a taxpayer who has potentially satisfied an outstanding liability during the pendency of a proceeding under 26 U.S.C. § 6330 should file a protective administrative action promptly, even if the IRS has not yet formally abandoned its request for a levy.
Justice Gorsuch speculated in dissent that today’s decision may incentivize the IRS to stop pursuing levies in 26 U.S.C. § 6330 proceedings if it anticipates unfavorable rulings from the Tax Court, and to instead pursue other mechanisms of collection, like keeping future overpayments.

The Court’s opinion is available here.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the U.S. Supreme Court. Please feel free to contact the following practice group leaders:

Appellate and Constitutional Law

Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com	Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com	Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com
Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com	Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com	Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com

Related Practice: Tax

Sandy Bhogal
+44 20 7071 4266
sbhogal@gibsondunn.com

Pamela Lawrence Endreny
+1 212.351.2474
pendreny@gibsondunn.com)

Eric B. Sloan
+1 212.351.5220
esloan@gibsondunn.com

Related Practice: Tax Controversy and Litigation

Sanford W. Stark
+1 202.887.3650
sstark@gibsondunn.com

Saul Mezei
+1 202.955.8693
smezei@gibsondunn.com

C. Terrell Ussing
+1 202.887.3612
tussing@gibsondunn.com

This alert was prepared by Samuel Eckman and Brian Sanders.

Please join us for an in-depth overview of the key legal considerations and liability risks that companies and their boards face during the IPO process and as they transition to life as a public company. With a focus on mitigating exposure under federal securities laws, the session covers the basics of liability under Sections 11 and 12 of the Securities Act of 1933, including the potential consequences of material misstatements or omissions in registration statements and prospectuses.

Designed for corporate executives, directors, and legal professionals, this session equips attendees with actionable insights to navigate the IPO process with confidence, minimize liability exposure, and establish robust practices for public company readiness.

MCLE CREDIT INFORMATION:

This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1.0 credit hour, of which 1.0 credit hour may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit.

Attorneys seeking New York credit must obtain an Affirmation Form prior to watching the archived version of this webcast. Please contact CLE@gibsondunn.com to request the MCLE form.

Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1.0 hour in the General Category.

California attorneys may claim “self-study” credit for viewing the archived version of this webcast. No certificate of attendance is required for California “self-study” credit.

PANELISTS:

Gerry Spedale is a partner in the Houston office of Gibson Dunn. He has a broad corporate practice, advising on mergers and acquisitions, joint ventures, capital markets transactions and corporate governance. He has extensive experience advising public companies, private companies, investment banks and private equity groups. With over 30 years of experience, Gerry covers a broad range of industries, with a focus on the energy industry, including upstream, midstream, downstream, oilfield services and utilities.

Gerry earned his Juris Doctor magna cum laude in 1993 from Tulane University Law School, where he was elected to the Order of the Coif. He graduated cum laude in 1990 from Louisiana State University, where he received a Bachelor of Arts degree in Political Science.

Michael Kahn is a litigation partner in the San Francisco office of Gibson Dunn. Michael’s practice focuses on securities litigation, including securities class actions and derivative suits. Michael represents clients at all stages of a company’s lifecycle, from defending established public companies against Exchange Act claims, to defending newly public companies against suits under the Securities Act, to prosecuting and defending private company shareholder disputes. He has crafted winning arguments in many complex securities actions, including for Slack in the U.S. Supreme Court’s 9-0 opinion in Slack Technologies v. Pirani. Michael also represents clients facing SEC investigations, and as both plaintiffs and defendants in a broad range of commercial litigation.

Michael received his Juris Doctor from New York University School of Law in 2012, where he was a Robert McKay scholar. He received his undergraduate degree from the University of California, Berkeley in 2009, where he graduated with High Honors in History and High Distinction in General Scholarship, and was elected to Phi Beta Kappa.

Jeff Lombard is of counsel in the Palo Alto office of Gibson, Dunn & Crutcher and a member of the firm’s Securities Litigation Practice Group.

Jeff’s practice focuses on the representation of companies and their officers and directors in securities class actions, merger and acquisition disputes, and shareholder derivative litigation. In addition, Jeff has substantial experience representing clients in other shareholder and securities related matters, including governmental and internal investigations, books and records demands, and FINRA inquiries. Jeff also regularly advises public and private companies about a wide range of issues relating to corporate governance, insider trading, disclosure obligations and litigation risk and strategy.

Jeff graduated summa cum laude from Santa Clara University School of Law in 2012. He received his Bachelor of Science from Santa Clara University in 2008, where he served as captain of the school’s Division 1 baseball team during the 2008 season.

Gibson Dunn will continue monitoring these developments and reporting to our trusted friends and clients in the days, weeks, and months ahead.

Two notable developments this week have clarified DOJ’s approach to corporate criminal enforcement generally under the Trump Administration and ended a four-month pause in bringing new enforcement actions under the Foreign Corrupt Practices Act (FCPA).

During a speech on June 10, 2025, the Head of DOJ’s Criminal Division, Matthew R. Galeotti, publicly announced the issuance of a memorandum dated June 9, 2025, by Deputy Attorney General Todd Blanche (Blanche Memorandum). The Blanche Memorandum provides much-anticipated guidance to the DOJ Criminal Division regarding the investigation and enforcement of the FCPA. In addition, Galeotti’s remarks highlighted several notable developments in the DOJ Criminal Division’s approach to corporate enforcement more generally and emphasized the Department’s focus on incentivizing corporate self-disclosure and cooperation and targeting the misconduct of specific individuals.

This guidance follows a February executive order in which President Trump paused new FCPA enforcement actions and directed DOJ to prepare the new guidance, as discussed in greater detail in our prior alert. That executive order mandated that any FCPA investigations or enforcement actions initiated or allowed to continue afterward must be governed by the revised guidelines and be “specifically authorized by the Attorney General.” The executive order followed a memorandum by Attorney General Pamela Bondi that instructed DOJ’s FCPA Unit to prioritize cases with a nexus to cartels and transnational criminal organizations (TCOs), while shifting focus away from cases lacking such nexus, as discussed in another prior alert.

The Blanche Memorandum

The much-awaited memorandum, titled Guidelines for Investigations and Enforcement of the FCPA, seeks to address directives in President Trump’s executive order by expressly “limiting undue burdens on American companies that operate abroad” and “targeting enforcement actions against conduct that directly undermines U.S. national interests.” More specifically, under the Blanche Memorandum, prosecutors must now consider four separate, non-exhaustive factors in determining whether to pursue FCPA investigations or enforcement actions:

Total Elimination of Cartels and TCOs – whether the misconduct (1) is directly tied to a cartel or TCO, (2) relates to money laundering efforts on behalf of a cartel or TCO, such as through a shell company, or (3) involves a foreign official or SOE employee who has received bribes from a cartel or TCO previously.

This factor ties into the Administration’s previously declared criminal enforcement priority of addressing the impact of cartels and TCOs on U.S. national security, foreign policy, and economy. The Blanche Memorandum leaves little doubt that FCPA enforcement will now provide another avenue for combatting the influence of entities and individuals with financial ties to cartels and TCOs . Including this factor in the Blanche Memorandum may further signal a shift toward more FCPA investigations wherever cartel and TCO connections exist—and possibly fewer in the absence of such links.

That said, the Memorandum creates ambiguity as to the scope of FCPA enforcement, making it increasingly difficult to predict how and when the FCPA Unit and DOJ’s political leadership will use their enforcement authority. For example, the third scenario described above, relating to foreign officials who have received bribes from cartels or TCOs in the past, could apply to companies or individuals who pay a bribe to a government official without any knowledge that the official had previously received a bribe from a cartel or TCO. In practice, this should not impact a company’s compliance measures, particularly given the difficulty of ascertaining the existence of any such prior bribes. It does, however, give DOJ flexibility to target jurisdictions with substantial cartel presence, such as Mexico and Venezuela.

Fair Opportunities for U.S. Companies – whether, and the extent to which, alleged misconduct adversely impacts the ability of U.S. entities to compete for and obtain business abroad.

The Blanche Memorandum highlights the way in which bribery skews markets to the disadvantage of law-abiding companies and directs prosecutors to consider the competitive and economic injury suffered by “specific and identifiable” American companies due to corruption. The Memorandum notes that DOJ will not focus on the nationality of the bribing entity but rather will prioritize prosecuting activities that harm U.S. national security and economic prosperity. Footnote 4 of the Blanche Memorandum does, however, assert that “[t]he most blatant bribery schemes have historically been committed by foreign companies.” It remains to be seen whether this directive will be applied in practice in a way that favors U.S. over non-U.S. companies in keeping with the Trump Administration’s broader America First agenda. Similarly, the Blanche Memorandum directs prosecutors to focus enforcement of the Foreign Extortion Prevention Act (FEPA) on “foreign officials’ demands for bribes” that harm U.S. entities or individuals. Again, this factor leaves several questions unanswered as to how the analysis of what misconduct impacts U.S. entities is carried out, as discussed further below. This ambiguity provides DOJ with significant leeway to implement the Memorandum’s guidance.

National Security – whether the misconduct impacted U.S. companies’ ability to obtain key “minerals, deep-water ports,” or other “infrastructure or assets,” in recognition of the importance of certain resources to the U.S. defense and intelligence sectors.
Serious Misconduct – whether the misconduct “bears strong indicia of corrupt intent tied to particular individuals,” such as substantial bribes, extensive measures to conceal bribes, fraudulent conduct related to bribery, or obstruction of justice. Expressly excluded from this focus are “routine business practices” and de minimis or low-dollar, generally accepted business courtesies. While the scope of this exclusion is not entirely clear, it may indicate DOJ does not intend to pursue FCPA cases that are based on systemic, low-value bribes—such as cases involving improper expenditures on gifts, travel, and entertainment, or cases that involve only internal controls or books and records violations.

None of these four factors is required, and the Blanche Memorandum recognizes that “myriad factors must be considered” in any prosecution. Additionally, footnote 2 suggests that prosecutors may be able to initiate an investigation with limited insight into the presence of any of these factors, given the likelihood that the investigation itself will be necessary to understand the facts at play. Taken together, the factors reflect an apparent enforcement focus on substantial bribery connected to large-scale criminal organizations or that otherwise undermines U.S. national interests.

As Galeotti explained in his remarks, the Blanche Memorandum also confirms a directive that misconduct “that does not implicate U.S. interests should be left to our foreign counterparts or appropriate regulators.” Although Galeotti stated that DOJ will help its foreign counterparts “vindicate their interests and pursue their mandates,” it is unclear whether DOJ will continue to pursue actions in parallel with foreign regulators as it often has in the past.

For corporations, this guidance also puts a clear onus on prosecutors to pursue corporate cases involving criminal misconduct attributable to individuals and disfavors charging a company with “nonspecific malfeasance.”

The Blanche Memorandum also imposes a new approval requirement. Before a Criminal Division prosecutor can open a new FCPA investigation or bring an FCPA enforcement action, the approval of the Assistant Attorney General (AAG) for the Criminal Division or a more senior DOJ official—all of whom are political appointees—is now required. At odds with AG Bondi’s prior memorandum suspending Justice Manual approval requirements for FCPA cases connected to cartels and TCOs, the new approval requirement takes the decision of whether to open a new FCPA investigation out of the hands of career DOJ prosecutors and places it in the hands of political appointees, limiting career prosecutors’ discretion in determining how to apply the law.

Other Remarks by Criminal Division Head Galeotti

After introducing the new FCPA guidance, Galeotti discussed the Criminal Division’s approach to white-collar crime generally and made clear that “[f]ighting white-collar and corporate crime is a critical component of the Criminal Division’s priorities.” His message notably tied “aggressive and robust” strategies for investigating and prosecuting white-collar and corporate crime with “[p]rotecting the American people.” Galeotti’s remarks further highlighted other developments in the DOJ Criminal Division’s approach to corporate enforcement, including three “key areas of change”:

Declinations. DOJ intends to move from a presumption to a near guarantee of declination for companies that self-report, cooperate, and remediate. This policy is aimed at providing more transparency around the process of granting declinations and incentivizing disclosure to “hold the most culpable individuals accountable.” Although the framework retains an element of discretion for cases that present aggravating circumstances, Galeotti stated that a declination will only be inappropriate when “truly” aggravating factors—recently narrowed in the revised Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) to the nature and seriousness of the offense, egregiousness or pervasiveness of misconduct, severity of harm caused, or similar misconduct resulting in criminal adjudication or resolution within the last five years—”outweigh” the company’s voluntary disclosure. Although the factors listed in the revised CEP are narrower than the prior CEP, they leave DOJ with significant discretion to determine when the factors are satisfied. Therefore, it is not yet certain whether DOJ will in fact grant more declinations going forward.
Monitorships. Galeotti explained that DOJ’s recently revised monitor policy clarifies when monitorships should be imposed and how monitorships should operate. The revised policy places emphasis on the need to balance the potential benefits of a compliance monitor with the expense of a monitorship for a company and the potential for interference with business operations. The policy provides considerations seeking to ensure that the scope and cost of a monitorship is proportionate to the severity of the misconduct, the company’s profits, and the company’s size and risk profile, among other considerations. Galeotti commented that in some resolutions, in place of monitors, the Criminal Division will work more closely with companies to ensure compliance, including by considering whether other measures (such as self-reporting or certifications) more efficiently achieve compliance. Galeotti expressed a belief that these “self-directed measures,” instead of monitorships, are often more efficient in helping companies achieve full compliance, “make lasting improvements,” and limit the waste of resources.
Efficiency and Cooperation. Galeotti highlighted a major focus on reducing the time spent on investigations. He emphasized speed and efficiency, and stressed that the Criminal Division will move the matters it sees as meritorious “expeditiously.” But Galeotti also noted that companies can contribute to this efficiency by complying with requests for documents and witnesses quickly and comprehensively, and stated that arguments about the lack of efficiency and length of investigations will not work if they are caused by those being investigated. We expect there to be continued back-and-forth between companies and prosecutors on what is realistic in terms of collection and production of evidence and completion of an internal investigation, particularly when DOJ’s requests and expectations can be very broad. Additionally, Galeotti indicated that companies and their counsel should be “conscientious” about avoiding premature appeals of the decisions of the attorneys leading their investigation to supervisors and should be prepared to follow DOJ’s process, ironing out issues with line attorneys to the extent feasible. He stressed that “seeking premature relief, mischaracterizing prosecutorial conduct, or otherwise failing to be an honest broker” will be “counter-productive to [one’s] appeals.” This suggests that complaining too high up the chain too quickly could backfire.

Galeotti highlighted that in less than thirty days from issuing the white-collar enforcement plan (as we discussed in our recent alert), DOJ has received new voluntary self-disclosures and “robust tips” from whistleblowers. He previewed that further “significant announcements in key priority areas” are on their way in the coming weeks, “including corporate resolutions across the white-collar landscape.” This is a notable statement, given that the Criminal Division has yet to announce a corporate resolution in this Administration, and we anticipate it will shed light on what to expect from the Criminal Division in the Trump Administration going forward.

Observations and Questions

The new approaches highlighted in the Blanche Memorandum and Galeotti’s remarks raise several questions—some of which we raised previously:

How will the Criminal Division’s emphasis on speed be accomplished amid the Administration’s restructuring and efficiency efforts? Public reporting indicates DOJ’s Fraud Section has seen recent staff reductions, raising questions about resourcing. A push to increase case turnover may lead to further strains on teams and resources.
Will the DOJ no longer pursue cases based on collective knowledge theories? Both the Blanche Memorandum and Galeotti’s remarks leave little doubt that DOJ Criminal Division leadership seeks to focus on corporate misconduct tied to specific bad acts by culpable individuals, not generalized notions of “nonspecific malfeasance” or collective corporate knowledge. DOJ’s pursuit of such theories is not unique to FCPA enforcement, and it remains to be seen whether DOJ will disfavor the approach when investigating or prosecuting non-FCPA offenses. To the extent the Criminal Division has historically disfavored collective knowledge theories, Galeotti’s remarks provide strong support that this will continue. In instances where DOJ does not pursue fraud cases against public companies under collective knowledge theories, the SEC may still seek to use corporate negligence theories to address similar conduct by issuers under the broader authority and with the lower burden of proof under Section 17(a) of the Securities Act of 1933.
How will the focus on TCOs affect FCPA enforcement? The Blanche Memorandum reiterates, and arguably expands, the directives and priorities in AG Bondi’s earlier memoranda prioritizing investigations and prosecutions of foreign bribery connected to cartels and TCOs. It is not entirely clear whether and how the Blanche Memorandum—which is addressed only to the Criminal Division and expressly does not apply to other TCO elimination efforts—will affect U.S. Attorneys’ Offices’ ability to bring FCPA cases that have a connection to cartels or TCOs without seeking prior authorization from the Criminal Division, as contemplated by AG Bondi’s Total Elimination of Cartels and TCOs memorandum. Still, the focus on cartels and TCOs may lead to increased enforcement in jurisdictions with significant cartel and TCO activity.
How does the Blanche Memorandum relate to cases pursued under alternate legal theories? As we have previously observed, a significant portion of foreign corruption enforcement has historically been pursued under adjacent criminal laws, including money laundering, wire fraud, and securities fraud. These offenses are not expressly covered by the Blanche Memorandum, which is limited to the FCPA, and remain avenues to pursue corruption-related fact patterns. The SEC and other international enforcement authorities may also still pursue actions outside the scope of DOJ’s priorities.
Will the SEC’s role in FCPA Enforcement be impacted? During a congressional hearing earlier this month, SEC Chair Paul Atkins was asked by Senator Coons whether the SEC was “directly affected” by the Trump Administration’s pause on FCPA enforcement. Chair Atkins explained that, to his understanding, the SEC was not affected by the executive order. Senator Coons requested a follow-up on the SEC’s anticipated enforcement trajectory. Whether and how the SEC’s FCPA enforcement priorities align with the DOJ Criminal Division’s, or cover other types of FCPA cases, remains an open question.
What constitutes “key infrastructure or assets”? The Blanche Memorandum implicates defense, intelligence, and critical infrastructure as key national security sectors and provides critical minerals and deep-water ports as examples. Additionally, the Blanche Memorandum notes “key infrastructure or assets” as a significant factor for prosecutors to consider when assessing whether the alleged conduct implicates key national security sectors, but neither the Blanche Memorandum nor Galeotti in his speech define these terms. DOJ could potentially interpret these terms broadly to include critical infrastructure sectors—such as those identified by the Cybersecurity and Infrastructure Security Agency (CISA)—and the assets associated with them. CISA’s “Critical Infrastructure Sectors“ include: agriculture, communications, energy, financial services, healthcare, transportation, and several other sectors considered “vital to” the United States’s “security, national economic security, national public health or safety, or any combination thereof.”
Where do routine business practices in other nations end and substantial bribe payments begin? Although misconduct at both ends of the spectrum from low-dollar business courtesies to massive, concealed, fraudulent bribe payments will be apparent, the middle ground between the two is vast. Although the new guidelines appear to provide more leeway for facilitating payments and other lower-value expenses, in practice, this change is likely too nuanced for companies to adjust their operations based on the Blanche Memorandum alone. Additionally, there is no equivalent exception in the law of other jurisdictions, such as the UK’s Bribery Act 2010.
How will requiring that all FCPA investigations and enforcement actions be approved by the Criminal Division AAG impact enforcement? Previously, the Justice Manual required all FCPA investigations and prosecutions to be approved by the Criminal Division generally rather than the Criminal Division AAG specifically. In practice, those approvals were delegated to the Deputy Chief of the Fraud Section in charge of the FCPA Unit. By requiring approval from the AAG him- or herself, a political appointee will now decide how the FCPA is applied, instead of career prosecutors, and can therefore ensure that career prosecutors do not undermine the Administration’s priorities or guidance. There is also a practical risk that approvals will take longer to obtain. However, under the Blanche Memorandum, the FCPA Unit continues to maintain its authority to investigate and prosecute FCPA cases—subject to the continuing suspension of the Justice Manual’s approval provisions for a narrow set of cases following AG Bondi’s earlier memorandum, which allows U.S. Attorneys’ Offices to pursue FCPA cases with a connection to cartels and TCOs upon twenty-four hours’ advance notice to the FCPA Unit.
How will the Criminal Division approach corporate resolutions? As noted above, Galeotti foreshadowed “corporate resolutions across the white-collar landscape” in the coming weeks. So far, the Criminal Division in this Administration has yet to announce a corporate resolution. How these coming corporate resolutions look will illuminate what we may expect from DOJ going forward, including, possibly, to what extent DOJ will prosecute U.S. companies.

We will continue monitoring these developments and reporting to our trusted friends and clients in the days, weeks, and months ahead.

The following Gibson Dunn lawyers prepared this update: F. Joseph Warin, Patrick Stokes, Stephanie Brooker, Winston Chan, Nicola Hanna, Matthew Axelrod, Courtney Brown, John Chesley, Michael Diamant, Melissa Farrar, Amy Feagles, Oleh Vretsona, Jaclyn Neely, Bryan Parr, Kio Bell, and Matt Weiner.

Gibson Dunn’s White Collar Defense and Investigations Practice Group successfully defends corporations and senior corporate executives in a wide range of federal and state investigations and prosecutions, and conducts sensitive internal investigations for leading companies and their boards of directors in almost every business sector. The Group has members across the globe and in every domestic office of the Firm and draws on more than 125 attorneys with deep government experience, including more than 50 former federal and state prosecutors and officials, many of whom served at high levels within the Department of Justice and the Securities and Exchange Commission, as well as former non-U.S. enforcers.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of Gibson Dunn’s White Collar Defense and Investigations or Anti-Corruption and FCPA practice groups:

Washington, D.C.
F. Joseph Warin (+1 202.887.3609, fwarin@gibsondunn.com)
Matthew S. Axelrod (+1 202.955.8517, maxelrod@gibsondunn.com)
Stephanie Brooker (+1 202.887.3502, sbrooker@gibsondunn.com)
Courtney M. Brown (+1 202.955.8685, cmbrown@gibsondunn.com)
David P. Burns (+1 202.887.3786, dburns@gibsondunn.com)
John W.F. Chesley (+1 202.887.3788, jchesley@gibsondunn.com)
Daniel P. Chung (+1 202.887.3729, dchung@gibsondunn.com)
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Stuart F. Delery (+1 202.955.8515, sdelery@gibsondunn.com)
Michael S. Diamant (+1 202.887.3604, mdiamant@gibsondunn.com)
Gustav W. Eyler (+1 202.955.8610, geyler@gibsondunn.com)
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Amy Feagles (+1 202.887.3699, afeagles@gibsondunn.com)
Scott D. Hammond (+1 202.887.3684, shammond@gibsondunn.com)
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Pedro G. Soto (+1 202.955.8661, psoto@gibsondunn.com)

New York
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Dallas
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Denver
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Oliver D. Welch (+852 2214 3716, owelch@gibsondunn.com)

Singapore
Oliver D. Welch (+852 2214 3716, owelch@gibsondunn.com)
Karthik Ashwin Thiagarajan (+65 6507 3636, kthiagarajan@gibsondunn.com)

If enacted in its current form, new section 899 could significantly affect the U.S. tax landscape for a variety of U.S. and non-U.S. persons.

On May 22, 2025, the House of Representatives passed the One Big Beautiful Bill Act (the “Act”). The Act would extend or make permanent certain components of the 2017 Tax Cuts and Jobs Act[1] that under current law expire at the end of 2025. The Act would also make a number of other changes to the U.S. Internal Revenue Code (the “Code”), including adding new section 899,[2] which would impose retaliatory U.S. federal income and withholding taxes on certain governments, individuals, and entities associated with or owned by residents of foreign countries that have implemented “unfair foreign taxes.” The Senate is currently considering the Act.

Section 899 is based on legislation that was proposed both earlier this year and in 2023 in different forms by House Ways and Means Committee Chairman Jason Smith. It also incorporates base erosion and anti-abuse (BEAT)-related legislation proposed earlier this year by Rep. Ron Estes (R-KS) (H.R. 2423).

If enacted in its current form, section 899 could significantly affect the U.S. tax landscape for a variety of U.S. and non-U.S. persons. The most dramatic effects likely would be felt by (i) non-U.S. investors (including sovereign wealth funds) resident in certain countries, (ii) private equity funds and other investment entities, (iii) U.S. borrowers under credit agreements with standard tax “gross-up” provisions, and (iv) certain multinational enterprises and their U.S. subsidiaries.

I. Summary

A. Scope of Foreign Persons and Taxes Covered

Section 899 would apply to an array of foreign persons and their affiliates, including governments and tax residents of countries with one or more unfair foreign taxes (“applicable persons”)[3], as well as foreign corporations of which more than 50 percent of the vote or value is owned by applicable persons. The provision would also increase the tax rate and extend the application of the BEAT to corporations in which more than 50 percent of the vote or value is owned by applicable persons, regardless of gross receipt and base erosion payment percentage safe harbors that otherwise apply.[4]

The definition of “unfair foreign tax” is broad and includes any undertaxed profits rule (UTPR), digital services tax, and diverted profits tax, although section 899 does not define any of these taxes.[5] In addition, to the extent provided by the Secretary of the Treasury, an “unfair foreign tax” would include any extraterritorial tax,[6] discriminatory tax,[7]or other tax enacted with a public or stated purpose that the tax be economically borne, directly or indirectly, disproportionately by U.S. persons.[8] Notably, under this definition, governments and residents of countries that have adopted a UTPR as part of their legislation aimed at implementing a global minimum tax on multinational enterprises (“Pillar 2”) or that impose a digital services tax or diverted profits tax automatically would be considered “applicable persons” for purposes of section 899, without further action required from Treasury.[9]

B. Taxes and Tax Rates Subject to Section 899

1. General Rule for Tax Rate Increases

The following tax rates would increase by five percentage points for the first calendar year beginning after section 899 becomes applicable to the “applicable person” and then by an additional five percentage points for each calendar year thereafter (capped at 20 percentage points over the statutory rate):

The 30 percent rate on U.S.-source dividends, interest, rents, royalties and other fixed, determinable, annual, or period income (FDAP) of foreign individuals and corporations.
The 21 percent rate imposed on income effectively connected with the conduct of a U.S. trade or business (ECI) of foreign corporations, including as a result of FIRPTA;
The graduated rates applicable to FIRPTA gains and losses of individuals;
The rates of withholding on FDAP items and payments subject to withholding under FIRPTA are similarly increased;
The 30 percent rate on branch profits; and
The 4 percent excise tax on foreign private foundations.

In addition to the rate increases noted above, Section 899 would also increase the BEAT tax rate for corporations to which it applies from 10 percent to 12.5 percent and remove the Code provisions that currently exclude certain payments from BEAT calculations, such as (i) tax benefits attributable to base erosion payments that are subject to withholding, (ii) base erosion payments for services that are eligible for use of the services cost method, and (iii) payments made at cost.

The bill does not affect the portfolio interest exemption or the FIRPTA exemption that applies to gain from the sale or exchange of shares in a “domestically controlled qualified investment entity.”

2. Interaction with Treaties

Importantly, the five percentage point rate increases would also apply to lower rates established by a treaty that applies in lieu of the above statutory rates. In that case, the annual increase would start with the lower rate but would continue until the rate is 20 percentage points higher than the statutory rate that would apply if there were no treaty in place. For example, if an income tax treaty with a particular country provides that dividends may not be taxed at a rate that exceeds 15 percent, the rate would increase to 20 percent in year one, 25 percent in year two, and so on until the rate is 50 percent.

Although it is not clear how this rule applies to treaties that (a) entirely cede taxing jurisdiction for an item of income to the other country (for example, a provision that U.S.-source interest may only be taxed by the other country) or (b) entirely exempt certain categories of investors, such as pension trusts. The House Budget Committee report suggests that section 899 would not affect those types of treaty exemptions. Specifically, the committee report notes that “[b]ecause the provision only increases the specified rates of tax, it does not apply to income that is explicitly excluded from the application of the specified tax…[c]ontrast certain categories of income that are subject to a reduced or zero rate of tax in lieu of the statutory rate, such as amounts that are exempted or subject to a reduced or zero rate of tax under a treaty obligation.”[10]

3. Other Effects

Foreign governments that otherwise are exempt from tax on FDAP under section 892(a) and subject to section 899 would not be eligible for the benefits of section 892(a) and would be subject to the increased FDAP withholding rates.

4. Effective Date

Assuming Congress enacts the bill by September 30, for countries that have already enacted an “unfair foreign tax,” the rate increases would apply beginning on January 1, 2026. For other countries, the rate increase would go into effect on the first day of the first calendar year beginning on or after (i) 90 days after the date of enactment of the bill, (ii) 180 days after the date of enactment of the applicable unfair foreign tax, or (iii) the first date that the unfair foreign tax begins to apply.[11]

II. A Few Practical Take-Aways

Fund structures. Depending on whether Congress enacts section 899 and in what form, fund compliance and planning would become more complex. For example, section 899 could require ongoing monitoring of the tax residence and status of investors in fund entities and their percentage interests in such entities (including feeders, holding companies, and intermediate entities, etc.), as well as monitoring of applicable withholding rates. Likewise, a fund entity itself might be an applicable person subject to section 899 (for example, a fund entity organized in a relevant country with a UTPR or digital services or profits tax). Fund structures that currently benefit from certain investors’ U.S. federal income tax or treaty exemptions may need to be re-visited.
Financings. Gross-up provisions, prepayment or call rights, and similar provisions in credit agreements and indentures and other financings, as well as derivatives or hedging transactions could be implicated.
Sovereign Wealth Funds. As currently drafted, section 899 would eliminate section 892 benefits for foreign governments that are applicable persons.

III. Next Steps

What are people doing now? Fund managers and other affected groups are closely monitoring the situation. Managers that are forming new funds may consider structures that would mitigate the effects of section 899 for their investors, to the extent possible. Companies issuing new debt (for example, new credit agreements) are seeking to mitigate the risk of tax gross-up provisions or ensuring they have protective measures (such as ability to prepay or call debt or ability to replace lenders) in their agreements.
What we are hearing. Section 899 is intended to provide the U.S. with negotiating leverage over other countries with respect to their UTPR, digital service taxes, or diverted profits taxes or other taxes thought to discriminate against U.S. persons. Therefore, support exists among some members of the Senate for preserving a version of section 899 in the final legislation. Industry groups and individual stakeholders are working on ideas that would modify certain provisions to ameliorate the risks while allowing the provisions to still have the desired leverage over relevant countries. Interestingly, Congressional Budget Office scoring shows that section 899 will ultimately have a negative impact on governmental revenue in the long term due to its chilling effect on inbound U.S. investment.

[1] The Tax Cuts and Jobs Act is formally titled “An act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018,” Pub. L. No. 115-97, 131 Stat. 2045.

[2] Unless indicated otherwise, all “section” references are to the Code or proposed additions to the Code.

[3] U.S. citizens and foreign corporations of which 50 percent or more of the vote or value is held directly or indirectly by U.S. persons are not included in the definition of “applicable person.”

[4] Constructive ownership rules apply for purposes of each of the 50 percent thresholds noted in the paragraph above.

[5] Although these concepts are not defined in section 899, the House Budget Committee Report discusses UTPRs and digital services taxes in detail. H.R. Rep. No. 119-106, at 1757-1760.

[6] An “extraterritorial tax” is a tax imposed by a foreign country on a corporation that is determined by reference to the income or profits of any other person connected to such corporation through any chain of ownership, other than by direct or indirect ownership by the corporation itself.

[7] A “discriminatory tax” is a tax imposed by a foreign country that (i) applies more than incidentally to income that would not be considered sourced within, or effectively connected with a trade or business in, the foreign country applying the relevant U.S. tax rules, (ii) is imposed on a base other than net income and does not permit recovery of costs and expenses, (iii) is exclusively or predominantly applicable to nonresidents, or (iv) is not treated as an income tax under the tax laws of such foreign country or is otherwise treated by the foreign country as being outside the scope of double tax treaties.

[8] This concept is consistent with existing section 891, which allows the President of the United States to double various tax rates applicable to citizens and corporations of a foreign country if the President finds that citizens and corporations of the United States are being subject to discriminatory and exterritorial taxes in such country.

[9] For example, most European Union countries, Australia, the United Kingdom, Japan, New Zealand, and others, have implemented a UTPR, and countries such as Canada, France, Italy, Spain, Turkey and the United Kingdom have enacted digital services or diverted profits taxes.

[10] H.R. Rep. No. 119-106, pt. 6, at 395 n.1533.

[11] Withholding agents could rely on a list of countries published by the IRS (with a 90-day phase-in for withholding on payments to subsidiaries and trusts) and apply the rates in effect on January 1 of the year of payment. Penalties and interests for withholding agents would be waived for 2026 upon demonstrating best efforts to comply with the new withholding rates under section 899.

The following Gibson Dunn lawyers prepared this update: Matt Donnelly, Bree Gong, Evan Gusler, James Jennings, Brian Kniesly, Pamela Lawrence Endreny, Yara Mansour, Galya Savir, Eric Sloan, and Dan Zygielbaum.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s Tax and Tax Controversy and Litigation practice groups:

Tax:
Dora Arash – Los Angeles (+1 213.229.7134, darash@gibsondunn.com)
Sandy Bhogal – Co-Chair, London (+44 20 7071 4266, sbhogal@gibsondunn.com)
Michael Q. Cannon – Dallas (+1 214.698.3232, mcannon@gibsondunn.com)
Jérôme Delaurière – Paris (+33 (0) 1 56 43 13 00, jdelauriere@gibsondunn.com)
Anne Devereaux* – Los Angeles (+1 213.229.7616, adevereaux@gibsondunn.com)
Matt Donnelly – New York/Washington, D.C. (+1 212.351.5303, mjdonnelly@gibsondunn.com)
Benjamin Fryer – London (+44 20 7071 4232, bfryer@gibsondunn.com)
Evan M. Gusler – New York (+1 212.351.2445, egusler@gibsondunn.com)
James Jennings – New York (+1 212.351.3967, jjennings@gibsondunn.com)
Kathryn A. Kelly – New York (+1 212.351.3876, kkelly@gibsondunn.com)
Brian W. Kniesly – New York (+1 212.351.2379, bkniesly@gibsondunn.com)
Pamela Lawrence Endreny – Co-Chair, New York (+1 212.351.2474, pendreny@gibsondunn.com)
Kate Long – New York (+1 212.351.3813, klong@gibsondunn.com)
Gregory V. Nelson – Houston (+1 346.718.6750, gnelson@gibsondunn.com)
Benjamin Rapp – Munich/Frankfurt (+49 89 189 33-290, brapp@gibsondunn.com)
Jennifer Sabin – New York (+1 212.351.5208, jsabin@gibsondunn.com)
Eric B. Sloan – Co-Chair, New York/Washington, D.C. (+1 212.351.2340, esloan@gibsondunn.com)
Edward S. Wei – New York (+1 212.351.3925, ewei@gibsondunn.com)
Lorna Wilson – Los Angeles (+1 213.229.7547, lwilson@gibsondunn.com)
Daniel A. Zygielbaum – Washington, D.C. (+1 202.887.3768, dzygielbaum@gibsondunn.com)

Tax Controversy and Litigation:
Saul Mezei – Washington, D.C. (+1 202.955.8693, smezei@gibsondunn.com)
Sanford W. Stark – Chair, Washington, D.C. (+1 202.887.3650, sstark@gibsondunn.com)
C. Terrell Ussing – Washington, D.C. (+1 202.887.3612, tussing@gibsondunn.com)

*Anne Devereaux, of counsel in the firm’s Los Angeles office, is admitted to practice in Washington, D.C.

From the Derivatives Practice Group: This week, the SEC selected Jamie Selway to lead its Trading and Markets Division.

New Developments

SEC Selects Jamie Selway to Run Trading and Markets Division. On June 5, Jamie Selway was selected to head the SEC’s Trading and Markets division. He previously withdrew his name from consideration when he was nominated for this role during the first Trump administration. Currently, Selway is a partner at Sophron Advisors. [NEW]
SEC Solicits Public Comment on the Foreign Private Issuer Definition. On June 4, the SEC issued a concept release soliciting public comment on the definition of foreign private issuer. The concept release solicits public input on whether the definition of foreign private issuer should be amended in light of significant changes in the population of foreign private issuers since 2003. [NEW]
CFTC Alerts Traders Domain Customers to July 28 Claim Deadline. On June 3, the CFTC alerted customers that the Traders Domain claims process will end July 28. Customers who believe they may be victims in this alleged fraud scheme are urged to complete the claims process by this date to be eligible for any future judgment. [NEW]
Natalia Díez Riggin Named Senior Advisor and Director of Legislative and Intergovernmental Affairs. On June 2, the SEC announced that Natalia Díez Riggin has been named Senior Advisor and Director of the agency’s Office of Legislative and Intergovernmental Affairs. Ms. Riggin has been serving as Acting Director since joining the SEC in January. [NEW]
CFTC Names Paul Hayeck as Acting Director of Division of Enforcement. On June 2, CFTC Acting Chairman Caroline D. Pham announced Paul G. Hayeck as the Acting Director of the Division of Enforcement. Hayeck has served at the CFTC for 25 years and has been a deputy director in the Division of Enforcement since 2013. He will continue to serve as the acting chief of the Division’s Complex Fraud Task Force. [NEW]
CFTC Adds 43 Unregistered Foreign Entities to RED List. On May 29, as part of the CFTC’s ongoing efforts to help protect Americans from fraud, the CFTC added 43 unregistered foreign entities to its Red List, a tool that provides information to U.S. market participants about foreign entities that are acting in an unregistered capacity and to help them make more informed decisions about trading. The Red List, which stands for Registration Deficient List, launched in 2015, and now contains almost 300 entities.
CFTC Awards Approximately $700,000 to Whistleblower. On May 29, the CFTC announced a whistleblower award of approximately $700,000. The whistleblower information prompted the CFTC to open the investigation and described the misconduct that ultimately appeared in the order. The whistleblower also provided substantial assistance and helped the Commission conserve resources during the investigation.
SEC Publishes Data on Regulation A, Crowdfunding Offerings, and Private Fund Beneficial Ownership Concentration. On May 28, the SEC published three new reports that provide the public with information on capital formation and beneficial ownership of qualifying private funds. The first two papers—analyses of the Regulations A and Crowdfunding markets—provide valuable information on how capital is being raised in the United States particularly by smaller issuers. The third paper on Qualifying Hedge Funds provides information on the interaction of beneficial ownership concentration, portfolio liquidity, investor liquidity, fund leverage, performance, and margins.
CFTC Staff Issues Advisory on Market Volatility Controls. On May 22, the CFTC issued a staff advisory reminding designated contract markets and derivatives clearing organizations of certain core principles and regulatory obligations under the Commodity Exchange Act and CFTC regulations related to controls designed to address market volatility.
Commissioner Kristin N. Johnson Makes Statement on Departure from CFTC. On May 21, Commissioner Kristin N. Johnson announced that she intends to step down from the Commission later this year.
CFTC Staff Issues Interpretation Regarding Certain Cross-Border Definitions. On May 21, the CFTC issued an interpretative letter confirming the application of certain cross-border definitions to Susquehanna Crypto, a proprietary trading firm organized in a foreign jurisdiction. Specifically, the interpretative letter confirms that the proprietary trading firm is not a “person located in the United States” for purposes of the “foreign futures or foreign options customer” definition in Commission regulation 30.1(c); is not a “participant located in the United States” for purposes of Commission regulation 48.2(c); is a “foreign located person” for purposes of Commission regulation 3.10(c)(1)(ii); and is not a “U.S. person” as defined by Commission regulation 23.23(a) and the Commission’s 2013 Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations.
CFTC Releases Procedures on Registered Non-U.S. Swap Entities Using Substituted Compliance. On May 20, the CFTC released procedures regarding CFTC-registered non-U.S. swap dealers or major swap participants relying on substituted compliance. The procedures establish how CFTC Divisions will address potential non-compliance with foreign law that has been found by the CFTC to be comparable in outcome to the Commodity Exchange Act or CFTC regulations pursuant to a substituted compliance order.

New Developments Outside the U.S.

- ESMA Urges Social Media Companies to Tackle Unauthorized Financial Ads. On May 28, ESMA wrote to several social media and platform companies encouraging them to take proactive steps to prevent the promotion of unauthorized financial services. This approach complements last week’s initiative launched by IOSCO, highlighting the global nature of doing online harm linked to financial misconduct.
- ESMA Renews the Mandate of the Chair and the Two Independent Members of the CCP Supervisory Committee. On May 28, ESMA renewed the mandates of Klaus Löber as Chair of the Central Counterparties (“CCP”) Supervisory Committee and Nicoletta Giusto and Froukelien Wendt as Independent Members. The renewed mandates will be effective as of December 1, 2025 for a 5-year period.
- ESMA Asks for Input on the Retail Investor Journey as Part of Simplification and Burden Reduction Efforts. On May 21, ESMA launched a Call for Evidence (“CfE”) on the retail investor journey under the Markets in Financial Instruments Directive 2014. The purpose of this CfE is to gather feedback from stakeholders to better understand how retail investors engage with investment services, and whether regulatory or non-regulatory barriers may be discouraging participation in capital markets.

New Industry-Led Developments

ISDA Responds to HMT SI on Digital Assets. On May 23, ISDA sent a comment letter in response to a draft statutory instrument (“SI”) from His Majesty’s Treasury (“HMT”) that establishes a new regulatory framework for digital assets. In the letter, ISDA recommended a review of the proposed “safeguarding” activity, noting that the current definition and scope, particularly on “control” and acting “on behalf of another,” could unintentionally capture standard collateral arrangements in the derivatives market, including both security interest and title transfer structures. [NEW]
ISDA Provides Guidance for EU Model Application for ISDA SIMM®. On May 29, ISDA provided guidance to ISDA Standard Initial Margin Model (“SIMM”) users to promote awareness and facilitate a consistent approach to preparing data for the initial application. ISDA SIMM v2.7+2412 goes into effect on July 12, 2025, triggering the initial application requirement for its continued use by all financial and non-financial EU counterparties exchanging IM calculated using ISDA SIMM®.
ISDA Publishes SwapsInfo for First Quarter of 2025. On May 27, ISDA published its SwapsInfo Quarterly Review. The review noted that interest rate derivatives trading activity increased in the first quarter of 2025, driven by elevated interest rate volatility, shifting central bank policy expectations and evolving inflation and growth outlooks. Trading in index credit derivatives also rose, as market participants responded to a changing macroeconomic environment and sought to manage credit exposure.
IOSCO Issues Final Report on Updated Liquidity Risk Management Recommendations for Collective Investment Schemes. On May 26, IOSCO published its Final Report on Revised Recommendations for Liquidity Risk Management for Collective Investment Schemes (“CIS”), alongside its Implementation Guidance. The Final Report includes 17 recommendations across six sections: CIS Design Process, Liquidity Management Tools and Measures, Day-to-Day Liquidity Management Practices, Stress Testing, Governance and Disclosures to Investors and Authorities.
ISDA Publishes ISDA SIMM® Methodology, Version 2.7+2412. On May 22, ISDA published updates to its SIMM methodology that are based on the full recalibration of the model and marked the first SIMM version publication of the new semiannual calibration cycle in 2025. The effective date of July 12, 2025 means that ISDA SIMM users should use SIMM version 2.7+2412 to calculate the initial margin for close of business on Friday, July 11, 2025 onwards. This means that the first day for exchange of initial margin calculated using SIMM version 2.7+2412 would be on Monday, July 14, 2025.
ISDA/SIFMA/SIFMA AMG Publish Joint Response to CFTC Request for Comment on 24-7 Trading. On May 21, ISDA, the Securities Industry and Financial Markets Association (“SIFMA”), and the SIFMA Asset Management Group (“SIFMA AMG”) jointly filed a comment letter in response to the CFTC’s request for comment on 24/7 trading and clearing. ISDA, SIFMA, and SIFMA AMG believe that the feasibility of both 24/7 trading and clearing needs to be evaluated holistically with an understanding of the interdependencies between market participants, trading venues, middleware and software providers, clearing systems, margining frameworks, payments systems, default mechanisms and adjacent markets.
IOSCO Makes Statement on Combatting Online Harm and the Role of Platform Providers. On May 21, IOSCO reiterated its concern about risks associated with investment fraud orchestrated through online paid-for advertisements and user-generated content. IOSCO stated that regulators and platforms providers are strategically positioned to mitigate the potential investor harm arising from these risks and asks platform providers to enhance efforts, consistent with local law, aimed at reducing risk of pecuniary harm to investors, which also threatens public trust in the services provided by platform providers.
IOSCO Releases Sustainable Bonds Report. On May 21, IOSCO published its Sustainable Bonds Report which identifies the key characteristics and trends tied to the sustainable bond market. IOSCO’s Report includes five key considerations which are designed to address market challenges, including enhancing investor protection, ensuring sustainable bond markets are operating in a fair and efficient way, and improving accessibility.
IOSCO Publishes Final Reports on Finfluencers, Online Imitative Trading Practices and Digital Engagement Practices. On May 19, IOSCO published the Final Reports on Finfluencers, Online Imitative Trading Practices and Digital Engagement Practices, as part of the third wave of its Roadmap for Retail Investor Online Safety. The Finfluencers Final Report explores the evolving landscape of finfluencers, the associated potential benefits and risks, and the current regulatory responses across jurisdictions.

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, Karin Thrasher, and Alice Wang.

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Darius Mehraban, New York (212.351.2428, dmehraban@gibsondunn.com)

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Adam Lapidus, New York (212.351.3869, alapidus@gibsondunn.com )

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

William R. Hallatt, Hong Kong (+852 2214 3836, whallatt@gibsondunn.com )

David P. Burns, Washington, D.C. (202.887.3786, dburns@gibsondunn.com)

Marc Aaron Takagaki, New York (212.351.4028, mtakagaki@gibsondunn.com )

Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

We are pleased to provide you with the May edition of Gibson Dunn’s digital assets regular update. This update covers recent legal news regarding all types of digital assets, including cryptocurrencies, stablecoins, CBDCs, and NFTs, as well as other blockchain and Web3 technologies. Thank you for your interest.

ENFORCEMENT ACTIONS

UNITED STATES

SEC Drops Binance Suit
On May 29, the SEC and Binance filed a joint stipulation dismissing with prejudice the SEC’s lawsuit against the trading platform. The suit had been stayed at the SEC’s request while the agency’s crypto task force considers a new regulatory framework for digital assets. Binance stated that the dismissal “signals a global green light for responsible crypto innovation, boosting confidence from the U.S. to the EU and beyond.” Gibson Dunn represented Binance in this matter. Joint Stipulation; Law360; The Block.
SEC Charges Unicoin and Its Executives with $100 Million Fraud
On May 20, the SEC brought an enforcement action under the antifraud provisions of the federal securities laws against New York-based crypto project Unicoin, Inc., and three of its executives, in the U.S. District Court for the Southern District of New York. Unicoin and its executives allegedly made false and misleading statements by offering certificates that purportedly conveyed rights to Unicoin’s tokens and common stock. SEC; Complaint; The Block.
FTC and the State of Nevada Sue Online Crypto Trading Education Firm for $1.2 Billion Fraud Targeting Young Investors
On May 1, the Federal Trade Commission and the State of Nevada filed a complaint against an entity currently operating as IYOVIA and more broadly referred to as “IML.” IML offers educational courses in cryptocurrency trading but allegedly stole over a billion dollars from young investors through fraudulent courses. The company allegedly misrepresented how much both customers and salespeople could make, claiming its salespeople could make up to $750,000 per month, while knowing that just one in five earned more than $500 per month. FTC; Complaint; The Block.
Prosecutors Drop Money-Transmitter Charge Against Tornado Cash Developer
On May 15, the U.S. Attorney’s Office for the Southern District of New York pared back a charge for conspiracy to operate a money-transmitting business in its criminal case against Tornado Cash developer Roman Storm. Storm was charged in August 2023 with three counts: conspiracy to violate sanctions, conspiracy to commit money laundering, and conspiracy to operate an unlicensed money-transmitting business. The government had argued that the money-transmitting conspiracy could be proved through either evidence that Storm failed to comply with money-transmitting regulations or evidence that he transmitted funds known to be derived from a criminal offense. The government has dropped the former theory but continues to maintain the latter (along with the remaining counts). The decision comes in response to the April 7 memorandum from Deputy Attorney General Todd Blanche, which directed federal prosecutors to avoid “enforcement actions that have the effect of superimposing regulatory frameworks on digital assets.” Law360; SDNY Letter; Blanche Memo.
Judge Vacates Fraud and Manipulation Convictions Against Mango Markets Trader
On May 23, a federal judge in Manhattan overturned a jury verdict for charges of wire fraud, commodities fraud, and commodities manipulation against Avraham Eisenberg. Eisenberg had been convicted in April 2024 of manipulating the price of Mango Markets’ MNGO token in order to artificially inflate the value of his assets on the Mango Markets platform, allowing him to “borrow” money he did not intend to return. The court vacated the commodities fraud and commodities manipulation convictions for lack of venue, and entered a judgment of acquittal for the wire fraud charge due to insufficient evidence by the government that Eisenberg had made false statements. Eisenberg’s separate conviction for possession of child pornography was left in place. Law360; Opinion and Order.
New York Man Charged with Using Sham Blockchain Venture
On May 21, the Department of Justice and the SEC filed parallel criminal and civil actions against Jeremy Jordan-Jones, CEO of start-up Amalgam Capital Ventures LLC. Jordan-Jones had allegedly misrepresented his business to investors, raising $500,000 on the claim that it had developed a blockchain-based payment processing system, when Amalgam allegedly had not developed the technology. The U.S. Attorney’s Office for the Southern District of New York charged Jordan-Jones with fraud, false statements, and identify theft offenses; in a parallel action, the SEC sued Jordan-Jones under the antifraud provisions of the federal securities laws for making material misrepresentations to investors. DOJ; Indictment; SEC.
Former Celsius CEO Alex Mashinsky Sentenced to 12 Years in Prison for Crypto-Related Fraud
On May 8, Alex Mashinsky, the former CEO of the now-defunct crypto lender Celsius, was sentenced to 12 years in prison after he had pleaded guilty to fraud and market manipulation in the U.S. District Court for the Southern District of New York. According to the U.S. Attorney’s Office, Mashinsky defrauded Celsius investors by taking inappropriate risks with their funds, including by propping up the price of Celsius’ crypto-token CEL. DOJ.
DOJ Seizes $24 Million of Cryptocurrency from Developer of Qakbot Malware
On May 22, the Department of Justice unsealed an indictment against Qakbot developer Rustam Rafailevich Gallyamov and filed a civil forfeiture action against cryptocurrency tied to Qakbot. The Qakbot malware had allegedly been used to infect thousands of computers, allowing Gallyamov to sell access to those computers to various ransomware attackers. As part of the investigation, the FBI seized approximately $24 million in cryptocurrency generated through Qakbot’s allegedly criminal activity. CoinTelegraph; DOJ; Indictment; Complaint.
Superseding Indictment Adds 12 Defendants to RICO Conspiracy for $263 Million Scheme
On May 15, a superseding indictment was unsealed in the U.S. District Court for the District of Columbia adding twelve additional defendants to a RICO criminal charge originally brought against two individuals, Malone Lam and Jeandiel Serrano. The case, originally filed in September 2024, alleges a conspiracy to steal over $263 million worth of cryptocurrency, include over $230 million of Bitcoin from one victim in Washington, D.C., and then launder the proceeds. The defendants are charged with RICO conspiracy, conspiracy to commit wire fraud, money laundering, and obstruction of justice. DOJ 1; DOJ 2; Original Indictment.
Arrests Made in Kidnapping Attempt to Steal Cryptocurrency
On May 23, two people were arrested in New York City for the kidnapping and torture of an Italian tourist. The kidnappers were allegedly attempting to extort the tourist into turning over control of “millions of dollars” in cryptocurrency. The Block; NYT.

INTERNATIONAL

Argentinian President Milei Dissolved Investigation into LIBRA Scandal
On May 19, Argentinian President Javier Milei and Justice Minister Mariano Cúneo Libarona signed a decree dissolving a task force which was investigating the LIBRA cryptocurrency. LIBRA was originally promoted by Milei via social media as a “private project” to stimulate the Argentine economy. Milei’s promotion of LIBRA caused a scandal when the cryptocurrency reached a market valuation of more than $4.5 billion before soon losing nearly 90% of its value. Forbes; CoinDesk.
German Authorities Seize Over $38 Million from Now-Defunct Crypto Exchange Platform eXch
On May 9, the German Federal Criminal Police Office (BKA) announced that it had seized the server infrastructure of eXch, along with €34 million in Bitcoin, Ether, Litecoin, and Dash. The crypto exchange, which had been operating since 2014, enabled anonymous exchanges of crypto assets without any KYC measures or anti-money laundering protocols. German prosecutors said that the platform advertised this lack of measures on websites and other platforms of “criminal underground economy.” It is estimated that up to $1.9 billion has been moved through the exchange since its inception, in large part from criminal origins. The German authorities also claimed that a portion of the $1.4 billion in crypto stolen from Bybit earlier this year was laundered through eXch. BKA; The Block.

REGULATION AND LEGISLATION

UNITED STATES

Senate Advances GENIUS Act
On May 19, the Senate invoked cloture on the Guiding and Establishing National Innovation for U.S. Stablecoins (“GENIUS”) Act. The bill is the first comprehensive federal regulatory framework for stablecoins. The bipartisan cloture vote (66-32) limits the amount of further debate before a final vote is taken to approve or reject the bill. There is still an opportunity to propose amendments before the final vote, after which the bill will advance to the House of Representatives. The Block; MSN; Democrat Amendments.
Crypto Market Structure Bill Formally Introduced in House of Representatives
On May 29, a bipartisan group of House members formally introduced the crypto market-structure bill that would clarify the jurisdictional boundaries of the SEC and CFTC over digital assets. A discussion draft of the legislation had been released earlier in the month. The House Financial Services and Agriculture committees will consider and revise the bill before voting on whether to send the bill to the full chamber. The House Financial Services Committee held a hearing on the bill on June 4. Axios; Law360; Bill.
New Hampshire Becomes the First U.S. State to Pass “Strategic Bitcoin Reserve” Bill
On May 6, New Hampshire Governor Kelly Ayotte signed bill HB 302 into law, enabling up to 10% of the State’s general fund to be allocated to both precious metals and digital assets with a market cap exceeding $500 billion – a threshold currently met only by Bitcoin. The State can invest in qualifying digital assets either directly or via an exchange-traded fund, and may self-custody these assets or use a custodian. On May 7, Arizona followed suit and passed its own crypto reserve bill, but Governor Katie Hobbs vetoed it five days later. A similar bill has been adopted by the Texas State Legislature and is awaiting the signature of Governor Greg Abbott. Other States are currently considering adopting similar legislation, while these efforts have been paused in Florida. The Block; Axios.
The OCC Confirms that U.S. Banks Can Buy and Sell Customers’ Crypto on Their Behalf
On May 7, the Office of the Comptroller of the Currency published Interpretive Letter No. 1184, which clarified that national banks and federal savings associations may buy and sell crypto-assets held in custody on a customer’s behalf at the direction of the customer. The agency also stated that national banks can outsource crypto custody and trade execution services to third parties if proper risk-management procedures are in place. The guidance is consistent with prior OCC, Federal Reserve, and FDIC guidance and other actions as they continue to signal increased receptivity to crypto-related activities and digital assets in the banking industry on behalf of clients. Interpretive Letter No. 1184; The Block.
SEC and FINRA Withdraw Broker-Dealer Guidance
On May 15, FINRA and the SEC Division of Trading and Markets withdrew their 2019 Joint Staff Statement on Broker-Dealer Custody of Digital Asset Securities. The Joint Statement had set forth the SEC’s interpretation of the so-called Customer Protection Rule, which effectively prohibited broker-dealers from taking custody of digital assets. The withdrawal was accompanied by new FAQs on broker-dealer responsibility. The FAQs state that broker-dealers can custody digital assets without complying with the Customer Protection Rule or with the requirements of the 2020 Special Purpose Broker-Dealer Statement. Withdrawal; Joint Statement; FAQs; Lexology.
Department of Labor Rescinds Guidance Discouraging 401(k) Crypto Investment
On May 28, the Department of Labor rescinded its 2022 guidance directing 401(k) plan fiduciaries to exercise “extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.” In its place, the Department’s new guidance states that “a plan fiduciary’s decision should consider all relevant facts and circumstances.” DOL; Prior Guidance; The Block.

INTERNATIONAL

Hong Kong Passes Stablecoin Bill
Hong Kong’s Legislative Council passed a stablecoin bill for fiat-referenced stablecoins. The bill will require stablecoin issuers to obtain a license from the Hong Kong Monetary Authority and comply with a range of requirements, including proper management of asset reserves, redemption mechanisms, and segregation of client assets. The bill is expected to come into effect this year, with “sufficient time” allowed for the industry to understand the requirements. The bill builds on Hong Kong’s recent expansion of its crypto market, including the introduction of a virtual crypto asset regime for crypto trading platforms in 2023, and the launch of a sandbox for stablecoin issuers in 2024. The Block; CNBC.
El Salvador Continues to Purchase Bitcoin After IMF Announces Agreement to Stop
On May 27, the International Monetary Fund announced that it had reached an agreement with the government of El Salvador to release $120 million of funds as part of a $1.4 billion loan program approved last year. As part of the agreement, the IMF noted that El Salvador agreed not to purchase more Bitcoin. After the announcement, however, El Salvador posted on X that it had purchased additional Bitcoin. The Block; IMF; X.
New Singapore Rules for Offshore Crypto Service Providers
The Monetary Authority of Singapore (MAS) has confirmed its new rules for crypto service providers that operate “outside Singapore” but with Singapore touchpoints (e.g. supported by a corporation or individuals in Singapore). To determine if a service provider operates “outside Singapore,” factors such as whether the front-office functions (e.g. sales, business development) or customers are located outside Singapore are relevant. In-scope service providers will not benefit from any transitional grandfathering. They must suspend or cease their business by June 30, 2025. The MAS will grant licenses under the new framework only in extremely limited circumstances (as this type of operating model generally gives rise to regulatory concerns, e.g. AML/CFT-related). The MAS has published ongoing requirements (conduct, prudential, governance, risk management etc.) for those service providers that will obtain a license. Consultation Paper.
FCA Consults on Stablecoin Issuance and Custody Rules
On May 28, the UK Financial Conduct Authority (FCA) published consultation papers CP25/14 and CP25/15, seeking stakeholder feedback on a draft framework that would bring the activities of issuing “qualifying stablecoins” and safeguarding “qualifying cryptoassets” within the regulatory perimeter, and introduce prudential rules for the aforementioned activities. Proposed regulatory measures relating to stablecoin issuance include requirements for full reserve backing, guaranteed par redemption on a T+1 basis, and a prohibition on distributing stablecoin yield to customers. The FCA is further proposing to introduce a new prudential regime to ensure that crypto firms set aside adequate financial resources. The proposed framework—which will mirror the three-pillared approach of minimum capital, liquidity buffers and risk controls used in traditional finance—will set baseline rules applicable across sub-sectors in the crypto industry and prescribe capital and liquidity rules for stablecoin issuers. Interested respondents are invited to provide comments by July 31, 2025. CP25/14; CP25/15.

SPEAKER’S CORNER

UNITED STATES

Commissioner Peirce Describes Role for the SEC in Crypto Regulation
On May 29, SEC Commissioner Hester Peirce spoke at the Bitcoin 2025 conference in Las Vegas. Acknowledging that the SEC had dismissed several crypto-related enforcement actions, Commissioner Pierce emphasized that the Commission still has a role in enforcing the law against bad actors in the crypto space. “The goal is to use our enforcement tool for what it was intended to be used for, which is when there are clear rules and people violate them, then we can use our enforcement too.” The Commissioner also stated that “most crypto assets as we see them today are probably not themselves securities,” but that “doesn’t mean that you can’t sell a token that is not itself a security in a transaction that is a securities transaction.” Speech; The Block; Cointelegraph.
SEC Holds Tokenization Roundtable
On May 12, the SEC held a roundtable on tokenization as part of a series of discussions on digital asset regulation. The roundtable, held at the SEC’s headquarters, included panels on the evolution of tokenized capital markets and on the future of tokenization. In his keynote address, SEC Chairman Paul Atkins outlined the Commission’s goals to create clear guidelines for issuance of digital assets, to allow more choice regarding how to custody digital assets, and to allow a wider variety of trades, including “‘pairs trading’ between securities and non-securities.” SEC; Keynote.

INTERNATIONAL

Nigel Farage Advocates for UK Bitcoin Reserve
On May 29, UK Reform Party leader and former Brexit campaigner Nigel Farage pledged to introduce legislation to establish a strategic bitcoin reserve if he were to be elected Prime Minister. Speaking at the Bitcoin 2025 conference in Las Vegas, he also pledged to ban crypto debanking and to lower the capital gains tax. Speech; The Block.

OTHER NOTABLE NEWS

Coinbase Acquires Crypto Options Exchange Deribit for $2.9 Billion
On May 8, Coinbase agreed to acquire the crypto options exchange Deribit for approximately $2.9 billion in cash and stock. The transaction is still subject to regulatory approvals and closing conditions and is expected to close by year-end. Coinbase Blog; CoinDesk.
Leaders of IRS Crypto Unit Departs, Trish Turner Takes Over
On May 6, Trish Turner, a longtime IRS official, was appointed to lead the agency’s digital-asset unit after the exit of Sulolit Mukherjee and Seth Wilks, who co-led the unit for over a year. Before this new role, Turner served as a senior advisor within this unit responsible for crypto taxation and enforcement. The Block.
Three CFTC Commissioners Announce Departure
On May 21, CFTC Commissioner Kristin Johnson announced her intent to leave the agency, joining two others—Summer Mersinger, and Christy Goldsmith Romero—who had already announced that they would step down at the end of May. With former Chairman Rostin Behnam having departed earlier this year, when Commissioner Johnson leaves only acting Chair Caroline Pham will remain. Pham has also stated that she plans to leave the agency once President Trump’s nominee, Brian Quintenz, is confirmed. The CFTC has not operated with so few governing members since early 2022. Law360.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Kendall Day, William Hallatt, Michelle Kirschner, Hagan Rooke, Jeff Steiner, Sara Weed, Sam Raymond, Nick Harper, Nicholas Tok, Apratim Vidyarthi, Justin Fishman, and Theo Curie.

FinTech and Digital Assets Group Leaders / Members:

Ashlie Beringer, Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (+1 202.955.8256, mbopp@gibsondunn.com)

Stephanie L. Brooker, Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)

Jason J. Cabral, New York (+1 212.351.6267, jcabral@gibsondunn.com)

Ella Alves Capone, Washington, D.C. (+1 202.887.3511, ecapone@gibsondunn.com)

M. Kendall Day, Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)

Sébastien Evrard, Hong Kong (+852 2214 3798, sevrard@gibsondunn.com)

William R. Hallatt, Hong Kong (+852 2214 3836, whallatt@gibsondunn.com)

Nick Harper, Washington, D.C. (+1 202.887.3534, nharper@gibsondunn.com)

Martin A. Hewett, Washington, D.C. (+1 202.955.8207, mhewett@gibsondunn.com)

Sameera Kimatrai, Dubai (+971 4 318 4616, skimatrai@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Stewart McDowell, San Francisco (+1 415.393.8322, smcdowell@gibsondunn.com)

Hagen H. Rooke, Singapore (+65 6507 3620, hhrooke@gibsondunn.com)

Mark K. Schonfeld, New York (+1 212.351.2433, mschonfeld@gibsondunn.com)

Orin Snyder, New York (+1 212.351.2400, osnyder@gibsondunn.com)

Ro Spaziani, New York (+1 212.351.6255, rspaziani@gibsondunn.com)

Jeffrey L. Steiner, Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)

Eric D. Vandevelde, Los Angeles (+1 213.229.7186, evandevelde@gibsondunn.com)

Benjamin Wagner, Palo Alto (+1 650.849.5395, bwagner@gibsondunn.com)

Sara K. Weed, Washington, D.C. (+1 202.955.8507, sweed@gibsondunn.com)

CC/Devas (Mauritius) Limited v. Antrix Corp. Ltd., Nos. 23-1201, 24-17 – Decided June 5, 2025

Today, a unanimous Supreme Court held that personal jurisdiction exists under the FSIA whenever an exception to immunity applies and service of process has been accomplished, without regard to whether a foreign state has minimum contacts with the United States.

“Personal jurisdiction exists under § 1330(b) of the FSIA when an immunity exception applies and service is proper.”

Justice Alito, writing for the Court

Background:

The Foreign Sovereign Immunities Act of 1976 provides that foreign states are generally immune from suit in United States courts, subject to several exceptions. 28 U.S.C. §§ 1330, 1602 et seq. For example, the FSIA waives immunity for certain suits to confirm arbitration awards. Id. § 1605(a)(6). When an exception applies, the FSIA vests federal courts with “original jurisdiction” over the claims, id. § 1330(a), and provides that “[p]ersonal jurisdiction over a foreign state shall exist” where the district court possesses subject-matter jurisdiction and “where service has been made under section 1608 of this title,” id. § 1330(b).

In 2005, Antrix Corporation Ltd.—the commercial arm of India’s national space agency—entered into a satellite-leasing agreement with Devas Multimedia Private Ltd.—a privately owned Indian company. Several years later, Antrix invoked the agreement’s force-majeure clause to terminate the agreement with Devas, arguing that India’s new satellite-allocation policy prevented it from performing under the contract. Devas initiated arbitration before the International Chamber of Commerce, which awarded Devas damages for Antrix’s breach of contract.

Devas sought to confirm the award in the United States, invoking the FSIA’s arbitration exception as the basis for federal jurisdiction. On appeal of the confirmed award, the Ninth Circuit held that the court lacked personal jurisdiction over Antrix. Although it did not question that the arbitration exception applied, the court of appeals imposed an additional requirement that a foreign state have sufficient “minimum contacts” with the United States. The Supreme Court granted certiorari to decide whether the FSIA requires proof of minimum contacts before a United States court can exercise personal jurisdiction over a foreign state.

Issue:

Whether plaintiffs must prove minimum contacts before federal courts may assert personal jurisdiction over foreign states sued under the FSIA.

Court’s Holding:

The FSIA does not require proof of minimum contacts before a court can exercise personal jurisdiction over a foreign state.

What It Means:

The Court interpreted 28 U.S.C. § 1330(b) to provide for personal jurisdiction whenever an FSIA exception to immunity applies and a party properly served the foreign state under 28 U.S.C. § 1608. In doing so, the Court admonished the Ninth Circuit for its “strange” statutory interpretation that failed to “enforc[e] these provisions as written.” Op. 10–11.
Although this case arose under the arbitration exception to immunity, the Court’s analysis of 28 U.S.C. § 1330(b) applies to any suit implicating one of the several exceptions in 28 U.S.C. §§ 1605–1607.
In reaching its decision that the statutory text of the FSIA does not impose a minimum contacts requirement, the Court left open for consideration on remand the question whether the Due Process Clause of the Fifth Amendment “itself requires a showing of minimum contacts.” Op. 12–13. Thus, it is possible future courts may hold jurisdiction lacking as a constitutional matter, regardless of the text of the FSIA.

Gibson Dunn represented Devas’s owners as Petitioners.

The Court’s opinion is available here.

Appellate and Constitutional Law

Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com	Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com	Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com
Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com	Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com	Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com
Jacob T. Spencer 202.887.3792 jspencer@gibsondunn.com	David W. Casazza +1 202.887.3724 dcasazza@gibsondunn.com

Related Practice: Judgment and Arbitral Award Enforcement

Matthew D. McGill
+1 202.887.3680
mmcgill@gibsondunn.com

This alert was prepared by associates Elizabeth A. Kiernan and Rebecca Roman.

Ames v. Ohio Department of Youth Services, No. 23-1039 – Decided June 5, 2025

Today, the Supreme Court unanimously held that Title VII of the Civil Rights Act of 1964 does not impose an additional requirement on majority-group plaintiffs to show “background circumstances” suggesting that their employer discriminates against the majority group.

“We hold that this additional ‘background circumstances’ requirement is not consistent with Title VII’s text or our case law construing the statute.”

Justice Jackson, writing for the Court

Background:

Title VII makes it unlawful for any “employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual . . . , because of such individual’s race, color, religion, sex, or national origin.” 42 U.S.C. § 2000e-2(a)(1). Those protections cover adverse employment actions based on sexual orientation. Bostock v. Clayton County, 590 U.S. 644, 649-52 (2020).

Marlean Ames, a straight woman, sued her employer under Title VII, claiming she was denied a promotion and later demoted based on her sexual orientation. In support, she pointed out that her employer hired a gay woman for the position to which she had applied and a gay man to fill her previous position after the demotion. The district court granted summary judgment for her employer, and the Sixth Circuit affirmed. Applying circuit precedent, the court of appeals held that Ames had failed to show “background circumstances to support the suspicion that the defendant is th[e] unusual employer who discriminates against the majority.” The Supreme Court granted review to decide whether Title VII imposes that background-circumstances requirement.

Issue:

Whether a plaintiff who belongs to a majority group must show “background circumstances” suggesting the defendant is the “unusual employer who discriminates against the majority” to establish a prima facie case of discrimination under Title VII of the Civil Rights Act of 1964.

Court’s Holding:

No: Title VII imposes the same evidentiary requirements on majority-as on minority-group plaintiffs.

What It Means:

Today’s decision confirms that courts assessing Title VII claims need not divide plaintiffs into majority and minority groups. The burdens of proof are identical for all Title VII plaintiffs, regardless of whether the plaintiffs are in the majority or minority with respect to their protected characteristics.
The Court’s opinion lowers the barrier for majority-group plaintiffs to bring (and increases the burden on employers to defend against) so-called reverse-discrimination claims, particularly in the Sixth, Seventh, Eighth, Tenth, and D.C. Circuits, all of which had adopted the background-circumstances requirement.
The Court’s opinion emphasizes that Title VII prohibits covered discrimination of any kind, not merely discrimination against a limited set of historically disadvantaged groups, which comports with the Court’s modern approach to most anti-discrimination statutes.
Given the narrowness of the question presented, the opinion leaves a number of related Title VII issues unaddressed. For example, the Court assumed without deciding that McDonnell Douglas—the traditional framework for evaluating Title VII claims based on circumstantial evidence—applies in the summary-judgment context. The Court also declined to address whether McDonnell Douglas requires specific evidence of pretext or only a showing that discrimination was a motivating factor in the employer’s decision. And Justices Thomas and Gorsuch, in a separate concurrence, questioned whether McDonnell Douglas “is a workable and useful evidentiary tool” at all.

The Court’s opinion is available here.

Appellate and Constitutional Law

Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com	Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com	Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com
Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com	Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com	Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com

Related Practice: Labor and Employment

Jason C. Schwartz +1 202.955.8242 jschwartz@gibsondunn.com	Katherine V.A. Smith +1 213.229.7107 ksmith@gibsondunn.com	Zakiyyah T. Salim-Williams +1 202.955.8503 zswilliams@gibsondunn.com
Danielle J. Moss +1 212.351.6338 dmoss@gibsondunn.com	Harris M. Mufson +1 212.351.3805 hmufson@gibsondunn.com	Cynthia Chen McTernan +1 213.229.7633 cmcternan@gibsondunn.com

This alert was prepared by associates Matt Aidan Getz and Bryston C. Gallegos.

Join us for a 30-minute briefing covering several Executive Compensation practice topics. This program is part of a quarterly webcast series designed to provide quick insights into emerging issues as well as practical advice.

Topics to be discussed:

Emerging best practices and analysis of disclosures around equity grant timing policies and practices
Expanding clawback policies beyond accounting restatements
Executive security, both physical and digital

MCLE CREDIT INFORMATION:

This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 0.5 credit hour, of which 0.5 credit hour may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit.

Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 0.5 hour.

Gibson, Dunn & Crutcher LLP is authorized by the Solicitors Regulation Authority to provide in-house CPD training. This program is approved for CPD credit in the amount of 0.5 hour. Regulated by the Solicitors Regulation Authority (Number 324652).

Neither the Connecticut Judicial Branch nor the Commission on Minimum Continuing Legal Education approve or accredit CLE providers or activities. It is the opinion of this provider that this activity qualifies for up to 0.5 hour toward your annual CLE requirement in Connecticut, including 0 hour(s) of ethics/professionalism.

Application for approval is pending with the Illinois, Texas, Virginia, and Washington State Bars.

PANELISTS:

Krista Hanvey is Co-Chair of Gibson Dunn’s Executive Compensation and Employee Benefits practice group and Co-Partner in charge of the firm’s Dallas office. She counsels clients of all sizes across all industries using a multi-disciplinary approach to compensation and benefits matters that crosses tax, securities, labor, accounting and traditional employee benefits legal requirements. Ms. Hanvey has significant experience with all aspects of executive compensation, health and welfare benefit plan, and retirement plan compliance, planning, and transactional support. She also oversees the Dallas office’s pro bono adoption program.

Alli Balick is Of Counsel in the Los Angeles office of Gibson Dunn. She is a member of the firm’s Executive Compensation and Employee Benefits Practice Group. Her practice focuses on all aspects of executive compensation and employee benefits, including tax, ERISA, accounting, corporate, and securities law aspects of equity and other incentive compensation plans, qualified and nonqualified retirement and deferred compensation plans and executive employment and severance arrangements. Alli also practices with the firm’s Corporate and Securities Regulation and Corporate Governance departments, focusing on mergers and acquisitions, emerging growth companies, corporate governance and securities law matters.

The U.S. enforcement environment governing international trade has intensified significantly in 2025. Since the start of the Trump Administration’s second term, U.S. trade policy has seen a sharp resurgence in unilateral tariffs accompanied by the risk of False Claims Act scrutiny, alongside an emphasis on increased sanctions and export enforcement under the administration’s America First Trade Policy. Enforcement activity continues to target specific countries and sectors, with sustained attention on sanctions, export controls, tariffs, and antiboycott regulations. From escalating tariff measures to multi-agency regulatory actions, understanding the evolving compliance expectations is more critical than ever. In this webinar, we examine the key enforcement trends, policy shifts, and practical compliance strategies shaping today’s global trade landscape.

MCLE CREDIT INFORMATION:

This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 1.0 credit hours, of which 1.0 credit hours may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit.

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PANELISTS:

F. Joseph Warin is Co-Chair of Gibson Dunn’s global White Collar Defense and Investigations Practice Group, and he is chair of the Washington, D.C. office’s 200-person Litigation Department. Mr. Warin is ranked annually in the top-tier by Chambers USA, Chambers Global, and Chambers Latin America for his FCPA, fraud and corporate investigations experience. Mr. Warin has handled cases and investigations in more than 40 states and dozens of countries involving federal regulatory inquiries, criminal investigations and cross-border inquiries by international enforcers, including UK’s SFO and FCA, and government regulators in Germany, Switzerland, Hong Kong, and the Middle East. He has served as a compliance monitor or counsel to the compliance monitor in three separate FCPA monitorships, pursuant to settlements with the SEC and DOJ.

Matt Axelrod is a nationally recognized white collar defense lawyer with deep criminal, national security, and export enforcement experience. Matt’s practice focuses on internal investigations, crisis management, and white collar criminal defense for U.S. and multinational companies. Matt is the only person to have served as both the Assistant Secretary for Export Enforcement at the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and Principal Associate Deputy Attorney General at the U.S. Department of Justice (DOJ) — a role described in the New York Times as “the most demanding job in all of DOJ.” His over 25 years of combined government enforcement and white-collar defense experience are why clients consistently rely on Matt to help them navigate their most sensitive and complex matters. Matt co-chairs the firm’s Sanctions and Export Enforcement practice, where he works closely with clients to conduct internal investigations, evaluate compliance programs, advise on voluntary self-disclosures, and defend against government-facing investigations.

Adam M. Smith is a partner in the Washington, D.C. office of Gibson Dunn and serves as co-chair of the firm’s International Trade Advisory and Enforcement and Sanctions and Export Enforcement Practice Groups. He is an experienced international lawyer with a focus on international trade compliance and white collar investigations, including federal and state economic sanctions enforcement, CFIUS, the Foreign Corrupt Practices Act, embargoes, and export and import controls. Clients benefit from Adam’s experience in the Obama Administration, where he was Senior Advisor to the Director of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and Director for Multilateral Affairs on the National Security Council. At OFAC, he was instrumental in shaping and enforcing sanctions policies, briefing congressional and private sector leaders, conducting extensive international outreach, and negotiating complex agreements. On the National Security Council, he advised the President on international sanctions, coordinated inter-agency efforts, and developed strategies to counter corruption and promote asset recovery.

Christopher T. Timura is a partner in the Washington, D.C. office of Gibson Dunn and a member of the firm’s International Trade Advisory and Enforcement, Sanctions and Export Enforcement, and White Collar Defense and Investigations Practice Groups. Christopher helps clients solve regulatory, legal and political problems that arise at the intersection of national security, trade, and foreign policy, and to develop corporate social responsibility (CSR) and environmental, social, and governance (ESG) strategies, policies, and procedures. His clients span sectors and range from start-ups to Global 500 companies. In 2022, Christopher was appointed to the Department of Commerce Bureau of Industry and Security Regulations and Procedures Technical Advisory Committee, where he chairs its export control enforcement working group. Most recently, Christopher was ranked in the Chambers Global 2024 guide for USA International Trade: Export Controls & Economic Sanctions.

Samantha Sewall is of counsel in the Washington, D.C. office of Gibson Dunn and a member of the firm’s International Trade Advisory and Enforcement and Sanctions and Export Enforcement Practice Groups. She advises clients on compliance with U.S. legal obligations at the intersection of global trade, foreign policy, and national security, focusing her practice on compliance with U.S. economic sanctions, export controls, national security reviews of foreign direct investment (CFIUS), customs, and anti-boycott laws. Samantha has experience advising companies across a wide range of sectors including aerospace, banking and financial institutions, defense, energy, medical devices and pharmaceuticals, shipping, retail, telecommunications, and travel.

We are pleased to provide you with the May edition of Gibson Dunn’s monthly U.S. bank regulatory update. Please feel free to reach out to us to discuss any of the below topics further.

KEY TAKEAWAYS

The GENIUS Act, establishing a statutory framework for payment stablecoins, moved closer to a full Senate vote after Democrats announced a number of amendments.
Acting on priorities outlined by Acting Chairman Travis Hill in his January 2025 statement, the Federal Deposit Insurance Corporation (FDIC) rescinded its 2024 Statement of Policy on Bank Merger Transactions and reinstated the prior Statement of Policy on Bank Merger Transactions. The FDIC again indicated it plans to conduct a broader reevaluation of its bank merger review process.
In similar fashion, the Office of the Comptroller of the Currency (OCC) adopted an interim final rule to restore the streamlined application and expedited review to its procedures for reviewing applications under the Bank Merger Act (BMA) and rescinded its 2024 policy statement on its review of applications under the BMA. The Senate and House passed a joint Congressional Review Act (CRA) resolution nullifying the OCC’s 2024 final rule. The CRA resolution has not been signed into law.
The OCC continued to revamp its approach to digital assets, clarifying that national banks and federal savings associations may buy and sell assets held in custody on a customer’s behalf at the direction of the customer and are permitted to outsource to third parties bank-permissible crypto-asset activities, including custody and execution services, subject to appropriate third-party risk management practices.
The Consumer Financial Protection Bureau (CFPB) withdrew 67 guidance documents, including interpretive rules, policy statements, advisory opinions and compliance bulletins. The withdrawals are applicable as of May 12, 2025. The CRA resolutions to repeal the CFPB overdraft rule and larger participant rule for digital payment companies were signed into law. The CFPB also rescinded its May 2022 interpretive rule regarding the scope of state enforcement under Section 1042 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
The CFPB also noted that it plans to vacate its Section 1033 open banking rule in a status report filed in the U.S. District Court for the Eastern District of Kentucky, stating “[a]fter reviewing the Rule and considering the issues that this case presents, Bureau leadership has determined that the Rule is unlawful and should be set aside.” The CFPB indicated it intends to file a motion for a summary judgment in the case by May 30, 2025.
The federal financial services regulatory agencies’ leadership teams continue to evolve.
- In an unsigned opinion, the Supreme Court signaled that members of the Federal Reserve Board and other members of the Federal Open Market Committee cannot be terminated by the President without cause, by virtue of for-cause removal protections. In its opinion, the Court explained that the “Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,” distinguishing it from other independent agencies.
- The Senate Banking Committee advanced out of committee the nomination of Michelle Bowman to be the Federal Reserve Board’s Vice Chair for Supervision. Jonathan Gould’s nomination to be the next Comptroller of the Currency previously advanced out of committee. Each awaits Senate confirmation.
- Secretary of the Treasury Scott Bessent announced President Trump’s intent to nominate Jonathan McKernan to serve as Undersecretary of Domestic Finance at the U.S. Department of the Treasury. McKernan’s nomination to serve as Director of the CFPB was withdrawn.
- The Acting Chair of the Commodity Futures Trading Commission (CFTC) Caroline Pham announced her departure once Brian Quintenz is confirmed as Chairman. CFTC Commissioners Summer Mersinger and Christy Goldsmith Romero announced they will step down at the end of May 2025 and Commissioner Kristin Johnson announced she will step down “later this year.”
- Vacancies remain on the boards of the FDIC and National Credit Union Administration.

DEEPER DIVES

FDIC and OCC Rescind Biden Administration Changes to Agency Review of Bank Merger Transactions. On May 8, 2025, the OCC adopted an interim final rule to restore the streamlined application and expedited review to its procedures for reviewing applications under the BMA and rescinded its 2024 policy statement on its review of applications under the BMA. (On May 7 and May 20, 2025, the Senate and House, respectively, passed a joint Congressional Review Act resolution nullifying the OCC’s 2024 final rule.) On May 20, 2025, the FDIC rescinded its 2024 Statement of Policy on Bank Merger Transactions and reinstated the prior Statement of Policy on Bank Merger Transactions, effective 30 days after publication in the Federal Register.

Insights. Although the changes mitigate or eliminate some of the issues created by the September 2024 changes to the agencies’ evaluations of merger transactions, more remains to be done to establish a process that maximizes predictability, efficiency and transparency for institutions of all sizes regardless of federal regulator. In that connection, the FDIC again indicated it plans to conduct a broader reevaluation of its bank merger review process.As in September 2024, the FDIC and OCC moves on changes to the agencies’ approach to evaluating transactions subject to approval under the BMA appear coordinated. Absent, though, was any coordinated action by the U.S. Department of Justice (DOJ). In September 2024, the DOJ announced the 2023 Merger Guidelines will be the “sole and authoritative statement across all industries.” The DOJ move expanded bank merger analysis beyond the traditional—and more predictable—assessment of local branch overlaps and HHI screens, into a “comprehensive and flexible framework,” considering issues such as the impact at the branch level with respect to individual lines of business, particular customer segments, or the quality/nature of customer service, and across broader geographic regions. At this time, it is unclear whether the 2023 Merger Guidelines will remain the “sole and authoritative statement across all industries,” though the 2023 Merger Guidelines do contain a HHI threshold (1,800/100) and a market share threshold (30% plus change in HHI of 100) for establishing a rebuttable presumption of anticompetitive harm.

OCC Clarifies Bank Authority to Engage in Certain Crypto-Related Activities. On May 7, 2025, the OCC published Interpretive Letter No. 1184 clarifying that national banks and federal savings associations may buy and sell assets held in custody on a customer’s behalf at the direction of the customer and are permitted to outsource to third parties bank-permissible crypto-asset activities, including custody and execution services, subject to appropriate third-party risk management practices.

Insights. Since the change in administration, the federal banking agencies have continued to signal increased receptivity to crypto-related activities and digital assets in the industry on behalf of clients, in all cases subject to the requirement that all activities be conducted in a safe and sound manner, consistent with all applicable laws and regulations. In practice, banks are still expected to engage with the Federal Reserve, FDIC and OCC regarding proposed crypto-related activities—as noted by the FDIC in FIL-7-2025, banks “should consider the associated risks … and should engage with their supervisory team as appropriate.”As we have previously discussed, crypto-related activities and product offerings may present thorny legal authority/permissibility issues under law or raise safety and soundness concerns, all of which must continue to be evaluated by institutions. Aside from buying, selling and issuing stablecoins to facilitate payments (OCC Interpretive Letter No. 1174), limitations remain on banks’ authority to engage in crypto-related activities as principal. Further, as noted by Acting Chairman Hill in his April 8, 2025 update on key policy issues, “one specific area that merits attention is the use of public, permissionless blockchains by banks.” The Federal Reserve’s Policy Statement on Section 9(13) of the Federal Reserve Act notes in the preamble to the final rule that the Federal Reserve “generally believes that issuing tokens on open, public, and/or decentralized networks, or similar systems is highly likely to be inconsistent with safe and sound banking practices.”

Agency	Actions
FDIC	Confirmed that FDIC-supervised institutions (i) may engage in “permissible crypto-related activities”* without receiving prior FDIC approval and (ii) “should consider the associated risks … and should engage with their supervisory team as appropriate.”Withdrew from the “Joint Statement on Crypto-Asset Risks to Banking Organizations” (Jan. 3, 2023) and the “Joint Statement on Liquidity Risks to Banking Organizations Resulting from Crypto-Asset Market Vulnerabilities” (Feb. 23, 2023) (together, the Joint Statements). * Although the FDIC broadly defines “permissible crypto-related activities” to include: acting as crypto-asset custodians; maintaining stablecoin reserves; issuing crypto and other digital assets; acting as market makers or exchange or redemption agents; participating in blockchain- and distributed ledger-based settlement or payment systems, including performing node functions; as well as related activities such as finder activities and lending, the footnote explaining “permissible” in FIL-7-2025 cites only to the OCC Interpretive Letters described below as examples of “permissible” activities.
Federal Reserve	Confirmed that (i) state member banks may engage in permissible crypto-asset activities without providing advance notification and (ii) the Federal Reserve will monitor banks’ crypto-asset activities through the “normal supervisory process.”Withdrew from the Joint Statements. Policy Statement on Section 9(13) of the Federal Reserve Act remains effective (describing limitations on state member banks’ authority to engage in crypto-related activities as principal).
OCC	Rescinded the requirement that OCC-supervised institutions receive supervisory nonobjection before they can engage in activities described in OCC Interpretive Letters Nos. 1170, 1172, and 1174 (crypto-asset activities) and confirmed those crypto-asset activities will be examined as part of the OCC’s “ongoing supervisory process.”Published Interpretive Letter No. 1183 to confirm the following are permissible for national banks and federal savings associations: crypto-asset custody services for customers (Interpretive Letter No. 1170), holding reserves for stablecoin issuers (Interpretive Letter No. 1172), and using independent node verification networks and stablecoins to facilitate bank-permissible activities, including payments (Interpretive Letter No. 1174). Published Interpretive Letter No. 1184 (see above). Withdrew from the Joint Statements.

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CFPB Continues Deregulatory Push. On May 12, 2025, the CFPB withdrew 67 guidance documents, including interpretive rules, policy statements, advisory opinions and compliance bulletins. The withdrawals are effective as of May 12, 2025. On May 15, 2025, the CFPB rescinded its May 2022 interpretive rule regarding the scope of state enforcement under Title X of the Dodd-Frank Act. The newly issued interpretive rule is effective May 15, 2025. Finally, on May 23, 2025, the CFPB notified the U.S. District Court for the Eastern District of Kentucky that it intends to vacate its 1033 open banking rule.

Insights. The withdrawals include 8 policy statements, 7 interpretive rules, 13 advisory opinions and 39 other pieces of guidance across a range of topics. The withdrawals are consistent with actions taken to date to narrow the CFPB’s mandate, as is the decision to vacate the 1033 open banking rule. The actions, though, have the potential to create a whipsaw effect for legal and compliance functions should future administrations re-empower the CFPB in any of these areas. Further, it is unclear whether the current administration will propose a new Section 1033 open banking rule or if the administration intends to implement one at all.

House Financial Services Committee Remains Active. On May 21, 2025, the U.S. House Financial Services Committee announced it had advanced out of committee 25 bills, many of which are designed to reshape bank regulation and supervision.

Insights. Although enactment of any of these bills into law is not guaranteed, certain themes emerge from a review of certain bills that are worth highlighting as continued areas of focus by the House Financial Services Committee, Senate Banking Committee, regulators and other stakeholders.

Bill (Topic)	Aim	Other Commentary
Bank Failure Prevention Act (timely BMA application decisions)	Establishes “shot clock” for federal regulators to act on BMA applications	Bowman (here); Acting FDIC Chairman Hill (here); Chairman French Hill (R-AR) (here)
Taking Account of Institutions with Low Operation Risk (TAILOR) Act (regulatory tailoring)** introduced in Senate as well	Requires federal financial regulatory agencies to tailor federal regulation based on banks’ specific risk profiles and business models	Bowman (here; here; here); Hill (here); Chairman French Hill (here)
Financial Institution Regulatory Tailoring Enhancement Act (regulatory tailoring)	Increases from $10 billion to $50 billion the asset thresholds at which financial institutions become subject to certain requirements (e.g., Volcker, Durbin amendment, CFPB supervision)	Bowman (here; here; here); Hill (here); Acting Comptroller Hood (here); Chairman French Hill (here)
Fair Audits and Inspections for Regulators’ (FAIR) Exams Act (supervisory findings appeals process)	Establishes new appeals processes for financial institution supervisory determinations	Hill (here); Chairman French Hill (here; here; here)
Halting Uncertain Methods and Practices in Supervision (HUMPS) Act (CAMELS ratings)	Requires the regulatory agencies to update the CAMELS rating system, particularly the “Management” component	Bowman (here); Hill (here); Chairman French Hill (here)
FIRM Act (debanking)** introduced in Senate as well	Limits use of reputational risk in examination reports	Hill (here); Chairman French (here; here); Jonathan Gould Gould (nominee) (here)

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OTHER NOTABLE ITEMS

Speech by Vice Chair Jefferson on Liquidity Facilities. On May 19, 2025, Federal Reserve Board Vice Chair Jefferson gave a speech titled “Liquidity Facilities: Purposes and Functions.” In his speech, Vice Chair Jefferson noted that the discount window has been used more than was the case before the pandemic.

FDIC Board of Directors Meeting. At the FDIC Board meeting on May 20, 2025, the FDIC Board reviewed the Deposit Insurance Fund Restoration Plan. In his remarks on the plan, Acting Chairman Hill noted that FDIC staff “project that the reserve ratio is likely to reach the statutory minimum of 1.35 percent ahead of the statutory deadline and recommend no changes to the Restoration Plan.” He also offered that the FDIC Board should consider “whether insured deposits is the right metric to measure the [Deposit Insurance Fund’s] exposure to losses,” indicating that FDIC staff, at his request, is analyzing an alternative permitted by the Federal Deposit Insurance Act to use total liabilities rather than insured deposits as the denominator of the reserve ratio.

FDIC Publishes 2025 Risk Review. On May 13, 2025, the FDIC published its 2025 Risk Review providing an overview of market and credit risks to banks in 2024. The risk review identified market risks arising from higher interest rates and an inverted yield curve during much of 2024 as an ongoing key risk to the industry. It noted that on-balance-sheet liquidity levels were “stable” in 2024, deposits increased for the first time since 2021 “as uninsured deposit growth resumed,” and wholesale funding growth slowed with the ratio of wholesale funds to total assets being “within pre-pandemic norms.” The risk review also highlighted asset quality deterioration in certain commercial real estate and consumer loan portfolio as the second key risk to banks in 2024.

Acting Comptroller Hood Discusses OCC Priorities. On May 8, 2025, Acting Comptroller Hood gave remarks at the Building Societies Annual Conference (Birmingham, England). In his remarks, Acting Comptroller Hood continued to highlight his four key areas of strategic focus for the OCC: (1) reducing regulatory burden (“ensur[ing] that regulations are effective and not excessive so that the institutions we supervise can thrive and innovate”); (2) promoting financial inclusion (“financial inclusion is the civil rights issue of our time”); (3) embracing bank-fintech partnerships (“innovation is not optional, but essential”); and (4) expanding responsible bank activities involving digital assets (“the OCC recently reaffirmed that a range of cryptocurrency activities are permissible by the institutions we supervise”).

OCC Publishes Interest Rate Risk Statistics Report. On May 14, 2025, the OCC published the spring 2025 edition of the Interest Rate Risk Statistics Report. The report presents interest rate risk data gathered during examinations of OCC-supervised midsize and community banks and federal savings associations.

OCC Issues RFI on Challenges Faced by Community Banks in Adoption and Implementation of Digital Banking Solutions. On May 5, 2025, the OCC issued a request for information (RFI) seeking input from community banks regarding the challenges and barriers faced in adopting and implementing digitalization strategies and initiatives. The RFI’s focus includes topics such as governance; diligence; third-party risk management; costs; use of AI and machine learning; and data sharing and tech interoperability. Responses to the RFI are due within 45 days of the date of publication in the Federal Register.

OFR Blog on Banks’ Unrealized Losses in Securities Portfolios. On May 15, 2025, the Office of Financial Research published a blog post, “The State of Banks’ Unrealized Securities Losses.” The post found that higher Treasury yields have kept unrealized securities losses at elevated levels, albeit lower than their highest levels reached in the third quarter of 2022. The post estimates that as of December 31, 2024, aggregate unrealized securities losses remained elevated at $481 billion, “approximately an average of 8.6% of the fair value of their aggregate securities holdings and 19.9% of the aggregate equity held at the banking subsidiaries.”

Joint Study Explores Feasibility of Central Bank Operations Using Tokenization and Smart Contracts. The Federal Reserve Bank of New York and the Bank for International Settlements published a joint research study that found that central banks could customize and deploy policy implementation tools using programmable smart contracts in a potential future state where commercial banks and other private sector financial institutions have widely adopted tokenization for wholesale payments and securities settlement.

Speech by Governor Cook on Financial Stability. On May 23, 2025, Federal Reserve Board Governor Lisa Cook gave a speech titled “A View on Financial Stability.” In her speech, Governor Cook focused on overall financial stability and ongoing uncertainty and risks. She highlighted ongoing risk and uncertainty in the system, as well as the importance of better understanding the interaction of banks and nonbanks and how that may impact overall financial stability and market shock absorption.

Speech on Recent Developments in Treasury Market Liquidity and Funding Conditions. In remarks on May 9, 2025, Roberto Perli, manager of the Federal Reserve’s System Open Market Account, discussed recent developments in U.S. Treasury market liquidity. On May 13, 2025, the Federal Reserve Bank of New York’s Teller Window highlighted Perli’s speech.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Ro Spaziani, and Rachel Jackson.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. Please contact the Gibson Dunn lawyer with whom you usually work or any of the member of the Financial Institutions practice group:

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Ro Spaziani, New York (212.351.6255, rspaziani@gibsondunn.com)

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

M. Kendall Day, Washington, D.C. (202.955.8220, kday@gibsondunn.com)

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Sara K. Weed, Washington, D.C. (202.955.8507, sweed@gibsondunn.com)

Ella Capone, Washington, D.C. (202.887.3511, ecapone@gibsondunn.com)

Sam Raymond, New York (212.351.2499, sraymond@gibsondunn.com)

Rachel Jackson, New York (212.351.6260, rjackson@gibsondunn.com)

Zack Silvers, Washington, D.C. (202.887.3774, zsilvers@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

Nathan Marak, Washington, D.C. (202.777.9428, nmarak@gibsondunn.com)

Gibson Dunn’s Immigration Task Force is available to help clients understand what these and other expected policy changes will mean for them and how to comply with new requirements.

In response to the federal government’s new rules and guidance impacting the immigration system, several legal challenges have been filed against the Trump Administration. This update outlines the background and status of certain notable lawsuits: (1) challenges to the invocation of the Alien Enemies Act to remove Venezuelan nationals allegedly connected to the gang Tren de Aragua; (2) a challenge to the removal of Kilmar Armando Abrego Garcia, a Salvadoran national who was lawfully present in the United States; (3) a challenge to the termination of the Temporary Protected Status designation for Venezuelans; (4) challenges to the termination of birthright citizenship; (5) a challenge to the termination of categorial parole programs, including for Cubans, Haitians, Nicaraguans, and Venezuelans; (6) a challenge to the Department of Homeland Security rule requiring registration of certain noncitizens; (7) challenges to the revocation of certain student visas; and (8) challenges to the termination of funding for congressionally appropriated programs benefiting immigrants.

Challenges to Removal of Venezuelan Nationals Under the Alien Enemies Act

Underlying Executive Order

On March 14, 2025, President Trump issued an Executive Order invoking the Alien Enemies Act of 1798 (AEA) to require the “immediate apprehension, detention, and removal” of Venezuelan nationals age 14 and older who are members of the Venezuelan gang, Tren de Aragua.[1] The Executive Order, titled “Invocation of the Alien Enemies Act Regarding the Invasion of the United States by Tren De Aragua,” states that Tren de Aragua has invaded the United States, “perpetrated irregular warfare,” and used drug trafficking as a weapon against U.S. citizens.[2]

The AEA, enacted in 1798, authorizes the President to “apprehend[], restrain[], secure[], and remove[]” any “alien enemies” only during a declared war or invasion against the United States.[3] The AEA requires that noncitizens are provided a right of voluntary departure and must be given “reasonable time” to depart “according to the dictates of humanity and national hospitality.”[4] The AEA has been invoked only three times since its enactment, during the War of 1812, World War I and World War II.[5] During World War II, the AEA was infamously invoked in the creation of the internment camps for noncitizens from Japan, Germany, Italy, Hungary, Romania and Bulgaria.[6] Until now, the AEA has not been invoked outside of a declared war.[7]

The government began removing Venezuelan nationals promptly following the publication of the Executive Order, resulting in various legal challenges. The first lawsuit, J.G.G v. Trump, successfully obtained a nationwide injunction protecting removal for any individual subject to the Executive Order. As detailed below, however, the Supreme Court overruled that decision on procedural grounds, and plaintiffs seeking to prevent their removal under the Executive Order have since been obligated to file habeas corpus proceedings in the jurisdictions in which they are detained.[8] As of today’s date, there are at least nine separate habeas petitions pending in various federal districts.

The Initial Case: J.G.G. v. Trump

On March 15, 2025, the American Civil Liberties Union (ACLU), Democracy Forward, and the ACLU of the District of Columbia filed suit in the District of Columbia District Court seeking a temporary restraining order (TRO) against the Executive Order’s enforcement.[9] The suit was brought on behalf of five detainees who had been informed the day before that they were going to be deported, as well as a potential class consisting of “all noncitizens in U.S. custody subject to the[Executive Order].” On the day the suit was filed, at 5:00 p.m., Judge James Boasberg held a hearing to consider the plaintiffs’ motions for class certification and a TRO. When asked whether there were any imminent removals planned, the government represented that they did not know and would “investigate.”[10] When plaintiffs’ counsel interjected that two removal flights were scheduled to depart during the time of the hearing, Judge Boasberg adjourned the hearing at 5:22 p.m. to allow the government to confirm whether any flights were scheduled to depart.[11] The hearing resumed at 6:00 p.m., but the government continued to represent that they had no information to share.[12] Around 6:45 p.m., Judge Boasberg verbally entered a nationwide TRO order to prevent the removal of the any members of the putative class for 14 days, concluding that (1) the AEA does not provide a basis for removal under the Executive Order, (2) “a brief delay in [the plaintiffs’] removal does not cause the government harm,” and (3) the plaintiffs face irreparable harm since they will be deported to “prisons in other countries or even back to Venezuela where they face persecution or worse.”[13] During the hearing, Judge Boasberg also ordered the government to “immediately” comply with the TRO and demanded that the government halt all planes or return planes that had already taken off.[14] At 7:25 p.m., Judge Boasberg published a written order memorializing the TRO.[15]

It was later confirmed that three removal flights departed from Harlingen, Texas during that hearing, around 5:25 p.m., 5:45 p.m., and 7:36 p.m.[16] All three planes were still in the air when the TRO was published, and all three planes arrived in El Salvador the following day. Later that day, Secretary of State Marco Rubio shared a video originally posted by El Salvador’s President Nayib Bukele recording the passengers being led off the plane in handcuffs and taken into a prison.[17] On March 17, 2025, the White House reported that 137 people had been removed from the United States under the AEA, although that figure may now be higher.[18]

The government appealed the district court’s decision, and sought a stay of the TRO.[19] The United States Court of Appeals for the District of Columbia Circuit denied the government’s request,[20] and the government appealed that decision to the U.S. Supreme Court.[21] On April 7, 2025, the Supreme Court published an unsigned order vacating the TRO for improper venue but holding that the government cannot deport individuals without the “notice and opportunity” to challenge their removal in federal court.[22] Specifically, the Court noted that “the Fifth Amendment entitles [noncitizens] to due process of law in the context of removal proceedings,” and that detainees must receive notice that they are subject to removal “within a reasonable time and in such a manner as will allow them to actually seek habeas relief” before the removal.[23] While the Court did not discuss the validity of the Executive Order, it noted that challenges to removal under the AEA must be brought in habeas corpus proceedings in the jurisdiction where the individual is confined.[24] As the plaintiffs in J.G.G. were detained in New York and Texas, the Court found that they had improperly filed in Washington, D.C.[25]

Contempt of Court – J.G.G. v. Trump:

On March 17, 2025, Judge Boasberg held a hearing to investigate whether the Trump Administration was in contempt of the TRO.[26] During the hearing, the government refused to answer any questions, invoking “national security concerns” and arguing that the hearing was an “incursion[] on Executive Branch authority.”[27] Judge Boasberg directed the Department of Justice to certify that no noncitizens were removed after the written order (published at 7:25 p.m. on March 15, 2025), to confirm the exact time the Executive Order was signed, made public, and went into effect, and to provide an estimate of the number of individuals subject to the Executive Order that remain in custody. Weeks of what Judge Boasberg called “increasing obstructionism” followed as the government refused to substantively respond to the information requests.[28] On April 16, 2025, Judge Boasberg determined that the government’s actions “demonstrate a willful disregard” for the TRO, concluding that probable cause existed to find the government in criminal contempt.[29] Even though by that time the Supreme Court had vacated the TRO for a venue defect, Judge Boasberg concluded that “even a legally defective order must be complied with until reversed through the appeals process.”[30]

Habeas Corpus Proceedings: Spotlighting A.A.R.P. and W.M.M. v. Trump:

Following the Supreme Court’s ruling on jurisdiction and venue, several plaintiffs filed habeas petitions in nine federal districts: the Southern District of New York,[31] the District of Rhode Island,[32] the Middle District of Georgia,[33] the Southern District of Texas,[34] the District of Nevada,[35] the Western District of Pennsylvania,[36] the District of Colorado,[37] the District of Columbia,[38] and the Northern District of Texas.[39] One of these cases garnered national attention and eventually resulted in a U.S. Supreme Court decision. On April 16, the ACLU filed a habeas petition on behalf of two named plaintiffs, A.A.R.P. and W.M.M., in the Northern District of Texas, requesting a TRO and class certification for “all noncitizens in custody in the Northern District of Texas who were, are, or will be subject to the [Executive Order].”[40] The district court denied the TRO, stating that the individuals are “not facing such an imminent threat” of removal. That same day, the plaintiffs learned that the detention facility had distributed removal notices to the detainees with warnings that removals were “imminent and will happen tonight or tomorrow.”[41] On April 18, 2025, the plaintiffs filed emergency motions in the district court and Fifth Circuit Court of Appeals, and upon hearing no response, applied to the Supreme Court for an emergency injunction.[42]

Early the following morning, at 12:55 a.m. on April 19, 2025, the Supreme Court issued an unsigned, one-page order temporarily blocking the removal of the class of detainees until further order on the pending injunction motion.[43] Justice Alito (joined by Justice Thomas) published a dissent hours later, calling the Court’s order “unprecedented and legally questionable relief.”[44] The dissent took issue with the timing of the appeal, arguing that without a ruling from the lower courts, and without the opportunity for the government to have been heard, the order was inappropriate.

On May 16, 2025, the Supreme Court granted an injunction pending appeal for the two named plaintiffs and putative class members who “fac[e] an imminent threat of severe, irreparable harm.”[45] The Court first determined that it had jurisdiction—even though the district court had not yet ruled on the plaintiffs’ request for an injunction—because the court’s inaction in the face of evidence that individuals were imminently being removed “had the effect of refusing an injunction.”[46] On the merits, the Court restated its conclusions in J.G.G v. Trump that providing “notice roughly 24 hours before removal, devoid of information about how to exercise due process rights to contest that removal” was not “reasonable” and did not provide “sufficient time and information to reasonably be able to contact counsel, file a petition, and pursue appropriate relief.”[47] The Court did not discuss the underlying legality of the invocation of the AEA, nor did it determine what process would be reasonable to satisfy due process rights; it remanded both questions to the Fifth Circuit, where the matter remains pending.[48]

The Supreme Court’s injunction in A.A.R.P. only binds class members within the Fifth Circuit.[49] As prescribed by the Supreme Court’s May 16 opinion, each lower court is to determine what constitutes “reasonable” and “sufficient” notice ahead of removal.[50] Of the nine cases pending before the federal district courts, eight have granted temporary or preliminary injunctions against the Executive Order as of as of today’s date.[51] With several separate cases pending across nine districts, the legal protections and rights for Venezuelan nationals suspected of being Tren de Aragua members may vary drastically from state to state. The universal result of these pending cases is that the government is required to provide more notice to Venezuelan nationals before removal, but there may be no consistent approach across each district.

Challenge to Removal of Kilmar Armando Abrego Garcia

Kilmar Armando Abrego Garcia is a citizen of El Salvador who had been living in the United States since 2011.[52] In 2019, after the Department of Homeland Security (DHS) initiated removal proceedings against him, an immigration judge granted Mr. Abrego Garcia withholding of removal status, which forbade DHS from removing him to El Salvador due to the threats he faced there from a local gang.[53] On March 12, 2025, however, DHS arrested Mr. Abrego Garcia and, within days, sent him (along with several Venezuelan nationals suspected of being Tren de Aragua members, discussed above) to a maximum security prison in El Salvador known as CECOT, based on his purported membership in the MS-13 gang.[54] Although the government has said in court documents that Mr. Abrego Garcia’s removal was an “administrative error,” it has claimed that Mr. Abrego Garcia’s return to the United States would pose a threat to the public.[55]

On March 24, 2025, Mr. Abrego Garcia, his wife, and his son filed a lawsuit in the United States District Court for the District of Maryland, challenging his removal and seeking an order requiring the government to take steps to return him to the United States. On April 4, 2025, Judge Paula Xinis issued an order finding that Mr. Abrego Garcia had been unlawfully removed to El Salvador in violation of the INA without any legal process and requiring the government to “facilitate and effectuate” his return to the United States.[56] The government asked the United States Court of Appeals for the Fourth Circuit to stay the district court’s decision pending appeal, and the Fourth Circuit denied the government’s motion, writing: “The United States Government has no legal authority to snatch a person who is lawfully present in the United States off the street and remove him from the country without due process.”[57] The government then applied to the United States Supreme Court for a stay, as well as vacatur of the district court’s injunction. After granting a short administrative stay,[58] on April 10, 2025, the Supreme Court voted 9-0 to leave in place the portion of the district court order requiring that the government “facilitate [Mr.] Abrego Garcia’s release from custody in El Salvador and to ensure that his case is handled as it would have been had he not been improperly sent to El Salvador.”[59] The Court ruled, however, that the district court should clarify the portion of its order requiring the government to “effectuate” Mr. Abrego Garcia’s return, as the intended scope of the term was “unclear, and may exceed the [district court’s] authority.”[60] The Court instructed the district court to “clarify its directive, with due regard for the deference owed to the Executive Branch in the conduct of foreign affairs,” while “the Government should be prepared to share what it can concerning the steps it has taken and the prospect of further steps.”[61]

On remand, the district court amended its order, directing the government to “take all available steps to facilitate the return of Mr. Abrego Garcia to the United States as soon as possible,” as well as file a declaration detailing “(1) the current physical location and custodial status of [Mr.] Abrego Garcia; (2) what steps, if any, Defendants have taken to facilitate [Mr.] Abrego Garcia’s immediate return to the United States; and (3) what additional steps Defendants will take, and when, to facilitate his return.”[62] The government asked the Fourth Circuit for another stay pending appeal, which the Fourth Circuit denied as “both extraordinary and premature.”[63] Writing for a unanimous panel, Judge J. Harvey Wilkinson explained:

It is difficult in some cases to get to the very heart of the matter. But in this case, it is not hard at all. The government is asserting a right to stash away residents of this country in foreign prisons without the semblance of due process that is the foundation of our constitutional order. Further, it claims in essence that because it has rid itself of custody that there is nothing that can be done. This should be shocking not only to judges, but to the intuitive sense of liberty that Americans far removed from courthouses still hold dear. . . . The Executive possesses enormous powers to prosecute and to deport, but with powers come restraints. If today the Executive claims the right to deport without due process and in disregard of court orders, what assurance will there be tomorrow that it will not deport American citizens and then disclaim responsibility to bring them home? And what assurance shall there be that the Executive will not train its broad discretionary powers upon its political enemies? The threat, even if not the actuality, would always be present, and the Executive’s obligation to “take Care that the Laws be faithfully executed” would lose its meaning.[64]

Judge Wilkinson rejected the government’s assertion that it only had to work on domestic bars to Mr. Abrego Garcia’s release, pointing to the “Supreme Court’s command that the government facilitate Abrego Garcia’s release from custody in El Salvador.”[65] “Facilitation,” Judge Wilkinson explained, “does not permit the admittedly erroneous deportation of an individual to the one country’s prisons that the withholding order forbids and, further, to do so in disregard of a court order that the government not so subtly spurns.”[66]

Discovery in the case is currently ongoing as the district court continues to attempt to assess what steps the government has taken and will take to comply with the court’s order. On April 22, 2025, the district court criticized the government for failing to satisfy its discovery obligations under the court’s expedited discovery plan.[67] The district court described the government’s objections to various discovery requests as “reflect[ing] a willful and bad faith refusal to comply with discovery obligations.”[68] On May 16, 2025, the district court again criticized the government for failing to comply with the court’s discovery orders.[69] These reprimands have been coupled with indications from the district court that it would entertain sanctions motions from Mr. Abrego Garcia’s lawyers,[70] as well as possibly holding the government in contempt.[71] Though neither sanctions nor contempt have yet been pursued, the district court continues to push the government to meet the expedited discovery deadlines in place. Mr. Abrego Garcia remains in El Salvador.

Challenge to Termination of Temporary Protected Status for Venezuelans

Approximately 350,000 Venezuelans are currently present in the country under the 2023 Temporary Protected Status (TPS) designation for the country.[72] On January 17, 2025, just days before leaving office, President Biden extended the TPS designation through September 2026, allowing those individuals the ability to continue to legally live and work in the country until then. On January 28, 2025, approximately one week into the Trump Administration, DHS advised that they were “reviewing” the TPS designation; on February 5, 2025, they advised that the designation would end on April 7, 2025. This marked the first time in the thirty-five-year history of the TPS statute that an agency has vacated a country’s designation.

On February 19, 2025, the National TPS Alliance and several individual TPS holders filed suit against DHS, challenging the vacatur of the extension of TPS for Venezuela and the subsequent termination of the original extension, alleging violation of the Administrative Procedure Act (APA) and the Fifth Amendment’s Equal Protection Clause.[73] On March 31, 2025, Northern District of California Judge Edward M. Chen granted the plaintiffs’ motion to “postpone the effective date” of the decision to end TPS for Venezuela while the case proceeded through final judgment.[74] The government appealed that decision to the Court of Appeals for the Ninth Circuit, which, on April 18, 2025, denied the emergency motion to stay the district court’s order.[75] The government then requested emergency relief from the U.S. Supreme Court.

On May 19, 2025, the Supreme Court granted the requested emergency stay of the district court’s order to postpone the effective date of the TPS termination for Venezuela. In doing so, protection for those individuals pending the outcome of the underlying litigation has been terminated. The two-paragraph unsigned order has spurred confusion, however, about when and how the loss of lawful status and work authorization will occur, and the order may require further interpretation via lower courts. Further proceedings are ongoing in the district court.

Challenges to Termination of Birthright Citizenship

On the first day of his second term, President Trump issued Executive Order 14160, “Protecting the Meaning and Value of American Citizenship,” declaring that an individual born in the United States is not a citizen if, at the time of their birth, (1) their mother is “unlawfully present” or (2) their mother’s presence is “lawful but temporary,” if in either circumstances their father is not a U.S. citizen or lawful permanent resident.[76] That Executive Order barred federal, state, and local governments from issuing documents purporting to recognize United States Citizenship for an individual in one of those categories, arguing they are not “subject to the jurisdiction” of the United States.[77] The Executive Order has been challenged in numerous jurisdictions on the ground that it violates the Fourteenth Amendment’s guarantee of citizenship to anyone born in the United States.

The Fourteenth Amendment, passed during the Reconstruction era following the end of the Civil War, grants citizenship to “[a]ll persons born or naturalized in the United States, and subject to the jurisdiction thereof.” In United States v. Wong Kim Ark, 169 U.S. 649, 693 (1898), the U.S. Supreme Court explained that the Amendment “affirms the ancient and fundamental rule of citizenship by birth within the territory, in the allegiance and under the protection of the country, including all children here born of resident aliens,” with limited exceptions for children of foreign ministers or of hostile occupiers.[78] The Fourteenth Amendment’s citizenship guarantee, the Court explained, “includes the children born within the territory of the United States of all other persons, of whatever race or color, domiciled within the United States.”[79] Since Wong Kim Ark, the Court has repeatedly reaffirmed this view of birthright citizenship. In U.S. ex rel. Hintopoulos v. Shaughnessy, 353 U.S. 72, 73 (1957), the Court recognized that a child born to two individuals present in the U.S. illegally was “an American citizen.” In I.N.S. v. Errico, 385 U.S. 214, 215 (1966), the Court explained that a child born to two individuals who acquired lawful immigration status by fraud still “acquired United States citizenship by birth.” And in I.N.S. v. Rios-Pineda, 471 U.S. 444, 446 (1985), the Court again recognized that a child born to two parents living in the U.S. illegally nonetheless “was a citizen of this country.”

Thus far, three district court judges have barred the federal government from enforcing the Executive Order: Judges John Coughenour of the Western District of Washington,[80] Deborah Boardman of the District of Maryland,[81] and Leo Sorokin of the District of Massachusetts[82] all ruled that the Executive Order violates the Fourteenth Amendment’s guarantee of birthright citizenship. The Ninth Circuit Court of Appeals,[83] Fourth Circuit Court of Appeals,[84] and First Circuit Court of Appeals,[85] respectively, have denied the government’s requests for stays of these district court orders.

On March 13, 2025, the government applied to the U.S. Supreme Court for a stay of the district courts’ injunctions. The orders framed the issue not as one of the Executive Branch’s authority to define citizenship within the boundaries of the Fourteenth Amendment, but instead as one of the district courts’ power to issue nationwide injunctions.[86] In the government’s view, the proper procedure would have been for the plaintiffs in each case to seek class certification and class-wide remedies. Absent the Court reforming nationwide injunction practice, the government argued, the Executive Branch “cannot properly perform its functions.” On April 17, 2025, the Court deferred a decision on the stay application pending oral argument,[87] which occurred on May 15, 2025.[88] The Court has not yet ruled on the stay application, meaning that the Executive Order is still currently on pause.

Challenge to Terminations of the Certain Humanitarian Parole Program

On January 20, 2025, President Trump issued an executive order, titled Securing Our Borders, that directed the Secretary of Homeland Security to “[t]erminate all categorical parole programs that are contrary to the policies of the United States established in [President Trump’s] Executive Orders,” including a Biden-era humanitarian parole program for Cubans, Haitians, Nicaraguans, and Venezuelans known as the CHNV program.[89] In accordance with the Executive Order, on March 25, 2025, DHS published a Federal Register Notice announcing the immediate termination of the CHNV program.[90] The Notice also announced the termination of all paroles under the program effective April 24, 2025 (unless the DHS Secretary makes an individual determination to the contrary), and further directed that parolees without a lawful basis to remain in the United States following the termination of the CHNV program must depart the United States before their parole termination date.

On February 28, 2025, parole beneficiaries and a members alliance filed a putative class action in the District of Massachusetts challenging the end of the CHNV program and other humanitarian parole programs, including Central American Minors Parole, Family Reunification Parole, Military Parole-in-Place, Uniting for Ukraine, and Operation Allies Welcome.[91] The plaintiffs alleged violations of the APA and Due Process violations associated with the parole program revocations, as well as DHS’s later representations that it had suspended processing of applications for other immigration benefit requests filed by certain parolees.

On April 15, 2025, Judge Indira Talwani issued an order staying the Notice insofar as it purported to revoke, without case-by-case review, previously granted parole and work authorizations issued to CHNV parolees prior to the originally stated parole end date.[92] The order further stayed all individualized notices sent to CHNV parolees via their USCIS online account notifying them that their parole was being revoked without case-by-case review. Among other things, Judge Talwani concluded that the plaintiffs were likely to succeed on their claim that the categorical termination of existing grants of parole was arbitrary and capricious. Judge Talwani further concluded that, absent preliminary relief, the plaintiffs would “be forced to choose between two injurious options: continue following the law and leave the country on their own, or await removal proceedings. . . . The first option will expose Plaintiffs to dangers in their native countries and will cause Plaintiffs to forfeit their APA claims. The second option will put Plaintiffs at risk of arrest and detention and, because Plaintiffs will be in the United States without legal status, undermine Plaintiffs’ chances of receiving other forms of immigration relief in the future—potentially permanently.”

The government appealed to the First Circuit Court of Appeals and asked for a stay pending appeal.[93] On May 5, 2025, the First Circuit Court of Appeals denied the government’s emergency motion for a stay.[94] On May 8, 2025, the government asked the U.S. Supreme Court to stay Judge Talwani’s order, and on May 30, 2025, the U.S. Supreme Court granted the stay in a one-paragraph order, with a lengthy dissent from Justice Jackson (joined by Justice Sotomayor).[95] Therefore, as of today’s date, the injunction pausing the mass revocation of CHNV parole has been reversed, and many CHNV parolees’ status has been terminated effective immediately.

Two days before the Supreme Court stayed the April 15 order on CHNV parole, on May 28, 2025, the district court issued its order on other forms of parole, staying the suspension of adjudication of re-parole applications and other immigration benefits for individuals lawfully present under categorical parole programs.[96] This order was not directly impacted by the May 30 Supreme Court order, so for the time being, it remains in effect.

Challenge to Registration Requirements for Certain Noncitizens

On March 12, 2025, DHS announced an interim final rule, effective April 11, 2025, that—for the first time in decades—purports to enforce the registration requirements of the Immigration and Nationality Act (INA) against certain noncitizens. These requirements include submitting a newly available registration form online and undergoing biometrics screening.[97] Noncitizens who follow such registration requirements will be issued a certificate or receipt card that they must carry with them at all times.[98]

On March 31, 2025, four organizations—Coalition for Humane Immigrant Rights (a California-based nonprofit that provides services to immigrant communities), United Farmworkers of America (an organization that focuses on improving the lives of agricultural workers), CASA, Inc. (a nonprofit that works to improve the quality of life in working-class diverse and immigrant communities), and Make the Road New York (a nonprofit that works to improve the lives of low-income New Yorkers)—filed suit in the United States District Court for the District of Columbia and moved for a stay of the effective date of the rule (or, in the alternative, for a preliminary injunction) and to enjoin the government from implementing or enforcing the rule for the pendency of the litigation.[99] Among other things, the plaintiffs argued that the rule violated the APA for failing to follow its notice and comment procedures and for being arbitrary and capricious.[100]

On April 10, 2025, Judge Trevor N. McFadden denied the plaintiffs’ motion on the basis that they had “failed to show that they have a substantial likelihood of standing.”[101] Judge McFadden concluded that the plaintiff organizations’ harms were “too speculative,” and they failed to show that the rule would “erode their core missions.” As a result, on April 11, 2025, the rule went into effect, meaning that certain noncitizens, namely those who have not applied for a visa, submitted one of several specific forms for immigration relief, or been issued one of several types of identity, visa, entry, or lawful status documents,[102] are required to register.[103] Noncitizens who are required to register but willfully fail to do so (or to provide proof of registration when requested by law enforcement) could face civil and criminal penalties including a fine of up to $5,000 or imprisonment for up to six months, or both.[104] On April 24, 2025, the plaintiffs appealed the district court’s decision to the District of Columbia Circuit Court[105] and moved the District Court for an injunction pending appeal.[106] Both the appeal and the motion are currently pending, meaning the registration requirement remains in effect as of today.

Challenges to Revocation of Certain Student Visas

Foreign Student Visas and the Student Exchange Visitor System (SEVIS)

Foreign students can study in the United States by applying for one of three types of visas. An F-1 visa is the most used, allowing students to attend an academic institution like a university; an M-1 visa allows students to join a vocational program; and a J-1 visa allows students to enter into an “exchange” program with a cultural component. Immigration and Customs Enforcement (ICE), as well as other agencies, use the Student and Exchange Visitor Program (SEVP) to monitor student status and compliance with their visas via the Student Exchange Visitor Information System (SEVIS).

The State Department may revoke visas for a number of reasons, ranging from violations of their status, criminal offenses, failure to register change of address, falsification of documents, engagement in any activity related to espionage, endangerment of public safety or national security, participation in an activity related to the opposition to or overthrow of the U.S. Government, or where their presence has potential adverse foreign policy consequences for the U.S. Government.[107] The State Department has clarified that a visa may be revoked even without a formal criminal charge, and all that is required is “derogatory information directly from another U.S. Government agency, including a member of the intelligence or law enforcement community.”[108] If a student violates a term of their student visa, they are ineligible to return to the United States for five years after the date of their violation.[109]

Beginning in March 2025, thousands of international students and recent graduates were advised that their SEVIS records had been terminated, that their underlying visas had been revoked, or both. DHS officials have stated that this was done as part of a “Student Criminal Alien Initiative” targeting students who had had any form of interaction with some form of law enforcement, whether or not it resulted in a criminal conviction that qualified for visa revocation under the law (or any criminal conviction at all).[110]

Doe v. Trump[111]

Following the Student Criminal Alien Initiative, at least 65 lawsuits were filed on behalf of at least 300 students whose SEVIS records and/or visas were terminated. One such group of consolidated cases, titled Doe v. Trump under the lead case, was filed by a group of student-plaintiffs in the Northern District of California on April 7, 2025, alleging that their SEVIS records and/or student visas were terminated in violation of the APA and requesting a TRO.[112] On April 25, 2025, the court held a hearing on the TRO requests and granted (or extended) them in each of the consolidated cases. On May 14, 2025, the court held a hearing on motions for preliminary injunctions, during which counsel for ICE advised that they would be restoring SEVIS records retroactively and contacting every individual impacted by mass terminations.

On May 22, 2025, Judge Jeffrey S. White issued a nationwide preliminary injunction prohibiting the arrest, incarceration, or “impositi[on of] any adverse legal effect” on individuals similarly situated to the plaintiffs pending the final resolution of the matter.[113] In his order, Judge White noted that the plaintiffs were likely to succeed on their APA claim that the “decision to terminate their SEVIS records was arbitrary and capricious because the decision was not based on a rational connection between the facts found and the choice made,” and that the “overwhelming majority of courts considering these cases have determined the plaintiffs are likely to succeed on the merits of the same claims presented here.”[114] Currently, therefore, international students whose SEVIS records were terminated or visas revoked via the mass Student Criminal Alien Initiative should have those terminations reversed and visas reinstated, permitting their continued lawful presence in the country for the pendency of their studies.

Challenges to Executive Actions Withholding Funding for Immigration-Related Services

The Trump Administration has suspended or entirely terminated funding for various grants and programming, including programs that assist noncitizens navigating the immigration legal system. Gibson Dunn is counsel in three of these cases, summarized below.

Amica Center for Immigrant Rights, et al. v. U.S. Department of Justice[115]

For more than two decades, Congress has appropriated funding for the Department of Justice specifically to spend on providing basic legal orientation programs (including a flagship Legal Orientation Program, or “LOP”) to educate noncitizens about legal rights and responsibilities in immigration detention facilities and immigration courts. These programs are often the only source of reliable legal information for many noncitizens, and the lawyers that run these programs are often the only non-government lawyers regularly inside immigration detention facilities. In January 2025, the Trump Administration issued a “stop work order” for these programs. On January 31, 2025, represented by Gibson Dunn, non-profit legal service providers that run these programs with government funding filed suit in the U.S. District Court for the District of Columbia to prevent the government from eliminating the programs. The suit brings claims under the APA and constitutional claims. Just days after the legal service providers filed their complaint, the government rescinded its stop work order. But on April 16, 2025, the government again stopped all funding for the legal orientation programs. The legal service providers moved for summary judgment, and Judge Randolph Moss ordered the government to supplement the administrative record in response to the government’s contention that it was going to “federalize” the programs. The programs are not currently being funded while the case is ongoing.

United States Conference of Catholic Bishops v. U.S. Department of State[116]

The United States has provided resettlement assistance for newly admitted refugees since 1980 under the Refugee Act and a series of appropriations bills. But on January 24, 2025, citing two Executive Orders, the State Department ended its relationships with private resettlement agencies and suspended resettlement assistance for refugees already in the country. The United States Conference of Catholic Bishops (USCCB) is one of the affected resettlement partners, and has long been providing services to refugees in the United States. The initial-resettlement services mandated by the Refugee Act for refugees in their first 90 days include food, housing, job training, English education, and other services aimed at successful integration into the United States and material support during the transition. At the time of the suspension, USCCB had nearly 7,000 refugees in their initial-resettlement period in its care, all assigned to the Conference by the federal government. On February 26, and after USCCB (represented by Gibson Dunn) filed suit, the State Department terminated its cooperative agreements with the USCCB, stating that the agreements “no longer effectuate[] agency priorities.” USCCB and its partner organizations were forced to rely on their own resources to serve the refugees in their care, lay off staff, and cut back on services provided. In its lawsuit in the U.S. District Court for the District of Columbia, USCCB brings claims under the Constitution, the Refugee Act, the Impoundment Control Act, the APA, and State Department regulations. USCCB is asking the Court to set aside the suspension and termination of its relationship with the United States and enter an injunction requiring the United States to provide the assistance mandated by Congress for newly admitted refugees.

Community Legal Services in East Palo Alto, et al. v. U.S. Department of Health & Human Services[117]

For more than a decade, the Department of Health & Human Services (HHS) has paid legal service providers to provide legal representation to unaccompanied children—children who arrive in the United States without a parent or legal guardian, and who may be as young as just a few months old. HHS provided this funding to comply with a command from Congress in the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008, which orders HHS to fund legal representation for unaccompanied children to the extent it has funding available to do so. In March 2025, HHS cut all funding for this representation. Represented by Gibson Dunn, non-profit legal service providers quickly filed suit and sought a TRO. Judge Araceli Martinez-Olguin of the U.S. District Court for the Northern District of California issued a TRO commanding the government to continue funding legal representations for unaccompanied children. The government appealed the TRO and the Ninth Circuit dismissed the appeal. Judge Martinez-Olguin then issued a preliminary injunction, commanding the government to continue funding the legal representations through the resolution of the case. The government has appealed that order, and the appeal is pending in the Ninth Circuit. The Ninth Circuit has rejected the government’s request to stay the preliminary injunction pending the appeal, meaning that the preliminary injunction requiring HHS’s compliance with Congress’s mandate to fund representation for unaccompanied children remains in effect.

[1] “Invocation of the Alien Enemies Act Regarding the Invasion of The United States by Tren De Aragua,” The White House (Mar. 15, 2025), https://www.whitehouse.gov/presidential-actions/2025/03/invocation-of-the-alien-enemies-act-regarding-the-invasion-of-the-united-states-by-tren-de-aragua/. While the Executive Order was issued and signed on March 14, 2025, it was not published online until March 15, 2025.

[2] Id.

[3] 50 U.S.C. § 21.

[4] Id. §§ 21, 22.

[5] Jennifer Elsea, Cong. Rsch. Serv., LSB 11269, The Alien Enemy Act: History and Potential Use to Remove Members of International Criminal Cartels 3 (Apr. 2, 2025).

[6] Id. See also Amended Class Action Petition for Writ of Habeas Corpus and Complaint, J.G.G. v. Trump, No. 1:25CV00766, 2025 WL 1270187 (D.D.C. Apr. 24, 2025).

[7] Elsea, supra note 5.

[8] Trump v. J.G.G., 145 S.Ct. 1003 (2025).

[9] Complaint and Petition for Writ of Habeas Corpus, J.G.G. v. Trump, 2025 WL 836447 (D.D.C. Mar. 15, 2025).

[10] Transcript of Proceedings before Chief Judge James E. Boasberg at 11, J.G.G. v. Trump, No. 1:25CV00766, (D.D.C. Mar. 15, 2025).

[11] Id. at 15.

[12] Id.

[13] Id. at 41–43.

[14] Id. at 43.

[15] Minute Order on Motion for Temporary Restraining Order, J.G.G. v. Trump, No. 1:25CV00766, 2025 WL 825116 (D.D.C. Mar. 15, 2025); see also Transcript of Proceedings before Chief Judge James E. Boasberg, J.G.G. v. Trump, No. 1:25CV00766, 2025 WL 829734 (D.D.C. Mar. 15, 2025).

[16]Luke Broadwater, et al., A Judge Ordered Deportation Planes to Turn Around. The White House Didn’t Listen, NYTimes (Apr. 8, 2025), available at https://www.nytimes.com/2025/03/17/us/politics/timeline-trump-deportation-flights-el-salvador.html.

[17] Id.

[18] US/El Salvador: Venezuelan Deportees Forcibly Disappeared, Human Rights Watch (Apr. 11, 2025), available at https://www.hrw.org/news/2025/04/11/us/el-salvador-venezuelan-deportees-forcibly-disappeared.

[19] Application to Vacate the Orders Issued by the United States District Court for the District of Columbia and Request for an Immediate Administrative Stay, J.G.G. v. Trump, No. 25-5067, 2025 WL 914682 (D.C. Cir. Mar. 26, 2025).

[20] Id.

[21] Application to Vacate the Orders Issued by the United States District Court for the District of Columbia and Request for an Immediate Administrative Stay, Trump v. J.G.G., No. 24A, 2025 WL 962719 (March 2025)

[22] Trump v. J.G.G., 145 S.Ct. 1003 (Apr. 7, 2025).

[23] Id. at 1006.

[24] Id.

[25] Id.

[26] Transcript of Proceedings before Chief Judge James E. Boasberg, J.G.G. v. Trump, No. 1:25CV00766, 2025 WL 829734 (D.D.C. Mar. 17, 2025).

[27] Id.

[28] Memorandum Opinion regarding Probable Cause Order, J.G.G. v. Trump, No. 1:25CV00766, 2025 WL 1119481 (D.D.C. Apr. 16, 2025).

[29] Id. at *7.

[30] Id.

[31] G.F.F. v. Trump, No. 25 Civ. 2886 (AKH), 2025 WL 1166911 (S.D.N.Y. Apr. 11, 2025).

[32] G.M.G. v. Trump, 1:25-CV-00195 (D.R.I. May 5, 2025).

[33] Y.A.P.A. v. Trump, 4:25-CV-00144 (M.D. Ga. Apr. 30, 2025).

[34] J.A.V. v. Trump, No. 1:25-CV-072, 2025 WL 1064009 (S.D. Tex. Apr. 9, 2025).

[35] Viloria Aviles v. Trump, 2:25CV00611 (D. Nev. Apr. 3, 2025).

[36] A.S.R. v. Trump, No. 3:25-cv-00113-SLH, 2025 WL 1122485 (W.D. Pa. Apr. 15, 2025).

[37] D.B.U. v. Trump, No. 1:25-cv-01163-CNS, 2025 WL 1106556 (D. Colo. Apr. 14, 2025).

[38] J.G.G. v. Trump, No. 1:25CV00766, 2025 WL 1352316 (D.D.C. Apr. 24, 2025).

[39] A.A.R.P. v. Trump, No. 1:25-cv-00059, 2025 WL 1148140 (N.D. Tex Apr. 27, 2025).

[40] Complaint – Class Action: Class Petition for Writ of Habeas Corpus and Complaint for Declaratory and Injunctive Relief, A.A.R.P. v. Trump, No. 1:25-cv-00059, E.C.F. No. 1 (N.D. Tex Apr. 16, 2025).

[41] Petitioners-Plaintiffs’ Renewed Emergency Application for Temporary Restraining Order, A.A.R.P. v. Trump, No. 1:25-cv-00059, E.C.F. No. 30 (N.D. Tex. Apr. 18, 2025).

[42] Emergency Application for an Emergency Injunction or Writ of Mandamus, Stay of Removal, and Request for an Immediate Administrative Injunction, A.A.R.P. v. Trump, No. 24A1007, 2025 WL 1171734 (S. Ct. Apr. 19, 2025).

[43] A.A.R.P. v. Trump, No. 24A1007, 145 S. Ct. 1034 (Mem) (S. Ct. Apr. 19, 2025).

[44] Id. at 1036 (Alito, J., dissenting).

[45] A.A.R.P. v. Trump, Nos. 24A1007, 24-1177, 2025 WL 1417281, at *2 (S. Ct. May 16, 2025).

[46] Id. at *3.

[47] Id. at *2.

[48] Id. at *4.

[49] Id.

[50] Id. at *2.

[51] One case is still pending in the District of Columbia District Court. See J.G.G. v. Trump, No. 1:25CV00766, 2025 WL 1349496 (D.D.C. May 8, 2025).

[52] See Abrego Garcia v. Noem, 2025 WL 1014261, at *2 (D. Md. Apr. 6, 2025).

[53] See id.

[54] Id. at *3.

[55] Application to Vacate the Injunction Issued by the United States District Court for the District of Maryland and Request for an Immediate Administrative Stay, Noem v. Abrego Garcia, No. 24A949, 2025 WL 1038907 (U.S. April 1, 2025).

[56] Abrego Garcia v. Noem, 2025 WL 1024654, at *1 (D. Md. Apr. 4, 2025), amended, 2025 WL 1085601 (D. Md. Apr. 10, 2025).

[57] See Abrego Garcia v. Noem, 2025 WL 1021113 (4th Cir. Apr. 7, 2025).

[58] Noem v. Abrego Garcia, 2025 WL 1022673 (U.S. Apr. 7, 2025), vacated, 2025 WL 1077101 (U.S. Apr. 10, 2025).

[59] Noem v. Abrego Garcia, 145 S.Ct. 1017, 1018 (2025) (internal quotation marks omitted).

[60] Id.

[61] Id.

[62] Abrego Garcia v. Noem, 2025 WL 1085601, at *1 (D. Md. Apr. 10, 2025).

[63] Abrego Garcia v. Noem, 2025 WL 1135112, at *1 (4th Cir. Apr. 17, 2025).

[64] Id. at *1-2.

[65] Id.

[66] Id. at 2.

[67] Devan Cole, ‘That ends now’: Judge overseeing Abrego Garcia case knocks Trump administration for repeated stonewalling, CNN (Apr. 22, 2025); available at https://www.cnn.com/2025/04/22/politics/abrego-garcia-judge-xinis-justice-that-ends-now.

[68] Abrego Garcia v. Noem, 2025 WL 1166402, at *1 (D. Md. Apr. 22, 2025).

[69] See Alan Feuer and Aishvarya Kavi, U.S. Takes Defiant Stance in Court, Saying Abrego Garcia Deportation Was Lawful, N.Y. Times (May 16, 2025); available at https://www.nytimes.com/2025/05/16/us/politics/doj-trump-deportation-abrego-garcia.html.

[70] Gary Grumbach and Dareh Gregorian, Judge in Abrego Garcia case indicates she’s weighing contempt proceedings against Trump administration, NBC News (Apr. 15, 2025), available at https://www.nbcnews.com/politics/immigration/judge-abrego-garcia-case-indicates-weighing-contempt-proceedings-trump-rcna201359.

[71]Sareen Habeshian, Judge in deportation case threatens Trump admin with contempt of court, Axios (Apr. 16, 2025), available at https://www.axios.com/2025/04/15/kilmar-abrego-garcia-deported-case-return.

[72] TPS is a program established by Congress to protect individuals who cannot safely return to their home country due to war, natural disaster, or another emergency. For further discussion of TPS, including the 2021 and 2023 designations for Venezuela, see Gibson Dunn’s Immigration Task Force Client Alert: Updates to Humanitarian Parole and Temporary Protected Status, dated February 24, 2025, available at https://www.gibsondunn.com/updates-to-humanitarian-parole-and-temporary-protected-status/.

[73] Complaint, National TPS Alliance v. Noem, 3:25-cv-01766, ECF No. 1 (N.D. Cal. Mar. 31, 2025).

[74] National TPS Alliance v. Noem, 3:25-cv-01766, ECF No. 93 (N.D. Cal. Mar. 31, 2025).

[75] National TPS Alliance, et al. v. Noem, et al., 25-2120, ECF No. 21 (9th Cir. Apr. 18, 2025).

[76] Exec. Order No. 14160, “Protecting the Meaning and Value of American Citizenship” (Jan. 20, 2025).

[77] Id. § 2(a); see also Gibson Dunn’s Immigration Task Force Client Alert, Jan. 27, 2025, available at https://www.gibsondunn.com/gibson-dunn-launches-immigration-task-force/.

[78] 168 U.S. 649, 693 (1898).

[79] Id.

[80] Washington v. Trump, 2025 WL 272198 (W.D. Wash. Jan. 23, 2025).

[81] CASA, Inc. v. Trump, 2025 WL 408636 (D. Md. Feb. 5, 2025).

[82] New Jersey v. Trump, 2025 WL 617583 (D. Mass. Feb. 26, 2025).

[83] Washington v. Trump, 2025 WL 553485 (9th Cir. Feb. 19, 2025).

[84] CASA, Inc. v. Trump, 2025 WL 654902 (4th Cir. Feb. 28, 2025).

[85] New Jersey v. Trump, 131 F.4th 27 (1st Cir. 2025).

[86] Application for a Partial Stay of the Injunction, Trump v. CASA, Inc., 2025 WL 817770 (U.S. Mar. 13, 2025).

[87] Trump v. CASA, Inc., 2025 WL 1132004 (U.S. Apr. 17, 2025).

[88] Transcript of Oral Argument, Trump v. CASA, Inc., 2025 WL 1424657 (U.S. May 15, 2025).

[89] Exec. Order No. 14165, 90 F.R. 8467, § 7(b) (Jan. 20, 2025), available at https://www.federalregister.gov/documents/2025/01/30/2025-02015/securing-our-borders.

[90] Department of Homeland Security, Termination of Parole Processes for Cubans, Haitians, Nicaraguans, and Venezuelans, 90 Fed. Reg. 13611 (Mar. 25, 2025), available at https://www.federalregister.gov/documents/2025/03/25/2025-05128/termination-of-parole-processes-for-cubans-haitians-nicaraguans-and-venezuelans (last visited May 30, 2025).

[91] Doe v. Noem, No. 1:25-cv-10495 (D. Mass.).

[92] Memorandum & Order Granting in Part Plaintiffs’ Emergency Motion for a Stay of DHS’sS En Masse Truncation of All Valid Grants of CHNV Parole, Doe v. Noem et al., No. 1:25-cv-10495-IT (D. Mass. Apr. 14, 2025), ECF No. 97.

[93] Doe v. Noem, et al., No. 1:25-cv-1384 (1st Cir. May 5, 2025).

[94] Id.

[95] Noem v. Doe, et al., 2025 WL 1534782 (S. Ct. May 30, 2025).

[96] Memorandum & Order Granting Partial Relief on Plaintiffs’ Motion for Preliminary Injunction and Stay of Administrative Action, Doe v. Noem et al., 2025 WL 1514420 (D. Mass. May 28, 2025).

[97] See Alien Registration Form and Evidence of Registration, 90 Fed. Reg. 11793 (Mar. 12, 2025).

[98] Id.

[99] See Compl., Coal. for Humane Immigrant Rts. v. U.S. Dep’t of Homeland Sec., No. 25 Civ. 943 (D.D.C. Mar. 31, 2025); Br. for Pls., Coal. for Humane Immigrant Rts. v. U.S. Dep’t of Homeland Sec., No. 25 Civ. 943 (D.D.C. Mar. 31, 2025).

[100] See Br. for Pls. at 10–28, Coal. for Humane Immigrant Rts. v. U.S. Dep’t of Homeland Sec., No. 25 Civ. 943 (D.D.C. Mar. 31, 2025).

[101] See Coal. for Humane Immigrant Rts. v. U.S. Dep’t of Homeland Sec., 2025 WL 1078776, at *1 (D.D.C. Apr. 10, 2025). On April 24, 2025, the plaintiffs filed their notice that they intended to appeal the District Court’s denial of their injunction motion. Notice of Appeal, Coal. for Humane Immigrant Rts. v. U.S. Dep’t of Homeland Sec., No. 25 Civ. 943 (D.D.C. Apr. 24, 2025).

[102] See Alien Registration Requirement, U.S. Citizenship and Immigr. Servs, available at https://www.uscis.gov/alienregistration (last visited May 30, 2025).

[103] Many noncitizens are considered to have already registered. See Gibson Dunn’s Immigration Task Force Client Alert: Agency Action Update, Mar. 21, 2025, available at https://www.gibsondunn.com/immigration-task-force-agency-action-update/.

[104] See Alien Registration Requirement, U.S. Citizenship and Immigr. Servs., available at https://www.uscis.gov/alienregistration (last visited May 30, 2025) (“It is the legal obligation of all unregistered aliens (or previously registered aliens who turn 14 years old) who are in the United States for 30 days or longer to comply with these requirements. Failure to comply may result in criminal and civil penalties, up to and including misdemeanor prosecution, the imposition of fines, and incarceration.”); Alien Registration Form and Evidence of Registration, 90 Fed. Reg. 11793, 11794 (Mar. 12, 2025) (“An alien’s willful failure or refusal to apply to register or to be fingerprinted is punishable by a fine of up to $5,000 or imprisonment for up to six months, or both.”).

[105] See Notice of Appeal from Denial of Preliminary Injunction, Coal. for Humane Immigrant Rts. v. U.S. Dep’t of Homeland Sec., No. 25 Civ. 943 (D.D.C. Apr. 24, 2025).

[106] See Pls.’ Mot. for Injunction Pending Appeal and Incorporated Mem. of Law, Coal. for Humane Immigrant Rts. v. U.S. Dep’t of Homeland Sec., No. 25 Civ. 943 (D.D.C. Apr. 24, 2025).

[107] 8 U.S.C. § 1127 (2025).

[108] Foreign Affs. Manual, U.S. Dep’t of State 9 FAM 403.11-5(B) (2024), available at https://fam.state.gov/fam/09FAM/09FAM040311.html#M403_11_5_B.

[109] 8 U.S.C. § 1182 (a)(6)(G) (2025).

[110] See, e.g., Vyas v. Noem, No. 3:25-cv-0261-RCC, 2025 WL 1351537, at *4 (S.D. W. Va. May 8, 2025).

[111] No. 4:25-cv-03140 (N.D. Cal.).

[112] Doe v. Trump was filed on behalf of a single student-plaintiff; the case was consolidated with various other cases brought on behalf of additional student-plaintiffs pending in the same district including S.Y. v. Noem, Chen v. Noem, Kim v. Noem, W.B. v. Noem, and Bai v. Noem.

[113] Ord. Granting Mots. Preliminary Injunction, No. 4:25-cv-03244-JSW, Doc. 50 at 20 (N.D. Cal. May 22, 2025).

[114] Id. at 19.

[115] No. 1:25-CV-00298 (D.D.C.).

[116] No. 1:25-cv-00465 (D.D.C.).

[117] No. 3:25-CV-02847 (N.D. Cal.).

The following Gibson Dunn lawyers prepared this update: Matt Rozen, Laura Raposo, Ariana Sañudo, Kayla Jahangiri, Zachary Goldstein, Arthur Halliday, Aly Cox, Shri Dayanandan, Carolyn Ye, and Matt Weiner.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, any leader or member of the firm’s Pro Bono, Public Policy, Administrative Law & Regulatory, Appellate & Constitutional Law, or Labor & Employment practice groups, or the following members of the firm’s Immigration Task Force:

Stuart F. Delery – Co-Chair, Administrative Law & Regulatory Practice Group,
Washington, D.C. (+1 202.955.8515, sdelery@gibsondunn.com)

Naima L. Farrell – Partner, Labor & Employment Practice Group,
Washington, D.C. (+1 202.887.3559, nfarrell@gibsondunn.com)

Nancy Hart – Partner, Litigation Practice Group,
New York (+1 212.351.3897, nhart@gibsondunn.com)

Katie Marquart – Partner & Chair, Pro Bono Practice Group,
Los Angeles (+1 213.229.7475, kmarquart@gibsondunn.com)

Laura Raposo – Associate General Counsel,
New York (+1 212.351.5341, lraposo@gibsondunn.com)

Matthew S. Rozen – Partner, Appellate & Constitutional Law Practice Group,
Washington, D.C. (+1 202.887.3596, mrozen@gibsondunn.com)

Ariana Sañudo – Associate, Pro Bono Practice Group,
Los Angeles (+1 213.229.7137, asanudo@gibsondunn.com)

Betty X. Yang – Partner & Co-Chair, Trials Practice Group,
Dallas (+1 214.698.3226, byang@gibsondunn.com)

From the Derivatives Practice Group: This week, the CFTC added 43 unregistered foreign entities to its Red List.

New Developments

CFTC Adds 43 Unregistered Foreign Entities to RED List. On May 29, as part of the CFTC’s ongoing efforts to help protect Americans from fraud, the CFTC added 43 unregistered foreign entities to its Red List, a tool that provides information to U.S. market participants about foreign entities that are acting in an unregistered capacity and to help them make more informed decisions about trading. The Red List, which stands for Registration Deficient List, launched in 2015, and now contains almost 300 entities. [NEW]
CFTC Awards Approximately $700,000 to Whistleblower. On May 29, the CFTC announced a whistleblower award of approximately $700,000. The whistleblower information prompted the CFTC to open the investigation and described the misconduct that ultimately appeared in the order. The whistleblower also provided substantial assistance and helped the Commission conserve resources during the investigation. [NEW]
SEC Publishes Data on Regulation A, Crowdfunding Offerings, and Private Fund Beneficial Ownership Concentration. On May 28, the SEC published three new reports that provide the public with information on capital formation and beneficial ownership of qualifying private funds. The first two papers—analyses of the Regulations A and Crowdfunding markets—provide valuable information on how capital is being raised in the United States particularly by smaller issuers. The third paper on Qualifying Hedge Funds provides information on the interaction of beneficial ownership concentration, portfolio liquidity, investor liquidity, fund leverage, performance, and margins. [NEW]
CFTC Staff Issues Advisory on Market Volatility Controls. On May 22, the CFTC issued a staff advisory reminding designated contract markets and derivatives clearing organizations of certain core principles and regulatory obligations under the Commodity Exchange Act and CFTC regulations related to controls designed to address market volatility.
Commissioner Kristin N. Johnson Makes Statement on Departure from CFTC. On May 21, Commissioner Kristin N. Johnson announced that she intends to step down from the Commission later this year.
CFTC Staff Issues Interpretation Regarding Certain Cross-Border Definitions. On May 21, the CFTC issued an interpretative letter confirming the application of certain cross-border definitions to Susquehanna Crypto, a proprietary trading firm organized in a foreign jurisdiction. Specifically, the interpretative letter confirms that the proprietary trading firm is not a “person located in the United States” for purposes of the “foreign futures or foreign options customer” definition in Commission regulation 30.1(c); is not a “participant located in the United States” for purposes of Commission regulation 48.2(c); is a “foreign located person” for purposes of Commission regulation 3.10(c)(1)(ii); and is not a “U.S. person” as defined by Commission regulation 23.23(a) and the Commission’s 2013 Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations.
CFTC Releases Procedures on Registered Non-U.S. Swap Entities Using Substituted Compliance. On May 20, the CFTC released procedures regarding CFTC-registered non-U.S. swap dealers or major swap participants relying on substituted compliance. The procedures establish how CFTC Divisions will address potential non-compliance with foreign law that has been found by the CFTC to be comparable in outcome to the Commodity Exchange Act or CFTC regulations pursuant to a substituted compliance order.
SEC Names Katherine Reilly as Acting Inspector General. On May 19, the SEC announced the appointment of Katherine Reilly as the agency’s Acting Inspector General. Ms. Reilly is currently serving as a Deputy Inspector General at the SEC. She replaces Deborah Jeffrey, who has served as the SEC’s Inspector General since 2023 and is retiring.
SEC’s Division of Trading and Markets Releases FAQ Relating to Crypto Asset Activities and Distributed Ledger Technology. On May 15, the SEC prepared responses to frequently asked questions relating to crypto asset activities and distributed ledger technology. The responses cover topics relating to broker-dealer financial responsibility and transfer agents. These responses represent the views of the staff of the Division of Trading and Markets. They are not a rule, regulation, or statement of the SEC.
Commissioner Christy Goldsmith Romero Makes Statement on Departure from CFTC. On May 16, Commissioner Christy Goldsmith Romero announced that she intends to step down from the Commission and retire from federal service. Her final day at the Commission will be May 31.
Commissioner Summer K. Mersinger Makes Statement on Departure from CFTC. On May 14, Commissioner Mersinger announced that she intends to step down from her position as Commissioner at the CFTC at the end of the month, to pursue new opportunities.
CFTC Warns Public of Imposter Scam Targeting Fraud Victims. On May 14, the CFTC warned the public about a growing imposter scam involving individuals falsely claiming to represent the agency. According to the CFTC, scammers are contacting members of the public and claiming to represent the CFTC Office of Inspector General and promise to help financial fraud victims recover lost funds from foreign bank accounts. The CFTC Office of Inspector General stated that it will never contact individuals with offers to recover money lost to investment scams.
Acting Chairman Pham Makes Statement on Court Sanctions Against CFTC. On May 13, CFTC Acting Chairman Caroline D. Pham made a statement regarding the Federal District Court report and recommendations for sanctions against the CFTC for misconduct in CFTC v. Traders Global Group Inc, highlighting proactive efforts to overhaul the CFTC’s Division of Enforcement and reform culture and conduct, develop staff, and leverage expertise and reduce siloing.

New Developments Outside the U.S.

ESMA Urges Social Media Companies to Tackle Unauthorized Financial Ads. On May 28, ESMA wrote to several social media and platform companies encouraging them to take proactive steps to prevent the promotion of unauthorized financial services. This approach complements last week’s initiative launched by IOSCO, highlighting the global nature of doing online harm linked to financial misconduct. [NEW]
ESMA Renews the Mandate of the Chair and the Two Independent Members of the CCP Supervisory Committee. On May 28, ESMA renewed the mandates of Klaus Löber as Chair of the Central Counterparties (“CCP”) Supervisory Committee and Nicoletta Giusto and Froukelien Wendt as Independent Members. The renewed mandates will be effective as of December 1, 2025 for a 5-year period. [NEW]
ESMA Asks for Input on the Retail Investor Journey as Part of Simplification and Burden Reduction Efforts. On May 21, ESMA launched a Call for Evidence (“CfE”) on the retail investor journey under the Markets in Financial Instruments Directive 2014. The purpose of this CfE is to gather feedback from stakeholders to better understand how retail investors engage with investment services, and whether regulatory or non-regulatory barriers may be discouraging participation in capital markets.

New Industry-Led Developments

ISDA Provides Guidance for EU Model Application for ISDA SIMM®. On May 29, ISDA provided guidance to ISDA Standard Initial Margin Model (“SIMM”) users to promote awareness and facilitate a consistent approach to preparing data for the initial application. ISDA SIMM v2.7+2412 goes into effect on July 12, 2025, triggering the initial application requirement for its continued use by all financial and non-financial EU counterparties exchanging IM calculated using ISDA SIMM®. [NEW]
ISDA Publishes SwapsInfo for First Quarter of 2025. On May 27, ISDA published its SwapsInfo Quarterly Review. The review noted that interest rate derivatives trading activity increased in the first quarter of 2025, driven by elevated interest rate volatility, shifting central bank policy expectations and evolving inflation and growth outlooks. Trading in index credit derivatives also rose, as market participants responded to a changing macroeconomic environment and sought to manage credit exposure. [NEW]
IOSCO Issues Final Report on Updated Liquidity Risk Management Recommendations for Collective Investment Schemes. On May 26, IOSCO published its Final Report on Revised Recommendations for Liquidity Risk Management for Collective Investment Schemes (“CIS”), alongside its Implementation Guidance. The Final Report includes 17 recommendations across six sections: CIS Design Process, Liquidity Management Tools and Measures, Day-to-Day Liquidity Management Practices, Stress Testing, Governance and Disclosures to Investors and Authorities. [NEW]
ISDA Publishes ISDA SIMM® Methodology, Version 2.7+2412. On May 22, ISDA published updates to its SIMM methodology that are based on the full recalibration of the model and marked the first SIMM version publication of the new semiannual calibration cycle in 2025. The effective date of July 12, 2025 means that ISDA SIMM users should use SIMM version 2.7+2412 to calculate the initial margin for close of business on Friday, July 11, 2025 onwards. This means that the first day for exchange of initial margin calculated using SIMM version 2.7+2412 would be on Monday, July 14, 2025.
ISDA/SIFMA/SIFMA AMG Publish Joint Response to CFTC Request for Comment on 24-7 Trading. On May 21, ISDA, the Securities Industry and Financial Markets Association (“SIFMA”), and the SIFMA Asset Management Group (“SIFMA AMG”) jointly filed a comment letter in response to the CFTC’s request for comment on 24/7 trading and clearing. ISDA, SIFMA, and SIFMA AMG believe that the feasibility of both 24/7 trading and clearing needs to be evaluated holistically with an understanding of the interdependencies between market participants, trading venues, middleware and software providers, clearing systems, margining frameworks, payments systems, default mechanisms and adjacent markets.
IOSCO Makes Statement on Combatting Online Harm and the Role of Platform Providers. On May 21, IOSCO reiterated its concern about risks associated with investment fraud orchestrated through online paid-for advertisements and user-generated content. IOSCO stated that regulators and platforms providers are strategically positioned to mitigate the potential investor harm arising from these risks and asks platform providers to enhance efforts, consistent with local law, aimed at reducing risk of pecuniary harm to investors, which also threatens public trust in the services provided by platform providers.
IOSCO Releases Sustainable Bonds Report. On May 21, IOSCO published its Sustainable Bonds Report which identifies the key characteristics and trends tied to the sustainable bond market. IOSCO’s Report includes five key considerations which are designed to address market challenges, including enhancing investor protection, ensuring sustainable bond markets are operating in a fair and efficient way, and improving accessibility.
IOSCO Publishes Final Reports on Finfluencers, Online Imitative Trading Practices and Digital Engagement Practices. On May 19, IOSCO published the Final Reports on Finfluencers, Online Imitative Trading Practices and Digital Engagement Practices, as part of the third wave of its Roadmap for Retail Investor Online Safety. The Finfluencers Final Report explores the evolving landscape of finfluencers, the associated potential benefits and risks, and the current regulatory responses across jurisdictions.
IOSCO Concludes its 50th Annual Meeting. On May 15, IOSCO concluded its 50th Annual Meeting, which was hosted by the Qatar Financial Markets Authority (“QFMA”) in Doha. IOSCO welcomed near 500 participants over the course of three days, followed by the QFMA public conference. The IOSCO Annual Meeting brings all 130 member jurisdictions together to discuss the most relevant issues and risks with regard to global financial markets, and how to assist regulators in implementing standards through capacity building.
ISDA Publishes Paper Exploring Use of Generative AI to Extract and Digitize CSA Clauses. On May 15, ISDA published a whitepaper that shows generative artificial intelligence can be used to accurately and reliably extract, interpret and digitize key legal clauses from ISDA’s credit support annexes, showing how this technology could increase efficiency, cut costs and reduce risks in derivatives processes that have traditionally been highly manual and resource intensive.
ISDA Margin Survey Shows Leading Derivatives Firms Collected $1.5 Trillion of Margin at Year-end 2024. On May 14, ISDA published its latest annual margin survey, which shows that initial margin (“IM”) and variation margin collected by leading derivatives market participants for their non-cleared derivatives exposures increased by 6.4% to $1.5 trillion at the end of 2024. The 32 responding firms included all 20 phase-one entities (the largest derivatives dealers subject to regulatory IM requirements in the first implementation phase), five of the six phase-two firms and seven of the eight phase-three entities.
ISDA Extends Digital Regulatory Reporting to Support Revised Canadian Reporting Rules. On May 13, ISDA extended its Digital Regulatory Reporting solution to cover new reporting rules in Canada and has made it compatible with a trade reporting messaging format used for North America reporting to maximize the benefit of adoption by those firms subject to the rules. The revisions are being implemented by the Canadian Securities Administrators and are scheduled for implementation on July 25, 2025.

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, Karin Thrasher, and Alice Wang.

Jeffrey L. Steiner, Washington, D.C. (202.887.3632, jsteiner@gibsondunn.com)

Michael D. Bopp, Washington, D.C. (202.955.8256, mbopp@gibsondunn.com)

Michelle M. Kirschner, London (+44 (0)20 7071.4212, mkirschner@gibsondunn.com)

Darius Mehraban, New York (212.351.2428, dmehraban@gibsondunn.com)

Jason J. Cabral, New York (212.351.6267, jcabral@gibsondunn.com)

Adam Lapidus, New York (212.351.3869, alapidus@gibsondunn.com )

Stephanie L. Brooker, Washington, D.C. (202.887.3502, sbrooker@gibsondunn.com)

William R. Hallatt, Hong Kong (+852 2214 3836, whallatt@gibsondunn.com )

David P. Burns, Washington, D.C. (202.887.3786, dburns@gibsondunn.com)

Marc Aaron Takagaki, New York (212.351.4028, mtakagaki@gibsondunn.com )

Hayden K. McGovern, Dallas (214.698.3142, hmcgovern@gibsondunn.com)

Karin Thrasher, Washington, D.C. (202.887.3712, kthrasher@gibsondunn.com)

Seven County Infrastructure Coalition v. Eagle County, Colorado, No. 23-975 – Decided May 29, 2025

Today, the Supreme Court held that agencies have broad discretion under NEPA in determining the scope and contents of an Environmental Impact Statement, and that agencies need not consider the indirect environmental effects of a project or factors outside the agency’s regulatory jurisdiction.

“The EIS need not address the effects of separate projects. In conducting [their] review, courts should afford substantial deference to the agency as to the scope and contents of the EIS.”

Justice Kavanaugh, writing for the Court

Background:

The National Environmental Policy Act (NEPA) requires federal agencies to consider the “reasonably foreseeable” environmental effects of permits and regulations that they issue. 42 U.S.C. § 4332(2)(C). Although NEPA does not impose substantive limits on what an agency may approve, it requires the agency to publish its analysis in an Environmental Impact Statement (EIS) that is then incorporated into the agency’s order and subject to judicial review under the Administrative Procedure Act.

The Seven County Infrastructure Coalition sought approval from the Surface Transportation Board (STB) to build a rail line in a remote part of Utah that would be used primarily to transport locally produced oil to the national rail network. After completing a 3,600-page EIS, the STB approved an 88-mile rail line. Environmental groups and Eagle County, Colorado challenged the STB’s approval, arguing that the STB made unreasonable analytical mistakes by failing to properly consider the project’s indirect environmental effects such as the effect on national rail-network traffic, the development of new oil wells in Utah, and the overall volume of oil processing on the Gulf Coast that could lead to more pollution and greenhouse gas emissions.

The STB defended its environmental analysis on the merits, and the Coalition intervened to argue that any analytical shortcomings were not actionable under NEPA because any indirect effects were not “reasonably foreseeable” insofar as they were neither proximate to the project nor within the STB’s regulatory authority. The D.C. Circuit ruled for the challengers, vacated the STB’s approval, and remanded for further environmental review. The Coalition appealed.

Issue:

Whether NEPA requires an agency to study environmental impacts beyond the proximate effects of the action over which the agency has regulatory authority.

Court’s Holding:

No. NEPA does not require an agency to study environmental impacts beyond either the proximate effects of the action or the scope of the agency’s regulatory authority.

What It Means:

Today’s decision will streamline federal permitting by limiting what agencies must consider in an EIS and limiting the ability of opponents to delay or defeat development projects through judicial challenges. The Court specifically noted that “NEPA has transformed from a modest procedural requirement into a blunt and haphazard tool employed by project opponents (who may not always be entirely motivated by concern for the environment) to try to stop or at least slow down new infrastructure and construction projects,” and expressed its goal of reversing this trend.
As the Court explained, “NEPA is a procedural cross-check, not a substantive roadblock.” NEPA helps agencies be informed about the significant environmental effects of their actions by requiring the agencies to prepare a report identifying and discussing those effects. An EIS must evaluate the significant environmental effects of the project at hand that are within the agency’s regulatory jurisdiction, but the inclusion of other issues will generally be in the agency’s discretion.
The Court emphasized that courts should afford “substantial deference to the agency” in reviewing the scope and contents of an EIS. The Court also noted that even a defective EIS does not require a court to vacate an approval of a project absent a reason to believe the mistake would lead the agency to disapprove the project.

The Court’s opinion is available here.

Appellate and Constitutional Law

Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com	Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com	Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com
Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com	Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com	Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com

Related Practice: Environmental Litigation and Mass Tort

Stacie B. Fletcher
+1 202.887.3627
sfletcher@gibsondunn.com

Daniel W. Nelson
+1 202.887.3687
dnelson@gibsondunn.com

Related Practice: Land Use and Development

Mary G. Murphy
+1 415.393.8257
mgmurphy@gibsondunn.com

Benjamin Saltsman
+1 213.229.7480
bsaltsman@gibsondunn.com

This alert was prepared by partner Samuel Eckman and associate Aaron Gyde.

Current changes in regulations are transforming the business landscape—are you prepared? Please join us for a presentation that focuses on the latest developments in the ever-evolving area of ESG. As regulatory landscapes and investor expectations continue to adjust, companies should ensure that they are equipped to respond to the opportunities and challenges.

This 60-minute webcast provides valuable insights for companies assessing sustainability commitments and trying to determine how to best maneuver during these challenging times. We attempt to provide a strategic understanding of how to navigate regulatory and litigation complexities, as well as market expectations.

Key topics include:

ESG Outlook: Reporting and Disclosure Considerations
Assessing Greenwashing and Litigation Risk from Altering Sustainability Commitments in the US Market
European ESG Regulation: Cutting back the green deal?
Greenwashing Risks in Europe: Recent Developments

MCLE CREDIT INFORMATION:

Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1.0 hour.

Gibson, Dunn & Crutcher LLP is authorized by the Solicitors Regulation Authority to provide in-house CPD training. This program is approved for CPD credit in the amount of 1.0 hour. Regulated by the Solicitors Regulation Authority (Number 324652).

Neither the Connecticut Judicial Branch nor the Commission on Minimum Continuing Legal Education approve or accredit CLE providers or activities. It is the opinion of this provider that this activity qualifies for up to 1 hour toward your annual CLE requirement in Connecticut, including 0 hour(s) of ethics/professionalism.

Application for approval is pending with the Colorado, Illinois, Texas, Virginia, and Washington State Bars.

PANELISTS:

Ferdinand Fromholzer is a partner in the Munich office of Gibson Dunn and a member of the firm’s corporate group. Ferdinand’s practice focuses on corporate law, in particular advising strategic and private equity investors on public and private M&A transactions. He also advises public companies on a wide range of legal issues, including disclosure requirements under capital market law, annual shareholders’ meetings, corporate structure measures and ESG aspects. He is also experienced in counseling on the duties and obligations of directors and officers, including in the context of compliance investigations.

Julia Lapitskaya is a partner in the New York office of Gibson Dunn. She is a member of the firm’s Securities Regulation and Corporate Governance Practice Group and co-chair of the ESG: Risk, Litigation and Reporting Practice Group. Julia’s practice focuses on SEC, NYSE/Nasdaq and Securities Exchange Act of 1934 compliance, securities and corporate governance disclosure issues, board and committee matters, corporate governance best practices, state corporate laws, the Dodd-Frank Act of 2010, SEC regulations, investor engagement and shareholder activism matters, proxy and annual meeting matters, sustainability and corporate responsibility matters, and executive compensation disclosure issues, including as part of initial public offerings and spin-off transactions. Julia is a frequent author and speaker on securities law and ESG issues and is a member of the Society for Corporate Governance.

Michael Murphy is a partner in Gibson, Dunn & Crutcher’s Washington, D.C. office. He is a leader of the firm’s ESG: Risk, Litigation, and Reporting practice area, and is a member of the firm’s Environmental Litigation and Mass Tort Practice Groups. Michael counsels clients on environmental and ESG issues related to corporate transactions and compliance. Michael advises clients in a variety of corporate, private equity, finance and real estate transactions. He is experienced in identifying environmental risks and negotiating transactional documents for buyers, sellers and investors of manufacturing, service, technology, aerospace, petroleum, energy, and financial industry clients. His litigation experience enables him to approach each environmental transactional issue with a broad perspective that takes into account all of his clients’ concerns. He advises clients on ESG and sustainability matters, including corporate disclosures, policies, reporting and integration issues.

Markus Rieder is a partner in the Munich office of Gibson Dunn and co-chair of the firm’s Transnational Litigation practice. He is also a member of the firm’s Class Actions, Securities Litigation and International Arbitration Groups. Markus focuses his practice on complex commercial litigation, both domestic and cross-border, and national and international arbitration, as well as on compliance and white-collar defense. He has substantial experience in the automotive, industrial and manufacturing sectors. He also advises related to the increased risks of ESG litigation, encompassing a variety of issues including climate and environmental protection matters, human rights and the new German Supply Chain Due Dilligence Act, and represents clients in major cutting-edge issues such as climate protection lawsuits.

During the week of May 19, 2025, the Texas Legislature passed two sets of amendments to the Texas Business Organizations Code through SB 1057 and SB 2411. These amendments allow certain corporations to impose higher thresholds for shareholder proposals, expand exculpation to officers of the corporation and streamline the approval and administration of major business transactions. These changes will become effective on September 1, 2025. Updated as of June 16, 2025.

Overview

During the week of May 19, 2025, two sets of amendments to the Texas Business Organizations Code (TBOC) passed the Texas Legislature. These amendments are in addition to the significant changes made by SB 29 that became effective on May 14, 2025. (See Gibson Dunn’s client alert summarizing SB 29 here.) On May 19, 2025, the Governor of Texas signed into law SB 1057, which allows certain publicly traded corporations to implement limitations on shareholder proposals. On May 27, 2025, the Governor of Texas signed into law SB 2411, which expands exculpation to include officers and streamlines the approval and administration of business transactions such as mergers and conversions.

SB 1057’s Key Changes to the TBOC

Limitations on Shareholder Proposals

SB 1057 allows certain corporations to implement significantly higher requirements for shareholder proposals. The amended provisions of the TBOC are available to any “nationally listed corporation,” which is defined as a Texas corporation that has equity securities registered under Section 12(b) of the Securities Exchange Act of 1934; and that either

a. is admitted to listing on a national securities exchange and has its principal office in the State of Texas; or

b. is admitted to listing on a national securities exchange and is admitted to listing on a stock exchange that (i) has its principal office in the State of Texas and (b) has received certain approval from the Texas Securities Commissioner under a specified provision of the Government Code.

Under Texas case law, the principal place of business of a corporation is the location where the corporation’s officers direct, control and coordinate the corporation’s activities.

To adopt these provisions, a nationally listed corporation must make an affirmative election by an amendment to one of the corporation’s governing documents. Under Texas law, governing documents include the certificate of formation and the bylaws. The corporation must provide notice to its shareholders of the proposed amendment to the governing documents in any proxy statement provided to shareholders in advance of adopting the amendment. The corporation must include in any proxy statement provided to shareholders specific information regarding how shareholders may submit a proposal on a matter requiring shareholder approval, including information about how the shareholders may contact one another for the purpose of satisfying the ownership requirements.

If a nationally listed corporation elects to adopt the new requirements, then, in order to submit a proposal requiring shareholder approval, a shareholder or a group of shareholders must hold a number of shares equal to at least $1 million in market value or 3% of the corporation’s voting shares. Voting shares of the corporation are defined as “shares that entitle the holders of the shares to vote on a proposal.” Ownership of the shares is determined as of the date the proposal is submitted, and the shareholders must hold such voting shares (i) for at least 6 months prior to the shareholder meeting and (ii) throughout the duration of the shareholder meeting. In addition, the shareholders must solicit holders of shares representing at least 67% of the voting power of shares entitled to vote on the proposal.

These provisions apply to any proposal on a matter to be submitted to shareholders for approval at a meeting of shareholders, other than director nominations and procedural resolutions that are “ancillary to the conduct of the meeting” (the scope of which is not defined). As such, the provisions apply not only to shareholder proposals under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (Rule 14a-8), but also to “floor” proposals submitted pursuant to a corporation’s advance notice provisions unless the proposal’s topic is “ancillary to the conduct of the meeting.”

Corporations evaluating adoption of SB 1057’s provisions should carefully evaluate views of their shareholders, enforceability under state corporate law for companies not incorporated in Texas, likely reactions by the proxy advisory firms, and how to implement the provisions, including whether to address procedural or interpretive aspects of the provisions.

Effective Date

These amendments will be effective on September 1, 2025.

SB 2411’s Key Changes to the TBOC

Expanded Exculpation of Officers

SB 2411 permits entities organized under the TBOC to limit or eliminate the liability of officers for monetary damages for an act or omission taken by the officer in his or her capacity as an officer of the entity, except that exculpation cannot be provided for breaches of loyalty, intentional misconduct, transactions in which the officer received an improper benefit, or statutory violations. SB 2411 provides exculpation to officers of the corporation to the same extent already permitted for directors. To adopt such exculpation provisions, an entity must make an affirmative election in their certificate of formation.

Streamlined Approval of Mergers, Major Transactions and Related Actions

SB 2411 expressly provides that the governing authority of an entity (e.g., board of directors of a corporation) may approve corporate documents such as plans, agreements and instruments in final or “substantially final form.” The amendments also provide that disclosure letters, schedules and other such similar documents to be delivered in connection with a plan of merger are not considered a part of the plan of merger unless expressly stated.

Under the amendments, a plan of merger may include provisions for appointing representatives to act on behalf of owners or members, with the sole exclusive authority to enforce or settle post-transaction rights. The appointment of such a representative may be made irrevocable and binding on the parties to such plan of merger upon approval of the plan.

In addition, the amendments provide that a plan of conversion can authorize any additional actions taken by the converted entity in connection with the plan of conversion without any approvals by the governing authority, owners or members of the converted entity other than approval of the plan of conversion itself.

Other

Among other things, SB 2411 also updates references in the TBOC to the new Texas Business Courts, includes certificate of formation content modernizations, and clarifies the use of ratifications and validations.

Effective Date

These amendments will be effective on September 1, 2025.

Conclusion

In summary, the recent amendments introduced by SB 1057 and SB 2411 represent the continual evolution of the TBOC. Collectively, these changes demonstrate the responsiveness and innovative approach Texas is taking to enhance the attractiveness of Texas as a jurisdiction for business formation and operation, while balancing the interests of boards of directors, managerial officials and shareholders. Gibson Dunn will continue to monitor and provide updates on any significant additional legal developments approved during the 89th Legislature’s regular session (which concludes on June 2, 2025) or that otherwise emerge.

Texas entities and publicly traded companies in Texas should review their board training presentations and organizational documents and any other applicable compliance policies against these changes and consider whether any updates may be appropriate. Gibson Dunn’s Texas lawyers are available to assist with any questions you may have regarding these developments.

The following Gibson Dunn lawyers prepared this update: Hillary Holmes, Gerry Spedale, Julia Lapitskaya, Ronald Mueller, and Jason Ferrari.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments. To learn more, please contact the Gibson Dunn lawyer with whom you usually work in the firm’s Securities Regulation & Corporate Governance practice group, or the authors:

Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@gibsondunn.com)

Gerry Spedale – Houston (+1 346.718.6888, gspedale@gibsondunn.com)

Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)

Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)

Jason Ferrari – Houston (+1 346.718.6736, jferrari@gibsondunn.com)

The do-over followed the Court’s separate conclusion that the board’s decision to reduce its size while in the shadow of a proxy fight was a breach of fiduciary duty.

The Delaware Court of Chancery recently concluded that a board properly rejected activists’ non-compliant director nomination notice, but nevertheless permitted the activists a rare second attempt at complying with the company’s advance notice bylaw. Applying Unocal and Blasius in a post-trial memorandum opinion, the do-over followed the Court’s separate conclusion that the board’s decision to reduce its size while in the shadow of a proxy fight was a breach of fiduciary duty.

Background

On May 21, 2025, Vice Chancellor Bonnie W. David issued a decision in Vejseli v. Duffy, 2025 WL 1452842 (Del. Ch. May 21, 2025), invalidating a board resolution that reduced the size of the board and permitting activists a second attempt at complying with an advance notice bylaw in nominating two new directors. The Court in this decision reaffirmed the enforcement of advance notice bylaws but, using its discretion as a court of equity, nevertheless provided a second chance at complying with the advance notice bylaw here due to the board’s own actions, which were not taken on a “clear day” and thus were a breach of the board’s fiduciary duties.

The opinion describes the facts as follows. In January 2024, digital currency mining assets of a company in Chapter 11 proceedings were spun off to a newly formed entity, Ionic Digital, Inc. (the “Company”), and many creditors became stockholders of the Company. The Company experienced significant management and director turnover, and a subset of stockholders became frustrated with the Company’s failure to publicly list its shares and what they considered other management failures. These activists aligned themselves with non-stockholder third parties whom the Company had previously passed over for arguably lucrative business opportunities. Those activists and third-party entities attempted to initiate a proxy contest at the Company’s first annual meeting of stockholders and install two new directors.

The Company’s board consisted of six seats (four directors and two vacancies), divided into three even classes, each standing for election every three years. Class I, consisting of one director and one vacancy, was up for re-election at the upcoming annual meeting of stockholders. In advance of the annual meeting, however, the Company’s board reduced its size from six directors to five, and, as a result, eliminated one of the two seats (which was vacant up until this point) that otherwise was going to be up for election. Without disclosing the board size reduction, the board announced the annual meeting date, triggering a 10-day window for submissions of nominations or other proposals of business under the company’s advance notice bylaw. The activists submitted nominations for the two board seats they believed were still up for election. In their nomination notice, however, the activists failed to disclose all existing agreements between them and the third-party entities with which they had partnered. After the nomination deadline passed, the board disclosed the board reduction and rejected the nomination notice based on the activists’ failure to include these agreements. The activists filed suit, alleging, among other things, that the directors had breached their fiduciary duties by reducing the board size and rejecting the nomination notice. In the meantime, the company postponed its annual meeting of stockholders until thirty days after the Court ruled in this action.

The Board Reduction

The Court first concluded that the board’s decision to reduce the board size was a breach of the board’s fiduciary duties. In reaching its decision, the Court considered the board’s actions under the enhanced scrutiny standard of review under Unocal, with a focus on election interference under Blasius, which considers whether (1) the board faced a “real and not pretextual” threat “to an important corporate interest or to the achievement of a significant corporate benefit,” and (2) the board’s response to the threat was reasonable in relation to the threat posed and was not preclusive or coercive to the stockholder franchise. The Court applied enhanced scrutiny because the resolution “interfere[d] with the election of directors,” and because the resolution was not adopted “on a ‘clear day,’” but rather as a defensive measure against the impending proxy contest.

In doing so, the Court noted that the most credible explanation offered at trial for the board reduction was that the board sought to ensure that “the Board, rather than the stockholders, could later identify better candidates,” which was “not a legitimate corporate purpose.” The Court also found that (1) the resolution was not necessary to accomplish the objectives of “cost savings and avoiding deadlock” that the board asserted post hoc as the reasons for the resolution, and (2) the board reduction was preclusive, because by eliminating a seat, the board made it impossible for stockholders to elect directors to that position, and therefore imposed its own favored outcome on the stockholders.

The Advance Notice Bylaw

The Court also held that the board properly rejected the nomination notice. First, the Court found that the activists failed to comply with the advance notice bylaw provision requiring “copies of all written agreements, contracts, arrangements, understanding, plans or proposals relating to” “[a]ny change in the present board of directors or management . . . , including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board” by not attaching the agreements between the activists and third-party entities and, more importantly, not even disclosing the existence of some of those agreements. The agreements included, among others, a solicitation agreement—described by but not attached to the nomination notice—for “the purpose of (i) supporting the [n]ominating [s]tockholders in their efforts to achieve the election of the persons they have nominated (at the [n]ominating [s]tockholders’ sole discretion) to the Board . . . at the 2025 [A]nnual [M]eeting . . . of [the Company.]” The Court concluded there are legitimate reasons why a board would want to know whether a nomination was part of a broader scheme relating to the governance, management, or control of the Company and such information was important to stockholders in deciding which director candidates to support. While the Court cited precedent suggesting that information regarding terminated agreements could be important, the Court did not definitively resolve whether such agreements needed to be disclosed because some provisions in the activists’ arrangements survived termination.

Second, the Court concluded the directors did not breach their fiduciary duties by rejecting the nomination notice. The Court analyzed the fairness of their decision under the enhanced scrutiny standard of review. The Court determined that the board rejected the notice to advance the “important corporate interest[]” of “preserving an informed stockholder vote,” and that the board’s enforcement of the advance notice bylaw was both reasonable and not preclusive because “[e]nforcing the Advance Notice Bylaw is a reasonable means of ensuring that stockholders receive material information about director nominees” and “did not preclude [the activists] from submitting a compliant Nomination Notice.” The Court also rejected the activists’ argument that the board’s failure to provide an opportunity to supplement the nomination notice before the nomination window closed was inequitable and found that such action did not amount to “manipulative conduct,” given that the window closed only two days after the activists submitted the nomination notice, noting that “Plaintiffs could have complied with the Advance Notice Bylaw’s disclosure requirements, but they did not.”

Despite concluding the board properly and fairly rejected the activists’ nomination notice, as a consequence of the board’s breach of fiduciary duty in reducing the board size, the Court issued an injunction “directing the Board to reopen the nomination window under the Advance Notice Bylaw to allow the Board, Plaintiffs, and any other the Company stockholder to submit director nominations.” In doing so, the Court stated that “[a] remedy that would permit the directors who breached their fiduciary duties to choose who will serve on the Board is no remedy at all.” The Court also noted that the “unusual facts of this case” necessitated this remedy because it was the board’s own wrongful conduct that required re-opening the nomination window, and the record did not support the board’s position that the activists intentionally concealed material information.

Takeaways

This decision reaffirms that the Delaware Court of Chancery applies enhanced scrutiny under Unocal with a focus on stockholder franchise concerns articulated in Blasius when evaluating claims that a board breached its fiduciary duties by taking defensive action that impacts the election of directors.
The Court reinforced that Delaware law permits a company to reject a non-complying nomination notice after the close of the nomination window where the activists’ submission did not provide the company sufficient time to do so before the deadline. If such rejection is challenged, however, a court may still examine a board’s motives in rejecting even a non-complying notice.
To avoid triggering enhanced scrutiny review, directors and advisors should ensure that any adjustment to board size is done on a clear day and for legitimate corporate interests, as documented by the record. This supports the notion that any board size decrease should (ideally) be done in connection with any director departure and that leaving a vacancy open for a period of time could lead to scrutiny if circumstances change in the future.
This case is a reminder that the Delaware Court of Chancery, as a court of equity, has broad discretion to fashion a remedy for breach of fiduciary duty. That principle is difficult to predict and plan around. It manifested here when, despite achieving practically complete victory with respect to the advance notice bylaw, the Company was compelled to give the activists another chance.
While the Court seemed to suggest that disclosure of recently terminated agreements would be appropriate, it also expressly acknowledged that it remains an open question whether an activists’ failure to disclose such agreements is sufficient to establish a violation of the advance notice bylaw at issue in this case. At minimum, disclosure is required where a material provision of such an agreement expressly survives termination.

The following Gibson Dunn lawyers prepared this update: Andrew Kaplan, Mark Mixon, and Justine Drohan.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following Securities Litigation, Mergers and Acquisitions, Private Equity, or Securities Regulation and Corporate Governance practice group leaders and members:

Securities Litigation:
Monica K. Loseman – Denver (+1 303.298.5784, mloseman@gibsondunn.com)
Brian M. Lutz – San Francisco (+1 415.393.8379, blutz@gibsondunn.com)
Jason J. Mendro – Washington, D.C. (+1 202.887.3726, jmendro@gibsondunn.com)
Mark H. Mixon, Jr. – New York (+1 212.351.2394, mmixon@gibsondunn.com)
Craig Varnen – Los Angeles (+1 213.229.7922, cvarnen@gibsondunn.com)

Mergers and Acquisitions:
Andrew Kaplan – New York (+1 212.351.4064, akaplan@gibsondunn.com)
Robert B. Little – Dallas (+1 214.698.3260, rlittle@gibsondunn.com)
Saee Muzumdar – New York (+1 212.351.3966, smuzumdar@gibsondunn.com)
George Sampas – New York (+1 212.351.6300, gsampas@gibsondunn.com)

Securities Regulation and Corporate Governance:
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
James J. Moloney – Orange County (+1 949.451.4343, jmoloney@gibsondunn.com)
Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)