Richard Manfredi, Author at Gibson Dunn

Trump v. Slaughter, No. 25-332 – Decided June 29, 2026

Today, the Supreme Court held 6-3 that Congress may not restrict the President’s power to remove members of so-called independent executive agencies, overruling Humphrey’s Executor v. United States.

“The FTC unquestionably exercises executive power, and must therefore be controlled by the Chief Executive, in whom such power is vested.”

Chief Justice Roberts, writing for the Court

Background:

Congress created the Federal Trade Commission in 1914. The agency is led by five Commissioners, appointed by the President and confirmed by the Senate. The Commissioners serve staggered seven-year terms, and no more than three can belong to the same political party. Originally, the FTC primarily issued cease-and-desist orders that courts could then enforce. But its authority has grown significantly. Today, the FTC can impose civil penalties, file civil lawsuits, make substantive rules, and even negotiate with foreign law-enforcement agencies.

Under the Federal Trade Commission Act, the President may remove an FTC commissioner only for “inefficiency, neglect of duty, or malfeasance in office.” 15 U.S.C. § 41. But in March 2025, President Trump removed FTC Commissioner Rebecca Slaughter for different reasons. Slaughter’s termination letter explained that her service was “inconsistent with [the] Administration’s priorities” and that she was being removed “pursuant to [President Trump’s] authority under Article II of the Constitution.”

Slaughter sued, arguing her removal violated the FTC Act because it was not based on “inefficiency, neglect of duty, or malfeasance in office.” The U.S. District Court for the District of Columbia agreed and ordered the government to reinstate Slaughter, reasoning that the Supreme Court’s decision in Humphrey’s Executor v. United States, 295 U.S. 602 (1935), had already upheld the FTC Act’s removal restrictions. The D.C. Circuit refused to stay the injunction pending appeal, but the Supreme Court granted a stay and agreed to review the district court’s decision.

Issue:

Do the statutory removal protections for members of the Federal Trade Commission violate the separation of powers and, if so, should Humphrey’s Executor be overruled?

Court’s Holding:

Yes. The FTC Act’s removal restrictions violate the separation of powers and Humphrey’s Executor is overruled.

What It Means:

Today’s decision continues the Supreme Court’s recent separation-of-powers jurisprudence by confirming that Congress may not insulate federal officers of multi-member independent agencies that exercise executive power from at-will presidential removal, even when Congress has historically provided “for-cause” protections.
The Court’s decision emphasizes that agencies exercising executive power—a power vested exclusively in the President by Article II of the Constitution—must remain accountable to the President. Congress may not enact statutes impeding that accountability.
The Court also recognized that “not all offices created by Congress necessarily come with executive or even sovereign power attached.” Op. 27. The Court expressly declined to consider the constitutionality of tenure protections for other “officials not before us,” including the judges of non-Article III courts, such as the Tax Court and the Court of Federal Claims. Op. 28. The Court also “left open the possibility” that “some functions traditionally handled outside the Executive Branch,” such as Legislative Branch agencies, may not be subject to presidential at-will removal. Op. 27.
The Federal Reserve likely is one such office. In a companion opinion in Trump v. Cook, the Court declined to stay an order reinstating a member of the Federal Reserve System Board of Governors who challenged her removal for cause, noting that “any definition of ‘cause’ in [that] context must reflect the Federal Reserve’s unique historical status and role.” Read about that decision here.
One consequence of today’s decision may be increased volatility in administrative policy across presidential administrations, as presidents now have broader power to reshape the leadership of formerly independent agencies. For example, the Court’s decision will strengthen presidential control over the FTC’s rulemaking and enforcement agenda, potentially enabling more direct White House influence over the agency’s consumer-protection priorities.
Justice Gorsuch authored a concurrence in which he observed that today’s decision does not eliminate the vast rulemaking and adjudicatory powers of federal agencies, but instead re-locates those powers in the President. He urged the Court to develop and apply its “many doctrines designed to protect the Constitution’s separation of powers,” including the nondelegation doctrine, the major questions doctrine, due-process and vagueness doctrines, and the Seventh Amendment right to a jury trial. These doctrines are likely to be a basis for continued litigation on separation-of-powers issues.

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 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	Jeffrey B. Wall +1 202.955.8533 jwall@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: Administrative Law and Regulatory

Stuart F. Delery
+1 202.955.8515
sdelery@gibsondunn.com

Eugene Scalia
+1 202.955.8673
shenry@gibsondunn.com

Helgi C. Walker
+1 202.887.3599
hwalker@gibsondunn.com

Related Practice: Consumer Protection

Gustav W. Eyler
+1 202.955.8610
geyler@gibsondunn.com

Svetlana S. Gans
+1 202.955.8657
sgans@gibsondunn.com

Ashley Rogers
+1 214.698.3316
arogers@gibsondunn.com

This alert was prepared by partner Samuel Eckman and associates Robert Batista and Jessica Kinnamon.

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.

Trump v. Cook, No. 25A-312 – Decided June 29, 2026

Today, the Supreme Court declined to stay the reinstatement of Federal Reserve Governor Lisa D. Cook, allowing her to remain in office pending further judicial proceedings.

“To accept [the Government’s] arguments would in effect transform the Federal Reserve’s for-cause protection into at-will employment—an interpretive leap out of step with the statute Congress enacted and our Nation’s tradition of central banking protected from political interference. We therefore deny the Government’s application.”

Chief Justice Roberts, writing for the Court

Background:

Governors of the Federal Reserve are “appointed by the President, by and with the advice and consent of the Senate” for a 14-year term. 12 U.S.C. § 241. They may only be “removed for cause by the President.” 12 U.S.C. § 242.

Governor Lisa D. Cook was confirmed to a full 14-year term on the Federal Reserve Board, commencing in 2024 and expiring in 2038. On August 15, 2025, the Director of the Federal Housing Finance Agency, William Pulte, sent a criminal referral letter to the Department of Justice, alleging that Governor Cook had potentially engaged in fraudulent conduct in connection with two mortgage agreements she entered before her appointment to the Board. The letter alleged that, to obtain favorable mortgage terms, Governor Cook had falsely designated two properties as her primary residence. Five days later, Director Pulte publicly released the letter on social media. Shortly thereafter, President Donald J. Trump called for Governor Cook’s resignation on social media.

On August 25, 2025, President Trump published a separate letter addressed to Governor Cook on social media, stating that he was removing her from the Federal Reserve Board, effective immediately. The letter asserted that there was “sufficient cause” for removal based on alleged “deceitful and potentially criminal conduct in a financial matter” or “gross negligence in financial transactions.” The President did not send the letter directly to Governor Cook.

Governor Cook subsequently filed suit against the President, the Federal Reserve Board, and the Chairman of the Board in the United States District Court for the District of Columbia. The district court granted a preliminary injunction preserving the status quo and preventing her removal, finding that she was likely to succeed on her claim that the President had not validly removed her “for cause.” A divided panel of the D.C. Circuit denied the Government’s request to stay the injunction pending appeal. The Government then applied to the Supreme Court for a stay.

Issue:

Whether Governor Cook is entitled to remain in office on an interim basis while the litigation regarding her removal proceeds.

Court’s Holding:

Yes. Governor Cook may remain in office pending final resolution of the litigation about whether her removal was proper.

What It Means:

Today’s decision allows Governor Cook to remain in office while the case returns to the lower courts, where the factual record and legal framework governing “for cause” removal will be further developed.
Deciding the case as a matter of statutory interpretation, the Court held that the Government had not shown a likelihood of success on the merits. The Court reasoned (1) that the President’s removal determination was judicially reviewable; (2) that “cause” to remove a Governor of the Board must satisfy a “substantial threshold”; and (3) that a court may order that a removed Governor can remain in office during the pendency of litigation when the Government is not entitled to a stay.
The Court focused on the process Governor Cook received before her purported removal, explaining that “the President failed to afford Governor Cook the procedural protections to which she was entitled by statute.” Although Governor Cook was not necessarily entitled to “an audience with the President or a full-blown judicial trial,” she was entitled, at a minimum, to “some explanation of the evidence at issue, some avenue for a response, and a deadline by which a response would be due.” The Court rejected the Government’s contention that the President’s social media posts satisfied that requirement.
The Court emphasized the Federal Reserve’s independence but did not resolve the ultimate question of whether the President may remove Governor Cook for cause. Instead, it stated that whether “cause” for removal exists will depend, at least in part, on “the seriousness of the alleged misconduct, and the extent of any nexus that may exist to the Governor’s professional duties.”
The Court appears to be continuing to carve out the Federal Reserve as institutionally distinct from other agencies. Drawing on the history and independence of the First and Second Banks of the United States, as well as the Founders’ understanding that “monetary policy should not be subject to political interference,” the Court’s decision reinforces the possibility that the Federal Reserve’s unique history, structure, and role may afford its officers greater protection from presidential removal. That distinction echoes the Court’s reasoning last year in Trump v. Wilcox, where the Supreme Court stayed the reinstatement of members of the National Labor Relations Board and the Merit Systems Protection Board, explaining that its reasoning did not call into question the Federal Reserve, which it described as a “uniquely structured, quasi-private entity.”

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 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	Jeffrey B. Wall +1 202.955.8533 jwall@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: Administrative Law and Regulatory

Stuart F. Delery
+1 202.955.8515
sdelery@gibsondunn.com

Eugene Scalia
+1 202.955.8673
shenry@gibsondunn.com

Helgi C. Walker
+1 202.887.3599
hwalker@gibsondunn.com

This alert was prepared by associates Vanessa Ajagu and Luke Wearden.

From the Derivatives Practice Group: This week, the CFTC and the SEC issued a joint request for public comment on approaches to further harmonize regulatory frameworks across securities, security-based swaps, futures, swaps, and related positions, building on their recent efforts to streamline regulations.

New Developments:

CFTC, SEC Seek Public Comment on the Harmonization of Portfolio Margining Frameworks. On June 26, the CFTC and the SEC issued a joint request for public comment on potential approaches to further harmonize regulatory frameworks applicable to portfolio margining across securities, security-based swaps, futures, swaps, and related positions. The public comment period will remain open for 60 days following publication of the request for comment in the Federal Register. [NEW]

CFTC Seeks Public Comment on Notice of Proposed Rulemaking Concerning Data Reporting Requirements for Certain Event Contracts. On June 25, the CFTC published a Notice of Proposed Rulemaking seeking public comment on amendments to Parts 15, 16, and 17 of the Commission’s regulations. According to the CFTC, the proposal sets forth an alternate framework for reporting of data for certain fully collateralized event contracts, which have been the subject of staff no-action letters since 2017, and would require certain reporting markets, futures commission merchants, clearing members, and foreign brokers to report certain event contracts pursuant to Parts 15 through 18 of the Commission’s regulations, rather than Parts 38, 39, 43 and 45. Comments must be received 30 days after publication of the notice in the Federal Register. [NEW]

CFTC Sues Kentucky to Prevent Violation of CFTC’s Exclusive Jurisdiction. On June 23, the CFTC filed a lawsuit against Kentucky to block the state’s efforts to shut down CFTC-registered contract markets using state laws. To date, the CFTC has also initiated legal proceedings against Minnesota, Illinois, and Rhode Island, and has submitted amicus briefs to the U.S. Court of Appeals for the Sixth and Ninth Circuits as well as the Supreme Judicial Court of Massachusetts. [NEW]

CFTC Seeks Public Comment on the Extension of Standard Futures Contracts to 24/7 Trading and on Perpetual Contracts Referencing Physically Delivered or Storable Energy Commodities. On June 22, the CFTC issued a request for comment seeking public input on two related developments in the energy derivatives markets: the extension of standard futures contracts to 24/7 trading, and the potential listing of perpetual contracts that reference physically delivered or storable energy commodities, such as crude oil. Comments must be in writing and received by Saturday, July 25, 2026. [NEW]

CFTC, SEC Seek Public Input on Data Reporting Frameworks for Security-Based Swap and Swap Markets. On June 18, the CFTC and the SEC issued a joint request for public comment on potential opportunities to harmonize, modernize, and streamline data reporting requirements in their regulation of the swap and security-based swap markets, respectively. The request for comment is intended to assist the agencies in evaluating whether changes to the design, scope, and structure of security-based swap and swap data reporting requirements would lead to greater alignment between their respective reporting frameworks.

CFTC, SEC Seek Public Comment to Further Clarify and Harmonize Derivatives Product Definitions. On June 18, the CFTC and the SEC issued a joint request for public comment on potential opportunities to further update, clarify, and harmonize certain derivatives product definitions and interpretive issues. The request for comment is intended to support the Commissions’ ongoing evaluation of whether current regulatory definitions, interpretations, and jurisdictional frameworks appropriately reflect evolving market structures, financial products, and trading practices.

CFTC Staff Issues No-Action Letter for Swap Post-Trade Risk Reduction Services. On June 17, the CFTC’s Division of Clearing and Risk, Division of Market Oversight, and Market Participants Division announced they have taken no-action positions related to a request from service providers that offer post-trade risk reduction services for swaps in the form of portfolio rebalancing and basis risk mitigation. The letter provided a no-action position to the providers for failure to register as swap execution facilities. The no-action letter also benefits any person who engages in portfolio rebalancing and basis risk mitigation services for: failure to enter into swaps on a designated contract market; swap execution facility; or a swap execution facility that is exempt from registration under the trade execution requirement; and failure to submit swaps that are required to be cleared to a derivatives clearing organization. The no-action letter reiterated the discussion of risk reduction services in the Commission’s 2020 part 43 final rule.

CFTC Issues a Request for Information to Facilitate Innovation and Competition for Fintech Firms. On June 16, the CFTC issued a Request for Information to assist the Commission in identifying regulations, guidance documents, orders, no-action letters, and other items that unduly impede fintech firms from entering into partnerships with federally regulated institutions as well as CFTC regulatory items that could be amended to streamline application processes for eligible fintech firms. The comment period will be open for 21 days after publication in the Federal Register.

CFTC Chairman Selig Announces Senior Staff Appointments. On June 15, CFTC Chairman Michael Selig announced two senior staff appointments. Don Battle joins the CFTC as chief data innovation officer, serving in the Division of Data and as a member of the Innovation Task Force, and J. Matthew Haws joins as senior advisor in the Office of the Chairman and as the Chicago Regional Administrator.

CFTC Issues No-Action Letter for DCMs Converting Existing Perpetual-Style Digital Commodity Futures into True Digital Commodity Perpetual Futures. On June 12, the CFTC announced it has issued no-action relief to designated contract markets seeking to convert their existing perpetual style digital commodity futures contracts into true digital commodity perpetual futures. This no-action letter follows recent Commission actions (see CFTC Press Release Nos. 9240-26 and 9242-26), which the CFTC said clarified the regulatory treatment of true perpetual futures contracts referencing bitcoin and other digital commodities with deep, active, and continuous spot market trading.

CFTC Sues New Mexico as the State Becomes the Latest Attempting to Infringe on Federal Jurisdiction. On June 12, the CFTC filed a lawsuit in federal court against the state of New Mexico, seeking to block the state’s efforts to apply state gaming laws against CFTC-registered contract markets. The CFTC’s complaint against New Mexico seeks a declaratory judgment that federal law grants it exclusive authority to regulate event contracts and requests a permanent injunction preventing the state from enforcing preempted state laws against its registrants.

CFTC Seeks Public Comment on Notice of Proposed Rulemaking Concerning Whistleblower Rules. On June 11, the CFTC published a Notice of Proposed Rulemaking to amend its whistleblower rules. According to the CFTC, the proposal incorporates a 30 percent presumption for whistleblower awards of $5 million or less, subject to Commission discretion and its analysis of relevant regulatory factors, and is modeled on the Securities and Exchange Commission’s rule 21F-6(c). The comment period will be open for 30 days after publication of the Notice of Proposed Rulemaking in the Federal Register.

New Developments Outside the U.S.

ESMA Publishes Register of External Reviewers under EuGB Regulation. On June 22, ESMA published the register of firms authorized to act as external reviewers of European Green Bonds (EuGB). As of June 22, registered external reviewers are subject to ESMA supervision and must fully comply with the requirements of the EuGB Regulation. The transitional regime provided for under Articles 69 and 70 of the EuGB Regulation has ended and external reviewers listed in ESMA’s transitional regime register must cease their external review activities. ESMA has also created a separate register, which it said is intended to ensure transparency about disclosure requirements for previously issued European Green Bonds, ESMA has created a separate register. The register lists firms that notified ESMA under Articles 69 and 70 and were allowed to provide external reviews during the transitional period, and includes the periods during which they were active. ESMA said that issuers planning to issue a European Green Bond should consult ESMA’s register to select a registered external reviewer to perform their pre-issuance, post-issuance and, where applicable, impact report review. [NEW]

ESMA Contributes to Global CCP Fire Drill Exercise. On June 19, Bafin, the Bank of England, Bundesbank, the CFTC, and ESMA published a report summarizing the outcome of, and industry feedback from, the 2025 CCP Global Default Simulation exercise, in which 38 central counterparties from across the world, together with clearing members, conducted a coordinated fire drill exercise simulating the failure of a hypothetical common participant. The report also highlights areas for consideration in the development of CCPs’ default management processes, as well as observations and recommendations from the lead authorities. [NEW]

ESMA Issues 2025 Annual Report, Focusing on Stronger Supervision, Regulatory Simplification, and Innovation. On June 17, ESMA published its Annual Report for 2025, which highlighted a year of progress in strengthening EU’s financial markets through enhanced supervision, regulatory simplification and innovation. According to ESMA, the report illustrates ESMA’s continued contribution to orderly, resilient and attractive EU capital markets.

New Industry-Led Developments

ISDA-Actrix US Treasury Repo Market Clearing Indicators May 2026. On June 25, ISDA published a research note highlighting how the ISDA-Actrix US Treasury Repo Market Clearing Indicators illustrate central clearing adoption in the US Treasury repo market. According to ISDA, sponsored cleared repo volumes are used as a proxy to monitor client participation in central clearing, the key objective of the Securities and Exchange Commission’s US Treasury clearing mandate. [NEW]

ISDA, FIA, GFMA, CMC, CMCE Responds to IOSCO on Best Practices for OTC Commodity Derivatives. On June 23, ISDA and others responded to IOSCO’s consultation report on best practices for over-the-counter (OTC) commodity derivatives position reporting. The associations indicated their support for IOSCO’s objectives of enhancing market integrity and orderly trading and resilience in OTC commodity derivatives markets, but emphasized that these goals should be achieved through better use of existing data and stronger cross-border regulatory cooperation, rather than introducing new reporting requirements. [NEW]

IOSCO Publishes Report on Supervisory Technology. On June 18, IOSCO published its Report on Supervisory Technology, summarizing a survey of 49 jurisdictions on their current and expected future use of technology in financial supervision.

IIF, ISDA and SIFMA Submit Comment Letter on Basel III Endgame Proposal. On June 18, ISDA, the Institute of International Finance (IIF), and the Securities Industry and Financial Markets Association (SIFMA) submitted a joint comment letter to the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency on the proposed Basel III endgame capital rule governing Category I and II banking organizations and banking organizations with significant trading activity.

ISDA, SIFMA, IIF Respond to 2026 US G-SIB Surcharge Proposal. On June 18, ISDA, the Securities Industry and Financial Markets Association, and the Institute of International Finance submitted a joint response to U.S. agencies on proposed changes to the surcharge for global systemically important banks (G-SIBs). The associations stated that they welcome the 2026 proposal as an improvement relative to the 2023 proposal, noting in particular that the revised proposal would not include client-cleared derivatives under the agency model in the complexity and interconnectedness categories of the G-SIB surcharge.

ISDA, SIFMA, IIF Respond to 2026 US Basel III Proposal. On June 18, ISDA, the Institute of International Finance, and the Securities Industry and Financial Markets Association submitted a joint response to the 2026 US Basel III notice of proposed rulemaking. The response focuses on the Fundamental Review of the Trading Book, the revised credit valuation adjustment framework, the securities financing transactions requirements and elements of the standardized approach for counterparty credit risk.

ISDA Publishes Paper on Digital Assets and Derivatives. On June 15, ISDA published a paper on the future of digital assets and derivatives. ISDA said the paper examines digital assets in derivatives markets and associated distributed ledger technologies through the lens of settlement design, prudential capital treatment and collateral management. According to ISDA, its central finding is that the institutional viability of digital assets depends on how exposures are structured, margined, settled and recognized within existing prudential frameworks.

ISDA Responds to CFTC’s Proposed Modifications to Clearing Requirements. On June 11, ISDA responded to the CFTC’s notice of proposed rulemaking on the clearing requirement determination under Section 2(h) of the Commodity Exchange Act for interest rate swaps to account for Canadian dollar-denominated and Mexican peso denominated interest rate benchmark transitions. ISDA supports the proposed updates and recommends an implementation period of at least three months.

ISDA Responds to EC Consultation on Calculation of Carbon Price Paid in a Third Country. On June 10, ISDA responded to the European Commission’s consultation on the calculation of the carbon price paid in a third country under Article 9 of the Carbon Border Adjustment Mechanism (CBAM). ISDA stated that it supports the EC’s proposal that evidence of the carbon price effectively paid should encompass all compliance options recognized under third-country pricing mechanisms, including the use of domestic carbon credits and international carbon credits, to meet CBAM obligations.

ISDA Publishes Report on ISDA-Actrix US Treasury Repo Market Clearing Indicators. On June 10, ISDA published a report concerning indicators related to central clearing adoption in the U.S. Treasury repo market. According to ISDA, sponsored cleared repo volumes can be used as a proxy to monitor client participation in central clearing, the key objective of the Securities and Exchange Commission’s U.S. Treasury clearing mandate.

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

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, any member of the firm’s Derivatives practice group, or the following practice leaders and authors:

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 )

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

Alice Yiqian Wang, Washington, D.C. (202.777.9587, awang@gibsondunn.com)

This update is designed as a guide to the constraints and opportunities that the United States will have as it moves toward a final agreement with the Islamic Republic.

On June 17, 2026, U.S. President Donald Trump and Iranian President Masoud Pezeshkian signed a Memorandum of Understanding (MOU) intended to permanently end hostilities between the United States and Iran and establish a framework for a comprehensive agreement to be negotiated over the next 60 days. Although the MOU leaves many of the parties’ most consequential disputes unresolved, it represents a significant diplomatic development that could reshape U.S. sanctions policy, regional trade, energy markets, and investment opportunities across the Middle East. As of this writing, changes have already emerged.

The MOU calls for the immediate cessation of military operations, the restoration of commercial navigation through the Strait of Hormuz, and immediate sanctions relief for Iranian oil exports. It also sets out a framework for broader objectives, including potential termination of seemingly “all” U.S. sanctions, the release of restricted Iranian assets, and the creation of a $300 billion reconstruction and development initiative for Iran.

Despite these commitments, we counsel caution for any businesses that might be tempted to view Iran as imminently “open for business.” The MOU is a political framework rather than a self-executing legal instrument, and many of its central promises would require substantial executive action, congressional review, regulatory implementation, and—in some cases—changes to statutory sanctions regimes that cannot be unilaterally unwound by the President. Significant questions also remain regarding the positions, risk tolerance, and strategies of numerous third parties who are not signatories to the MOU: the European Union, the United Kingdom, the United Nations Security Council, the Financial Action Task Force (which still has Iran on its blacklist), other countries in the region, numerous countries that currently hold restricted Iranian assets, private insurers, and the broader financial sector. The cooperation of all these actors is necessary to deliver meaningful and durable sanctions relief. For example, the consent of other UN Security Council members would be needed to lift UN sanctions on Iran, and tangible economic engagement with Iran could only be undertaken by private commercial enterprises.

The experience following the 2015 Joint Comprehensive Plan of Action (JCPOA) provides a useful, if sobering, guide. Even after a comprehensive multilateral agreement and extensive sanctions relief under the Obama administration, many companies nevertheless remained reluctant to commit capital to Iran because of legal uncertainty, compliance concerns, financing constraints, and the risk that sanctions could return (as they ultimately did during President Trump’s first term). Those concerns are likely to be even more pronounced under the current framework, where key terms remain unresolved and implementation depends on future negotiations as well as buy-in from the non-signatory actors mentioned above. Further, as was true at the time of the JCPOA and remains true under the recently signed MOU, Iran’s economy is highly centralized and prone to corruption, which creates significant business risk. Iran’s troubling human rights record and its support for terrorist proxy groups create still more risk for companies that may be interested in investing.

This alert is not designed to provide a blow-by-blow assessment of current negotiations between Washington and Tehran. Rather, it is designed as a guide to the constraints and opportunities that the United States will have as it moves toward a final agreement with the Islamic Republic. In particular, this alert provides an overview of the pre-MOU U.S. legal and policy framework concerning Iran; examines the MOU’s immediate legal effects, the obstacles to implementing its promised sanctions relief, the implications for shipping and commerce through the Strait of Hormuz, and the proposed Iran reconstruction fund; and highlights the practical considerations for companies evaluating current or future business opportunities involving Iran.

I. Background

The United States and Israel launched major combat operations against Iran on February 28, 2026, sparking a regional conflict with major global economic consequences. The stated rationale for the strikes changed as the conflict progressed, as officials in Washington and Jerusalem variously indicated that the strikes were intended to degrade Iran’s military capabilities, curtail its support for regional militant groups, prevent the development of a nuclear weapon, and increase pressure on the clerical regime in Tehran. While the parties had agreed to informal ceasefires before late June 2026, the MOU marked the most significant diplomatic development of the conflict, and, rather than setting out a temporary cessation of hostilities, it establishes a framework for negotiations that could substantially reshape the regional economic landscape.

The conflict was the culmination of years of mounting pressure on Iran. Following the United States’s withdrawal from the JCPOA under the first Trump administration and the August 2025 reimposition of UN sanctions initiated by France, the United Kingdom, and Germany (the E3) using the JCPOA snapback mechanism, Iran faced severe economic strain, mounting domestic unrest, and increasing international isolation. At the same time, Iran’s military and nuclear position had weakened following the June 2025 U.S. attacks (dubbed Operation Midnight Hammer), while several of Iran’s regional partners and proxies had suffered setbacks of their own.

During the initial six weeks of U.S.-Israeli operations, Washington and Jerusalem inflicted significant damage on Iran’s military and security apparatus. The United States and Israel ultimately struck thousands of targets, including missile and drone facilities, naval assets, military-industrial infrastructure, and command-and-control networks associated with the Iranian military and the Islamic Revolutionary Guard Corps (IRGC). Yet battlefield success did not produce a decisive political outcome. Iran continued to retaliate against U.S. military bases, Israel, and countries throughout the region, including all of the Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates—and further afield—Iraq, Jordan, and Turkey. The conflict quickly expanded into the maritime domain as well.

The most economically consequential escalation of the conflict came on March 4, 2026, when the IRGC announced the closure of the Strait of Hormuz and threatened vessels transiting the waterway. The United States subsequently imposed its own naval restrictions on Iranian ports and coastal areas. Although Pakistan brokered a ceasefire between the two parties in April 2026, negotiations toward a more permanent détente stalled over the future of Iran’s nuclear program, and periodic military exchanges continued. Meanwhile, disruptions to traffic through the Strait of Hormuz—through which approximately one-quarter of global oil supplies and one-fifth of global liquefied natural gas (LNG) shipments ordinarily pass—contributed to rising energy prices, inflationary pressures, and growing concerns about global economic stability.

By late May 2026, reports from both Washington and Tehran indicated that negotiations were gaining momentum. The Trump administration announced the MOU on June 10, 2026, and the full text was revealed a week later. Although significant questions regarding the status of the Strait of Hormuz and hostilities between Israel and Hezbollah remain unresolved, and negotiations toward a broader agreement continue in the shadow of spasms of violence, the MOU reflects a shared interest in de-escalation and opens the possibility of substantial changes to sanctions, trade, investment, and regional commerce.

II. The Memorandum of Understanding

The MOU is a brief, fourteen-paragraph framework agreement. It is significantly less detailed than even the interim agreement signed between Iran and the United States during the Obama administration (the Joint Plan of Action), which eventually led to the final 150-page Joint Comprehensive Plan of Action that the parties concluded 18 months later. The MOU combines a limited number of immediately operative commitments with a broader set of objectives that the parties have agreed to pursue during a 60-day negotiating period.

Several provisions have immediate practical significance. The MOU calls for:

The immediate and permanent cessation of military operations between the parties. (MOU Paragraph 1).
The termination of the U.S. naval blockade and the restoration of commercial navigation through the Strait of Hormuz. (MOU Paragraphs 4, 5).
U.S. sanctions relief for the export and sale of Iranian crude oil, petroleum products, and related services. (MOU Paragraph 10). (This initial relief was granted by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) on June 22, 2026, in the form of a general license (GL).[1])

More consequential for businesses, however, are the commitments the parties have agreed to pursue as part of an eventual final agreement. Those objectives include:

Mutual recognition of the territorial integrity of the United States, Iran, and Lebanon. (MOU Paragraphs 1, 2).
A future arrangement among Iran, Oman, and other Persian Gulf countries concerning the administration and operation of the Strait of Hormuz. (MOU Paragraph 5).
The development of a reconstruction and economic-development initiative for Iran, backed by at least $300 billion in funding and accompanied by the licenses, waivers, and authorizations necessary to facilitate related financial transactions. (MOU Paragraph 6).
The termination, pursuant to a schedule yet to be negotiated, of broad categories of sanctions against Iran, including UN sanctions, measures imposed under the International Atomic Energy Agency (IAEA) regime, and U.S. primary and secondary sanctions. (MOU Paragraph 7).
Resolution of issues relating to Iran’s stockpiles of enriched nuclear material and the future scope of its nuclear program. (MOU Paragraph 8).
The release or unfreezing of Iranian funds and assets that are currently restricted or blocked. (MOU Paragraph 11).

Taken at face value, the MOU contemplates a far-reaching transformation of the legal and commercial landscape surrounding Iran. Yet many of its most consequential commitments—including broad sanctions relief, the release of frozen assets, and the proposed reconstruction fund—remain contingent on future negotiations and, in many cases, legal, political, and military steps that neither signatory can accomplish unilaterally. As discussed below, the gap between the MOU’s aspirations and the mechanisms required to implement them will be as central to the negotiators as it is to businesses evaluating potential opportunities involving Iran.

III. The MOU Compared with the JCPOA and Other U.S. Sanctions Relief

While the MOU is unprecedented in its scale, parts of the agreement have analogs to both prior Iran negotiations and elements of U.S. sanctions relief recently provided to Venezuela and Russia. On its face, the most clearly relevant precedent for the MOU is the JCPOA, i.e., the 2015 agreement among Iran, the United States, the United Kingdom, France, Germany, China, Russia, and the European Union that exchanged nuclear restrictions for sanctions relief. Although the current MOU addresses some of the same issues, it differs from the JCPOA in several important respects, including the breadth of the sanctions relief it contemplates, the mechanism and timing of implementation, and the parties involved.

A. Differences in the Scope of Sanctions Relief

The MOU appears to contemplate substantially broader sanctions relief than the JCPOA.

The JCPOA’s sanctions relief was carefully limited. It principally suspended or terminated U.S. nuclear-related secondary sanctions—that is, measures targeting non-U.S. persons for engaging in certain transactions and activities involving Iran. Contrary to a common misconception, the JCPOA largely preserved the U.S. primary sanctions embargo on Iran, subject to a handful of narrow exceptions, including certain imports of Iranian carpets and foodstuffs and a licensing framework for commercial aircraft-related transactions. As a practical matter, even under the JCPOA, U.S. persons and financial institutions remained highly restricted in their dealings with Iran. Much of the relief provided under the JCPOA was subsequently reversed following the United States’s withdrawal from the JCPOA in 2018.

The MOU, by contrast, contains considerably broader language. Paragraph 7 provides that the United States will “terminate all types of sanctions against the Islamic Republic of Iran, including the United Nations Security Council resolutions, IAEA Board of Governors resolutions, and all unilateral U.S. sanctions, primary and secondary,” pursuant to a schedule to be negotiated as part of the final agreement.

Whether that commitment should be understood literally remains an open question. As explained in more detail below, the United States maintains sanctions on Iran (and thousands of Iranian companies, individuals, and organizations) for numerous reasons unrelated to the country’s nuclear program, including other weapons of mass destruction proliferation activities, ballistic missile development, support for terrorism, and human rights abuses. Because the MOU’s substantive obligations focus primarily on nuclear issues, some observers have argued that Paragraph 7 should be understood as referring principally to nuclear-related sanctions. The text, however, contains no such limitation on its face. The sanctions provision appears in a standalone paragraph and refers broadly to “all types of sanctions,” without qualification.

As discussed further below, significant legal and political barriers would complicate any effort to eliminate every sanctions program applicable to Iran. Nonetheless, on its face, the MOU contemplates a scope of sanctions relief that is materially broader than that offered to Tehran under the JCPOA.

B. Differences in Timeline

The MOU also differs from the JCPOA in the way it approaches implementation. The JCPOA set out a detailed, pre-agreed-upon timeline. That timeline featured key locked-in dates, including Adoption Day, Implementation Day, Transition Day, and Termination Day, with ultimate relief conditioned on certain verified steps that Iran needed to take with respect to its nuclear program. By contrast, the MOU does not contain a comparable sanctions-related roadmap beyond its two phases: (1) the initial MOU itself and (2) a subsequent 60-day negotiation period. The MOU front-loads a few items (e.g., lifting the naval blockade and restoring shipping within 30 days) but leaves the rollout of most of the economic incentives and Iranian commitments to the future negotiations over the subsequent 60 days.

C. Differences in the Parties

The parties to the two agreements may prove to be the most consequential difference of all. The JCPOA bound not just the United States and Iran but also the other permanent members of the UN Security Council and the European Union. And, once it was ratified by a binding UN Security Council resolution (Resolution 2231), all UN member states became bound by the agreement. The inclusion of these other parties made it possible for the signatories to credibly commit to action at the United Nations level and across the European Union and United Kingdom as well as the United States. The exclusion of those parties from the MOU could pose challenges to the United States’s ability to uphold its end of the bargain, though we note that the MOU’s Paragraph 14 indicates that the final negotiated agreement (after the 60-day period) is to be “endorsed by a binding UN [Security Council] resolution.” We note that the MOU also purports to bind two non-signatory states, one named in the document (Lebanon) and the other unnamed (Israel). The legal basis for establishing commitments by non-states party is presumptively suspect, and, indeed, these unagreed-to commitments have already encountered political resistance from both states.

IV. Short-Term and Long-Term Effects on the Strait of Hormuz (MOU Paragraphs 4 and 5)

A. The International Legal Status of the Strait

The MOU stops short of ceding control of the Strait of Hormuz to Iran, but the agreement’s structure tilts toward a coastal-state-managed system (i.e., one managed by Iran and Oman), which is in tension with the law of international straits. Paragraph 5 commits Iran only to use “best efforts” to ensure safe passage, “with no charge for 60 days only,” and tasks Iran with opening a dialogue with Oman to define the Strait’s “future administration and maritime services,” to be conducted “in line with the applicable international law and the sovereign rights of coastal states.” But Hormuz is an international strait: at its roughly 21-nautical-mile narrows, it is composed entirely of Iranian and Omani territorial waters.[2] Under Part III of the UN Convention on the Law of the Sea (UNCLOS), the right of transit passage cannot be hampered or suspended by bordering countries; coastal regulation is confined to narrow safety, pollution, and fiscal matters; and, read together with UNCLOS Article 26, the regime permits no charge for passage as such, only non-discriminatory fees for specific services rendered.[3] Under international law, a bilateral U.S.-Iran understanding (or a later Iran-Oman arrangement) cannot create a system that could impede third-country shipping, and Oman, an UNCLOS party, has repeatedly and publicly rejected Iran’s toll proposal.[4]

The risk is that the “sovereign rights of coastal states” language in the MOU—notwithstanding the reference to “applicable international law”—appears to provide precedential support to a potential toll-and-clearance scheme. Iran had already enacted a toll model (its March 30, 2026 transit-fee law required a payment of roughly $2 million per voyage), which was (and is) manifestly contrary to international law.[5] In fact, precedent cuts against tolling. Iran may point to the seemingly most relevant precedent, the 1936 Montreux Convention, under which Turkey administers the Bosporus Strait. This agreement allows merchant vessels to enjoy full freedom of transit in peacetime, and it permits Turkey to charge those vessels only for bona fide cost-based services, not a general transit toll. However, this arrangement only endures because UNCLOS Article 35(c) grandfathers in longstanding conventions of that kind. The Strait of Hormuz has never been subject to such control, and, as a matter of international law, the MOU cannot change that.[6]

B. Impacts: Added Costs to Shippers and Insurers

As the global economy quickly learned, parties who have historically relied on an open Strait have no ready means to fully avoid Hormuz. Prior to the conflict, roughly 20 million barrels of oil per day (about one-quarter of seaborne oil) and 20 percent of the world’s LNG transited the waterway, and it remains the only sea route for the United Arab Emirates, Qatar, Bahrain, Kuwait, and Iraq. Regional bypass pipelines can absorb only a fraction of that volume, with no LNG bypass at all.[7] Since the Iran war began, the Lloyd’s Market Association Joint War Committee has expanded its Listed Areas to cover the entire Persian Gulf, and war-risk premiums have risen from roughly 0.125 percent of hull value per transit to between 2 percent and 3 percent—on the order of $2 million to $3 million for a single very large crude carrier voyage, and $10 million to $14 million for U.S.-nexus tonnage per voyage.

The U.S. International Development Finance Corporation (DFC) stepped in with a government-backed maritime reinsurance facility (initially about $20 billion, doubled to about $40 billion in April 2026), yet shipping traffic stayed sharply reduced, underscoring that so long as vessel safety is uncertain, the existence of willing insurers is unlikely to move ship owners.[8]

For businesses planning operations that require transiting the Strait, two points from the MOU are central. First, the MOU’s “no charge for 60 days only” language appears to telegraph that, once this period lapses, Iran may well impose a transit toll (reported at about $1 per barrel, or roughly $2 million per very large crude carrier). For shipowners, this cost would be in addition to already-elevated war-risk premia. That charge is not only legally contestable but also could give rise to sanctions exposure in its own right. OFAC has advised that payments to the Government of Iran or the IRGC for safe passage through the Strait are unauthorized for U.S. persons and carry significant exposure for others. OFAC has also imposed blocking sanctions on the Persian Gulf Strait Authority, the Iranian body that the IRGC established to administer its Strait scheme. Either way, these costs flow through to freight rates, ultimately, to oil and LNG prices, and eventually to end consumers.[9]

Second, acquiescence to such a toll would create precedent for parties who need to negotiate other critical geographic chokepoints.[10] This could include the Bab-el-Mandeb Strait between Yemen and the Horn of Africa (which notably could become controlled by—and thus operated for the benefit of—an Iranian proxy group that holds the littoral territory on the east side of the Strait: the Houthis). During the active conflict, Iran at times threatened to also close the Bab-el Mandeb Strait.

The United States’s terrorism-risk-insurance program (named after the Terrorism Risk Insurance Act [TRIA], reauthorized through 2027) is unlikely to be usable for any losses incurred in Hormuz. The program backstops Treasury-certified acts of terrorism, not losses that arise from a state-on-state armed conflict. This is why Washington turned to the DFC political-risk cover rather than to TRIA.[11]

V. Short-Term and Long-Term Sanctions Relief (MOU Paragraphs 7 and 10)

As previewed above, the MOU promises seemingly unbounded sanctions relief to Iran. The termination of all Iran sanctions would mean the end of one of the most comprehensive, complex, and longstanding sanctions regimes in history. Even with the requisite political will, such a wide-ranging unwinding cannot be accomplished overnight.

A. Overview of the Iranian Sanctions Programs

Iran is currently one of a handful of jurisdictions subject to comprehensive U.S. economic sanctions, meaning that for U.S. persons or parties engaging in transactions with a U.S. touchpoint, virtually all commercial and financial engagement with Iran is prohibited, subject to well-established exceptions (e.g., humanitarian aid).

The Iranian Transactions and Sanctions Regulations (ITSR), which are primarily implemented pursuant to the International Emergency Economic Powers Act (IEEPA) and codified at 31 C.F.R. Part 560, impose broad restrictions on U.S. involvement in Iran and form the foundation of U.S. primary sanctions targeting the Islamic Republic.

The ITSR implements a web of Congressionally mandated sanctions as well as Executive-mandated restrictions. While the President has flexibility to alter Executive-mandated restrictions (even if limited by certain statutes), he cannot remove statutory restrictions without a new law or amendment being promulgated by Congress.

One pillar of the ITSR is a trade embargo. Section 560.201 of the ITSR prohibits the importation into the United States of any Iranian-origin goods or services, and Section 560.204 prohibits the exportation of goods or services from the United States to Iran. Section 560.206 goes even further, prohibiting any U.S. person from engaging in any transaction related to goods to or from Iran.

The ITSR’s trade embargo is complemented by a comprehensive investment ban. Section 560.207 prohibits new investment by U.S. persons in Iran or in property owned or controlled by the Government of Iran. And Section 560.208 prohibits U.S. persons from approving, financing, facilitating, or guaranteeing transactions by foreign persons that would be prohibited if undertaken directly by a U.S. person.

Additionally, Section 560.211 of the ITSR blocks all property and interests in property of the Government of Iran, including the Central Bank of Iran, and any Iranian financial institution (defined to include foreign branches in the ITSR).

The ITSR are supplemented by secondary sanctions, such as those on foreign financial institutions involved in Iran’s nuclear program or support for terrorist activities, see 31 C.F.R. § 561.201, and those involved in any transactions for the supply of industrial metals to Iran, see 31 C.F.R. § 561.205.

B. Terminating Iran Sanctions Under Legislative Constraints

As the prior subsection shows, U.S. Iran sanctions form an all-encompassing web of restrictions that would be difficult to unwind. The MOU does not have the force of law in the United States, is not a self-executing treaty, and cannot directly lift any U.S. sanctions. Practically, the President could issue an Executive Order (E.O.) directing agencies across the executive branch to implement the MOU. That could be done at any time, but the President has not done so as of this writing, and, as discussed in detail below, concerns related to secondary sanctions relief would remain.

Historically, under the JCPOA and in other instances of rolling back sanctions, relief has come through OFAC’s issuing permissive GLs to authorize certain otherwise-prohibited transactions. Indeed, as noted above, OFAC has already done so with respect to the sale of Iranian-origin oil, fulfilling the United States’s commitment in Paragraph 10 of the MOU.

However, many aspects of U.S. foreign policy with respect to Iran are governed by a mosaic of statutes that include the U.S. Congress in the policymaking process and render unilateral OFAC licensing activity insufficient and, at times, impermissible. Some provisions require congressional review or approval before relief may take effect; others require notice, reporting, or certification to and by Congress; and others permit temporary waivers while reserving full statutory termination for Congress or upon a demanding presidential certification. These laws, which are detailed below, create space for Congress to sculpt or even walk back implementation of the administration’s promise to provide Iran broad sanctions relief.

The most immediate and relevant restriction on the President’s ability to provide wide-ranging sanctions relief to Iran is the Iran Nuclear Agreement Review Act of 2015 (INARA). This statute, which was passed in 2015 with broad bipartisan support in the wake of the JCPOA, is explicitly designed to ensure congressional oversight of nuclear negotiations with Iran. INARA requires the President to submit for congressional review “an agreement with Iran relating to the nuclear program of Iran,” and it prohibits the President, during the statutory review period and any disapproval or veto periods, from waiving, suspending, reducing, or otherwise limiting statutory sanctions with respect to Iran pursuant to such an agreement.

While INARA prescribes restrictions, it does not require affirmative congressional approval in every case. If Congress enacts a joint resolution of approval, statutory relief may proceed. If Congress enacts a joint resolution of disapproval that survives presentment, statutory relief is barred. But, if Congress enacts neither within the review period, statutory sanctions relief may proceed after the review and disapproval windows expire.

Although INARA was designed as a response to the JCPOA, members of Congress across both sides of the aisle have expressed a desire to apply it to the current U.S.-Iran deal. Of course, any joint resolution of disapproval would be vulnerable to a presidential veto, which seems almost certain. Congressional opposition to the deal would therefore need a veto-proof majority to legally block statutory sanctions relief. Conversely, the absence of an affirmative approval resolution by itself would not block relief once the statutory review and disapproval windows close. Overall, the INARA review process will likely give Congress a formal voice, leverage over timing, and a possible window to provide input to the Trump administration on particular terms. That said, it in no way mandates that Congress weigh in. We note that it is not clear whether the administration provided the MOU to Congress out of a desire to comply with the requirements of INARA or a belief that the MOU is the type of agreement that requires INARA review. However, we assess it as very likely that any final agreement after the 60-day negotiations will go through the INARA process.

Apart from INARA, a compendium of laws underpins U.S. sanctions on Iran, and these laws each have their own provisions that set out in slightly different ways roles for the President and Congress in the rollback of sanctions. We detail the more than a dozen primary laws and those relevant provisions here:

1. International Emergency Economic Powers Act (IEEPA), 50 U.S.C. §§ 1701–1710, and National Emergencies Act (NEA), 50 U.S.C. §§ 1601–1651

President’s Power to Terminate/Waive Sanctions: The President may revoke the underlying Iran-related E.O.s (including E.O. 13059, E.O. 13599, and E.O. 13846, which all rest on the national emergency declared in E.O. 12957), terminate the national emergency related thereto (here, with respect to Iran) by proclamation under the NEA, and direct OFAC to amend or rescind the ITSR.
Congress’s Role: Although the President must consult with and report to Congress upon declaring an emergency and at least semiannually thereafter, and although Congress may itself terminate the emergency by a joint resolution, the President does not need Congress’s approval to terminate the emergency and end measures taken pursuant thereto.
Timing: The President must renew the emergency annually by notice to Congress and publication in the Federal Register, or it lapses automatically. He can terminate the emergency and end its constituent sanctions measures at any time.
Non-Waivable Measures: No sanctions measures are written into the statutes themselves, so none of them are only amendable through legislation. They are all enacted as part of E.O.s the President can alter.
Duration of Waiver/Termination: Once the President revokes the orders and ends the emergency, that termination is permanent, and no provision reimposes that emergency or those measures.

2. Iran Sanctions Act of 1996 (ISA), as amended, 50 U.S.C. § 1701 note; Iran Threat Reduction and Syria Human Rights Act of 2012, Pub. L. No. 112-158

President’s Power to Terminate/Waive Sanctions: The President may waive ISA Section 5 secondary sanctions (which target significant investment in Iran’s petroleum sector and weapons-related transfers) upon a determination that the waiver is “essential” (for petroleum-related waivers) or “vital” (for weapons-related waivers) to U.S. national security interests, supported by advance reporting.
Congress’s Role: No congressional approval is required. The President owes only advance notice and a report to the appropriate congressional committees.
Timing: Each waiver lasts no more than one year and requires a report to the appropriate congressional committees at least 30 days before it takes effect.
Non-Waivable Measures: Termination of the ISA Section 5(a) petroleum sanctions requires the President to certify that Iran has ceased pursuing nuclear, chemical, and biological weapons and ballistic missiles, has been removed from the U.S. state-sponsor-of-terrorism list, and “poses no significant threat” to U.S. national security, interests, or allies. The terrorism list element first requires rescinding Iran’s state sponsor designation under the Export Control Reform Act of 2018, which is discussed below.
Duration of Waiver/Termination: Waivers are renewable in successive one-year increments, but each requires a fresh “vital national security” determination (for weapons-related waivers) or “essential to the national security interests of the United States” (for petroleum-related waivers) determination and 30-day report. The sanctions can be permanently lifted following the President’s aforementioned certification.

3. Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA), Pub. L. No. 111-195, as amended

President’s Power to Terminate/Waive Sanctions: To disapply the CISADA Section 103 trade embargo, the President need only determine that the export of particular goods, services, or technology is “in the national interest.” Frozen assets are released once the person no longer meets the IEEPA designation criteria, which is an executive branch determination. The Section 104 sanctions on foreign financial institutions can be waived by the Treasury on a determination that waiver is “necessary to the national interest.”
Congress’s Role: Only reporting. There is no congressional approval vote for the national interest determinations, asset releases, or Section 104 waiver.
Timing: A Section 103 blocking determination must be reported to Congress within 14 days. A Section 104 waiver takes effect only on or after the 30th day following the determination and report.
Non-Waivable Measures: Section 105 human rights sanctions can only be terminated once the President certifies that Iran has released all political prisoners, ceased its practices of violence and unlawful detention, conducted a transparent investigation of post-2009 abuses, and committed to an independent judiciary. They cannot be waived on a temporary basis.
Duration of Waiver/Termination: The Section 103 and 104 national interest waivers can be renewed indefinitely (no statutory sunset on the authority). Section 105 sanctions remain until the merits certification is made but are then permanently terminated.

4. Countering America’s Adversaries Through Sanctions Act (CAATSA), Pub. L. No. 115-44

President’s Power to Terminate/Waive Sanctions: The President may waive sanctions on a determination that the waiver is “vital to the national security interests” of the United States, with congressional notification and reporting.
Congress’s Role: The Iran section requires only notice and a report to Congress. Unlike the Russian section of CAATSA, which gives Congress a 30-day window to pass a joint resolution of disapproval, the Iran section does not include a congressional review or approval period.
Timing: Notification and reporting to the appropriate congressional committees at least 30 days before the waiver takes effect. Waivers run for renewable periods of up to 180 days.
Non-Waivable Measures: None. With an appropriate waiver, all sanctions may be suspended.
Duration of the Waiver/Termination: The 180-day waivers may be renewed indefinitely.

5. Fight and Combat Rampant Iranian Missile Exports Act (Fight CRIME Act), Pub. L. No. 118-50, Division K

President’s Power to Terminate/Waive Sanctions: The President may waive the conduct-based sanctions on missile- and arms-related transfers to or from Iran as to a foreign person upon a written determination and justification that the waiver is in the “vital national security interests” of the United States.
Congress’s Role: No congressional approval is required; only an after-the-fact written presidential determination submitted to the appropriate committees.
Timing: Waivers run for renewable periods of up to 180 days, and the President must submit the determination and justification not later than 15 days after the waiver takes effect.
Non-Waivable Measures: The President cannot terminate the sanctions regime without a certification to Congress that Iran (1) “no longer repeatedly provides support for international terrorism” and (2) has ceased the pursuit, acquisition, and development of, and verifiably dismantled, its nuclear, biological, and chemical weapons and ballistic missiles and ballistic-missile launch technology. The termination takes effect 30 days after the President’s certification.
Duration of the Waiver/Termination: Waivers are renewable in 180-day increments without limit, but each requires a fresh “vital national security interests” determination. Permanent termination needs the merits certification.

6. Iran Freedom and Counter-Proliferation Act of 2012 (IFCA), Pub. L. No. 112-239

President’s Power to Terminate/Waive Sanctions: The President may waive IFCA’s blocking sanctions (which reach dealings with Iran’s energy, shipping, and shipbuilding sectors, sectors determined to be controlled by the IRGC, transfers of precious metals or specified industrial materials, related underwriting and insurance, and foreign financial institutions transacting with designated Iranians) on a case-by-case determination that the waiver is “vital to the national security interests” of the United States.
Congress’s Role: No congressional approval is required; only a report to the appropriate committees.
Timing: Waivers run for renewable periods of up to 180 days.
Non-Waivable Measures: Although IFCA references the National Iranian Oil Company, the National Iranian Tanker Company, and the Islamic Republic of Iran Shipping Lines as “entities of proliferation concern,” it does not self-execute their designation. Its sanctions are conduct-based and fully waivable.
Duration of the Waiver/Termination: The waivers are indefinitely renewable on a continuing “vital national security” determination and a report to appropriate congressional committees.

7. International Security and Development Cooperation Act of 1985 (ISDCA), 22 U.S.C. § 2349aa-9

President’s Power to Terminate/Waive Sanctions: The President may lift any import restrictions imposed under ISDCA. The authority to ban imports is discretionary.
Congress’s Role: ISDCA requires only consultation with, and a report to, Congress when the authority is exercised and every subsequent 6 months.
Timing: No waiting period or fixed term; consultation and a report accompany exercise of the authority.
Non-Waivable Measures: None. Because the authority is discretionary and names no party, the President can unilaterally lift ISDCA-based restrictions.
Duration of Waiver/Termination: The decision to issue, lift, and/or reinstate restrictions is within the President’s discretion; there is no statutory sunset.

8. Mahsa Amini Human Rights and Security Accountability Act (MAHSA), Pub. L. No. 118-50, Division L

President’s Power to Terminate/Waive Sanctions: MAHSA imposes no sanctions of its own but instead directs the President to enforce sanctions already imposed under CISADA, E.O. 13224 (focused on terrorism), and E.O. 13818 (focused on human rights) and directs the President to consider whether members of Iran’s government are eligible for sanctions designations under those other authorities. The President can determine that the members of government do not meet those criteria.
Congress’s Role: No congressional approval is required. MAHSA calls only for periodic presidential determinations and reporting.
Timing: The President must make the periodic determinations beginning within 90 days of enactment and annually thereafter.
Non-Waivable Measures: The determinations are non-waivable and must occur regularly. No designations are included in the law.
Duration of Waiver/Termination: Relief is as durable as the President’s decisions on the underlying CISADA and Executive Order sanctions.

9. Section 1245 of the National Defense Authorization Act (NDAA) for Fiscal Year 2012, Pub. L. No. 112-81, as amended; Iran-China Energy Sanctions Act of 2023 (ICESA), Pub. L. No. 118-50, Division S

President’s Power to Terminate/Waive Sanctions: The President may waive the sanctions (which are conduct-based) on a determination that the waiver is in the national security interest of the United States. Separately, a foreign financial institution is exempt where the President determines and reports that the country with primary jurisdiction over it has significantly reduced its crude oil purchases from Iran.
Congress’s Role: No congressional approval is required. Only presidential determinations and reports to Congress.
Timing: A waiver runs up to 120 days and is renewable. The oil-reduction exemption applies for a renewable period of 180 days after the President’s determination.
Non-Waivable Measures: Sanctions for entities meeting the conduct-based criteria are mandatory, but the laws feature no named designations.
Duration of Waiver/Termination: Durable relief ultimately depends on terminating the underlying IEEPA emergency.

10. Stop Harboring Iranian Petroleum (SHIP) Act, Pub. L. No. 118-50, Division J

President’s Power to Terminate/Waive Sanctions: The President may waive imposition of the sanctions upon certifying that the waiver is vital to the national interests of the United States. The President is not required to impose sanctions upon a certification that a person is no longer engaged in prohibited activities or has taken and is continuing to take steps toward permanently terminating those activities. This sanctions regime terminates upon the President’s certification.
Congress’s Role: No congressional approval is required. Only a certification to the appropriate congressional committees.
Timing: A waiver runs up to 180 days; the President must certify to the appropriate congressional committees not later than 15 days after the waiver takes effect. Termination can take effect only 30 days after the required certification.
Non-Waivable Measures: The SHIP Act mandatorily sanctions foreign persons who own or operate a port, vessel, or refinery transacting in Iranian crude oil or petroleum products. It may be terminated only 30 days after the President certifies that Iran no longer supports international terrorism and has verifiably dismantled its nuclear, biological, and chemical weapons and its ballistic missiles and launch technology.
Duration of Waiver/Termination: Waivers are renewable in 180-day increments, but permanent termination requires the merits certification.

11. Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), 22 U.S.C. §§ 7201–7211

President’s Power to Terminate/Waive Sanctions: TSRA imposes no sanctions on Iran. It instead bars the President from imposing new unilateral agricultural or medical sanctions without a 60-day advance report to Congress and congressional authorization. Therefore, it does not include the creation of any sanctions termination or waiver mechanisms.
Congress’s Role: N/A.
Timing: N/A.
Non-Waivable Measures: N/A.
Duration of Waiver/Termination: N/A.

12. Export Control Reform Act of 2018 (ECRA), 50 U.S.C. §§ 4801–4852, and Export Administration Act of 1979 (EAA)

President’s Power to Terminate/Waive Sanctions: Sanctions relief turns on Iran’s designation under this export-controls-based regime as a state sponsor of terrorism. After the EAA was mostly rescinded, its export control provisions were replicated in ECRA and promulgated anew under the President’s IEEPA authority. The President can remove Iran from the list of designated state sponsors of terrorism. The President, through the U.S. Department of Commerce Bureau of Industry and Security (BIS), can also individually authorize exports to Iran by issuing export licenses.
Congress’s Role: No congressional approval vote is required, only notice and reporting.
Timing: Short of dramatic regime and policy change in Iran, in which case there is no time requirement for the report, the President must report to Congress 45 days before rescinding the designation. Congress must separately receive notice 30 days before any export license is issued.
Non-Waivable Measures: The licensing controls are mandatory while the state sponsor designation stands. The designation cannot be terminated unless the President certifies to Congress either a “fundamental change” in the target government’s leadership and policies such that it no longer supports international terrorism, or that it has not supported terrorism in the preceding six months, with assurances against future support.
Duration of Waiver/Termination: Once the designation is rescinded, relief is durable.

Note: ECRA continues to create export restrictions with regard to Syria based on its undisturbed state sponsor designation despite the attempted rollback of sanctions and some export controls following the regime change in the country, which demonstrates the extra hurdle that would be presented as part of an attempted Iran rollback.

Altogether, sanctions on Iran span numerous statutes and require reporting, certification, and, in some cases, legislative amendments that will make providing any broad sanctions relief to Iran quite difficult for the administration to accomplish.

VI. The $300 Billion Reconstruction Fund (MOU Paragraph 6)

One of the most eye-catching components of the MOU is its commitment in Paragraph 6 to develop a $300 billion fund “for the reconstruction and economic development of the Islamic Republic of Iran.” For businesses evaluating future opportunities in Iran, the fund would rightly be seen as a proxy for broader commercial activities in Iran. As a result, the proposed fund may, if it comes to fruition, prove as consequential as the MOU’s sanctions-relief provisions. Yet the MOU provides almost no detail regarding how the fund will be structured, financed, governed, or implemented. Indeed, the agreement expressly provides that “the mechanism for the implementation of this plan will be finalized as part of the final Deal.”

Public statements from the White House offer only limited guidance. President Trump and Vice President Vance have told reporters that the fund will not be financed by U.S. taxpayers and would instead draw support from regional partners and private investors. Consistent with those statements, the MOU provides only that the United States will “undertake[], with regional partners, to develop” the fund and will grant the licenses, waivers, and permissions necessary to facilitate the associated financial transactions.

If the United States ultimately implements the MOU as written and terminates all U.S. sanctions on Iran, few U.S. legal impediments to foreign investment would remain. The embargo would cease. In that scenario, the United States could largely meet its commitments regarding both sanctions relief and the reconstruction fund through the same set of actions. As discussed in the prior section, however, significant legal and political obstacles may prevent the Trump administration from quickly or completely dismantling the existing sanctions architecture. Accordingly, understanding which restrictions currently impede investment in Iran—and how the administration might seek to address them—provides the best indication of what the reconstruction fund could look like in practice.

A. Several Layers of Sanctions Restrict Investment in Iran

Although the precise contours of the proposed reconstruction fund remain unknown, any large-scale investment and development initiative in Iran would intersect with multiple layers of existing U.S. sanctions restrictions, which are described in more detail above.

In particular, Section 560.207 of the ITSR prohibits new investment by U.S. persons in Iran or in property owned or controlled by the Government of Iran, while Section 560.208 of the ITSR prohibits U.S. persons from approving, financing, facilitating, or guaranteeing transactions by foreign persons that would be prohibited if undertaken directly by a U.S. person. Because international transactions frequently involve U.S. financial institutions or the U.S. financial system, these restrictions could significantly impede the flow of capital into Iran absent new authorizations from OFAC. Additionally, the U.S. trade embargo on Iran would apply to construction equipment, industrial machinery, software, and other inputs necessary for large-scale development projects.

In addition to these country-based restrictions, many of the sectors most likely to be involved in reconstruction and economic-development efforts—including construction, energy, shipping, logistics, banking, and infrastructure—contain entities and individuals that remain subject to U.S. blocking sanctions, including hundreds of Iran-related parties identified on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List and their majority-owned entities. These include not only the IRGC and its affiliates, but also numerous Iranian financial institutions, state-owned enterprises, shipping companies, energy firms, and other actors designated under U.S. legal authorities relating to terrorism, proliferation, human rights abuses, and other sanctions programs. As a result, even where a transaction would not otherwise be prohibited by country-wide restrictions on Iran, the involvement of a blocked person may independently give rise to sanctions exposure.

One particularly significant restriction arises from the U.S. Department of State’s 2025 determination under IFCA that Iran’s construction sector is controlled by the IRGC. As discussed above, IFCA exposes non-U.S. persons to sanctions risk for supplying goods or services to sectors determined to be controlled by the IRGC. Given the central role that construction would likely play in any reconstruction initiative, this determination presents a direct challenge to implementation of the fund. Moreover, the IRGC remains designated as a Foreign Terrorist Organization (FTO). Under the Antiterrorism and Effective Death Penalty Act of 1996, knowingly providing material support to an FTO is a criminal offense.

Accordingly, even if the reconstruction fund ultimately moves forward, its practical viability will depend heavily on the extent to which the Trump administration is willing and able to relax, waive, or otherwise mitigate existing sanctions restrictions affecting investment and commercial activity in Iran.

B. Possible Approaches to Authorizing Fund Activities and Other Commercial Activities

Past OFAC licenses, both those recently adopted in the course of the Iran war and those adopted under the JCPOA, offer a glimpse of possible models for authorizations OFAC may issue to actualize the promised reconstruction fund and/or other commercial activities. As a matter of precedent, it is important to note that even the JCPOA did not involve a significant rollback of statutory sanctions.

Absent a sweeping authorization that would end all primary and secondary sanctions against Iran under all laws and executive orders, there are several models available for a nuanced approach to enabling the reconstruction fund. First, following the model of OFAC’s GL authorizing certain sales of Russian-origin oil after the Iran war erupted, Russia GL 134C, OFAC could issue a GL specifically tied to the reconstruction fund. Such a license could tie the authorization to the fund itself, likely permitting “all transactions otherwise prohibited . . . that are ordinarily incident and necessary to” the fund’s activities. Given the constellation of prohibitions that could be implicated, such as those described in this section, a broad license would need to invoke each relevant sanctions authority in order to comprehensively mitigate the legal risk to actors. Russia GL 134C, for instance, licensed activities that had been prohibited under seven different sanctions programs and four executive orders.

This outcome-driven licensing approach has already been taken by OFAC following the MOU’s conclusion in order to implement the immediate commitment to ease sanctions on Iranian oil. Iran General License X, which OFAC issued on June 22, 2026, closely mirrored Russia GL 134C and authorized all transactions ordinarily incident and necessary to the production, sale, delivery, and offloading of Iranian-origin oil through August 21, 2026. Indicative of the scope of restrictions in place on Iran, for Iran GL X to be operational, it had to cover activities that have been prohibited under a dozen different authorities. The Trump administration could seek to use a similarly intersectional approach to provide broader direct relief here. Of course, it is worth noting that the scope of any such authorization would still be limited by the patchwork of sanctions laws, detailed above, that undergird U.S. trade restrictions on Iran and that cannot be wiped away temporarily (let alone permanently) by a single GL issued by OFAC.

If the United States wished to take a more piecemeal approach to authorizing activities related to the reconstruction fund, it could issue narrower GLs and add conditions. For example, following the JCPOA, OFAC issued a general license that authorized otherwise-prohibited activities by foreign entities that are owned or controlled by U.S. persons. Although that license only applied to a narrow category of entities, and it only invoked a narrow category of OFAC’s Iran sanctions rather than the sweeping tapestry of sanctions authorities discussed above, it sent a signal, in combination with other policy tools, that foreign parties could begin to relax their learned aversion to doing business with Iran. The Trump administration may utilize a similar model to authorize some categories of actors and/or some categories of activities with respect to the fund promised by the MOU.

The other component of the post-JCPOA sanctions-easing framework that OFAC constructed was a combination of (1) a statement of licensing policy and (2) a general license authorizing the negotiation of, and entry into, contingent contracts that could be authorized pursuant to the statement of licensing policy. In the JCPOA context, this component was connected to commercial passenger aircraft. However, the model could theoretically be applied to the MOU’s contemplated reconstruction fund or any other commercial activity. OFAC could issue a statement of licensing policy inviting U.S. persons to apply for specific licenses to undertake activities related to construction and investment in Iran and promising to look favorably upon those applications as well as a GL authorizing U.S. persons to engage in negotiations and enter into contingent contracts with otherwise-prohibited parties for such activities subject to the granting by OFAC of a specific license. A version of this model is being pursued with respect to Venezuela sanctions relief. This staged approach would be slower than the cross-cutting GL method, and it would not directly terminate the sanctions risk to foreign persons, as only U.S. persons would be eligible to apply for and receive specific licenses. However, there is established precedent for this approach, and it would enable the administration to carefully monitor fund activities without opening the floodgates to unrestricted investment in Iran.

In sum, the U.S. government has not yet revealed what the promised $300 billion Iran reconstruction fund will look like, who will be involved, or where the money will go. Nor has the administration explained what licenses, authorizations, and permits it will issue in order to make that fund a reality. However, it is clear that many current U.S. sanctions restrictions would likely impede the operation of this fund in the absence of new authorizations, and prior practice provides hints at what authorizations may look like.

VII. Releasing Frozen Iranian Assets (MOU Paragraph 11)

The U.S. commitment, set forth in Paragraph 11, to release frozen or restricted Iranian funds and assets is the MOU’s most legally fraught undertaking. As a threshold matter, most of Iran’s reserves (estimated at roughly $100 billion) sit in restricted accounts outside the United States, so the United States has no ability to directly provide those funds to Iran. Note that those funds are not “frozen” as they are not under U.S. jurisdiction. However, the United States could ease access to those funds by removing secondary sanctions, which are the principal tool by which those assets are restricted (because foreign banks generally will not send money to Iran for fear of losing access to the U.S. financial system through U.S. correspondent bank accounts or otherwise). Yet, even if those secondary measures were lifted, it would be the jurisdictions and financial institutions holding those funds, not the United States, that would have the power to send any of that money to Iran. Financial institutions with global operations—which implement U.S., EU, and UK sanctions as a matter of policy (a practice that has become more widespread following the wave of sanctions against Russia since 2022)—may be reluctant to act if the European Union and United Kingdom do not relax their autonomous sanctions regimes targeting Iran.

The Iranian money in the United States, which is formally blocked (“frozen”), is comparatively small in amount and severely encumbered, and not just by sanctions. Removing these encumbrances would require dismantling U.S. primary sanctions like those described in Section V.A above (including the ITSR and E.O. 13599), delisting the Central Bank of Iran and IRGC-linked entities, and issuing OFAC licenses. Moreover, the IRGC remains a designated FTO; that designation would need to be removed to avoid material-support exposure for U.S. persons.

An even more significant barrier to implementing Paragraph 11 of the MOU is TRIA Section 201(a), which makes the blocked assets of a terrorist party (defined to include any of that party’s agencies or instrumentalities) available to satisfy judgments held by victims of terrorism.[12] Iran has been a designated state sponsor of terrorism since 1984 and is subject to numerous judgments aggregating into the tens of billions of dollars. In Bank Markazi v. Peterson, the U.S. Supreme Court upheld a statute making approximately $1.75 billion of blocked Central Bank of Iran assets available to those creditors, and Section 1610(g) of the Foreign Sovereign Immunities Act (FSIA) reaches the property of Iran and its instrumentalities notwithstanding their separate juridical status.[13] The existing U.S. legal regime collides directly with Paragraph 11 of the MOU, which would render Iran’s “frozen or restricted funds and assets . . . fully usable for payment to any ultimate beneficiary designated by the Central Bank of [Iran].” Executive authorization cannot extinguish judgment creditors’ vested rights, and any release of U.S.-situated Iranian funds would invite an immediate attachment claim by victims of terrorism and/or their families.[14]

VIII. International Context of the Deal and the Effects on Partners

As discussed above, the MOU is a bilateral instrument between the United States and Iran. Neither the other permanent members of the UN Security Council (China, France, Russia, and the United Kingdom), nor the European Union, all of which signed the JCPOA, are parties to the MOU, and it neither imposes obligations on them nor confers rights they can invoke. The MOU’s commitment in Paragraph 7 that the United States will terminate “all types of sanctions against the Islamic Republic of Iran” reaches only U.S. measures; it does not, and cannot, lift the restrictions maintained by any other country or international body.

As a matter of obligation, all countries remain bound—as UN members—by the Security Council sanctions reinstated through the sanctions snapback mechanism that was initiated on August 28, 2025, and took effect on September 28, 2025, until the Security Council affirmatively lifts them. Thus, the MOU’s promise to terminate UN sanctions cannot be delivered by the United States acting alone; it requires a new UN Security Council resolution rescinding the reimposed resolutions, in the same manner that Resolution 2231 (2015) gave effect to the JCPOA. The other permanent Security Council members could use such a resolution to express their approval or disapproval of the MOU because they each possess individual authority to veto any resolution. Were such a resolution adopted, the European Union and United Kingdom would unwind their UN-derived measures accordingly.

Two considerations temper the prospect of adoption. First, the validity of the 2025 snapback is itself contested. Russia and China have challenged the legality of the reimposition of sanctions, a dispute that has already divided the Security Council and would complicate any clean resolution reversing course. Second, the principal Security Council movers behind the snapback (France and the United Kingdom) not only triggered the snapback but have (along with Germany) continued to press Iran over its non-cooperation with the IAEA, so their support for a resolution lifting the sanctions should not be assumed.

Distinct from UN sanctions, numerous countries, in particular the United Kingdom and EU Member States, maintain autonomous sanctions on Iran that the MOU does not (and cannot) touch and that would remain in full force without further action from those countries.[15] The European Union and United Kingdom may, as a discretionary policy matter, suspend or lift their nuclear-related autonomous measures to parallel any U.S. relief (as both did in 2015–16 under the JCPOA), but they are under no obligation to do so (and do not appear so inclined at present). Critically, EU and UK nuclear sanctions are only part of the picture. Both maintain sanctions regulations independent from nuclear-related measures. For example, under EU law, Iran is also targeted by a regime focused on the country’s military support for Russia.

Indeed, throughout 2026, the European Union has been expanding, not relaxing, its Iran sanctions on grounds unrelated to nuclear issues: it designated the IRGC as a terrorist organization in February 2026, adopted further human-rights designations in the first quarter, and broadened its framework to target those impeding freedom of navigation in the Strait of Hormuz (under the Russia-related sanctions program). The United Kingdom also maintains a parallel architecture across nuclear and other Iran issues. Because a nuclear-focused deal would not reach these separate bases, even full relief on nuclear-related measures would not alter these other substantial EU and UK sanctions measures.

Although it is too early to predict what diplomatic consensus, if any, the United States will reach with global partners, the first responses from Europe have been cool. The EU High Representative for Foreign Affairs and Security Policy has stressed that the European Union would leave its sanctions on Iran for now, the French foreign minister Jean-Noël Barrot has conditioned his support for the deal on whether it also addresses Iran’s support for local militant groups, and the major European powers have stated they are prepared to lift only “relevant sanctions,” and only “in response to clear, verifiable steps by Iran on its nuclear program[].” Overall, the European Union and United Kingdom are focused on behavioral change and broader regional stability (notably, peace in Lebanon)—not just on free passage through geographic chokepoints and normalized energy supplies. As the lifting of sanctions in Europe would require unanimity among Member States, clear answers on these points are essential to build broad consensus.

If the goals of the MOU are realized, the locus of legal risk for companies operating in Europe and the United Kingdom could shift from the sanctions imposed by the United States to the measures these other governments have left in place. Historically, U.S. secondary sanctions have deterred European engagement. Whatever the United States ultimately decides with respect to its sanctions on Iran, Europe’s own response runs through its Blocking Statute, which attempts to prohibit EU parties from complying with specified U.S. sanctions (including some on Iran). If the U.S. deterrent recedes, EU and UK parties would no longer be caught between Washington and their home regulators but would instead be principally concerned by the EU and UK measures described above, which are likely to remain in force.

IX. Looking Forward

Even if the 60-day U.S.-Iran negotiations yield comprehensive U.S. sanctions relief and financial incentives and open a less hostile chapter between the two countries, whether that opening actually materializes into expanded business ties will turn on factors such as U.S. state-level restrictions, private-sector confidence, and the response of the insurance market, which will reveal themselves only with time. The cautious posture that followed the JCPOA offers a preview of industry behavior likely to take hold here.

First, broad U.S. federal sanctions and economic relief, which would be difficult to achieve for the reasons explained above, would not automatically remove U.S. state-level measures targeting Iran, which are principally tied to public-pension divestment and state-contracting eligibility. While federal relief would likely set off a ripple effect, how and whether individual states would unwind their own restrictions in light of their own political dynamics remains to be seen.

Second, even assuming U.S. sanctions relief is delivered in full, legal authorization alone will not generate the confidence that cross-border investment requires, particularly given that, for the time being, the United States is acting alone. Iran offers genuinely attractive opportunities—in energy, in its sizable and highly educated consumer market, and in the reconstruction effort the MOU contemplates—and the commercial pull is legitimate. But against the backdrop of the past months of armed conflict, decades of hostility that preceded them, a significantly corrupt and centralized Iranian economy, an emboldened leadership committing human rights abuses on a massive scale, and a broader regime that has promised to use assets generated from sanctions relief to rebuild its military and proxy networks, businesses will reasonably wait to see whether a new era of U.S.-Iran relations proves durable and indicates real change by the Iranian authorities before committing capital. The JCPOA provides a cautionary tale: even after a broad, multilateral deal, many firms were slow to enter Iran, even before the U.S. withdrawal in 2018. While the JCPOA arguably did not have a chance to deliver that relief—after all, the initial sanctions relief only entered into force in January 2016, and in November of that year President Trump, who had made it clear during the campaign that he would withdraw from the deal if elected, won the Presidency—it remains the case that there was reticence and that reticence would likely have continued. That history advises caution here, where the framework remains provisional.

Third, the insurance market may prove to be a gating factor. Providers of political risk and directors and officers coverage may price the risk conservatively, or limit capacity, until the arrangement proves itself—and where coverage is unavailable or too costly, even businesses ready to act may find re-entry impractical.

In short, it remains to be seen how the promised U.S. sanctions relief will be delivered (if at all), how industry responds, and whether other jurisdictions follow. Gibson Dunn is closely monitoring the implementation of the U.S.-Iran MOU and will keep our clients updated as the situation evolves. Please do not hesitate to contact the team below should you have any questions about your current or future business, sanctions, or litigation considerations with respect to Iran.

[1] A general license authorizes a particular type of transaction for a class of persons without the need to apply for a specific license. A specific license, on the other hand, is a written document issued by OFAC to a particular person or entity, authorizing a particular transaction in response to a written license application.

[2] The Strait of Hormuz is approximately 21 nautical miles wide at its narrowest point. See U.S. Energy Information Administration, The Strait of Hormuz is the world’s most important oil transit chokepoint (Jan. 4, 2012), available at https://www.eia.gov/todayinenergy/detail.php?id=4430. Because Iran and Oman each claim a 12-nautical-mile territorial sea, the navigable channel lies entirely within their territorial waters. See Nilufer Oral, Transit Passage Rights in the Strait of Hormuz and Iran’s Threats to Block the Passage of Oil Tankers, 16 ASIL Insights, Issue 16 (May 2012), available at https://asil.org/insights/volume-16-issue-16/.

[3] UNCLOS arts. 38, 42 and 44 (transit passage may not be impeded or suspended; the laws of states bordering straits are confined to safety of navigation, pollution, fishing, and customs or fiscal matters, must be non-discriminatory, and must not impair transit); id. art. 26 (no charge may be imposed merely for passage through the territorial sea, and any charge must correspond to specific services rendered and be levied without discrimination). Article 26 sits among the Part II (innocent-passage) provisions; its no-charge principle applies with even greater force to the more protective transit-passage regime, whose bar on suspension (art. 44) would be hollowed out by tolling. The United States, though not a party to UNCLOS, treats the straits-transit regime as customary international law.

[4] Iran signed UNCLOS in 1982 but has not ratified it, declaring upon signature that only states parties may invoke the Convention’s contractual rights, including the right of transit passage through straits used for international navigation. Iran’s 1993 Marine Areas Act recognizes only innocent passage. Oman ratified UNCLOS in 1989, subject to declarations. Oman has publicly rejected Iran’s proposed transit fees. See The Washington Institute for Near East Policy, Clarifying Freedom of Navigation in the Gulf (Jul. 2019), available at https://www.washingtoninstitute.org/policy-analysis/clarifying-freedom-navigation-gulf; The Eno Center for Transportation, The Legal Question of Tolling Hormuz (Apr. 2026), available at https://enotrans.org/article/the-legal-question-of-tolling-hormuz/. See also Arab News, Oman confirms Strait of Hormuz will remain toll-free (Jun. 25, 2026), available at https://www.arabnews.com/node/2648575/middle-east.

[5] Iran’s parliamentary committee approved a bill, the “Strait of Hormuz Management Plan” (reported March 30, 2026), which codifies the transit-fee regime, authorizing charges of up to roughly $2 million per voyage, framed as security- and environment-related fees, and has conditioned passage on vessel nationality, a discrimination impermissible under UNCLOS arts. 42 and 44. See Institute for the Study of War, Iran Update Special Report (Mar. 31, 2026), available at https://understandingwar.org/research/middle-east/iran-update-special-report-march-31-2026/; EJIL: Talk!, Codifying Coercion: Iran’s “New Legal Regime” and the Law of International Straits (Apr. 2026), available at https://www.ejiltalk.org/codifying-coercion-irans-new-legal-regime-and-the-law-of-international-straits/.

[6] Convention Regarding the Régime of the Straits (Montreux), July 20, 1936, 173 L.N.T.S. 213, arts. 1 and 2 and Annex I (in peacetime, merchant vessels of any flag enjoy full freedom of transit, and no charges may be imposed beyond the cost-based dues authorized in Annex I, namely sanitary, lighthouse and light-or-buoy, and life-saving dues); UNCLOS art. 35(c) (Part III does not affect the legal regime in straits whose passage is regulated, in whole or in part, by longstanding international conventions in force). Montreux thus confirms that even a coastal-state-administered straits regime cannot levy general transit tolls, and that any such regime rests on a multilateral convention accepted by user states.

[7] U.S. Energy Information Administration, World Oil Transit Chokepoints (2017, last updated Mar. 3, 2026), available at https://www.eia.gov/international/analysis/special-topics/world_oil_transit_Chokepoints (about 20 million b/d, roughly one-quarter of global seaborne oil); U.S. Energy Information Administration, About one-fifth of global liquefied natural gas trade flows through the Strait of Hormuz (June 24, 2025), available at https://www.eia.gov/todayinenergy/detail.php?id=65584; Cong. Research Serv., R45281, Iran Conflict and the Strait of Hormuz: Impacts on Oil, Gas, and Other Commodities (2026), available at https://www.congress.gov/crs-product/R45281 (combined bypass-pipeline capacity is well below strait throughput, and there is no pipeline alternative for LNG).

[8] U.S. International Development Finance Corporation maritime reinsurance facility (war risk): announced March 6, 2026 at approximately $20 billion of coverage on a rolling basis, with Chubb as lead underwriter, and doubled to approximately $40 billion on April 3, 2026 as additional U.S. insurers joined. Coverage (initially hull, machinery, and cargo, later including liability) remained available, but vessel-safety concerns kept traffic sharply reduced regardless of capacity. See DFC, DFC Announces $20B Plan for Maritime Reinsurance in the Gulf (Mar. 6, 2026), available at https://www.dfc.gov/media/press-releases/dfc-announces-20b-plan-maritime-reinsurance-gulf; Insurance Journal, US Doubles Hormuz Reinsurance Guarantees to $40 Billion (Apr. 6, 2026), available at https://www.insurancejournal.com/news/international/2026/04/06/864586.htm; Cong. Research Serv., IN12688, DFC Shipping Reinsurance Facility: Iran Conflict and the Strait of Hormuz (May 2026), available at https://www.congress.gov/crs-product/IN12688.

[9] Reporting indicates an IRGC charge of roughly $1 per barrel, or about $2 million for a very large crude carrier. See Brookings, From Chokepoint to Crisis: The Strait of Hormuz and Global Oil Markets (June 8, 2026), available at https://www.brookings.edu/articles/from-chokepoint-to-crisis-the-strait-of-hormuz-and-global-oil-markets/; The Eno Center for Transportation, supra. On the sanctions consequences of any such payment, see OFAC FAQ No. 1249 (Apr. 28, 2026, updated May 29, 2026) (advising that U.S. persons, including U.S. financial institutions and U.S.-owned or -controlled foreign entities, may not make such safe-passage payments to the Government of Iran or the IRGC, and that non-U.S. persons face significant sanctions exposure for doing so).

[10] See Brookings, supra (warning that normalizing a Hormuz toll would invite emulation at other chokepoints, including the Straits of Malacca and Gibraltar, Bab-el-Mandeb, and the Danish Straits).

[11] Terrorism Risk Insurance Act of 2002, Pub. L. No. 107-297, 116 Stat. 2322, reauthorized through December 31, 2027 by the Terrorism Risk Insurance Program Reauthorization Act of 2019, Pub. L. No. 116-94. The program backstops insured losses from Treasury-certified acts of terrorism in covered U.S. commercial property and casualty lines; marine hull and cargo war-risk on foreign-flag tonnage arising from a state-on-state conflict falls outside it.

[12] TRIA § 201(a), Pub. L. No. 107-297, 116 Stat. 2322, 2337 (codified at 28 U.S.C. § 1610 note), provides that a person holding a judgment against a terrorist party on a claim under 28 U.S.C. § 1605A may execute or attach against the blocked assets of that party, including the blocked assets of its agencies and instrumentalities, to the extent of compensatory damages.

[13] Bank Markazi v. Peterson, 578 U.S. 212 (2016) (upholding 22 U.S.C. § 8772, which made approximately $1.75 billion in blocked Central Bank of Iran assets available to terrorism-judgment creditors); 28 U.S.C. § 1610(g) (subjecting the property of a foreign state and its agencies and instrumentalities to attachment for § 1605A judgments notwithstanding separate juridical status); see also Rubin v. Islamic Republic of Iran, 583 U.S. 202 (2018) (stating that § 1610(g) abrogates the Bancec separateness presumption but does not itself create a freestanding attachment exception).

[14] Unblocking or licensing assets does not extinguish the vested rights of existing judgment creditors, and repatriating Iranian funds into the United States would expose them to execution. Cf. Bank Markazi, 578 U.S. 212.

[15] See Council Regulation (EU) No 267/2012 of 23 March 2012 concerning restrictive measures against Iran, and Council Decision 2010/413/CFSP of 26 July 2010, each as amended following the snapback by Council Regulation (EU) 2025/1975 and Council Decision (CFSP) 2025/1972 of 29 September 2025 respectively; asset-freeze designations reinstated by Council Implementing Regulation (EU) 2025/1980 and Council Implementing Regulation (EU) 2025/1982 of 29 September 2025. For the United Kingdom, see the Iran (Sanctions) (Nuclear) (EU Exit) Regulations 2019, S.I. 2019/461, as amended by the Iran (Sanctions) (Nuclear) (EU Exit) (Amendment) Regulations 2025, S.I. 2025/1052; see also the Iran (Sanctions) Regulations 2023, S.I. 2023/1314 (as amended), for the United Kingdom’s broader human-rights and hostile-activity regime.

The following Gibson Dunn lawyers prepared this update: Dominic Solari, Audi Syarief, Adam M. Smith, Patrick Pearsall, Stuart Delery, Chris Timura, Scott Toussaint, Anna Searcey, Irene Polieri, Chris Mullen, Samantha Sewall, Erika Suh Holmberg, Alex Chiang, Roxana Akbari, Fang Hui, Justin duRivage, Soo-Min Chae, Ester Cross, Albert Tian, and Layla Reynolds.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s International Trade Advisory & Enforcement or Sanctions & Export Enforcement practice groups:

United States:
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
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Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Audi K. Syarief – Washington, D.C. (+1 202.955.8266, asyarief@gibsondunn.com)
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Karsten Ball – Washington, D.C. (+1 202.777.9341, kball@gibsondunn.com)
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Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
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Anna Searcey – Washington, D.C. (+1 202.887.3655, asearcey@gibsondunn.com)
Dominic J. Solari – Washington, D.C. (+1 202.777.9597, dsolari@gibsondunn.com)
Erika Suh Holmberg – Washington, D.C. (+1 202.777.9539, eholmberg@gibsondunn.com)
Scott R. Toussaint – Washington, D.C. (+1 202.887.3588, stoussaint@gibsondunn.com)

Asia:
Kelly Austin – Denver/Hong Kong (+1 303.298.5980, kaustin@gibsondunn.com)
David A. Wolber – Hong Kong (+852 2214 3764, dwolber@gibsondunn.com)
Fang Xue – Singapore (+65 6507 3692, fxue@gibsondunn.com)
Qi Yue – Beijing (+86 10 6502 8534, qyue@gibsondunn.com)
Dharak Bhavsar – Hong Kong (+852 2214 3755, dbhavsar@gibsondunn.com)
Soo-Min Chae – Singapore (+65 6507 3632, schae@gibsondunn.com)
Hui Fang – Hong Kong (+852 2214 3805, hfang@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@gibsondunn.com)

Europe:
Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com)
Patrick Doris – London (+44 207 071 4276, pdoris@gibsondunn.com)
Michelle M. Kirschner – London (+44 20 7071 4212, mkirschner@gibsondunn.com)
Penny Madden KC – London (+44 20 7071 4226, pmadden@gibsondunn.com)
Irene Polieri – London (+44 20 7071 4199, ipolieri@gibsondunn.com)
Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com)
Nikita Malevanny – Munich (+49 89 189 33 224, nmalevanny@gibsondunn.com)
Melina Kronester – Munich (+49 89 189 33 225, mkronester@gibsondunn.com)
Vanessa Ludwig – Frankfurt (+49 69 247 411 531, vludwig@gibsondunn.com)

We are pleased to provide you with Gibson Dunn’s ESG Risk, Litigation, and Reporting update covering the following key developments during May 2026. Please click on the links below for further details.

I. GLOBAL

Science Based Targets initiative (SBTi) publishes five-year corporate climate action plan to build on prior set of standards and updates its net-zero standard

On May 21, 2026, the SBTi published its new five-year corporate climate action plan, SBTi 2026–2030 Strategy. SBTi’s new strategy is based on feedback from companies and reflects four key shifts in the organization’s approach: (i) more tailored approaches to target-setting for different industry sectors and geographies, (ii) a “pivot towards implementation, with a stronger emphasis on data transparency and system-level assessment of progress and challenges,” (iii) work to strengthen partnerships and increase system coherence to address duplication and burden on companies, and (iv) expansion of its network in high-emitting regions and sectors. SBTi has summarized its strategy here.

Reflecting its new strategy, on June 11, 2026, SBTi released its Corporate Net-Zero Standard Version 2.0. The new standard is intended to move “beyond a one-size-fits-all approach” by “introduc[ing] a range of target-setting options that reflect differing business contexts while remaining consistent with science.” Under the new standard, companies are expected to pursue targets on a “best-efforts basis,” including to “use all available levers to reduce emissions, address any implementation barriers and transparently report on them.” Other updates include accommodations for different markets (small and medium-sized enterprises (SMEs) and lower-income countries) and allowance of carbon credits in certain circumstances as part of a “voluntary recognition mechanism.”

Draft Taskforce on Inequality and Social-Related Financial Disclosures (TISFD) framework released

On May 26, 2026, the TISFD released its first draft of The TISFD Framework: Recommendations for Disclosure of People-related Information by Businesses and Financial Institutions. The framework seeks to provide uniform guidelines to companies on disclosing people-related impacts, dependencies, risks, and opportunities. According to the TISFD framework, “business and investment decision-makers still lack consistent, comparable information, or fail to take account of how people-related impacts, dependencies, risks and opportunities affect performance and long-term value creation.” The TISFD framework builds on standards and frameworks from the International Sustainability Standards Board (ISSB), Global Reporting Initiative (GRI), and European Sustainability Reporting Standards (ESRS) and to “foster greater harmonisation across global disclosure standards and reduce fragmentation, helping make reporting on people-related issues more consistent and comparable globally.”

The TISFD framework is structurally aligned with the Task Force on Climate-related Financial Disclosures and Taskforce on Nature-related Financial Disclosures frameworks to “support a more integrated approach to disclosures across people, climate and nature” using the same four pillar framework: governance, strategy, impact and risk management, and metrics and targets. The metrics and targets pillar is still under development and will be available in a future version of the framework. TISFD anticipates the final version of the framework will be available in 2027. In the meantime, a public comment period on this initial draft is open through July 31, 2026.

Other highlights:

On May 18, 2026, ISS-Corporate released a reporting program designed to help companies comply with the ISSB’s reporting standards, including assistance with gap assessments, carbon accounting, climate risk and opportunity assessments, target setting, transition plan development, and regulatory reporting.
On May 26, 2026, the International Financial Reporting Standards Foundation (IFRS) and GRI issued a joint statement regarding their collaboration on sustainability standards. While the IFRS and GRI will continue to maintain their distinct roles and make decisions independently, they have agreed to collaborate to align “common disclosures with the aim of reducing duplication, fragmentation and complexity for reporting entities and users of the information reported.” This work is relevant to GRI’s development of sector-specific standards and ISSB’s nature-related guidance and amendments to the Sustainability Accounting Standards Board standards.
On May 7, 2026, the EU, Brazil, and China launched the Open Coalition on Compliance Carbon Markets, a new international initiative aimed at strengthening the effectiveness, transparency, and integrity of domestic carbon pricing schemes worldwide, with New Zealand and Germany joining as the first additional members.
On April 30, 2026, Climate Action 100+ (CA100+) released a streamlined Net Zero Company Benchmark framework for 2026. The new framework includes several significant changes, including a partnership with the World Benchmarking Alliance to track decarbonization metrics and the use of InfluenceMap for climate lobbying metrics, each aimed at reducing duplication and promoting consistency. The new framework also removes and refines certain metrics and methodologies.
On May 20, 2026, the United Nations (UN) General Assembly adopted a resolution building on the UN’s International Court of Justice’s advisory ruling in July 2025 and calling on UN Member States to “take all possible steps to avoid causing significant damage to the climate and environment, including emissions produced within their borders, and to follow through on their existing climate pledges under the Paris Agreement.” A total of 141 countries voted in favor of the resolution, while 8 voted against it (Belarus, Iran, Israel, Liberia, Russia, Saudi Arabia, the United States, and Yemen) and 28 abstained.

II. UNITED KINGDOM

The UK Department for Energy Security and Net Zero (DESNZ) publishes post-implementation review of the streamlined energy and carbon reporting (SECR) framework

On May 26, 2026, DESNZ published a review of the UK’s implementation of the SECR framework, including the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. The review indicates that the SECR regulations have mainly met their objectives and have delivered measurable benefits. However, attribution remains challenging given the presence of overlapping policies and wider market conditions. The review recommends retaining the SECR requirements with amendments, including introducing a standardized disclosure template and aligning SECR definitions and metrics with ISSB, Corporate Sustainability Reporting Directive (CSRD), and Task Force on Climate-related Financial Disclosures frameworks to allow adaptation with the evolving reporting landscape.

The Climate Change Committee publishes the Fourth Independent Assessment of UK Climate Risk

On May 20, 2026, the Climate Change Committee published the Fourth Independent Assessment, providing statutory advice to inform the UK Government’s next five-yearly assessment of climate risks under the Climate Change Act 2008. The Climate Change Committee is an independent statutory body established under the Climate Change Act 2008 to advise the UK and devolved governments on emissions reduction and adaptation. The report identifies climate risks, actions, and enablers across 14 systems, including health, land, and the economy.

The Employment Rights Act 2025 unfair dismissal reforms will come into force on January 1, 2027

On May 26, 2026, the Employment Rights Act 2025 (Commencement No. 4 and Transitional and Saving Provisions) Regulations 2026 (SI 2026/559) were finalized, bringing into force key reforms to the unfair dismissal regime by January 1, 2027. These new regulations will reduce the qualifying period for bringing an unfair dismissal claim from two years of continuous employment to six months, as well as remove the statutory cap on compensatory awards for successful unfair dismissal claims (currently 52 weeks of gross pay or £123,543 (whichever is lower)). The changes introduced by the new regulations will apply to any unfair dismissal claims where the effective date of termination is on or after January 1, 2027.

Other highlights:

On May 21, 2026, the UK Financial Conduct Authority published their findings from the Transition Finance Pilot, examining barriers to scaling finance for climate solutions.

III. EUROPE

CSRD reporting standards update

Consultation on Revised ESRS and voluntary sustainability reporting standard closes: Formal adoption of the final standards of both the revised ESRS and a voluntary sustainability reporting standard by the European Commission is expected in late June or early July 2026.

The four-week public consultation on the two draft delegated acts under the CSRD closed on June 3, 2026 (see feedback on the draft ESRS and on the new voluntary sustainability reporting standard), recording more than 400 responses. As reported in our April 2026 ESG Update, the European Commission launched the consultation on May 6, 2026, covering a set of revised ESRS and a new voluntary sustainability reporting standard for companies outside the scope of the CSRD, the latter incorporating the “value chain cap” that limits the sustainability information larger CSRD-reporting companies may request from smaller suppliers and business partners. Feedback from investors was varied. For example, several major institutional investors raised concerns over broad disclosure exemptions and called for greater alignment with ISSB standards, and other financial institutions such as AXA Group and Crédit Agricole welcomed the European Commission’s decision to retain the double materiality approach unaltered.

Once adopted, the delegated acts will be submitted to the European Parliament and the Council of the EU for scrutiny under the standard no-objection procedure, which runs for two months and may be extended by a further two months. No transposition into national law is required. On this timeline, entry into force is likely to occur in the fourth quarter of 2026. The revised ESRS are intended to first apply for all CSRD reporting for financial years beginning on or after January 1, 2027.

European Financial Reporting Advisory Group (EFRAG) invites participation in a field test of the draft non-EU sustainability reporting standard: On June 4, 2026, EFRAG launched a field test for a dedicated sustainability reporting standard for non-EU groups (“N-ESRS”) that fall within the scope of the CSRD by virtue of their EU operations. The field test will occur ahead of EFRAG’s public consultation on the N-ESRS, which is expected to be launched in the second half of July 2026.

France: updates regarding duty of vigilance cases

Landmark ruling expected in climate duty of vigilance case on June 25, 2026: In February 2026, the Paris Judicial Court held the first merits hearing in France in a climate-related duty of vigilance claim brought by NGOs and supported by the City of Paris, alleging failures to address climate and environmental risks in the defendant company’s vigilance plan. The case raises three legal issues: whether France’s 2017 duty of vigilance law applies to climate change, whether Scope 3 emissions should be included in the company’s risk mapping and vigilance plan, and how far the court may go in reviewing or ordering changes to that plan. The plaintiffs seek, among other measures, an end to new hydrocarbon projects and reductions in oil and gas production by 2030, while the defendant argues that responsibility for emissions rests primarily with consumers and public policy choices. The Paris Judicial Court is expected to hand down its judgment on June 25, 2026. Gibson Dunn’s Paris team will issue a specific client alert once the judgment has been made public.

Vigilance plan challenged before French courts over downstream human rights risks: Five organizations, including certain shareholders, have announced their intention to bring proceedings against a European defense-sector joint venture before the Paris Judicial Court for alleged breaches of the French duty of vigilance law. The contemplated proceedings are expected to center on a question of broad relevance under the French vigilance regime: whether a company’s vigilance plan must address human rights risks linked to the downstream use of its products by third parties, or whether those obligations are confined to its upstream value chain.

Separately, Amnesty International has announced that it is joining a distinct complaint in Belgium concerning allegedly unlawful arms transits to Israel involving actors in the logistics chain, underscoring broader European scrutiny of logistics chains connected to the Gaza conflict.

Other highlights:

On May 28, 2026, the European Commission opened infringement procedures against 20 EU member states for failing to transpose the Directive on Empowering Consumers for the Green Transition (ECGT) into national law. The ECGT, adopted in 2024, bans unverified generic environmental claims and restricts the use of sustainability labels to those based on official certification schemes or established by public authorities. The affected member states now have two months to respond and complete transposition.
An overview of the current transposition status of the CSRD into national laws and the “Stop-the-Clock” process under the Omnibus Simplification Package can be found here.

IV. NORTH AMERICA

The U.S. Department of Justice (DOJ) files suit seeking to block a Minnesota lawsuit against multiple energy companies

On May 4, 2026, the DOJ filed suit in the U.S. District Court for the District of Minnesota against the State of Minnesota to block a lawsuit filed in 2020 by the Minnesota Attorney General against multiple energy companies arguing that the companies engaged in consumer fraud and deceptive trade practices by failing to inform consumers about how they impacted climate change. The DOJ’s complaint alleges that the 2020 lawsuit is preempted because “federal law, not state law, exclusively governs regulation of global greenhouse gas emissions.” The complaint asserts preemption under the Constitution’s federal interest principles, separation of powers doctrine, foreign affairs doctrine, and Commerce Clause, as well as the Clean Air Act. This follows lawsuits brought by the DOJ last year against Hawaii and Michigan seeking to prevent the states from pursuing climate change lawsuits against fossil fuel companies, as covered in our May 2025 ESG Update.

Lawsuits involving, and brought by, proxy advisory firms Institutional Shareholder Services Inc. (ISS) and Glass Lewis & Co. LLC (Glass Lewis)

In May 2026, Attorneys General from Texas, Nebraska, Iowa, and West Virginia each filed suit against proxy advisory firm ISS alleging that ISS violated consumer protection laws and engaged in deceptive practices by promoting ESG and diversity, equity, and inclusion (DEI) proposals and policies in its advice to investors instead of providing “objective and impartial” investment advice. The Attorneys General also argue that ISS has a conflict of interest because it provides ESG consulting services directly to multiple companies for which it also provides voting information to investors. These lawsuits follow a similar lawsuit filed by the Florida Attorney General in November 2025, alleging violations of state consumer protection and antitrust laws. For more information, please see the November 2025 ESG Update.

As noted in our April 2026 ESG Update, ISS and Glass Lewis filed lawsuits challenging Indiana statute H.B. 1273, which requires proxy advisors to issue warnings if they have not conducted a “written financial analysis” considering the financial costs and benefits of a proposal when advising clients to vote against company management’s recommendation. ISS and Glass Lewis have also brought lawsuits challenging a similar law in Kansas.

Other highlights:

The California Air and Resources Board (CARB) has updated its Cap-and-Invest Program by establishing more stringent allowance budgets, requiring 80% of allowances to “directly benefit California” including through electricity bill credits, providing an incentive fund to support investments by businesses that reduce emissions and future compliance costs, and adding compliance support for industry. The changes aim to “strengthen affordability, support economic stability, enhance industry assistance, and incorporate public feedback, while maintaining program ambition and integrity.”

In case you missed it…

On May 29, 2026, the U.S. Securities and Exchange Commission (Commission) formally proposed to rescind the Commission’s climate-related disclosure rules adopted in March 2024. Comments on the proposal are due on or before August 3, 2026. For more details, see our client alert here.
The Gibson Dunn Workplace DEI Task Force has published its updates summarizing the latest key developments, media coverage, case updates, and legislation related to diversity, equity, and inclusion.
A collection of our analyses of the legal and industry impacts from the current administration is available here.

V. APAC

Singapore partners with the World Bank Group to launch Carbon Markets Program

On May 20, 2026, the Singapore Government and the World Bank Group launched the Singapore Carbon Markets Program at the Innovate4Climate conference in Singapore. The program aims to address key barriers to the development and scaling of carbon markets by supporting countries in building technical capacity, institutional frameworks, and digital infrastructure required for high‑integrity carbon markets. It comprises three core components: (i) developing interoperable carbon registries and digital monitoring, reporting, and verification tools; (ii) piloting new approaches to aggregating carbon credit supply and demand to reduce transaction costs and improve market access; and (iii) supporting the development of national carbon market strategies and policies.

Asia Pacific Loan Market Association (APLMA) publishes Practice Note on Sustainability-Linked Loan Principles (SLLP) for SMEs

On May 15, 2026, the APLMA, an Asia Pacific loan market industry association based in Hong Kong, published a Practice Note providing guidance on the applicability of the SLLP to loans made to SMEs. The Practice Note supplements the SLLP by addressing practical challenges in the SME context, with a focus on key areas such as key performance indicator selection, target‑setting, reporting, and verification. The Practice Note also addresses program-based sustainability-linked loan structures, which allow lenders to offer standardized SLLP products to large numbers of SMEs rather than negotiating bespoke terms with individual SME borrowers.

Other highlights:

Companies Commission of Malaysia consults on mandatory sustainability reporting for non-listed companies, including SMEs.

The following Gibson Dunn lawyers prepared this update: Cleo Batista, Carla Baum, Mellissa Campbell Duru, Nyala Carbado, Ellie Carter*, Becky Chung, Sydney Colopy, Georgia Derbyshire, Julie Doria, Pierre-Emmanuel Fender, Ferdinand Fromholzer, Saad Khan, Julia Lapitskaya, Vanessa Ludwig, Babette Milz, Johannes Reul, Annie Saunders, Meghan Sherley, Nicholas Tok, and Maggie Valachovic.

ESG: Risk, Litigation, and Reporting Leaders and Members:
Susy Bullock – London (+44 20 7071 4283, sbullock@gibsondunn.com)
Perlette M. Jura – Los Angeles (+1 213.229.7121, pjura@gibsondunn.com)
Ronald Kirk – Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
Michael K. Murphy – Washington, D.C. (+1 202.955.8238, mmurphy@gibsondunn.com)
Robert Spano – London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)

*A trainee solicitor in the London office who is not yet admitted to practice law.

Pung v. Isabella County, No. 25-95 – Decided June 23, 2026

Today, the Supreme Court unanimously held that the government may foreclose on a tax debtor’s property, sell the property in a fair auction, and compensate the debtor based on the sale price rather than the property’s higher hypothetical “fair market value.”

“We hold that the auction price is the proper baseline, at least when the procedure is fair in light
of our country’s history of tax sales.”

Justice Alito, writing for the Court

Background:

The Takings Clause of the Fifth Amendment states that “private property [shall not] be taken for public use, without just compensation.” The Excessive Fines Clause of the Eighth Amendment states that “excessive fines [shall not] be imposed.” Both clauses apply to the States through the Fourteenth Amendment.

In 2018, Michael Pung, as representative of his late nephew’s estate, sued Isabella County, Michigan, after the County foreclosed on and sold the estate’s home to fulfill a tax debt of approximately $2,000. The County sold the property at auction for approximately $76,000 and retained all the proceeds. Pung challenged the County’s retention of the sale proceeds, arguing that he was entitled to compensation based not on the sale price but on the home’s asserted “fair market value” of nearly $200,000. The district court and the Sixth Circuit held that the Takings Clause entitled the estate only to the sale’s surplus proceeds, plus interest. Pung’s Excessive Fines claim was denied as moot.

Issue:

When the government sells a taxpayer’s property to satisfy a tax debt, does the Takings Clause or the Excessive Fines Clause entitle the taxpayer to more than the surplus proceeds from the sale?

Court’s Holding:

No. So long as the sale was conducted fairly, neither the Takings Clause nor the Excessive Fines Clause entitles the taxpayer to more than the surplus proceeds of the auction.

What It Means:

The Court rejected hypothetical “fair market value” as the measure of compensation required under the Takings Clause, explaining that a “long legal tradition dating back to the Founding embodies [the] principle” that governments are obligated to return to former property owners only the surplus proceeds from tax sales, at least where the tax sale is “fairly conducted.”
The Court also found no “historical evidence” suggesting that a government violates the Excessive Fines Clause when it returns only the surplus proceeds from a tax sale conducted with fair procedures.
The Court did not resolve what procedures are required to make a tax-sale process “fair,” but instead remanded for the Sixth Circuit to consider any procedural challenges that were preserved.
By declining to require compensation based on fair market value, the Court preserved the ability of federal, state, and local governments to use tax sales as a means of collecting tax debts. The Court explained that, unlike voluntary sales of property, “tax sales are designed to collect unpaid taxes without undue delay and administrative expense.” Requiring compensation based on fair market value would place “unprecedented burdens” on taxing authorities seeking to recover debts, according to the Court.
Justice Thomas authored a separate opinion in which he agreed with the Court that an “auction surplus from a tax foreclosure sale can constitute just compensation if it is consistent with historical practice.” He went on to explain his view, joined by Justice Gorsuch, that based on historical practice, the County’s actions likely violated the Takings Clause because the County did not first “try to collect anything less than the entire property—such as the Pungs’ personal goods, their car, or a portion of their land.”

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 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	Jeffrey B. Wall +1 202.955.8533 jwall@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	Miguel A. Estrada +1 202.955.8257 mestrada@gibsondunn.com

Related Practice: Real Estate

Eric M. Feuerstein
+1 212.351.2323
efeuerstein@gibsondunn.com

Jesse Sharf
+1 310.552.8512
jsharf@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

Related Practice: Litigation

Barry H. Berke +1 212.351.3860 bberke@gibsondunn.com	Reed Brodsky +1 212.351.5334 rbrodsky@gibsondunn.com	Trey Cox +1 214.698.3256 tcox@gibsondunn.com	Theane Evangelis +1 213.229.7726 tevangelis@gibsondunn.com
Helgi C. Walker +1 202.887.3599 hwalker@gibsondunn.com	Jason Myatt +1 212.351.4085 jmyatt@gibsondunn.com

This alert was prepared by associates Robert A. Batista and Warren G. Bloom.

From the Derivatives Practice Group: This week, the CFTC and the SEC issued joint requests for public comment on security-based swaps, swap markets, and derivatives product definitions.

New Developments

CFTC Seeks Public Comment on Notice of Proposed Rulemaking Concerning Event Contracts Involving Enumerated Activities. On June 10, the CFTC published a Notice of Proposed Rulemaking seeking public comment on amendments to CFTC Regulation 40.11 and the addition of Appendix F to part 40. The Commission said that it has continued to observe growth in the number and variety of event contracts listed for trading by CFTC-registered entities, including contracts referencing sporting events. The CFTC indicated, in light of these developments, that its proposal would establish a structured framework for evaluating whether such contracts involve an activity enumerated in Section 5c(c)(5)(C) of the Commodity Exchange Act and, if so, whether that contract is contrary to the public interest. According to the Commission, the proposal sets out a 90-day review process ensuring critical procedural protections and a set of public interest factors the Commission would apply on a contract-by-contract basis; it also proposes definitions key statutory terms, including “involve” and “gaming.”

CFTC Establishes Joint Data Standards as Required Under the Financial Data Transparency Act of 2022. On June 8, the CFTC announced that it established joint data standards under the Financial Data Transparency Act of 2022. According to the Commission, the final rule establishes technical standards for data submitted to certain financial regulatory agencies and is designed to promote interoperability of financial regulatory data across various agencies by establishing common identifiers for entities, geographic locations, dates, and certain products and currencies.

New Developments Outside the U.S.

ESAs Publish the First Report on DORA Major ICT-related Incidents. On June 3, the European Supervisory Authorities (ESAs) published their first annual overview of major information and community technology (ICT) incidents in the EU financial sector based on a reporting mechanism established by the Digital Operational Resilience Act (DORA). ESMA said that the report shows that ICT risks are increasingly borderless and interconnected. The ESAs also noted that the recent evolution of highly capable AI-driven tools should encourage financial entities to strengthen cybersecurity measures going forward.

Euribor Panel to Include KBC Bank. On May 27, the European Money Markets Institute, the administrator of Euribor, announced the inclusion of KBC Bank in the Euribor panel. ESMA and the Belgian Financial Services and Markets Authority welcome the inclusion of KBC Bank in the panel as a positive development that contributes to strengthening the robustness and reliability of this critical benchmark.

New Industry-Led Developments

IOSCO publishes Report on Supervisory Technology. On June 18, IOSCO published its Report on Supervisory Technology, summarizing a survey of 49 jurisdictions on their current and expected future use of technology in financial supervision. [NEW]

ISDA Publishes ISDA-Actrix US Treasury Repo Market Clearing Indicators Methodology. On June 9, ISDA published a white paper intended for market participants interested in the structure and methodology used to construct the ISDA-Actrix US Treasury Repo Market Clearing Indicators. According to ISDA, this report provides precise details that allow participants to access the publicly available data and replicate the calculations in the report themselves.

IOSCO Publishes Recommendations for Secondary Market Disclosure. On June 8, IOSCO published its Final Report on Recommendations for Secondary Market Disclosure. The report is intended to assist regulators in reviewing their existing disclosure frameworks and considering whether updates or refinements may be appropriate.

ISDA Responds to BoE Consultation on Permissions to Facilitate Mobilization of New CCPs. On June 4, ISDA submitted a response to the Bank of England’s (BoE) consultation on its approach to using its requirements and permissions powers to facilitate mobilization of new central counterparties (CCPs). The consultation includes a draft policy statement, setting out how the BoE will use its powers to impose de miminis limits and give permissions to modify or waive certain rules for new CCPs in a “mobilization” phase.

ISDA and the Credit Derivatives Governance Committee Select S&P Global as DC Administrator. On June 4, ISDA and the Credit Derivatives Governance Committee announced that S&P Global Market Intelligence has been selected as the administrator for the Credit Derivatives Determinations Committees (DCs). According to ISDA, the DCs were introduced in 2009 as a centralized decision-making body to enable a standardized auction settlement process and ensure central clearing could be implemented for credit derivatives.

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, 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 )

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

Alice Yiqian Wang, Washington, D.C. (202.777.9587, awang@gibsondunn.com)

Gibson Dunn lawyers present a recorded 30-minute briefing covering several M&A practice topics, including issues relating to informal settlements with activists, the U.S. Securities and Exchange Commission’s new exemptive order shortening the minimum time period for tender offers, and developments in the law governing covenants not to compete.

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 0.50 credit hour, of which 0.50 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 0.50 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:

Presenters:

Andrew Kaplan is a partner in the New York office of Gibson Dunn, where his practice focuses on mergers and acquisitions, and corporate governance matters. Andrew represents both public and private acquirors and targets in connection with mergers, acquisitions and takeovers, both negotiated and contested. Andrew also advises corporations and their boards of directors in connection with corporate governance and compliance matters, shareholder activism, takeover preparedness, and other corporate matters. He also represents various major investment banks as financial advisors in M&A transactions, and hedge funds in their M&A and investment activities. Andrew also has represented both issuers and underwriters in a variety of securities transactions.

Mellissa Duru is a corporate partner in the Washington, D.C. office of Gibson Dunn, where she is a member of the firm’s Securities Regulation and Corporate Governance Practice Group. Prior to joining Gibson Dunn, Mellissa served as Deputy Director of the Division of Corporation Finance’s Legal Regulatory Policy group at the U.S. Securities and Exchange Commission (SEC). As Deputy Director, Mellissa oversaw transactional filings, rules, interpretative guidance, and exemptive and no-action relief requests within the Division of Corporation Finance’s Office of Mergers & Acquisitions, Office of International Corporation Finance, Office of Small Business Policy, Office of Rulemaking, and Office of Structured Finance.

Krista Hanvey is Co-Chair of Gibson Dunn’s Employee Benefits and Executive Compensation 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. Krista 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.

Moderator:

Stephen Glover is a partner in the Washington, D.C. office of Gibson Dunn and a former Co-Chair of the firm’s Global Mergers and Acquisitions Practice. Stephen has an extensive practice representing public and private companies in complex mergers and acquisitions, joint ventures, equity and debt offerings, and corporate governance matters. His clients include large public corporations, emerging growth companies and middle market companies in a wide range of industries. He also advises private equity firms, individual investors, and others. Stephen has been ranked in the top tier of corporate transactions attorneys in Washington, D.C. for the past nineteen years (2005 – 2025) by Chambers USA America’s Leading Business Lawyers, among numerous other accolades.

Navigating recent SEC rule proposals, shifting investor engagement, and other new securities regulation and corporate governance developments.

A deregulatory Securities and Exchange Commission (SEC), an increasingly fragmented investor engagement landscape, and continued competition among states to serve as the preferred jurisdiction of incorporation are reshaping the public company governance environment. The headline development since the start of the year is the SEC’s move from policy signaling to actual rulemaking: in May 2026, the Commission issued a suite of proposals that, if adopted, would materially change reporting cadence, capital-raising mechanics, and disclosure obligations. A central theme of these proposals as well as the SEC’s recent administration of the shareholder proposal rule is the promotion of private ordering: fewer mandatory requirements and greater flexibility to accommodate company-specific circumstances. Moreover, the SEC has invited input on additional rulemaking initiatives, including significantly revising executive compensation disclosures, revising Regulation S-K, which prescribes the required disclosures in Form 10-K, Form 10-Q and other SEC filings, and additional securities offering communication reforms. Each of these initiatives are expected to result in rule proposals before year-end.

SEC rule proposals. Management should track four May 2026 rule proposals and discuss their potential implications with their boards of directors:

Optional semiannual reporting (proposed May 5). The proposed rule would permit companies to file a new Form 10-S covering the first six months of their fiscal year in lieu of filing a Form 10-Q for each of the first three fiscal quarters.[1] Under the rule proposal, semiannual reporting would be voluntary, and a company that elects semiannual reporting may continue to issue quarterly earnings releases. Each company will need to assess its particular circumstances in determining whether to opt into semiannual reporting, continue quarterly reports on Form 10-Q, or take a hybrid approach, considering factors including: investor and analyst expectations and feedback; the implications for securities trading by insiders; stock repurchases by the company; Regulation FD risks that could arise from longer periods between financial reports or SEC periodic reports; potential implications for internal controls systems; the extent of any cost savings (particularly if a company continues to issue quarterly financial results); and the possibility that some of the burdens of quarterly reporting on Form 10-Q will be alleviated through the SEC’s anticipated amendments to Regulation S-K. See our client alert discussing the proposed rule here.
Filer status simplification (proposed May 19). The proposed rule would collapse filer categories into “large accelerated” and “non-accelerated” filers and raise the large accelerated filer public float threshold from $700 million to $2 billion. In addition, any company regardless of size would be eligible for “non-accelerated” filer status during the first five years following its initial public offering. The SEC estimates that these revisions would result in less than 20% of current public companies being subject to the “full” reporting requirements applicable to large accelerated filers.[2] The other 80% would be eligible to benefit from the more streamlined disclosure requirements available to smaller companies, including relief from auditor assessments of internal control over financial reporting and exemption from the requirements to hold shareholder advisory votes to approve executive compensation (commonly known as “say-on-pay” votes), on the frequency of say-on-pay votes, and on golden parachute compensation in connection with mergers and acquisitions. As with semiannual reporting, companies qualifying as non-accelerated filers could elect to voluntarily follow some or all of the disclosure practices applicable to large accelerated filers, such as holding an annual say-on-pay vote to mitigate the possibility that any shareholder concerns with compensation decisions result in votes against directors serving on the compensation committee. See our client alert discussing the proposed rule here.
Registered offering modernization (proposed May 19). The proposed rule would substantially expand eligibility for short form and shelf registration on Form S-3 and extend pre-filing communication flexibility to a larger group of smaller public companies.[3] The rule proposal would also preempt state “blue sky” review for all registered offerings. If adopted, the rule proposal would facilitate access to the public markets for many companies, including newly public companies and companies that currently can be disqualified from favorable regulatory treatment due to “foot-fault” timely filing deficiencies. Boards and finance teams at companies that may benefit from the expanded Form S-3 benefits should consider whether existing capital plans, financing authorizations, and disclosure controls are appropriate for taking advantage of these changes and accessing markets more quickly, including through at-the-market programs and unlimited-size, automatically effective Form S-3 filings. Companies considering pursuing an initial public offering (IPO) in the future should revisit timing and the longer-term cadence of capital raising given the potentially reduced compliance expense and greater capital raising opportunity available following completion of the IPO. See our client alert discussing the proposed rule here.
Climate disclosure rules rescission (proposed May 29). The proposed rule would formally withdraw the 2024 climate disclosure rules in their entirety.[4] The practical impact is limited given the existing stay of the rules, but the proposal confirms a significant shift in SEC priorities. The SEC estimates annualized cost savings of approximately $4.9 billion if the rules are rescinded. Companies will need to continue assessing the implications on any voluntary climate-related reporting they prepare, including whether to follow the reporting framework of the Task Force on Climate-Related Financial Disclosures (TCFD), which heavily influenced the SEC’s rule proposal. See our client alert discussing the proposed rule here.

Shareholder proposals. The Rule 14a-8 shareholder proposal regime is in flux. In November 2025, the SEC staff announced that, subject to a limited exception, it would suspend its historical practice of issuing no-action responses to companies that notified it of their intention to exclude shareholder proposals from their proxy statements pursuant to Rule 14a-8, leaving exclusion determinations to companies.[5] This has introduced uncertainty, leading to fewer shareholder proposal exclusions, a rise in negotiated resolutions resulting in proposals being withdrawn, and several lawsuits over exclusions, some of which settled quickly. However, in two such lawsuits, the court denied the proponent’s request for an injunction to force the company to include the proposal in the proxy statement, while in another case, the court approved such an injunction. The possibility that the SEC staff will continue not to issue responses to the vast majority of no-action requests could result in more proposals and, where excluded, more litigation. Boards also should evaluate the results of the 2026 proxy season and consider whether to alter their approach for the coming year. The SEC’s rulemaking agenda includes proposing rules to “modernize” Rule 14a-8,[6] and SEC Chairman Atkins has separately suggested that companies may be able to exclude precatory (non-binding) proposals as improper under state law.[7] Taken as a whole, the market has read these developments as signaling additional significant changes to the Rule 14a-8 shareholder proposal regime. Repeal or substantial revision of Rule 14a-8 would create a major governance transition, and company advisers and boards should start to consider how they will respond.

Investor engagement. Investor engagement is shifting. The SEC’s updated guidance regarding Schedule 13D/13G “passive investor” status[8] has changed engagement, with both BlackRock and Vanguard’s U.S. engagements falling sharply year-over-year,[9] and pushed more investors into listen-only meetings. Vanguard, BlackRock, and State Street have split their stewardship teams and are expanding pass-through “voting choice,” each of which dilutes the predictability of their votes. Glass Lewis has announced that it will drop its single benchmark recommendation in 2027, though it is unclear when the change will occur and in what form the go-forward approach will take;[10] ISS has moved to a case-by-case approach on environmental and social matters;[11] it was reported that JPMorgan will stop using external proxy advisory firms in favor of its own artificial intelligence (AI) proxy tool;[12] and Wells Fargo has launched an internal proxy voting system to reduce its reliance on third parties.[13] The net effect is that voting outcomes are becoming less predictable, potentially increasing the value of clear, compelling proxy messaging and direct, board-led engagement with the largest holders in which the board sets the agenda.

Executive compensation. Significant changes are afoot in the design and disclosure of executive compensation. Companies and their advisors had their first look during the 2026 proxy season after Glass Lewis and ISS implemented revised pay-for-performance analyses and voting guidelines for executive compensation. Glass Lewis introduced several new evaluation metrics, while ISS shifted its policy perspective on several issues, including viewing long-term service-vested restricted stock units as an acceptable alternative to performance-vesting equity awards. As noted above, upcoming SEC proposals to significantly revise executive compensation disclosure may also allow greater flexibility in the design and implementation of executive compensation programs. For example, the Summary Compensation Table may cease to present a “Total Compensation” figure that combines current cash compensation with the accounting value of equity awards (which in the context of restricted stock and certain performance-based awards, fails to reflect vesting term or the potential for above- or below-target payouts). Boards may wish to start evaluating whether and how they may adjust their executive compensation programs in light of these developments.

State of incorporation. A substantial majority of S&P 500 companies remain incorporated in Delaware. However, following several off-market judicial decisions regarding corporate matters in Delaware, some companies have proposed to reincorporate in Texas and Nevada, and states are competing for incorporations. Recent amendments to Delaware law have expanded officer exculpation, codified controlling shareholder safe harbors, and narrowed the books and records right to provide a more predictable corporate law framework,[14] but “Dexit” continues at the margins.[15] Most public companies have not left Delaware, given the shareholder approval requirement for reincorporation, high transaction costs, proxy advisory firms’ opposition to reincorporation, and some uncertainty about how other states’ corporate laws would be interpreted due to less developed caselaw. However, there have been a number of high-profile departures, and it has been reported that 61.8% of companies going public in 2025 chose Delaware as compared to 80.2% in 2024, 80.0% in 2023, and 88.8% in 2022.[16] Large institutional investors are learning about and evaluating reincorporation proposals and the effect of various state law provisions on a case-by-case basis. Their evaluations include assessing the rationale for reincorporating, expected economic benefits, impacts on a company’s exposure to frivolous or costly litigation that produces few tangible benefits to continuing shareholders, changes in the ability of shareholders to take various actions, and other potential implications of reincorporation, as well as a company’s broader governance profile. Boards weighing a move should evaluate the same factors, as well as commentary and voting precedents of their significant shareholders, so they may approach any decision in a deliberate, well-documented manner.

Additional key topics. Two additional areas boards should focus on now are AI oversight and prediction markets. Directors are expected to understand how AI bears on strategy and enterprise risk management, and an understanding of AI and how it is operating at their company is increasingly expected in the boardroom. Directors need not be AI experts, but the board ideally should be assured that the company is deliberately deciding how AI is deployed. Three common issues for briefing and board oversight are: (1) who is responsible for AI’s outputs and what testing and validation is being performed; (2) how is AI-generated information deployed, protected and retained; and (3) how are AI issues identified and escalated. Separately, given the current focus of the Commodity Futures Trading Commission (CFTC) and the Department of Justice on insider trading on prediction markets transactions,[17] boards should also consider whether their codes of conduct or insider trading policies should be updated to expressly prohibit the use of nonpublic information in making or influencing prediction market transactions.

[1]See Semiannual Reporting, Release No. 33-11414 (May 5, 2026) [91 Fed. Reg. 24968]. The public comment period ends on July 6, 2026.

[2]See Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies, Release No. 33-11419 (May 19, 2026) [91 Fed. Reg. 30086]. The public comment period is open until July 20, 2026. If the proposed amendments were in place today, 19.2% of current public companies would be large accelerated filers (compared to 35.4% currently) and 80.8% would be non-accelerated filers (compared to 51.9% currently). See id.; Fact Sheet: Enhancing the Public Company Reporting Framework (May 19, 2026), https://www.sec.gov/files/33-11419-fact-sheet.pdf.

[3]See Registered Offering Reform, Release No. 33-11418 (May 19, 2026) [91 Fed. Reg. 31022]. The rule proposal would eliminate “Well-Known Seasoned Issuer” (WKSI) status for domestic issuers in favor of new “Eligible Listed Issuer” (ELI) and “Seasoned Eligible Listed Issuer” (SELI) categories. ELIs are those issuers eligible to use Form S-3 with at least one class of common equity listed on a national securities exchange. SELIs are ELIs that have reported under the Exchange Act for at least 12 full calendar months. ELIs would receive all current WKSI benefits other than the ability to file an automatic shelf registration statement effective immediately upon filing, which would be available only to SELIs. The public comment period ends on July 27, 2026.

[4]See Rescission of Climate-Related Disclosure Rules, Release No. 33-11421 (Aug. 3, 2026) [91 Fed. Reg. 33296]. The public comment period ends on August 3, 2026. The rules proposed for rescission are The Enhancement and Standardization of Climate-Related Disclosures for Investors, Release No. 33-11275 (Mar. 6, 2024) [89 Fed. Reg. 21668]. See our discussion of that final climate change rule here.

[5] See SEC Division of Corporation Finance, “Statement Regarding the Division of Corporation Finance’s Role in the Exchange Act Rule 14a-8 Process for the Current Proxy Season” (Nov. 17, 2025), available at https://www.sec.gov/newsroom/speeches-statements/statement-regarding-division-corporation-finances-role-exchange-act-rule-14a-8-process-current-proxy-season.

[6] See “Shareholder Proposal Modernization,” available at https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202504&RIN=3235-AN47. President Trump also issued an Executive Order on December 11, 2025 targeting proxy advisory firms and directing Chairman Atkins to consider revising or rescinding any rules, including Rule 14a-8, that are inconsistent with the order’s purpose. See The White House, Protecting American Investors from Foreign-Owned and Politically-Motivated Proxy Advisors (Dec. 11, 2025), available at https://www.whitehouse.gov/presidential-actions/2025/12/protecting-american-investors-from-foreign-owned-and-politically-motivated-proxy-advisors/.

[7]See Chairman Paul S. Atkins, “Keynote Address at the John L. Weinberg Center for Corporate Governance’s 25th Anniversary Gala” (Oct. 9, 2025) (suggesting that, because Delaware law confers no inherent right for stockholders to vote on precatory proposals, such proposals may be excludable under Rule 14a-8(i)(1) as not a “proper subject” for shareholder action under state law), available at https://www.sec.gov/newsroom/speeches-statements/atkins-10092025-keynote-address-john-l-weinberg-center-corporate-governances-25th-anniversary-gala.

[8] See SEC Division of Corporation Finance, Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting, Questions 103.11 and 103.12 (updated Feb. 11, 2025). See our discussion here.

[9] See Reuters, “BlackRock, Vanguard scale back company talks as new guidance bites” (Sept. 19, 2025), available at https://www.reuters.com/sustainability/boards-policy-regulation/blackrock-vanguard-scale-back-company-talks-new-guidance-bites-2025-09-19/.

[10] See Glass Lewis, “Glass Lewis Leads Change in Proxy Voting Practices” (Oct. 15, 2025), available at https://www.glasslewis.com/news-release/glass-lewis-leads-change-in-proxy-voting-practices.

[11] See ISS, “ISS Governance Announces 2026 Benchmark Policy Updates” (Nov. 25, 2025), available at https://www.iss-stoxx.com/press-releases/iss-governance-announces-2026-benchmark-policy-updates/.

[12] See The Wall Street Journal, “JPMorgan Cuts All Ties With Proxy Advisers in Industry First” (Jan. 7, 2026), available at https://www.wsj.com/finance/banking/jpmorgan-cuts-all-ties-with-proxy-advisers-in-industry-first-78c43d5f?st=BipA9U.

[13] See Wells Fargo, “Wells Fargo Wealth & Investment Management Launches Internal Proxy Voting System” (Jan. 28, 2026), available at https://newsroom.wf.com/news-releases/news-details/2026/Wells-Fargo-Wealth–Investment-Management-Launches-Internal-Proxy-Voting-System/default.aspx.

[14] We discuss the recent controller transaction and inspection demand amendments in our client alert here.

[15] See Dexit Tracking Portal (June 12, 2026), available at https://leavedelaware.org/tracking (reporting that, since 2024, there have been 68 proposed reincorporations, redomiciliations, and other similar transactions).

[16] Houlihan Lokey, “PLI Mergers & Acquisitions 2026: Advanced Trends and Developments – Reincorporations and Redomestications” (Feb. 2, 2026).

[17] We discuss the CFTC enforcement advisory concerning prediction markets in our client alert here and the CFTC’s recent proposed rulemaking concerning event contracts involving enumerated activities here.

The following Gibson Dunn lawyers prepared this update: Aaron K. Briggs, Mellissa Campbell Duru, Andrew L. Fabens, Elizabeth Ising, Thomas J. Kim, Brian J. Lane, Julia Lapitskaya, Ronald O. Mueller, Michael A. Titera, Geoffrey E. Walter, Lori Zyskowski, and Matthew Dolloff.

Gibson Dunn’s Securities Regulation and Corporate Governance team is available to assist companies and boards of directors in positioning themselves to address these issues as the state of play and expectations continue to evolve. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders of the firm’s Securities Regulation & Corporate Governance or Capital Markets practice groups:

Securities Regulation & Corporate Governance:
Aaron Briggs – San Francisco (+1 415.393.8297, abriggs@gibsondunn.com)
Mellissa Campbell Duru – Washington, D.C. (+1 202.955.8204, mduru@gibsondunn.com)
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)
Brian J. Lane – Washington, D.C. (+1 202.887.3646, blane@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)
Michael Scanlon – Washington, D.C.(+1 202.887.3668, mscanlon@gibsondunn.com)
Michael A. Titera – Orange County (+1 949.451.4365, mtitera@gibsondunn.com)
Geoffrey E. Walter – Washington, D.C. (+1 202.887.3749, gwalter@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

Capital Markets:
Andrew L. Fabens – New York (+1 212.351.4034, afabens@gibsondunn.com)
Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@gibsondunn.com)
Stewart L. McDowell – San Francisco (+1 415.393.8322, smcdowell@gibsondunn.com)
Peter W. Wardle – Los Angeles (+1 213.229.7242, pwardle@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 digital assets, including cryptocurrencies, stablecoins, digital asset market structure, tokenized assets, decentralized finance, prediction markets, digital asset custody and trust charters, crypto enforcement actions, and blockchain-related legislative and regulatory developments in the United States and internationally.

REGULATION AND LEGISLATION

UNITED STATES

Illinois Advances 0.2% Privilege Tax on Cryptocurrency Transactions
On June 1, the Illinois legislature passed SB 3019, a state revenue bill that Illinois Governor JB Pritzker is expected to sign, establishing a 0.2% privilege tax on digital asset transactions, the first such tax in the nation. The measure would require digital asset brokers to register with the Department of Revenue by January 1, 2027, with noncompliance constituting a Class 3 felony. The tax applies to transactions where the customer is physically present in Illinois or where data such as IP address, account information, or mailing address indicates Illinois is their place of primary use. Bill Text; State Affairs.

CFTC Takes Steps Toward Crypto Perpetual Futures Contracts in the U.S.
On May 29, the CFTC issued an Order for Approval to KalshiEX, LLC, a designated contract market, for the listing of the BTCPERP Contract, a perpetual futures contract referencing the spot price of bitcoin, after determining that the contract complies with the Commodity Exchange Act and applicable regulations. On the same day, the CFTC’s Market Participants Division issued a staff letter confirming that certain crypto asset perpetual contracts, consistent with the Kalshi order, may be categorized as foreign futures under Commission Regulation 30.1. CFTC Press Release (Kalshi); CFTC Press Release (Coinbase); The Block.

Senate Banking Committee Advances CLARITY Act
On May 14, 2026, the Senate Banking Committee voted 15-9 to advance the Digital Asset Market Clarity Act of 2025 (CLARITY Act), a market structure bill establishing regulatory rules for digital assets. The bill was placed on the Senate Legislative Calendar on June 1, making it formally eligible for full Senate consideration, though no floor date has been set; the remaining steps to enactment include a Senate floor vote requiring a 60-vote threshold, reconciliation with the House-passed version, and the President’s signature. The Block; Senate Banking Committee Release; Yahoo Finance.

CFTC Weighs Rulemaking to Protect Non-Custodial Software Developers
On May 5, Commodity Futures Trading Commission (CFTC) Chair Michael Selig said the agency is considering rulemaking to codify protections for non-custodial crypto software developers. The effort would build on a March 2026 no-action letter stating the CFTC would not pursue enforcement against crypto wallet provider Phantom regarding registration as a broker, establishing that non-custodial software developers who meet certain conditions are not required to so register. The Block.

FINRA Approves Securitize for Tokenized IPO Underwriting and Custody
On May 4, the Financial Industry Regulatory Authority (FINRA) approved Securitize’s broker-dealer subsidiary, Securitize Markets, to become the first firm to custody tokenized securities within a standard broker-dealer and to act as an underwriter for tokenized IPOs and secondary offerings. This approval consolidates functions that previously required separate intermediaries, allowing trades between tokenized stocks and stablecoins to settle directly on-chain in a single step. The Block.

SEC Grants Paxos Clearing Agency Registration
On May 27, the U.S. Securities and Exchange Commission (SEC) granted Paxos’s subsidiary, Paxos Securities Settlement Company, LLC (PSSC), temporary registration, for a period of 18 months, as a clearing agency under Section 17A of the Securities Exchange Act of 1934, enabling it to provide clearing and settlement services as a central securities depository in the United States. The 18-month term allows PSSC to complete a “Ramp-Up Period” (including becoming a DTC participant, securing a settling bank, and onboarding initial participants), after which the SEC will determine whether the requirements for full registration are met. SEC Order; Paxos Press Release; The Block; Yahoo Finance.

South Carolina Governor Signs Comprehensive Cryptocurrency Law
On May 19, South Carolina Governor Henry McMaster signed S. 163 into law, establishing a comprehensive regulatory framework for cryptocurrency in South Carolina that protects crypto users, exempts certain cryptocurrency activities from money transmitter licensing, and bans the use of central bank digital currencies (CBDCs). The law prohibits restrictions on accepting digital assets as payment or using self-hosted wallets, exempts cryptocurrencies used for payment from state and local taxes, and bars state agencies from accepting or participating in any test of a CBDC issued by the Federal Reserve. The law also protects crypto mining operations by prohibiting local governments from restricting mining in industrial zones. Bill Text; The Block; Yahoo Finance.

President Trump Orders Review of Fintech Access to Federal Reserve Payment Systems
On May 19, President Trump signed an executive order titled “Integrating Financial Technology Innovation into Regulatory Frameworks,” directing federal financial regulators to review and update regulations to remove barriers to entry for fintech firms, including crypto and digital asset companies. The order also specifically requests the Federal Reserve to evaluate its framework governing access to Reserve Bank payment accounts and services, explore options for extending such access to fintech and crypto firms, and clarify whether the twelve Federal Reserve banks have independent legal authority to grant or deny such access. The following day, on May 20, the Federal Reserve Board (Federal Reserve) requested public comment on a proposal to establish a new “payment account” that legally eligible institutions could use solely for clearing and settling payments; the Federal Reserve also encouraged Reserve Banks to temporarily pause decisions on account access requests from Tier 3 institutions—i.e., non-federally-insured institutions not subject to federal prudential oversight, until it completes the related policy development process. The Federal Reserve expects the pause to end on or before December 31. Executive Order; The Block; Federal Reserve.

Minnesota Enacts Law Permitting Banks and Credit Unions to Offer Cryptocurrency Custody Services
On May 15, Minnesota Governor Tim Walz signed HF 3709 into law, permitting Minnesota banks and credit unions to offer virtual currency custody services effective August 1, 2026. Institutions must maintain written policies governing risk management, internal controls, and cybersecurity, provide written notice to the Minnesota Commissioner of Commerce at least 60 days before commencing such services, and ensure that customer virtual currency is legally and operationally segregated from the institution’s own assets. HF 3709; The Block.

INTERNATIONAL

European Commission Opens Consultation on Markets in Crypto-Assets Regulation Review
On May 20, the European Commission opened a public and targeted consultation on whether Markets in Crypto-Assets Regulation (MiCA), the bloc’s landmark crypto-assets framework, remains fit for purpose, inviting feedback through August 31. The review covers core elements of the framework, including rules for crypto-asset issuers, asset-referenced tokens, e-money tokens, and crypto-asset service providers. The consultation comes ahead of a July 2026 deadline for firms operating under MiCA transitional regimes to secure full authorization. The Block.

Brazil Central Bank Excludes Crypto from Regulated Cross-Border Payments
On May 1, Brazil’s central bank issued Resolution No. 561, which excludes cryptocurrencies, including stablecoins, from the country’s regulated cross-border payments framework. The measure does not ban crypto transfers outright but requires regulated international payments to remain within traditional foreign exchange channels. The Block.

South Korean Court Stays Bithumb Suspension Pending Final Ruling
On May 1, a South Korean court granted Bithumb’s request to stay a six-month partial business suspension imposed by the Financial Intelligence Unit. The suspension, issued over alleged anti-money laundering failures and accompanied by a 36.8 billion won fine (approximately $24 million), will remain on hold while Bithumb’s administrative challenge proceeds. Yonhap News.

Bank of Italy Urges EU to Explore Tokenized SEPA Payments
On May 5, Bank of Italy Deputy Governor Chiara Scotti called on the EU to consider a tokenized extension of the Single Euro Payment Area (SEPA), Europe’s core payments infrastructure, framing it as a practical path for modernizing the system rather than replacing it wholesale. Her proposal reflects concern that private digital assets like stablecoins and tokenized deposits could fragment Europe’s financial ecosystem if they develop separately from existing payment rails. Reuters; The Block.

Hong Kong Concludes Consultation on Virtual Asset Advisory and Management Regimes
On May 26, the Hong Kong Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC) published consultation conclusions on proposed legislative regimes for virtual asset (VA) advisory and VA management service providers. The VA advisory regime is intended to align with Type 4 regulated activity (advising on securities), while the VA management regime is intended to align with Type 9 regulated activity (asset management) under the Securities and Futures Ordinance. The proposed regimes will be introduced under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, with a bill expected to be introduced into the Legislative Council in 2026. SFC; Gibson Dunn Prior Client Alert.

FCA and Bank of England Seek Input on Tokenized Wholesale Markets
On May 18, the Financial Conduct Authority and Bank of England opened a joint consultation seeking industry feedback on the regulation, infrastructure, and market practices needed to support tokenized wholesale financial markets in the UK. The consultation forms part of the government’s Wholesale Financial Markets Digital Strategy (WFMDS) and focuses on tokenized securities, including bonds, equities, and fund units, with proposed approaches covering prudential treatment, tokenized collateral, and settlement instruments. Market participants have until July 3 to submit responses, after which the regulators plan to hold industry workshops, publish a feedback statement in summer 2026, and issue a cross-authority roadmap later in the year. Call for Input; The Block.

UK PRA Issues Two Letters on Digital Assets and Deposit Innovation
On May 18, the UK Prudential Regulation Authority (PRA) published two related letters on digital assets. The first updates expectations for banks and designated investment firms on tokenized assets, stablecoins and other digital asset exposures, reminding firms to maintain strong risk controls and apply the full prudential framework, while recognizing that certain digital assets may warrant more risk-sensitive treatment. The second, superseding the PRA’s 2023 letter, permits deposit-takers to experiment with innovative products such as stablecoins and tokenized deposits—but only through a separate, insolvency-remote entity—and urges firms considering wholesale stablecoin use cases to engage supervisors early. PRA Letter (tokenized assets and stablecoins); PRA Letter (deposits).

Poland Adopts MiCA Implementation Bill Amid Exchange Probe
On May 15, Polish lawmakers approved a government-backed bill implementing the EU’s Markets in Crypto-Assets Regulation, moving to finalize the country’s domestic crypto framework ahead of a July compliance deadline. The legislation comes as prosecutors investigate Zondacrypto, Poland’s largest digital asset exchange, where thousands of users have reportedly been unable to withdraw funds and estimated losses exceed 350 million zlotys. The bill remains politically sensitive after President Karol Nawrocki previously vetoed earlier crypto regulatory proposals, arguing they imposed excessive burdens on the industry. The Block.

ECB Official Calls for Central Bank Digital Currencies (CBDCs) and Regulation to Address Stablecoin Risks
On June 1, European Central Bank Executive Board member Isabel Schnabel stated that central banks should respond to stablecoin risks with robust regulation and central bank digital currencies, including the digital euro, to preserve the anchoring role of central bank money. Speaking at the 2026 Bank of Korea International Conference in Seoul, Schnabel warned that stablecoins pose risks to financial stability, monetary policy, and the international monetary order, including run risk from liquidity mismatches and loss of confidence in reserve assets. Schnabel also cautioned that dollar-denominated stablecoins could further entrench U.S. dollar dominance through network effects, while euro-pegged stablecoins remain marginal. The Block.

VARA Issues Circular on UAE Proliferation Financing National Risk Assessment 2026
On May 22, the Dubai Virtual Assets Regulatory Authority (VARA) issued a circular notifying all Virtual Asset Service Providers (VASPs) of the publication of the UAE Proliferation Financing National Risk Assessment (PF NRA) 2026, issued by the Executive Office for Control and Non-Proliferation. The VASP sector was specifically identified as the highest-risk sector in the PF NRA. VASPs are required, within 30 calendar days, to assess and enhance their PF risk frameworks, including to (i) update their Business Risk Assessments to incorporate PF NRA findings and assess PF risk separately from ML/TF risks; and (ii) strengthen sanctions and TFS controls, including wallet and counterparty screening and asset-freezing capability. VARA.

ENFORCEMENT ACTIONS

UNITED STATES

California Man Pleads Guilty in Danbury Bitcoin Kidnapping and Attempted Robbery
On June 1, Adam Iza of California pleaded guilty in Bridgeport federal court to conspiracy to interfere with commerce by robbery (Hobbs Act Robbery) for his role in an August 2024 kidnapping and attempted bitcoin robbery in Danbury, Connecticut. Iza and others planned and coordinated the attempted robbery and ultimately the kidnapping of the parents of an individual who had participated in the theft of at least $245 million in bitcoin. Iza faces a maximum of 20 years in prison and is scheduled to be sentenced on August 12. DOJ Release.

DOJ’s Scam Center Strike Force Announces Results of U.S. and Private Industry “Disruption Week”
The Department of Justice’s (DOJ) Scam Center Strike Force announced the results of its “Disruption Week,” where the private sector, including major technology firms, took voluntary action to interrupt millions of social media, email, and internet access accounts used by transnational organized crime actors in Southeast Asia that were being used to defraud Americans. With the government’s sharing of information, the private actors were able to voluntarily freeze $3.8 million in cryptocurrency involved in laundering funds stolen from Americans. DOJ Release.

CFTC Joins Gemini in Motion for Relief from Judgment
On May 27, the CFTC announced that it was joining Gemini Trust Company LLC in a motion for relief from judgment in CFTC v Gemini Trust Co. LLC, a case filed in the Southern District of New York in June 2022 and previously resolved via consent order in January 2025. The CFTC argued that the complaint should not have been filed and would not have been filed under current enforcement standards. In part, the CFTC argued that the complaint lacked evidentiary support, that the complaint incorrectly focused on Gemini, a fraud victim, instead of the alleged fraudsters, and that the CFTC was improperly biased in bringing the claim against Gemini. CFTC Press Release.

OFAC Designates Nobitex, Iran’s Largest Digital Asset Exchange
On June 2, the Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned Iran’s largest digital asset exchange, Nobitex, along with three other Iranian digital asset exchanges. OFAC stated that Nobitex provided significant support to the Iranian regime, processing more than 50% of all Iranian digital asset inflows in 2025, and facilitated payments tied to Iran’s terrorist activities, sanctions evasion efforts, and Islamic Revolutionary Guard Corps (IRGC)-linked transactions. OFAC also sanctioned Nobitex’s chairman, co-founder, and former CEO Amir Hossein Rad. Nobitex has previously denied having direct ties to the Iranian government and said that any illicit transactions that may have passed through its platform did so without the knowledge or approval of management. Treasury Press Release; Radio Free Europe.

New York AG Settles with Uphold Over Failed Crypto Yield Product
On May 3, New York Attorney General Letitia James announced a more than $5 million settlement with cryptocurrency platform Uphold HQ, Inc. over its promotion of CredEarn, a third-party crypto yield product that collapsed in 2020. Uphold advertised CredEarn as a reliable savings product, when according to the allegations raised by the Attorney General, CredEarn was making risky loans to borrowers in China with no credit histories. NY AG Press Release.

SEC Charges Texas Resident With $12.3 Million Crypto Asset Fraud
On May 28, the SEC charged Nathan Fuller, a Texas resident, in the Southern District of Texas with operating a fraudulent digital asset trading scheme through his company, Privvy Investments, LLC. The SEC alleges that Fuller raised approximately $12.3 million from about 150 investors by falsely claiming he would use proprietary AI-based trading bots to conduct high-frequency arbitrage trading on crypto trading platforms. According to the SEC, Fuller’s bots did not function as represented, and he misappropriated around $6.2 million for personal expenses and used approximately $5.5 million to make Ponzi-like payments to earlier investors. SEC Press Release; The Block.

Missouri Attorney General Sues Crypto ATM Operator CoinFlip
On May 21, Missouri Attorney General Catherine Hanaway filed suit against GPD Holdings LLC, doing business as CoinFlip, alleging the operator of approximately 143 bitcoin ATMs in Missouri facilitated fraud schemes while charging hidden fees of up to 21.9% in violation of Missouri’s Merchandising Practices Act. The attorney general seeks approximately $1.8 million in statutory penalties, restitution for affected consumers, punitive damages, and an injunction barring CoinFlip from operating in the state until it implements fraud prevention measures and adequately discloses its fees. Law360.

Ohio Man Sentenced for $10 Million Cryptocurrency Ponzi Scheme
On May 19, Rathnakishore Giri, 31, of New Albany, Ohio, was sentenced to nine years in prison for allegedly orchestrating a cryptocurrency investment fraud scheme that raised over $10 million from investors by falsely promoting himself as an expert bitcoin derivatives trader, promising guaranteed returns with no risk to principal, and using new investor funds to repay earlier investors. Notably, the DOJ asserted that Giri continued to solicit funds from new victims while on pretrial release following his October 2024 guilty plea to wire fraud. DOJ Press Release.

INTERNATIONAL

MAS Revokes Major Payment Institution Licence of Digital Payment Token Service Provider
On May 20, the Monetary Authority of Singapore (MAS) announced that it had revoked the Major Payment Institution license of Bsquared Technology Pte. Ltd. (BSQ), effective May 14, 2026, due to alleged serious breaches of regulatory requirements, including significant weaknesses in BSQ’s risk management practices and conflict of interest policies, alleged failures to comply with MAS’ Guidelines on Outsourcing in its arrangements with related entities, and the alleged provision of materially false or misleading information to MAS on multiple occasions. MAS.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Kendall Day, Jeff Steiner, Sara Weed, Sam Raymond, Nick Harper, Apratim Vidyarthi, Nicholas Tok, Zuzanna Bobowiec, Michelle Lou, Cullen Omori, and Pavlina Skoufi*.

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)

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

*A legal trainee who is not yet admitted to practice law.

Gibson Dunn announces release of “Lexology Panoramic: Anti-Money Laundering 2026 (USA).”

Gibson Dunn is pleased to announce the release of Lexology Panoramic: Anti-Money Laundering 2026 (USA). The publication is the U.S. chapter of Lexology Panoramic’s Anti-Money Laundering guide, which is comprised of 12 jurisdictional chapters. The chapter covers U.S. anti-money laundering criminal laws applicable to all U.S. persons under 18 U.S.C. §§ 1956-57 and regulatory requirements for financial institutions under the Bank Secrecy Act. It discusses the elements of these laws and regulations, enforcement authorities and priorities, and compliance program trends.

Gibson Dunn partners Stephanie L. Brooker and M. Kendall Day and of counsel Ella Alves Capone and Sam Raymond authored the chapter.

The chapter is live and FREE for a limited time to access HERE.

The following Gibson Dunn lawyers contributed to this publication: Stephanie Brooker, M. Kendall Day, Ella Alves Capone, Sam Raymond, and Akila Bhargava.

Gibson Dunn’s Anti-Money Laundering (AML) practice is renowned for its expertise in advising financial institutions and businesses on compliance with AML and economic sanctions laws and regulations, and defending clients from AML and sanctions enforcement investigations.

Stephanie Brooker, a partner in the Washington, D.C. office of Gibson Dunn, is Co-Chair of the firm’s Global White Collar Defense and Investigations, Anti-Money Laundering, and Financial Institutions Practice Groups. Stephanie served as a prosecutor at DOJ, including serving as Chief of the Asset Forfeiture and Money Laundering Section, investigating a broad range of white-collar and other federal criminal matters, and trying 32 criminal trials. She also served as the Director of the Enforcement Division and Chief of Staff at FinCEN, the lead U.S. anti-money laundering regulator and enforcement agency. Stephanie has been consistently recognized by Chambers USA for enforcement defense and BSA/AML compliance as an “excellent attorney,” who clients rely on for “important and complex” matters, and for providing “excellent service and terrific lawyering.” She has also been named a National Law Journal White Collar Trailblazer and a Global Investigations Review Top 100 Women in Investigations.

M. Kendall Day is a nationally recognized white-collar partner in the Washington, D.C. office of Gibson Dunn, where he is co-chair of the Global Fintech and Digital Assets Practice Group, co-chair of the firm’s Financial Institutions Practice Group, co-leads the firm’s AML practice, and is a member of the White Collar Defense and Investigations and Crisis Management Practice Groups. Kendall is recognized as a leading white-collar attorney in the District of Columbia by Chambers USA – America’s Leading Business Lawyers. Kendall was recognized in The Best Lawyers in America® (2023–2026) for his work in white-collar criminal defense and named in Lawdragon’s 500 Leading Global Cyber Lawyers guide (2024–2025), which highlights “lawyers who connect it all – data and security, innovation and inspiration, litigation and exploration”. He is also recognized by Lawdragon as a Global Leader in Crisis Management. The Legal 500 US 2025 guide distinguishes Kendall as a “Recommended Lawyer” in Financial Services Litigation and Banking. Prior to joining Gibson Dunn, Kendall had a distinguished 15-year career as a white-collar prosecutor with the DOJ, rising to the highest career position in the DOJ’s Criminal Division as an Acting Deputy Assistant Attorney General (“DAAG”). As a DAAG, Kendall had responsibility for approximately 200 prosecutors and other professionals. Kendall also previously served as Chief and Principal Deputy Chief of the MNF. In these various leadership positions, from 2013 until 2018, Kendall supervised investigations and prosecutions of many of the country’s most significant and high-profile cases involving allegations of corporate and financial misconduct. He also exercised nationwide supervisory authority over the DOJ’s money laundering program, particularly any BSA and money laundering charges, deferred prosecution agreements and non-prosecution agreements involving financial institutions.

Ella Alves Capone is of counsel in the Washington, D.C. office of Gibson Dunn and a member of the firm’s White Collar Defense and Investigations, Global Financial Regulatory, AML, and Fintech and Digital Assets Practice Groups. Her practice focuses on advising multinational corporations and financial institutions on BSA/AML, anti-corruption, sanctions, payments, and consumer financial regulatory and enforcement matters, with a particular focus on regulatory matters impacting banks, casinos and gaming platforms, fintechs, e-commerce marketplaces, and digital assets businesses. She has significant experience representing clients in enforcement matters involving the DOJ, SEC, FinCEN, OCC, OFAC, the Federal Reserve, and state financial services regulators, including the NYDFS and state gaming regulators.. Ella regularly assists financial institutions with evaluating, structuring and enhancing their BSA/AML and sanctions compliance programs and controls, and she has extensive experience advising clients on regulatory coverage and licensing under state money transmitter regulations. Ms. Capone has been recognized by Law360 as a Fintech Rising Star, Super Lawyers as a “Rising Star” in White Collar every year since 2022, and Lawdragon 500 X – The Next Generation for her white-collar litigation and investigations work.

Sam Raymond is of counsel in Gibson Dunn’s New York office and a member of the White Collar Defense and Investigations, Litigation, Anti-Money Laundering, Fintech and Digital Assets, and National Security Groups. As a former federal prosecutor, Sam has a broad-based government enforcement and investigations practice, with a specific focus on investigations and counselling related to anti-money laundering, the Bank Secrecy Act, and sanctions. Prior to joining Gibson Dunn, Sam was an Assistant United States Attorney in the U.S. Attorney’s Office for the Southern District of New York from 2017 to 2024. In that role, Sam tried multiple cases to verdict and prosecuted a broad range of federal criminal violations. Sam was a member of the team that prosecuted executives at FTX and Alameda Research, and was a member of the trial team in United States v. Bankman-Fried. He also served as one of the Office’s inaugural Digital Asset Coordinators, offering trainings and coordinating within the Office regarding digital assets, and engaging with other U.S. Attorney’s Offices, DOJ components, and law enforcement agencies regarding cryptocurrency.

Contact Information:

For assistance navigating these issues, please contact the Gibson Dunn lawyer with whom you usually work, the leaders or members of the firm’s Anti-Money Laundering practice group, or the authors:

Stephanie Brooker – Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)
M. Kendall Day – Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)
Ella Alves Capone – Washington, D.C. (+1 202.887.3511, ecapone@gibsondunn.com)
Sam Raymond – New York (+1 212.351.2499, sraymond@gibsondunn.com)

We are pleased to provide you with the May 2026 edition of Gibson Dunn’s monthly European privacy, cybersecurity, and data Innovation update. Please feel free to reach out to us to discuss any of the below topics further.

Europe

05/26/2026

NIS Cooperation Group | Templates | NIS2 Incident Reporting

The NIS Cooperation Group has adopted common templates for cyber incident reporting under the NIS2 Directive.

The templates were agreed at the Group’s 39th plenary meeting in Cyprus by EU Member States, the European Commission and ENISA. They establish a common reporting format and harmonized reporting fields for cybersecurity incident notifications across the EU, with the aim of reducing administrative burden and supporting consistent compliance with NIS2 reporting obligations. The European Commission frames the templates as a first step toward the single-entry point for incident reporting proposed under the Digital Omnibus. As a next step, the European Commission is expected to adopt the templates through an implementing act, making them mandatory for all Member States.

For more information: European Commission [EN]

05/05/2026

European Commission | Cooperation | EU-Japan Digital Platform Regulation Cooperation

The European Commission and Japan’s platform regulator have entered into a cooperation arrangement on digital platform supervision.

Signed during the fourth EU-Japan Digital Partnership Council, the arrangement is intended to support supervisory work under the EU Digital Services Act and Japan’s Information Distribution Platform Act. According to the European Commission, cooperation will focus on areas of common interest including platform transparency requirements and notice-and-action mechanisms and will be carried out through technical expert dialogues, joint training, the sharing of best practices, joint studies and coordinated research projects.

For more information: European Commission [EN]

France

05/28/2026

CNIL | Guidance | Cloud Computing under the GDPR

The CNIL has published guidance clarifying how GDPR roles should be allocated between cloud providers and their customers.

The guidance examines the qualification of cloud providers and customers as controllers, processors or joint controllers in the context of service provision, service improvement, and cloud security. It states that, for service provision, the customer generally acts as controller and the provider as processor; for security “of” the cloud, the provider may act as controller; and for security “in” the cloud, the customer generally remains controller with provider support as processor. The CNIL further recommends documenting the qualification reasoning where roles are uncertain.

For more information: CNIL Website [FR]

05/27/2026

CNIL | Case Study | Cyberattack at a Processor and Data Breach Response

The CNIL has published a case study on data breach response where a processor is compromised.

The scenario – fictional but based on real incidents notified to the CNIL – describes a cloud solution provider compromised through social engineering, with the attacker copying data belonging to both the provider itself and several of its client companies. The case turns on the provider’s dual role: it acts as a controller for its own data and as a processor for its clients’ data, and must handle both sets of obligations at once. The CNIL highlights the processor’s duty to alert controllers rapidly, the controller’s duty to notify the CNIL within 72 hours, and the duty to inform affected individuals where the breach is likely to result in a high risk. It also sets out preventive measures for controllers, DPOs and security teams before outsourcing processing.

For more information: CNIL Website [FR]

05/18/2026

CNIL | Report | 2025 Annual Report and Cybersecurity Enforcement Priorities

The CNIL has published its 2025 annual report and announced a stronger cybersecurity focus for 2026.

The report records 20,150 complaints, 323 investigations, and 259 corrective measures including 83 sanctions, with fines totaling nearly €487 million in 2025. The CNIL also received 6,167 data breach notifications, with hacking accounting for around half of notified incidents, and said it will devote 50% of its controls and enforcement actions in 2026 to data security, including in sectors processing large volumes of sensitive or highly personal data.

For more information: CNIL Website [FR]

Germany

05/06/2026

BfDI | Report | 34th Activity Report

Germany’s Federal Commissioner for Data Protection and Freedom of Information (BfDI) has presented its activity report for 2025.

The report notes an increase in supervisory activity, with 11,824 submissions received in 2025 (+36% year-on-year), alongside 80 on-site inspections, 40 written audits, and 129 supervisory measures. It also highlights a €45 million fine imposed on a telecommunications company over deficiencies in the supervision of partner agencies and authentication processes. In addition, the BfDI outlines several initiatives launched in 2025, including “ReguLab,” its dedicated data protection sandbox introduced as part of its broader guidance efforts. Finally, the BfDI expresses concerns regarding the proposed reform to the oversight of intelligence services, which would transfer supervisory responsibility from the BfDI to the Independent Control Council (UKRat).

For more information: BfDI Website [DE]

05/04/2026

Berlin DPA | Reprimand | Data Breach at a Public Transport Operator

The Berlin Commissioner for Data Protection and Freedom of Information (Berlin DPA) reprimanded the Berlin public transport operator over its handling of a data breach at a processor.

The breach arose when a service provider – engaged by the operator to send letters and emails, and handling around 180,000 customer records (names, addresses, contract and customer numbers and, in part, email addresses) – was hit by a cyberattack in 2025. The Berlin DPA found that the operator had relied on the processor’s contractual assurance that the data would be deleted without verifying that deletion had in fact taken place, even though the data should no longer have been stored once the assignment had ended, in breach of Article 5(2) read with Article 5(1)(c), (e) and (f) and Article 32(1) GDPR. It further found that the operator had notified the breach late, contrary to Article 33 GDPR. The authority issued a reprimand rather than a fine. The case underscores that controllers must actively monitor their processors, including as regards data deletion, and report breaches without undue delay.

For more information: Berlin DPA [DE]

Ireland

05/08/2026

Data Protection Commission | Sanction | Data Breach

The Irish Supervisory Authority (DPC) has published its final decision following an inquiry into a series of personal data breaches at a bank.

The breaches arose after malicious actors used customer information to impersonate customers through the controller’s contact center, gain access to their accounts, amend account details, and obtain additional account information. The DPC found infringements of Articles 5(1)(f), 32(1) and 33(1) GDPR, concluding that appropriate security protocols had not been followed in any of the three incidents. The authority reprimanded the bank, fined it €250,000 for security-related infringements and €27,500 for the delayed breach notification.

For more information: DPC Website [EN]

05/05/2026

Data Protection Commission | Inquiry | Transfers of Personal Data to China

Ireland’s DPC has opened an inquiry into an online fashion retailer’s transfers of personal data to China.

The inquiry concerns transfers of personal data of EU and EEA data subjects from the online fashion retailer’s Irish entity to China. The DPC states that the inquiry will assess compliance with GDPR Article 5, Article 13 and Chapter V, with particular focus on whether the transfer arrangements between the Irish company and China ensure a level of protection essentially equivalent to that guaranteed in the EU. The DPC also indicated that the investigation will be conducted in cooperation with other European supervisory authorities.

For more information: DPC Website [EN]

Italy

05/28/2026

Garante | Warning | AI in the Workplace

The Italian Supervisory Authority (Garante) warned an Italian start-up that its workplace AI tool may violate data protection and worker-protection rules.

The Garante issued a formal warning to a start-up whose AI-powered workplace monitoring tool analyzes employee communications to infer stress levels and emotional states. The Garante stressed that such processing could infringe the GDPR, Italian worker-protection rules, and the EU AI Act’s ban on workplace emotion-inference systems and ordered privacy-by-design safeguards to prevent employer access to individual emotional data.

For more information: Garante Website [IT]

05/21/2026

Garante | Sanction | Data Breach

The Garante has reported an €85,000 fine against a consulting firm for GDPR infringements following a data breach.

The breach resulted in unauthorized access to personal data relating to more than 61,000 users of online services, including names, emails, and passwords. The Garante found infringements of Articles 5(1)(e) and (f), 32 and 34 GDPR, noting in particular that certain passwords were stored in clear text or protected with outdated cryptography, and that credentials for unused systems had been retained. The authority also found that affected individuals were informed approximately two months after the incident was discovered, and only following a corrective order, stressing that reputational concerns cannot override data subjects’ rights.

For more information: Garante Website [IT]

05/06/2026

Garante | Press Release | Deepfakes

The Garante has issued a further warning on deepfake services that generate harmful content from real images or voices.

The Garante, in a push to obtain greater powers to deter deepfakes, states that services using AI to generate and share content from real images or voices, including services that “undress” people without consent, may seriously affect fundamental rights and freedoms and may also involve criminal conduct. It recalls an earlier warning concerning AI-based services, and states that the authority should be able to block access from Italy to such services in order to limit rapid viral dissemination of harmful material.

For more information: Garante press release [IT]

The Netherlands

05/08/2026

AP | Sanction | Unlawful Transfers to Russia

The Dutch Supervisory Authority (AP) has fined the operator of a taxi app €100 million for unlawful transfers of personal data from Finland and Norway to Russia.

The AP fined the operator for unlawfully transferring personal data of Norwegian and Finnish drivers and customers to Russian servers, including sensitive data such as ID scans, locations, chat content, and social security numbers. The AP found violations of GDPR after the operator failed to implement adequate safeguards for transfers outside the EEA, noting that Russia’s lack of an independent privacy authority creates risks of government access, and ordered the company to cease all transfers immediately.

For more information: AP Website [NL]

Spain

05/28/2026

AEPD | Guidance | Legal Reports Publication

The Spanish Supervisory Authority (AEPD) has published more than 1,500 of its legal opinions as open data.

The AEPD has made more than 1,500 legal opinions publicly available to promote legal certainty and proactive compliance, covering interpretations of data protection law across multiple sectors. The reports, issued in response to consultations from organizations and individuals, can now be browsed individually or bulk-downloaded via a new Open Data section, advancing the transparency goals of the AEPD’s 2025–2030 Strategic Plan.

For more information: AEPD Website [ES]

05/26/2026

AEPD | Decision | Termination of Cross-Border Proceeding

The AEPD has closed a cross-border GDPR proceeding against a travel technology company after voluntary payment of €14.4 million.

The AEPD fined Amadeus €18 million (reduced to €14.4M after voluntary payment) for aggregating travelers’ booking data into profiles for product development without adequate transparency under Article 14 GDPR or a valid lawful basis under Article 6. The cross-border investigation found that Amadeus reused years-old booking data from airlines and travel agencies for purposes travelers could not reasonably expect, without providing specific notice or demonstrating a proper legitimate-interest balancing test.

For more information: AEPD Decision [ES]

05/06/2026

AEPD | Annual Report | 2025 Annual Report

The AEPD has reported a significant increase in complaints and continued activity in cross-border cases.

The AEPD’s 2025 annual report records 30,931 complaints, a 64% increase compared with the previous year, and notes growth in sanctions and warnings linked to data breaches. The report also highlights 1,118 cross-border cases in which the AEPD participated, 47 cases in which it acted as lead supervisory authority, total sanctions of €48.108 million, and more than 126,000 registered DPOs.

For more information: AEPD Annual Report [ES]

United Kingdom

05/19/2026

ICO | News | Data Protection Complaints Process

The UK’s Supervisory Authority (ICO) has reminded organizations that new statutory complaints-handling requirements will apply from 19 June 2026 under the Data (Use and Access) Act 2025.

Under the Data (Use and Access) Act 2025, all UK organizations must have a formal data protection complaints process in place by 19 June 2026, requiring a clear channel for complaints, acknowledgment within 30 days, timely investigation, and communication of outcomes. The ICO is urging SMEs in particular to review its published guidance now, emphasizing that a good complaints process protects customer trust and reduces regulatory risk.

For more information: ICO Website [EN]

05/18/2026

ICO | Advice | Online Advertising Rules

The ICO has published advice to the UK Government on possible amendments to online advertising rules under PECR.

The ICO has published advice to the UK government recommending that PECR Regulation 6 be amended to exempt low-risk, context-based advertising from consent requirements, while maintaining mandatory consent for intrusive cross-site behavioral tracking and profiling. The proposal aims to reduce consent fatigue, incentivize privacy-preserving ad technologies, and remove regulatory barriers to innovation, though current rules remain in force until any legislative change is made.

For more information: ICO Website [EN]

05/11/2026

ICO | Sanction | Cyberattack and Data Breach

The ICO has fined two companies £963,900 (€1,105,453) after a cyberattack affecting more than 633,000 people.

The ICO intervened after a phishing-initiated breach went undetected for nearly two years, ultimately resulting in 4.1TB of personal data, including bank details, National Insurance numbers, and health-related information, being published on the dark web. The investigation revealed critical security failures including minimal network monitoring (only 5% coverage), use of obsolete software like Windows Server 2003, and inadequate access controls, with the ICO stressing that proactive security is a legal requirement, not optional. Accordingly, the ICO identified infringements of Article 5(1)(f) and Article 32(1) UK GDPR, and noted that the companies reached a voluntary settlement, admitted the infringement, and agreed to pay the reduced fine without appeal.

For more information: ICO Website

The following Gibson Dunn lawyers prepared this update: Ahmed Baladi, Vera Lukic, Kai Gesing, Joel Harrison, Thomas Baculard, Ioana Burtea, Kelly Cannon, Billur Cinar, Hermine Hubert, Christoph Jacob, Yannick Oberacker, 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)
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)
Vivek Mohan – Palo Alto (+1 650.849.5345, vmohan@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)
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)

The Office of the U.S. Trade Representative has proposed forced labor-related tariffs that are about more than forced labor: they are an early test of whether the Trump Administration can use traditional trade authorities to rebuild broad tariff coverage after the Supreme Court invalidated the President’s novel IEEPA tariffs. The proposal, issued under Section 301 of the Trade Act of 1974, would impose new 10% or 12.5% duties on products of 60 economies that USTR found either lack, or do not effectively enforce, a ban on imports of goods with forced labor. If finalized, the tariffs may offer a more process-heavy—but potentially more legally durable—alternative to emergency tariff authorities, provided USTR develops a reasoned record, responds to significant comments, and connects the remedy to its statutory findings.

Pursuant to Section 301 of the Trade Act of 1974 (Section 301), the Office of the U.S. Trade Representative (USTR) may investigate whether a foreign government’s trade practices are unjustifiable, unreasonable, or discriminatory and burden or restrict U.S. commerce. On June 2, 2026, after receiving more than 450 written comments, hearing testimony from nearly 60 witnesses, and conducting consultations with 46 economies, USTR issued its report and proposed action in 60 investigations into foreign economies’ forced-labor import regimes.

The report stated that 54 economies have not imposed a legal prohibition on imports of goods made with forced labor and that the remaining six economies have imposed such prohibitions but have not effectively enforced them. On June 3, 2026, USTR issued a Federal Register notice proposing ad valorem duties of 10% or 12.5% on products of those economies, subject to a lengthy Annex A of exclusions and several categorical carve-outs. Comments are due July 6, 2026, and the Section 301 Committee will hold hearings beginning July 7, 2026, after which USTR may modify, finalize, or decline to adopt the proposed action. Just as the President’s global 10% tariff under Section 122 is set to expire (absent Congressional action) in late July, this expansive use of Section 301 has apparently been developed to be a flexible enough tool to achieve the administration’s tariff goals, but on a firmer statutory ground to survive likely legal challenges.

I. Background

On March 12, 2026, less than three weeks after the Supreme Court struck down the President’s International Emergency Economic Powers Act (IEEPA) tariffs in Learning Resources, Inc. v. Trump, USTR initiated 60 parallel investigations (against 59 countries and the European Union) for forced labor enforcement failures. The initiation notice solicited information on whether foreign economies’ failure to prohibit and effectively police imports of goods produced wholly or in part with forced labor constitutes an unreasonable or discriminatory act, policy, or practice that burdens or restricts U.S. commerce.

The proposal should be understood as country- and economy-based, not shipment-specific. That is, the tariffs would apply based on the country of origin and product scope, regardless of whether the importer can prove that a particular shipment is free of forced labor. Conversely, products excluded from the proposed tariffs could still be detained or excluded under the Uyghur Forced Labor Prevention Act (UFLPA), a withhold release order, or other forced labor enforcement tools if U.S. Customs and Border Protection (CBP) identifies supply chain risk.

Three features of the proposal are notable:

Scope: The action would reach products of 60 economies (which account for approximately 99.4% of U.S. imports, as estimated by USTR), including most major U.S. trading partners, rather than targeting a single country and sector as in the case of past Section 301 actions. However, major sectors—including energy, certain agricultural products, minerals and metals, pharmaceuticals, and certain electronics—would be exempt.
Structure: USTR proposes a two-tier tariff, subject to a long list of exclusions in Annex A and several categorical carve-outs, along with a reduced-rate textile import mechanism.
Record: USTR appears to be seeking to support the action with a view toward defending against potential judicial challenges, relying on public comments, hearings, consultations, case studies, and responses to significant comments. (This approach is likely taken, at least in part, in response to litigation involving Section 301 action taken against Chinese imports in the first Trump Administration; as noted below, litigation over prior Section 301 tariffs targeting goods from China is currently subject to a request for review pending at the U.S. Supreme Court and involves whether the USTR had properly accounted for comments filed in response to modifications to the original Section 301 relief.)

II. Proposed Action and Legal Framework

A. Scope and Structure of the Proposed Tariffs

The Federal Register notice proposes ad valorem duties on all products of the investigated economies, except products excluded by Annex A or by categorical carve-outs. The proposed rates are:

10% additional duties for 14 economies (Argentina, Bangladesh, Cambodia, Canada, Ecuador, El Salvador, the European Union, Guatemala, Indonesia, Malaysia, Mexico, Pakistan, Taiwan, United Kingdom) that it was stated have imposed a forced labor import prohibition, undertaken commitments regarding forced labor import prohibitions in Agreements on Reciprocal Trade, or which USTR otherwise stated had a partial regime preventing the importation of certain forced labor goods.
12.5% additional duties for all other 46 investigated economies that it was stated had failed to impose and effectively enforce a forced labor import prohibition. The list includes significant U.S. trading partners, such as Brazil, China, Japan, and South Korea.

Unless a product is excluded (as discussed below), the new duties would be imposed in addition to other applicable duties, taxes, fees, and charges, including most-favored-nation duties, China Section 301 duties (previously imposed), antidumping and countervailing duties, and other tariff measures.

Although the notice begins from a broad premise—all products of the 60 investigated economies—Annex A excludes, that is, removes from tariff coverage, a wide range of products that USTR appears to view as strategically sensitive, difficult to replace, or unlikely to advance the action’s objectives if tariffed. The excluded categories include, among others:

energy products, fuels, natural gas, coal, coke, petroleum products, and electrical energy;
critical minerals, ores, concentrates, unwrought metals, scrap, rare earth and specialty metals, gold, silver, platinum group metals, and certain magnets and coins;
many food and agricultural products, including certain meats, tropical fruits and vegetables, coffee, tea, cocoa, spices, and specialty crops;
pharmaceuticals, active pharmaceutical ingredients, medicaments, vaccines, immunological products, chemicals, fertilizers, and certain radioactive materials;
computers, servers, semiconductors, integrated circuits, telecommunications equipment, smartphones, display modules, batteries, and semiconductor manufacturing equipment;
civil aviation articles and parts; and
natural rubber, woodpulp, certain hardwood products, polymers, ferroalloys, stainless steel scrap, and other industrial inputs.

The notice also categorically excludes informational materials, donations, and accompanied baggage. Further, products already subject to tariffs under Section 232 of the Trade Expansion Act of 1962, United States-Mexico-Canada Agreement (USMCA)-compliant goods of Canada or Mexico, and certain textiles and apparel articles entering duty-free as goods of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, or Nicaragua under the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) are also exempted from the proposed forced labor tariffs.

A proposed textile mechanism is one of the more novel—and least developed—features of the notice. USTR proposes a “textile mechanism that would allow for a certain volume of apparel and textile imports from certain economies to enter the United States at a reduced Section 301 tariff rate.” Although the notice is light on details as proposed, one category of reduced-duty imports would be tied to a trading partner’s purchases of U.S.-produced textile inputs, and a separate category would be tied to that partner’s imports of U.S. cotton and cotton products. In practical terms, the mechanism appears designed to encourage supply chains in which U.S. cotton, yarn, fabric, or other textile inputs are used abroad for downstream apparel and textile production, while leaving key operational details to be developed through the comment process.

USTR is inviting comments on the scope of the proposed tariff list, whether products should be added to or removed from Annex A, the proper duty rate, whether different rates should apply depending on an economy’s legal or negotiated commitments, and how the textile mechanism should be designed. USTR specifically asks commenters to address whether a product is a necessary raw material, whether a tariff would create domestic unavailability, serious supply dislocations, or economy-wide disruptions, and whether tariffing the product would be practicable or effective in eliminating the challenged practices. Comments must be submitted through USTR’s electronic portal by July 6, 2026.

B. USTR’s Record and Potential Legal Challenges

The USTR report provides the administrative record for the proposed action. At a high level, the report does four things. First, it describes forced labor as prevalent, profitable, and embedded in global supply chains. Second, it concludes that failing to prohibit imports of forced labor goods is an unreasonable practice under Section 301. Third, it contends that such practices burden or restrict U.S. commerce by exposing U.S. producers to unfair competition in both U.S. and third-country markets. Fourth, it makes economy-specific findings for each of the 60 investigated economies.

The report includes case studies addressing sectors such as solar products and polysilicon, cotton, textiles and apparel, tobacco, rice, and beef. Those examples are designed to connect forced labor practices abroad with lost U.S. exports, price suppression, displacement of U.S. products in third-country markets, and downstream competition against U.S. producers.

Section 301 requires USTR to find both an unreasonable or discriminatory act, policy, or practice and a burden or restriction on U.S. commerce. The report does not attempt a granular, country-by-country injury analysis for every investigated economy. Instead, USTR appears to build the record in two steps: first, by making economy-specific findings that each investigated economy has failed to prohibit or effectively enforce a forced-labor import ban; and second, by relying on sectoral case studies, public comments, consultations, and broader evidence regarding forced labor’s effects on global competition to show a burden on U.S. commerce. That approach could become central to any future litigation: challengers will likely argue that the action is too sweeping and insufficiently tailored, while the Government will likely contend that Section 301 permits broad remedial action when the record shows that the challenged acts, policies, or practices burden U.S. commerce.

The Supreme Court’s IEEPA tariff decision turned in large part on the absence of an express congressional grant of tariff-imposing authority. Section 301 provides much more solid ground. Congress expressly authorized duties in Section 301 (and even identified forced labor as an example of “unreasonable” practices in the statute), but it conditioned the implementation of such duties on conducting an investigation, consulting with affected foreign countries, inviting public participation, and providing reasoned decision-making. As we discussed in an earlier alert, traditional trade authorities remain available even if emergency tariff authority is constrained. The tradeoff is slower implementation, but a stronger legal foundation.

The recent history of litigation over the China Section 301 List 3 and List 4A tariffs may be cited by the Government as support for its proposed action. That litigation involved challenges by thousands of importers to USTR’s later rounds of China Section 301 tariffs, which expanded the original tariff action targeting China’s acts, policies, and practices related to technology transfer and intellectual property. As modified, the duties covered hundreds of billions of dollars in additional Chinese-origin goods imported into the United States. The challengers argued, among other things, that USTR exceeded its statutory authority and failed to comply with Administrative Procedure Act requirements in adopting the later tariff lists. In response to the challenge, the Court of International Trade (CIT) required USTR to provide a fuller explanation of its decision making and to address significant public comments to satisfy the APA requirements. After remand, the CIT sustained the tariffs as falling within USTR’s statutory authority, and the Federal Circuit affirmed. Plaintiffs in that case have now asked the Supreme Court to weigh in, and that request is pending.

However, the earlier Section 301 action may certainly be distinguished from the current proposed action, particularly since (1) the prior Section 301 action was limited to one specific country (China), (2) the challenged action targeted practices as to which there were clear factual bases for action (technology transfer and intellectual property), and (3), perhaps most significantly, the challenged action did not involve the original Section 301 measures, but rather the scope of USTR’s authority to “modify” the original relief.

In any event, it seems likely that litigation will follow if the proposed forced labor tariffs are finalized. The breadth of the proposed action—60 economies and most product categories—makes it unlike the historical, more targeted Section 301 actions of the past. The proposal also arrives against an active tariff-litigation backdrop, including the CIT’s recent rejection—now on appeal—of the Trump Administration’s Section 122 global tariffs, and the pendency of the request for a U.S. Supreme Court review of the Section 301 action noted above. But the Trump Administration will have the benefit that Section 301 plainly provides Congressional authority to impose increased tariffs as a remedy (unlike IEEPA) without express time deadlines (unlike Section 122).

III. Implications for Business and Supply Chains

Although the tariffs are not yet final, the proposal has immediate practical implications. U.S. importers and other interested parties may wish to use the comment period to assess potential exposure, preserve advocacy options, and prepare for possible implementation. In particular, companies should consider the following steps:

Consider mapping tariff exposure by Harmonized Tariff Schedule classification, country of origin, and exclusion status. Companies may wish to identify potentially covered imports by Harmonized Tariff Schedule of the United States (HTSUS) classification and country of origin, and assess those products against Annex A and the categorical exclusions. The key question is not whether a company sources from a high-risk forced labor region, but whether its imports are products of a covered economy and whether the specific HTSUS provision is excluded.
Consider using the comment period as the near-term exclusion opportunity. The notice does not establish a post-final, importer-specific exclusion process. It does, however, invite comments on whether particular products should be added to or removed from the tariff scope and whether existing Annex A exclusions are appropriate. Companies seeking relief may wish to consider targeted comments supported by data: domestic supply constraints, lack of U.S. substitutes, risk of production shutdowns, price effects, contractual constraints, strategic supply considerations, and evidence that duties on the product would not advance the forced labor objective.
Evaluate the absence of an importer-specific compliance safe harbor in the current proposal. Under the proposal as drafted, an importer would not obtain a lower tariff rate simply because it has a strong forced labor compliance program or can prove that a particular shipment is not made with forced labor. The tariff is tied to USTR’s findings about an economy’s legal and enforcement regime, and to product scope. A strong compliance record may be useful advocacy evidence in the comment process—for example, to support a product-specific exclusion, a reduced or phased-in tariff rate, a narrower tariff-line approach, or even the creation of an importer certification or exclusion process in the final action. But unless USTR adds such a mechanism, compliance evidence would not itself remove a covered product from the proposed duty.
Other U.S. forced labor-related laws remain in force. The proposed tariff does not replace UFLPA or CBP forced labor enforcement. Instead, it adds a separate layer of country-based tariff risk. Companies in solar, apparel, textiles, agriculture, electronics, base metals, automotive, and other high-risk sectors may wish to continue stress-testing supplier mapping, bill-of-materials traceability, purchase order controls, contractual audit rights, and escalation procedures. CBP’s UFLPA enforcement statistics remain a useful benchmark for enforcement focus by sector and origin. Supply chain due diligence may not affect the tariff, but it remains critical to avoid detentions, exclusions, penalties, and reputational risk—and it can support comments explaining why particular products or supply chains should not be swept into the final action.

Assess supply chains with the breadth of the proposal in mind. Because the proposal covers 60 economies, shifting production from one foreign country to another may not eliminate exposure. The more meaningful opportunities may involve products that qualify for Annex A, USMCA-compliant goods of Canada or Mexico, CAFTA-DR treatment for certain textiles and apparel, or the proposed textile mechanism. Companies considering origin planning may wish to review country-of-origin rules carefully and avoid any structure that could be characterized as evasion or unlawful transshipment.
Consider reviewing commercial contracts now. Importers, distributors, manufacturers, and retailers may wish to review contracts for duty allocation, price-adjustment rights, tariff-change clauses, force majeure language, customs responsibility, Incoterms, and recordkeeping obligations. Because comments are due quickly and final tariffs could follow soon after the hearings, companies may have limited time to renegotiate commercial terms after the final action is announced.

IV. Conclusion and Looking Ahead

The proposed forced-labor tariffs are not final, and the rate tiers, product scope, exclusions, and textile mechanism could change after the comment period and upcoming hearings. Interested companies may wish to consider submitting public comments to advocate for product-specific exclusions, adjustments to duty rates, clarification of the proposed textile mechanism, administrability concerns, or compliance-sensitive approaches for companies that can document robust forced-labor due diligence.

Looking ahead, businesses should also watch for final action in this proceeding and any resulting litigation, as well as other ongoing Section 301 matters, such as the parallel investigations USTR initiated in March 2026 into structural excess capacity and production in manufacturing sectors across 16 economies as well as the pending request for the Supreme Court to review the prior China Section 301 actions. Section 301 may become the Trump Administration’s preferred vehicle for broad tariff measures going forward, as this statute—while more process-heavy than emergency tariffs—is potentially more durable in court. Unless expressly exempted, new tariff measures may stack—making classification, origin, exclusion analysis, and supply-chain documentation central to tariff planning for the remainder of 2026 and beyond.

The following Gibson Dunn lawyers prepared this update: Adam M. Smith, Ron Kirk, Don Harrison, Chris Timura, Samantha Sewall, Anna Searcey, Layla Reynolds, Hui Fang, and Erika Suh Holmberg.

United States:
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
David P. Burns – Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
Courtney M. Brown – Washington, D.C. (+1 202.955.8685, cmbrown@gibsondunn.com)
Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Roxana Akbari – Orange County (+1 949.475.4650, rakbari@gibsondunn.com)
Karsten Ball – Washington, D.C. (+1 202.777.9341, kball@gibsondunn.com)
Sarah Burns – Washington, D.C. (+1 202.777.9320, sburns@gibsondunn.com)
Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
Justin duRivage – Palo Alto (+1 650.849.5323, jdurivage@gibsondunn.com)
Zach Kosbie – Washington, D.C. (+1 202.777.9425, zkosbie@gibsondunn.com)
Dorkas Laura Medina – Washington, D.C. (+1 202.777.9444, dmedina@gibsondunn.com)
Chris R. Mullen – Washington, D.C. (+1 202.955.8250, cmullen@gibsondunn.com)
Sarah L. Pongrace – New York (+1 212.351.3972, spongrace@gibsondunn.com)
Layla Reynolds – New York (+1 332.253.7690, lreynolds@gibsondunn.com)
Anna Searcey – Washington, D.C. (+1 202.887.3655, asearcey@gibsondunn.com)
Erika Suh Holmberg – Washington, D.C. (+1 202.777.9539, eholmberg@gibsondunn.com)
Audi K. Syarief – Washington, D.C. (+1 202.955.8266, asyarief@gibsondunn.com)
Scott R. Toussaint – Washington, D.C. (+1 202.887.3588, stoussaint@gibsondunn.com)
Shuo (Josh) Zhang – Washington, D.C. (+1 202.955.8270, szhang@gibsondunn.com)

May ‘26 – like May ‘25 but with GLP-1. Lots of sugar-coated proposals, but is there the appetite?

May highlights

This time last year was a deal banquet with half of the total transactions for 2025 launched across May and June and 11 firm offers announced in May alone. There was plenty on the menu again this year but is anyone ordering?

Starter

What else but EQT’s improved and final £9.4bn indicative proposal for Intertek Group plc on 12 May. The Intertek board is “minded to recommend” it. However, as potentially the second largest P2P ever, it might cause indigestion.

Mains – there is a choice of:

Ingredion Incorporated’s £2.65bn indicative approach to Tate & Lyle plc announced on 14 May 2026. This one may be held in the kitchen while competition authorities taste-test.
Toscafund’s non-binding £1bn proposal for Spire Healthcare Group plc also announced on 14 May 2026 (another of the month’s specials which the Spire board is “minded to recommend”). Toscafund’s clearly hungry to upsize its existing 18% shareholding.
Back on the menu (following previous discussions with TA Associates and Montagu Private Equity both of which were returned to the kitchen) is AIM listed Advanced Medical Solutions Group plc, announcing on 21 May it had received an all-cash indicative approach from H.B. Fuller Company.

For dessert – there is:

the Gamma Communications plc special, with potential bidders served three different ways (Providence Equity Partners L.L.C., Eiris LLP or a consortium of Oakley Capital and Giacom) for the c.£900m potential target; or
a double “TREIT” of Glenstone REIT plc’s possible offer for Alternative Income REIT plc announced on 15 May and LondonMetric Property plc and Schroder Real Estate Investment Trust Limited’s announcement on 12 May of agreed key terms in relation to a non-binding all share offer for Picton Property Income Limited.

The May Data

Offers Announced

Offers by Sector (YTD)

Bid Premia	Financial Advisor Fees (% deal value)

What’s Happened?

A proposal with no price

Price discovery through multiple revised and increased proposals has become a common feature of recent bids, in particular bigger ticket ones (see EQT’s approach to Intertek). A request for due diligence access without naming a price (with that price dependent on the diligence findings) is more unusual. However, that is what Glenstone REIT plc has put forward in connection with its announcement that it is considering a possible cash offer for Alternative Income REIT plc, in which it is the largest shareholder (24%).

Glenstone’s request follows the announcement by AEW UK REIT plc in April that it would not make an offer for Alternative Income REIT plc as “although indicative heads of terms were reached at an early stage of the process, it was established during the course of due diligence that agreement on certain key matters could not be concluded”.

Offers that were launched took AIM

Three formal offers were launched in May. Each was for an AIM listed target and there were other common themes (such as the parties being well known to each other and the bidder giving a cost coverage agreement) which may have helped in getting these across the line.

The largest of these was AMG Critical Minerals N.V.’s recommended £57m cash and share offer for Zinnwald Lithium plc announced on 14 May. Dutch based AMG (producer of speciality materials and provider of furnace systems) is currently the largest shareholder (29.3%) in Zinnwald, which has an interest in one of Europe’s major lithium reserves that straddles the German-Czech border.

The German connection continued with Vossloh AG’s recommended £29m cash offer for Cordel Group plc announced on 13 May. Rail infrastructure maintenance provider Vossloh, similarly is no stranger, having participated in a pilot project in Continental Europe last year with rail network monitoring specialist Cordel.

Like AMG Critical Minerals, NEO NEXT+ Energy Upstream UK Limited agreed to a cost coverage agreement in respect of its £7.2m recommended cash offer for Deltic Energy plc announced on 7 May.

The even longer long stop date

Last November, Harwell Private Equity announced a recommended £64m cash offer for Frenkel Topping Group plc with a novel alternative offer of part cash and part stapled units (each unit comprising a mix of ordinary shares, loan notes and preference shares in different entities in the acquisition structure).

In a reminder of the potential additional complexities in offering alternative share consideration for an FCA regulated entity, the parties had to extend the long stop date for the transaction from 29 March to 29 May. The Scheme is conditional upon FCA change of control approval for each of the proposed controllers (including through the alternative share consideration). As the parties were continuing to engage with the FCA to ensure Bidco’s capital structure meets the changes to the capital adequacy requirements which came into effect on 1 April, the long stop date needed to be extended again to 29 July. FCA approval has since been obtained following structural amendments to the stapled units to replace the preference share component with additional ordinary shares and certain of the companies in the acquisition structure being replaced by newly established Jersey entities.

Looking Ahead

Holiday season

Back in November, PPHE Hotel Group Ltd commenced a formal sale process following the announcement by its two main shareholders (who collectively hold 44%) that they were considering a range of options in relation to their investment.

On 27 May 2026 PPHE announced it had received an indicative proposal from the Tel Aviv listed hospitality group Fattal Hotel Group. The indicative cash proposal values PPHE at £930m. Fattal has said that it is discussing potential structures for the transaction with PPHE with a view towards announcing a firm offer within the next 4 weeks. To be seen if PPHE’s major shareholders can be booked in before summer.

P2P Financing

There were no debt-financed bids for UK public companies in May, but for prospective bidders eyeing the availability of debt the signs were very promising. The geopolitical issues (Middle East conflict and elevated fuel prices) and sectoral issues (AI disruption to software businesses) which have subdued the debt markets since February remain unresolved. Nevertheless, May saw a decided uptick in the number of borrowers raising debt, with around €6.6 billion of loans launched in the first two weeks alone. And almost every loan that came to the syndicated market tightened its pricing guidance or accelerated the deadline for responses, reflecting deep demand from lenders.

The standout event was a €2.02 billion dual currency syndicated loan to back Carlyle’s €7.7 billion buyout of BASF’s Coatings division. This was underwritten at the end of 2025 but was held back to avoid the dislocation in the markets. However, the underwriters need not have worried. Despite concerns around heavily adjusted EBITDA and the energy-intensive business model, the Euro portion of the loan was upsized during syndication to €1 billion and priced at E+375, in line with the reported underwritten margin.

The private credit market remained equally resilient, proving itself once again a reliable source of acquisition financing in disrupted times. Apollo’s acquisition of Forvia’s auto interior business, originally expected to head to the bond market, was ultimately backed by a €700 million unitranche loan provided by HPS, alongside a €100 million capex and acquisition facility to fund future growth. Industrial businesses (in a pivot away from software) remain popular with private credit investors, with Oaktree reportedly among lenders backing Tikehau and Mubadala’s €700 million buyout of aerospace maintenance firm Revima.

Documentation terms also remain very borrower friendly, with few reports of successful lender pushback in syndication and flexible features like portability increasingly common. All indications are that fresh M&A supply will be received with great interest by the loan markets in the short term. The coming weeks may reveal whether this proves to be a limited window of opportunity for P2P bidders or a prolonged recovery after recent disruptions. Watch this space!

Equity Capital Markets

This month, the National Investment Fund of the Republic of Uzbekistan JSC saw its Global Depositary Receipts (each representing 64,700 ordinary shares) admitted to the Official List and to trading on the LSE’s Main Market, making it the first company from Uzbekistan to list equity on the LSE. UzNIF’s market capitalisation on admission was approximately £1.44 billion.

May also saw The Beauty Tech Group plc (which completed its IPO in October 2025) announce a secondary placing of ordinary shares by existing shareholders by way of an accelerated bookbuild to institutional investors. Certain pre-IPO shareholders sold, in aggregate, ordinary shares – representing approximately 7.9% of TBTG’s issued share capital – at a price of £3 per share (slightly above the IPO share price of £2.71 per share), generating gross proceeds of £26,389,605 for the selling shareholders.

From June 2026, the minimum free float requirement for inclusion in the FTSE UK Index Series will be reduced to 10% for non-UK incorporated companies, subject to all other inclusion criteria being met. This is a notable change for non-UK incorporated companies, for which the current minimum free float threshold is 25%, and will mean the threshold aligns across both UK and non-UK incorporated companies.

Key Contacts:

Will McDonald Partner, Corporate	Chris Haynes Partner, Corporate	David Irvine Partner, Finance	Kavita Davis Partner, Finance
James Addison Of Counsel, Corporate	Thomas Barker Of Counsel, Corporate	Lauren Richardson Associate, Corporate	Pete Usher Associate, Corporate

On June 6, 2026, a federal district court vacated IRS Notice 2025-42 in full, holding that the IRS acted arbitrarily and capriciously in eliminating the “Five Percent Safe Harbor” for certain tax credit-eligible wind and large solar projects seeking a longer completion deadline. Unless stayed or reversed on appeal, the decision restores that safe harbor for all such projects — though substantial uncertainty remains ahead of the OBBBA’s July 4, 2026 grandfathering deadline.

On June 6, 2026, the U.S. District Court for the District of Columbia issued its decision in Oregon Environmental Council v. Internal Revenue Service (the Decision), vacating Notice 2025-42 (the Notice) in full and remanding to the IRS.[1] The court held that the Notice, which made “physical work of a significant nature” the only way most wind and solar projects could “begin construction” after 2024 before becoming subject to a more stringent statutory completion deadline, was arbitrary and capricious under the Administrative Procedure Act (the APA).

Background

Under current federal tax law, qualifying solar and wind energy facilities that begin construction after 2024 are eligible for either a 10-year production tax credit (rate based on kWh of electricity produced) or an investment tax credit (ranging from 30 to 70 percent of qualifying costs).[2] The One Big Beautiful Bill Act (the OBBBA) accelerated the termination of these credits: For facilities on which construction begins after July 4, 2026, the facility must be placed in service by December 31, 2027 to be eligible for credits.[3] Projects that begin construction on or before July 4, 2026 (i.e., in the next 27 days), on the other hand, rely on IRS guidance indicating that a project’s beginning of construction date will be respected as long as the facility is placed in service by the end of the fourth calendar year after the year in which construction began.

For over a decade, under IRS guidance interpreting prior identical statutory credit termination deadlines, a taxpayer could establish the “beginning of construction” either by performing physical work of a significant nature (the Physical Work Test) or by paying or incurring at least five percent of qualifying costs to construct the facility (the Five Percent Safe Harbor), and then placing the facility in service by the end of the fourth calendar year after the calendar year in which construction began.[4]

In August 2025, implementing Executive Order 14315, the IRS issued the Notice, making the Physical Work Test the exclusive method for beginning construction on wind and solar facilities (except solar facilities of 1.5 MW or less) and eliminating the Five Percent Safe Harbor for those facilities, in each case, for purposes of the OBBBA’s new credit termination deadline.[5] In the Notice, the IRS stated that the purpose of the guidance was “to prevent taxpayers from circumventing the statutory credit termination date, prevent the artificial manipulation of eligibility for the [tax credits] for applicable wind and solar facilities, and ensure that a substantial portion of any applicable wind or solar facility not subject to the credit termination date is built by the beginning of construction deadline.” The practical impact of the Notice was that it made it more challenging for wind or solar facilities to establish that construction had begun, therefore making it more challenging to benefit from the extended placed in service deadline.

The Court’s Decision

After resolving the government’s threshold objections as to jurisdictional and standing matters, holding that five of the seven plaintiffs had standing, the court reached the merits.

On the merits, the court held the Notice arbitrary and capricious. An agency reversing a longstanding position must acknowledge the change, weigh the serious reliance interests its prior policy created, and explain its reasons. The court found the Notice’s lone explanatory paragraph inadequate: it did not explain how Five Percent Safe Harbor facilities were “circumventing” the statute, why the IRS rejected the narrower anti-abuse alternatives commenters proposed (such as barring safe-harbor purchases from prohibited foreign entities), or why wind and large solar facilities were singled out.

The court ordered the ordinary APA remedy — vacatur in full and remand to the IRS — declining both to remand without vacating and to limit relief to the plaintiffs, because only universal vacatur could fully redress injuries flowing from the Notice’s effect on third-party developers.

What This Means

The Five Percent Safe Harbor for the OBBBA’s July 4, 2026 deadline is restored — if the IRS agrees. With the Notice vacated, the pre-Notice beginning-of-construction guidance, including the Five Percent Safe Harbor, again governs wind and large solar (small solar of 1.5 MW or less was never affected). But a government appeal and a stay request are likely, the court warned that appellate review will probably outlast the July 4, 2026 deadline, and the IRS may re-issue guidance on remand, meaning that market participants must plan for continued uncertainty. Absent immediate IRS acquiescence to the Decision, the resulting uncertainty means the availability of the Five Percent Safe Harbor is likely of little practical use.
Document both methods. Any developers considering relying on the Five Percent Safe Harbor should also document satisfaction of the Physical Work Test, so eligibility does not turn on which rule ultimately prevails.

[1]Oregon Env’t Council v. IRS, No. 1:25-cv-04400-CKK (D.D.C. June 6, 2026). All references to the “IRS” and the “Treasury” are to the U.S. Internal Revenue Service and the U.S. Department of the Treasury, respectively.

[2] Facilities for which construction begins before 2025 are eligible for different (albeit similar) credits that are not affected by the Notice.

[3]Pub. L. No. 119-21, §§ 70512–70513 (2025).

[4]See Notice 2013-29 and its successor notices (each method subject to a continuity requirement). The IRS completion deadlines are longer for certain more complex facilities and facilities constructed during the Covid-19 pandemic.

[5]Notice 2025-42, 2025-36 I.R.B. 351; Exec. Order No. 14315, 90 Fed. Reg. 30821 (July 7, 2025). Our prior alert on the Notice can be found here.

The following Gibson Dunn lawyers prepared this update: Josiah Bethards, Michael Q. Cannon, and Matt Donnelly.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding this decision. To learn more about these issues or discuss how they might impact your business, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any member of the firm’s Tax and Tax Controversy and Litigation practice groups:

Tax:
Dora Arash – Los Angeles (+1 213.229.7134, darash@gibsondunn.com)
Michael Q. Cannon – Dallas (+1 214.698.3232, mcannon@gibsondunn.com)
Matt Donnelly – New York/Washington, D.C. (+1 212.351.5303, mjdonnelly@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)
Rachel D. Kleinberg – Palo Alto (+1 650.849.5207, rkleinberg@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)
Gregory V. Nelson – Houston (+1 346.718.6750, gnelson@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)

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)

The Bavarian Highest Regional Court has held that a foreign State may not invoke sovereign immunity to resist the recognition and enforcement of an arbitral award arising from a commercial arms-supply contract, and that a State which participates in the arbitration – all the more so where it brings a counterclaim – is precluded from later challenging the arbitration agreement before the German courts.

I. Introduction

In a decision of 19 December 2025 (case no. 101 Sch 61/24e), the Bavarian Highest Regional Court (Bayerisches Oberstes Landesgericht, BayObLG) declared an ICC award enforceable against a foreign State, rejecting the State’s reliance on sovereign immunity, its challenge to the validity of the arbitration agreement, and its application for security for costs. The ruling reaffirms Germany’s standing as an enforcement-friendly jurisdiction and addresses three issues that recur in the enforcement of awards against sovereign States: the scope of State immunity, the treatment of security for costs following Brexit, and the preclusion of jurisdictional objections raised for the first time at the enforcement stage. A Rechtsbeschwerde (appeal on points of law) is pending before the Federal Court of Justice (Bundesgerichtshof, BGH; case no. I ZB 107/25).

II. Background

The claimant, a company domiciled in the United Kingdom, contracted in 2008 with the procurement authority of a foreign State for the supply and installation of tactical communication systems in the vehicles of that State’s armed forces, together with associated training. The contract contained an ICC arbitration clause providing for a seat in Geneva and the application of Swiss substantive law.

After unrest broke out in the State in 2011, the claimant terminated the contract, and a dispute arose over the lawfulness and consequences of that termination. The claimant commenced ICC arbitration in 2013; the State defended on the merits and brought a substantial counterclaim. In its 2016 award, the tribunal ordered the State to pay a principal sum in respect of the State’s unjustified call on standby letters of credit, plus interest, and to bear the bulk of the costs of the arbitration.

The claimant sought partial recognition and enforcement (Vollstreckbarerklärung) of the award before the BayObLG, relying on the fact that the State owns two plots of land within the court’s district. The State asserted immunity, contested the validity of the arbitration agreement, and applied for an order requiring the claimant to provide security for costs.

III. Key Holdings

1. State immunity

The court reaffirmed that, proceedings for a declaration of enforceability (Vollstreckbarerklärung) of an arbitral award are not enforcement proceedings (Zwangsvollstreckung) but a recognition proceeding sui generis (Erkenntnisverfahren eigener Art). The applicable test is therefore the one under the law of jurisdictional immunity, not the (narrower) law of enforcement immunity.

Germany adheres to the restrictive (as opposed to absolute) theory of sovereign immunity. Under the doctrine of restrictive immunity, a State enjoys immunity only for sovereign acts (acta iure imperii), not for conduct it undertakes like a private party (acta iure gestionis). The distinction turns on the nature of the act or legal relationship, not on its motive or purpose. Critically, the court held that, although national defense and the maintenance of armed forces are sovereign functions, this does not prevent contracts connected with the sale of arms and munitions from being concluded on a private-law footing. By entering into the contract and calling on the guarantees, the State had acted like a private party; the fact that the goods were destined for military use, or that contract was said to form part of bilateral defense cooperation between the two governments, did not alter the private-law nature of the transaction.

Although jurisdictional immunity governed the merits, the State also invoked enforcement immunity to dispute the court’s local jurisdiction, which rested on the land the State owns in the district (the asset-based venue under Section 1062 ZPO). As a matter of general international law, enforcement against a foreign State’s assets is barred where those assets are dedicated to sovereign purposes (Zweckbestimmung) and such property is placed beyond the reach of execution. This protection does not require the asset to be already in actual sovereign use; it is enough that a competent organ of the State attests a sovereign dedication. On the facts, the court ruled that the planned offices for “economic” and “technical cooperation” on the plots of land in question were not by their nature a sovereign activity and were not comparable to the representation of culture and science abroad; the State had also failed adequately to attest a sovereign dedication of the land. The Federal Foreign Office had moreover noted that exercising sovereign functions on German soil would require Germany’s consent, which the State had not obtained. The court therefore found no enforcement immunity, and the asset-based venue – and with it German jurisdiction – held.

2. Security for costs

The court confirmed that the rules on security for costs (cautio iudicatum solvi, Section 110 of the German Code of Civil Procedure (ZPO)) apply by analogy to proceedings for a declaration of enforceability of an arbitral award, and that, following Brexit, a claimant seated in the United Kingdom is in principle no longer relieved of the obligation as an EU/EEA party.

That said, the court concluded that the claimant was nonetheless exempt under the exception in Section 110(2) No. 2 ZPO, because an international treaty – the German-British Convention of 14 July 1960 on the reciprocal recognition and enforcement of judgments in civil and commercial matters – secures the enforcement of any cost order in the claimant’s home State. Notably, the court treated this as independent of Brexit. That is because, the EU regime (the 1968 Brussels Convention and the Brussels I and Brussels Ia Regulations) has always excluded arbitration from its scope, so the 1960 Convention was never superseded in arbitration-related matters and simply remained in force throughout. The court therefore did not need to resolve the disputed question whether the Convention “revived” for other civil and commercial matters after Brexit, and it rejected the argument that enforcement of the costs order had to be “beyond doubt”: it suffices that enforcement is secured, and the abstract risk of divergent interpretation does not defeat a treaty that is in force and has not been terminated.

3. Validity of the arbitration agreement: preclusion of the objection

The State also argued that the procurement authority had lacked capacity under its domestic law to conclude an arbitration agreement without ministerial approval, rendering the clause invalid. In deciding whether the State was entitled to raise this point at the recognition stage, the court distinguished two situations:

Failure to seek annulment at the seat is not preclusive. The State was not barred from raising it merely because it had not brought set-aside proceedings against the award in Switzerland; a party does not forfeit grounds for resisting recognition simply by declining to use a (time-barred) remedy in the State of origin.
Participation without objection is preclusive. The State was, however, barred because it had not raised the invalidity of the arbitration agreement in the arbitration itself and had even advanced a counterclaim. While the New York Convention contains no express preclusion rule, the prohibition of contradictory conduct (venire contra factum proprium) – rooted in good faith and recognized as a principle inherent in the Convention – applies. By bringing a counterclaim, the State signaled that it treated the arbitration agreement as binding and would not later contest it before national courts; it thereby deprived the tribunal of the opportunity to rule on its own jurisdiction and deprived the claimant of the chance to resort to the national courts instead. The objection could not be revived at the recognition and enforcement stage, and barring it did not offend international public policy (ordre public international).

IV. Practical Takeaways

The decision is a robust signal to award creditors that German courts will not allow sovereign respondents to escape recognition through immunity arguments where the underlying transaction is commercial in nature – even in the sensitive field of defense procurement.

The character of transaction determines State immunity. Counterparties contracting with States or State entities should not assume that a connection to defense, security, or other sovereign functions automatically confers immunity; what matters is whether the State acted like a private party. Conversely, a State seeking to preserve immunity from execution over its assets must be prepared to demonstrate a genuine sovereign dedication of the asset and, where relevant, to obtain host-State consent for any sovereign use.

Raise jurisdictional objections in the arbitration or forfeit them. A respondent that intends to contest the existence or validity of an arbitration agreement must do so within the arbitration itself. Participating in arbitral proceedings without challenging jurisdiction – and especially counterclaiming – will, as a rule, preclude the objection at the recognition and enforcement stage. This is a powerful tool for award creditors and a trap for respondents that participate without reserving the point, since failure to raise it may forfeit the objection.
Security for costs is unlikely for UK-seated claimants enforcing awards. The court held that the 1960 German-British Convention applies to arbitration-related recognition and enforcement applications regardless of Brexit, since arbitration was always carved out of the EU regime. UK-seated award creditors enforcing in Germany can therefore expect, as a rule, not to be required to post security for costs.

The ruling consolidates Germany’s standing as a reliable forum for the enforcement of arbitral awards, including against sovereign debtors, and rewards parties that conduct their arbitrations consistently and in good faith.

The following Gibson Dunn lawyers prepared this update: Dr. Finn Zeidler, Dr. Annekathrin Schmoll, Marc Kanzler, and Simon Ruhland.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Judgment & Arbitral Award Enforcement or International Arbitration practice groups:

Finn Zeidler – Frankfurt (+49 69 247 411 530, fzeidler@gibsondunn.com)

Annekathrin Schmoll – Frankfurt (+49 69 247 411 533, aschmoll@gibsondunn.com)

Marc Kanzler – Munich (+49 89 189 33 269, mkanzler@gibsondunn.com)

Simon J. Ruhland – Frankfurt (+49 69 247 411 527, sruhland@gibsondunn.com)

Christopher Harris KC – Global Co-Chair, Judgment & Arbitral Award Enforcement / International Arbitration Groups, Zurich / London (+41 44 382 5490, charris@gibsondunn.com)

Miguel A. Estrada – Co-Chair, Judgment & Arbitral Award Enforcement Group,
Washington, D.C. (+1 202.955.8257, mestrada@gibsondunn.com)

Robert Weigel – Co-Chair, Judgment & Arbitral Award Enforcement Group,
New York (+1 212.351.3845, rweigel@gibsondunn.com)

Gibson Dunn’s Workplace DEI Task Force aims to help our clients navigate the evolving legal and policy landscape following recent Executive Branch actions and the Supreme Court’s decision in SFFA v. Harvard. Prior issues of our DEI Task Force Update can be found in our DEI Resource Center.

Key Developments

On June 4, U.S. Equal Employment Opportunity Commission (“EEOC”) Chair Andrea Lucas issued a National Enforcement Plan (“NEP”) for the agency for fiscal years 2025–2029, which replaces the prior Strategic Enforcement Plan issued for fiscal years 2024–2028. The NEP establishes new “global principles” for how the agency will deploy its resources, which include operating as a nationwide enforcement agency, broad enforcement of the laws in the EEOC’s jurisdiction, aligning with Administration priorities and executive orders, and prioritizing disparate treatment claims over disparate impact claims. The NEP also identifies categories of substantive enforcement priorities, including cases involving overt or repeated discrimination (including job advertisements focused on diverse candidates or visa holders, fellowship programs that exclude individuals based on race or other protected characteristics, and “mass denials of accommodations”) and challenges to broad employment policies (with specific attention to programs that preference visa holders as well as DEI-related programs that may constitute race- or sex-based preferences). The NEP identifies for targeting—“[d]epending on the specific facts”—DEI practices including aspirational goals; limited-access training, mentoring, and events; diverse slates, diverse panels, and diversity statements; sharing demographic data with managers, the public, or others outside of HR and legal departments; and tying compensation to diversity goals. The NEP also focuses on development of the law (a) regarding DEI programs, religious accommodation, and sex and gender identity following recent seminal cases including Ames, Muldrow, SFFA, Groff, and Bostock; (b) regarding voluntary affirmative action programs, foreshadowing an effort to reverse Weber and Johnson; and (c) regarding the relatively new Pregnant Workers Fairness Act. In addition, the NEP prioritizes protecting vulnerable workers such as teenagers, low-wage earners, survivors of sexual assault, and individuals with disabilities. Lucas also designated four Chair priorities: addressing DEI-related discrimination; protecting American workers from national origin discrimination; defending women’s rights to single-sex spaces at work; and safeguarding workers’ religious liberty rights. The NEP takes effect immediately and supersedes all prior district-level enforcement plans.

On June 4, the Department of Justice’s Civil Rights Division announced that it opened investigations into potential race discrimination in admissions at fifteen medical schools. The announcement follows the Department’s recent determinations that UCLA and Yale University used race as a factor in admissions to their medical schools in violation of Title VI of the Civil Rights Act of 1964, as interpreted by the Supreme Court in SFFA v. Harvard. In announcing the new investigations, Assistant Attorney General Harmeet K. Dhillon of the Civil Rights Division stated that “[m]any of America’s top medical schools appear more concerned about the demographics of their incoming classes than training students to succeed in the profession” and that the Division “will continue to protect American students from discriminatory and illegal preferences in admissions — especially in professions as critical as medicine.”

On May 29, the Office of Management and Budget (“OMB”) proposed sweeping revisions to the federal financial assistance guidance codified at 2 CFR Part 200. Among other things, the proposed rule seeks to prohibit federal agencies and pass-through entities (organizations that receive federal funds then pass those funds on to other entities) from using federal awards to “fund, promote, encourage, subsidize, or facilitate” DEI initiatives that “violate any applicable Federal anti-discrimination laws.” This includes, specifically, “racial preferences or other forms of racial discrimination,” as well as activities where “race or intentional proxies for race are used as selection criteria for employment or program participation.” Additionally, OMB proposes a new Section 200.218 that would prohibit the use of federal awards to promote or support theories of disparate-impact liability based on federally protected characteristics such as race, sex, or age “including by not issuing terms, conditions, or guidance that would advance theories of disparate-impact liability.” The rule would also require senior political appointees at federal agencies to conduct pre-issuance reviews of discretionary awards to ensure that proposed funding decisions are consistent with applicable law, agency priorities, and the national interest, including by assessing whether the awards comply with, among other things, the prohibition on DEI-related discrimination. Where recipients are found to have engaged in prohibited DEI practices, the government may seek to recover funds or terminate the award. The public has 45 days to comment on the proposed regulations.

On May 27, the EEOC submitted a proposal to OMB to rescind its interpretive rule, “Affirmative Action Appropriate Under Title VII of the Civil Rights Act of 1964,” a 1979 regulation that provides guidance to private employers on how to implement voluntary affirmative action plans without violating Title VII of the Civil Rights Act of 1964. The existing rule allows employers to conduct a self-analysis of whether their employment practices have had an adverse impact on protected groups and, if so, to adopt reasonable corrective measures—such as goals and timetables—to address discriminatory patterns under certain circumstances.

On May 26, in a per curiam decision, the Ninth Circuit affirmed in part and reversed in part the district court’s preliminary injunction ordering the Environmental Protection Agency, the National Science Foundation, and the National Endowment for the Humanities to reinstate certain grants on behalf of two provisional classes of University of California researchers whose grants had been terminated pursuant to certain Executive Orders issued by the Trump Administration. The Ninth Circuit held that the district court likely lacked jurisdiction over the so-called “Form Termination Class”—researchers whose grants were terminated by form letter without grant-specific explanation. According to the court, under the Supreme Court’s ruling in National Institutes of Health v. American Public Health Association, 145 S. Ct. 2658 (2025), claims based on research grants that seek to enforce an obligation to pay money are contractual in nature and, under the Tucker Act, fall within the jurisdiction of the Court of Federal Claims, not federal district courts. At the same time, the court affirmed the preliminary injunction for the “DEI Termination Class”—researchers whose grants were terminated because of DEI-specific Executive Orders. The court explained with respect to the DEI Termination Class that these researchers were likely to succeed on a First Amendment viewpoint discrimination claim. The court reasoned that even in the provision of subsidies, the government may not aim to suppress disfavored viewpoints, and that the agencies had selected grants for termination based on recipients’ perceived ideology rather than redefining the scope of a program. The case was remanded for further proceedings. The case is Thakur et al. v. Donald J. Trump, et al., No. 25-4249 (9th Cir. 2026).

On May 18, non-profit group Protect the Public’s Trust filed a complaint with the U.S. Department of Education (“DOE”), Department of Health and Human Services (“HHS”), and Department of Justice (“DOJ”), alleging violations of Titles VI, VII, and IX by Penn State University’s Dickinson Law School. The complaint focuses on the law school’s 2026 “Strategic Plan Update,” a document intended to guide the law school’s admissions and employment practices for the next five years, which, among other things, articulates the law school’s goal to “[p]romot[e] diversity in legal education and the profession to achieve equity in society.” Specifically, the complaint alleges that the Strategic Plan Update unlawfully directs consideration of diversity and inclusion in hiring and admissions. It also challenges the Strategic Plan Update’s alleged requirement that all first-year students take a course on race and the law, claiming that the course requires students to “affirm activist talking points” such as the need to “eradicate patriarchy” and that white students specifically are asked to “reflect on their perceived wrongs.” The complaint repeatedly references a former Penn State student who is a white male and who claims he was forced to withdraw from the law school after refusing to participate in the course. According to the complaint, the student viewed required participation in the course as a form of “compelled speech.” The complaint asks DOE, HHS, and DOJ to investigate Penn State in relation to these allegations.

On May 15, the EEOC sent OMB a proposed rule that would rescind employers’ legal obligations to collect and report workforce demographic data. The proposal seeks to rescind EEO-1 reporting requirements, which require private-sector employers with 100 or more employees and federal contractors with over 50 workers to submit to the EEOC annual reports on workforce demographics. The proposed rule also would eliminate the EEO-3, EEO-4, and EEO-5 data collections from unions, state and local governments, and public schools, respectively. According to reporting by Law360, former EEOC Chair Jenny R. Yang criticized the proposal, calling it a move “in the wrong direction” at a time when “data-driven decision-making is more important than ever.” The EEOC has not responded or made any public statement on the proposal.

Also on May 15, Representative Jerrold Nadler of New York and 11 other Democratic members of Congress sent a letter to EEOC Chair Andrea Lucas, expressing concern that the agency had not yet opened its annual EEO-1 data collection cycle for 2026. The letter notes that large private employers have been required to submit workforce demographic data since 1966, that the collection portal typically opens in the spring, and that the pending regulation (described above) suggests the Commission may be considering rescinding the EEO-1 requirement altogether. The letter further expresses concern that the EEOC apparently had not renewed its contract with third-party vendor Westat, which was set to expire at the end of fiscal year 2025, thereby “call[ing] into question the agency’s preparedness to carry out this year’s [EEO-1] collection.” The letter also flags that OMB’s approval for the EEO-1 collection expires on November 30, 2026, and it states that “[w]e expect the EEOC to initiate the process to renew this clearance in a timely manner to ensure there is no interruption in data collection.” The letter concludes by posing questions about the EEO-1 process, including the reporting deadline, contracting status, any steps to suspend or modify the collection, and plans for renewed OMB approval for EEO-1 collection.

On May 7, 2026, Judge Colleen McMahon of the U.S. District Court for the Southern District of New York permanently enjoined the National Endowment for the Humanities (“NEH”) from terminating over 1,400 grants that were eliminated at the direction of the Department of Government Efficiency (“DOGE”) in early 2025. The case is American Council of Learned Societies, et al. v. National Endowment for the Humanities, et al., No. 1:25-cv-03657 (S.D.N.Y. 2025). The plaintiffs filed the suit on May 1, 2025, against the NEH, DOGE, and numerous individual government defendants, asserting that the over 1,400 grant eliminations violated the separation of powers doctrine, the Administrative Procedure Act, the First Amendment, and the Fifth Amendment. On March 6, 2026, the plaintiffs moved for summary judgment, arguing that DOGE personnel targeted grants with descriptors that used terms like “BIPOC” and “gay” to identify DEI-related NEH grants for termination. The plaintiffs argued that the terminations constituted unconstitutional viewpoint discrimination under the First Amendment, violated the Fifth Amendment by employing classifications based on race, sex, and sexual orientation, and lacked authority from Congress. On March 27, 2026, the defendants filed a cross-motion for summary judgment, contending that the court lacked jurisdiction because the claims were contract disputes belonging in the Court of Federal Claims under the Tucker Act.

On May 7, 2026, the court granted the plaintiffs’ motion for summary judgment and denied the defendants’ cross-motion. The court held that, as a matter of law, (1) the grant terminations were ultra vires (“beyond the [agency’s] powers”) because DOGE lacked statutory authority to identify, select, or direct terminations of NEH grants; (2) the grant terminations violated the First Amendment because DOGE’s processes reflected viewpoint discrimination; and (3) the terminations violated the Equal Protection Clause of the Fifth Amendment because DOGE used protected characteristics as criteria for selecting grants for termination, and the government’s asserted interests of administrative convenience, merit, and waste reduction “[did] not come close to satisfying strict scrutiny or heightened scrutiny.” With respect to the defendants’ cross-motion, the court held that the Tucker Act did not divest the court of jurisdiction over the plaintiffs’ claims, which rested on independent constitutional and statutory grounds. The government has not yet indicated whether it intends to appeal.

On May 5, OMB, the Office of Federal Procurement Policy, the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration published a request for comments regarding information to be collected in connection with Executive Order 14398, including information and reports required to ascertain compliance with the EO such as books, records, and accounts, reports of subcontractor violations, and reports of subcontractor suits that put the EO’s validity at issue. (EO 14398 prohibits certain “racially discriminatory DEI activities” and requires that government contractors make available records to verify compliance.) The notice solicits comments on four specific questions: (1) whether the proposed collection is necessary for the proper performance of federal acquisition functions, including the practical utility of the proposed collection; (2) the accuracy of the burden estimate; (3) ways to enhance the quality, utility, and clarity of the information collected; and (4) ways to minimize the burden on respondents, including through automation. The notice also states that the Federal Acquisition Regulatory (“FAR”) Council intends to issue separate rulemaking, providing the public an opportunity to comment on the substantive policy implementation of EO 14398 in the FAR. Comments are due by July 6, 2026.

Media Coverage and Commentary

Below is a selection of recent media coverage and commentary on these issues:

Law.com, “Federal Judge to Law Grads: DEI Is ‘Absolutely Intrinsic’ to Equal Justice” (May 21, 2026): Avalon Zoppo of Law.com reports on remarks by U.S. District Judge Mustafa Kasubhai of the District of Oregon at a commencement address at the University of Oregon School of Law, in which he defended DEI as “absolutely intrinsic” to the pursuit of equal justice and the rule of law. According to Zoppo, Judge Kasubhai emphasized that diversity of background and lived experience in the legal profession will “make the law better.” The article notes that the remarks come amid the Trump Administration’s continued scrutiny of DEI policies and as companies have rolled back such programs in response. Zoppo also reports that the scrutiny may be affecting diversity commitments at law firms, citing National Association for Law Placement data showing a decline in racial and ethnic diversity at law firms in 2025 and a drop in survey participation from firms and lawyers compared to prior years.
Law360, “ABA Section Votes To Scrap Law School DEI Standards” (May 15, 2026): Emma Cueto of Law360 reports that on May 15, the American Bar Association’s (“ABA”) Council of the Section of Legal Education and Admissions to the Bar voted 10-4 to repeal Standard 206, which required law schools to “demonstrate by concrete action a commitment to diversity and inclusion” and to commit to maintaining a student body “diverse with respect to gender, race and ethnicity.” The decision followed recommendations from the section’s Standards Committee, which concluded that the standard could jeopardize the ABA’s role as a nationwide accreditor because the DOE and several states had interpreted applicable law to prohibit enforcing such diversity requirements as minimum accreditation standards. The ABA received 50 public comments on the proposal, 48 of which opposed the repeal, with many arguing for the constitutionality of Standard 206 and urging the ABA not to capitulate to political pressure. As reported by Cueto, the Standards Committee acknowledged these comments, stating that it “understands the dedication of the commenters to diversity and inclusion” and noting that “law schools, affiliate organizations and bar associations are free to further these goals consistent with their missions and the law.” The recommendation will next proceed to the ABA House of Delegates for a vote in August.
Law360, “As DEI Challenges Rise, Circuits Sketch Out Boundaries” (May 14, 2026): Law360’s Anne Cullen reports that recent decisions from the Tenth and Second Circuits have clarified that a single DEI training is insufficient to support a harassment claim, but a series of such trainings, combined with tangible workplace consequences for refusing to participate, may support such a claim. As Ms. Cullen reports, on May 11, 2026, the Tenth Circuit rejected a white corrections officer’s hostile work environment claim based on a single mandatory racial sensitivity training, finding that the one-time session was insufficient to meet Title VII’s “severe or pervasive” standard. Conversely, in September 2025, the Second Circuit reinstated a white supervisor’s harassment suit where the employer’s DEI programming allegedly involved repeated mandatory workshops, an overnight retreat, and consequences for pushback, including loss of supervisory responsibilities. Cullen quotes Gibson Dunn partner Jason Schwartz, who observed that “[c]ourts are drawing a line between training alone and training plus . . . . A one-time training is generally not enough to create a hostile work environment, but courts have found that training plus follow-on comments or conduct, depending on how serious and frequent, could cross the line.” Other practitioners quoted in the article added that certain DEI practices, such as broadening recruiting pipelines, tracking workforce demographics, and publishing diversity reports remain legally sound, provided that individual employment decisions are not made on the basis of protected characteristics.
Bloomberg Law, “Trump’s Anti-DEI Efforts Struggle Under Federal Judges’ Scrutiny” (May 6, 2026): Bloomberg Law’s Chris Marr and Khorri Atkinson report that the Trump Administration’s anti-DEI policies have met repeated resistance in federal courts, with judges finding various enforcement mechanisms unconstitutional on First Amendment, vagueness, and separation-of-powers grounds. The fight has taken on what one interviewed attorney described as a “whack-a-mole” quality, meaning that when one avenue is blocked, the Administration pivots to another. The authors describe the various methods the Administration has used to advance its policy goals in relation to DEI, including implementing executive orders, terminating grants, imposing funding conditions, withholding regulatory licenses, and conditioning merger approvals. At the same time, Marr and Atkinson report, many rulings related to federal DEI policy remain at the preliminary injunction stage and are pending appeal, meaning the courts’ orders are not permanent. As a result, they conclude that the boundaries of permissible DEI activity remain unsettled.
Reuters, “Are Companies Quiet Quitting DEI?” (April 28, 2026): Reuters’ Sharon Kits Kimathi reports that DEI policies “are falling down the list of priorities for companies.” As Kimathi writes, a recent report by the Thomson Reuters Foundation drew data from nearly 3,000 global companies and found that DEI commitments remain most common for gender representation, while targets related to ethnicity and disability are comparatively limited. According to the report, 53% of companies surveyed publicly disclosed any DEI-related commitments, which were primarily focused on gender. The report found that 8% of companies reported setting ethnicity-related goals, while 5% set disability-related goals. Fewer than half of all companies reported having time-limited DEI targets. The report also found that public reporting on workforce ethnicity data had declined. According to the report, stronger adoption of DEI incentives did not necessarily correlate with narrower pay gaps.
AP News, “DeSantis Signs Florida Law Banning Local DEI Funding, Says White Men Are ‘Disfavored’” (April 22, 2026): AP’s Mike Schneider reports that Florida Governor Ron DeSantis signed legislation that prohibits Florida counties and cities from funding or promoting DEI initiatives. The new law permits residents to sue local governments for violations, and officials found to have funded DEI programs in contravention of the law can be removed from office. The article includes DeSantis’s commentary on the new law, as well as his opinion that DEI programs “disfavor” white men, Asian Americans, and other groups. As Schneider reports, the law builds on DeSantis’s anti-DEI record during his two terms in office, such as trying to restrict how race and sex are taught in schools through the “Stop WOKE Act.”

Case Updates

Below is a list of updates in new and pending cases:

1. Employment discrimination and related claims

EEOC v. Coca-Cola Beverages Ne., Inc., No. 1:26-cv-00115 (D.N.H. 2026): The EEOC sued Coca-Cola Beverages Northeast on February 17, 2026, alleging it engaged in unlawful employment practices on the basis of sex in violation of Title VII. The complaint alleges that Coca-Cola invited only female employees to an “employer-sponsored trip and networking event” at a casino resort, which featured a “social reception, team-building exercises and recreational activities,” excusing them from their regular work duties and paying their normal wages. The complaint alleges that Coca-Cola’s exclusion of male employees from the event constitutes a “denial of equal compensation, terms, conditions, or privileges of employment on the basis of sex.” On April 20, 2026, Coca-Cola moved to dismiss the complaint, arguing that its employer-sponsored event was a lawful attempt to expand the company’s pool of qualified candidates among its existing employees without impacting the selection process for advancement, and that its actions complied with Title VII and Executive Order 11246, which was in effect at the time of the networking event.
- Latest update: On May 4, 2026, the EEOC filed its opposition to the motion to dismiss, arguing that it had pled facts sufficient to show that male employees who were excluded from the networking event suffered an adverse employment action. On the law, the EEOC argued that the U.S. Supreme Court’s recent decision in Muldrow v. City of St. Louis only requires “some harm”—which need not be “economic or tangible”—for an employer’s activity to rise to the level of an adverse action. On the facts, the EEOC contended that it had shown that men were excluded from the networking event, which “render[ed] male employees worse off than their female counterparts” in part by “deny[ing] them the same paid time off that the female employees received to attend the event.” The EEOC further argued that a Rule 12(b)(6) motion to dismiss is not an appropriate vehicle to attack its prayer for relief, and that the court should decline to dismiss the EEOC’s request for punitive damages.
Steffens v. Walt Disney Co., No. 25NNCV00944 (Cal. Sup. Ct. Los Angeles Cnty. 2025): On February 11, 2025, a white former executive for Marvel Entertainment sued Disney, alleging the company discriminated against him on the basis of race, sex, and age. He alleged he was denied a promotion because of his race and age, and that the Company failed to promote him as retaliation for his objection to “effort[s] to promote presidents to senior vice presidents based on their race and a memorandum that would have referred to employees with the racial signifier ‘BIPOC.’”
- Latest update: On March 30, 2026, the plaintiff filed a request for dismissal with prejudice of all parties and all causes of action, citing no reason for the dismissal.
Vaughn v. CBS Broadcasting, Inc., et al., No. 2:24-cv-05570 (C.D. Cal. 2024): On July 1, 2024, former Los Angeles news anchor Jeff Vaughn filed suit against CBS Broadcasting, alleging that CBS-affiliated Los Angeles stations terminated him because he is “an older, white, heterosexual male.” Vaughn claims that CBS replaced him with a “younger minority news anchor” in violation of Section 1981, Title VII, and the Age Discrimination in Employment Act. The complaint points to public statements by CBS expressing its commitment to diversity, including statements discussing various representation goals. Vaughn, who is represented by America First Legal, is seeking over $5 million in damages. On October 31, 2025, the defendants moved for summary judgment, arguing that the termination was based on legitimate, nondiscriminatory grounds, the plaintiff lacked evidence of pretext or but-for causation, and the plaintiff failed to establish individual liability against the individual defendants under Section 1981. The defendants further contended that CBS’s conduct, even if found discriminatory, would still be protected by the First Amendment because CBS, a private company engaged in expressive activity, has a First Amendment right to choose who channels that expression.
- Latest update: On April 7, 2026, the court granted the defendants’ motion for summary judgment. The court held that the plaintiff’s race discrimination claims under Section 1981 and Title VII fail as a matter of law under both the McDonnell Douglas burden-shifting and mixed-motive frameworks. Under McDonnell Douglas, the court found that the defendants had articulated a legitimate, non-discriminatory reason for the plaintiff’s termination—namely, longstanding performance deficiencies supported by negative evaluations and low viewer recognition—and that the plaintiff had failed to show that the termination was pretextual with “specific and substantial” evidence. Under the mixed-motive framework, the court found no direct or circumstantial evidence that race was a motivating factor in the termination. Ultimately, the court determined that no reasonable jury could find discriminatory intent on the record presented. On April 20, 2026, the plaintiff filed a notice of appeal to the Ninth Circuit.
Young v. Colorado Dep’t of Corrections, No. 23-cv-01688-NYW-SBP (D. Colo. 2023), No. 25-1068 (10th Cir. 2023): On June 30, 2023, a white former Colorado Department of Corrections officer, Joshua Young, filed suit against his former employer, the Colorado Department of Corrections, and individual directors in the Department, asserting hostile work environment claims under Title VII and Section 1981. Young alleged that a mandatory DEI training he completed in March 2021 contained racially discriminatory content targeting white employees and created a hostile work environment, compelling his resignation in July 2021. On January 27, 2025, the district court granted a motion to dismiss, holding that Young’s allegations regarding a single training session lacked “any well-pleaded factual allegations detailing how the [] training affected the workplace or how the workplace was otherwise infected with racial animus” and thus were insufficient to allege a hostile work environment based on race. The Tenth Circuit heard oral argument on Young’s appeal on January 22, 2026, on which we reported in our February 2026 newsletter.
- Latest update: On May 11, 2026, the Tenth Circuit affirmed the dismissal, reasoning that Young’s allegations regarding the single training session did not cross the “extremely high” threshold for a hostile work environment claim and that Young’s fears about future diversity training could not save his claim.

2. Challenges to statutes, agency rules, executive orders, and regulatory decisions

City of Seattle v. Trump, et al., No. 2:25-cv-01435 (W.D. Wash. 2025): On July 31, 2025, the City of Seattle sued the Trump Administration, challenging EOs 14173 and 14168, which voided affirmative action requirements for government contractors and outlined the federal government’s policy to “recognize two sexes,” respectively. Seattle alleges that the EOs violate principles of separation of powers, the Fifth and Tenth Amendments, and the Spending Clause of the U.S. Constitution, and that they are arbitrary and capricious in violation of the Administrative Procedure Act. Seattle asserts that enforcement of the EOs will result in the loss of “committed federal grants and contracts if” Seattle does not abide by “improperly imposed (and impossibly vague) funding conditions.” On October 31, 2025, the court granted Seattle’s motion for a preliminary injunction, finding that Seattle was likely to succeed on the merits because EOs 14173 and 14168 likely violate the separation of powers doctrine. Additionally, the court found that the harm to Seattle in the absence of a preliminary injunction would be irreparable and certain because Seattle would lose government grants that support a wide array of public safety, law enforcement, and other services. On December 29, 2025, the defendants filed a notice of appeal of the district court’s order granting a preliminary injunction.
- Latest update: On April 7, 2026, Seattle filed an amended complaint, adding as plaintiffs the cities of Cleveland, Columbus, Durham, and Portland, as well as the counties of Allegheny, Hennepin, Prince George’s, and Ramsey. The amended complaint also added various federal agencies as defendants. The causes of action remain the same. On May 1, 2026, the plaintiffs filed a second motion for preliminary injunction, seeking to extend to the additional plaintiffs the injunctive relief granted to Seattle.
Fell v. Trump, No. 1:25-cv-04206 (D.D.C. 2025): On December 3, 2025, four former federal employees who had separated from the federal government pursuant to EOs 14151 and 14173 sued President Trump and numerous federal agencies and officials, challenging the executive orders and their implementing directives as violating the First Amendment, Title VII, and the Civil Service Reform Act. On March 3, 2026, the plaintiffs moved to certify a class of “potentially thousands” of federal employees who were allegedly separated from their positions under EOs 14151 and 14173. The plaintiffs also sought to certify two sub-classes: a Title VII Gender Subclass that includes female or non-binary federal employees, and a Title VII Race/Ethnicity Subclass that includes African American/Black, Hispanic/Latino, Asian American/Pacific Islander, and/or Native American/Indigenous federal employees. On April 6, 2026, the defendants filed their opposition to class certification, as well as a motion to dismiss, arguing that the plaintiffs (i) lack standing to sue agencies and agency heads that never employed them, (ii) failed to exhaust administrative remedies, and (iii) failed to state viable claims for relief.
- Latest update: On May 11, 2026, the plaintiffs filed an opposition to the defendants’ motion to dismiss, arguing that standing exists because the defendants functioned as a “single entity” executing a common presidential directive to “purge” federal employees in DEI-related positions. On the merits, the plaintiffs contend they have plausibly alleged that the Trump Administration publicly equated DEI with its political opponents and then targeted DEI-associated employees for removal—giving rise to First Amendment retaliation claims, and Title VII claims under advocacy, motivating-factor, and pattern-or-practice theories of liability.
Flinn et al. v. City of Evanston, No. 1:24-cv-04269 (N.D. Ill. 2024): On May 23, 2024, a putative class action complaint was filed against the City of Evanston challenging Evanston’s Restorative Housing Program, which compensates Black residents for housing discrimination they or their ancestors may have faced between 1919 and 1969. The program assists eligible applicants with buying or improving their homes, and in some cases, qualifies households for direct payments of up to $25,000. The plaintiffs allege that the program violates Section 1983 because it is limited to only Black residents or their ancestors. The suit seeks to certify a class of “all individuals who are able and ready to apply for the program and are eligible for a $25,000 payment but for the program’s race-based eligibility requirement.” On March 27, 2026, the court denied a motion to dismiss filed by the City.
- Latest update: On May 8, 2026, the City answered the complaint, denying liability and asserting six affirmative defenses: (1) failure to state a claim upon which relief can be granted; (2) statute of limitations; (3) laches; (4) lack of standing; (5) failure to satisfy the requirements for class certification under Rule 23; and (6) governmental immunity for legislative acts.
Nat’l Ass’n of Diversity Officers in Higher Educ., et al. v. Trump, et al., No. 1:25-cv-00333 (D. Md. 2025), No. 25-1189 (4th Cir. 2025): On February 3, 2025, the National Association of Diversity Officers in Higher Education, the American Association of University Professors, the Restaurant Opportunities Centers United, and the Mayor and City Council of Baltimore, Maryland brought suit against the Trump Administration, challenging EOs 14151 and 14173. The plaintiffs contend that the EOs exceed presidential authority, violate the separation of powers and the First Amendment, and are unconstitutionally vague. On February 21, 2025, the Court granted in part a preliminary injunction to prevent the Administration from enforcing the EOs. On March 14, 2025, the Fourth Circuit stayed the injunction. On February 6, 2026, the Fourth Circuit vacated the preliminary injunction and remanded to the lower court, finding that the plaintiffs lacked standing to challenge the Enforcement Threat Provision and failed to show that they were likely to succeed on their claims that the Termination Provision and Certification Provision are facially unconstitutional.
- Latest update: On April 30, 2026, in district court, the defendants filed a motion to dismiss for lack of subject matter jurisdiction and failure to state a claim. In the motion, the defendants argue that the plaintiffs lack standing to challenge the Enforcement Threat Provision because it is an intra-governmental action and does not create an imminent danger of injury. They alternatively argue that the allegations are moot because “[t]he at-issue report has already been ‘submitted … to the President,” that the plaintiffs’ First Amendment argument fails because the plaintiffs have no protected speech interest in operating unlawful programs, and that the plaintiffs’ Fifth Amendment vagueness challenge to the Termination Provision fails because courts tend to defer to government funding decisions and bar challenges based on facial vagueness where the government is “acting as a patron, rather than as sovereign.” Finally, the defendants assert that the plaintiffs’ Spending Clause and separation-of-powers claims fail because the EOs do not impose new funding conditions or usurp Congress’s authority.
Nat’l Ass’n of Diversity Officers in Higher Educ., et al. v. Trump, et al., No. 8:26-cv-01532 (D. Md. 2026): On April 20, 2026, the National Association of Diversity Officers in Higher Education, American Association of University Professors, the United Academics of Maryland-University of Maryland, College Park, Prince George’s County, Maryland, the National Association of Minority Contractors, and the National Association of Minority Contractors, DMV Chapter brought suit against the Trump Administration, challenging EO 14398. The plaintiffs contend that the EO exceeds presidential authority and violate the First Amendment’s prohibitions on content-based restrictions, free speech, and free association. The plaintiffs seek preliminary and permanent injunctive relief preventing implementation or enforcement of the EO.
- Latest update: On May 22, the plaintiffs amended the complaint to now challenge the constitutionality of both EO 14398 and the FAR Council Guidance, dated April 20, 2026, issued to implement EO 14398. The Amended Complaint contends that the FAR Council guidance violates the Administrative Procedure Act because it is unconstitutional, arbitrary and capricious, and not issued in accordance with procedural requirements. It also adds a challenge to EO 14398 under the Fifth Amendment contending the EO is void for vagueness because it “does not provide fair notice of what is prohibited and encourages and authorizes discriminatory enforcement because it fails to adequately define the scope of the circumstances when it applies.”
Oregon Council for the Humanities, et al. v. DOGE, No. 3:25-cv-00829 (D. Or. 2025): On May 15, 2025, the Oregon Council for the Humanities and the Federation of State Humanities Councils sued DOGE, the NEH, and the National Council on the Humanities, among others, alleging the NEH under DOGE’s control unlawfully terminated nearly all grants to humanities councils in violation of the Administrative Procedure Act, the NEH authorizing statute, the Impoundment Control Act, and constitutional separation of powers principles.
- Latest update: On April 17, 2026, the plaintiffs filed a motion for summary judgment, arguing that the defendants violated the constitutional separation of powers doctrine by refusing to spend funds that Congress appropriated to the Federal State Partnership and instead following EOs that it contends conflict with Congress’s priorities as expressed in the National Foundation on the Arts and Humanities Act. The plaintiffs further argue that the grant terminations violated the Administrative Procedure Act because the defendants ignored statutory funding formulas and termination procedures and instead terminated grants en masse, and that the defendants’ actions were arbitrary and capricious because the administrative record contains no satisfactory explanation for the terminations. Finally, the plaintiffs argue that the defendants failed to consider the plaintiffs’ reliance interests after sixty years of unbroken funding.
AI LLC v. Philip J. Weiser, No. 1:26-cv-01515 (D. Colo. 2026): On April 9, 2026, X.AI LLC filed suit against Colorado Attorney General Philip Weiser to enjoin enforcement of Colorado Senate Bill 24-205. The law, effective June 30, 2026, would prevent “algorithmic discrimination” by requiring developers and deployers of “high‑risk” AI systems to mitigate reasonably foreseeable risks of algorithmic discrimination and to publicize disclosures about those efforts to the Attorney General and the public. X.AI alleges that the law violates the First Amendment, the Commerce Clause, and the Equal Protection Clause, and is unconstitutionally vague. On April 24, the court granted the DOJ’s unopposed motion to intervene as a plaintiff in the case.
- Latest update: On April 24, 2026, the parties filed a joint motion to vacate the scheduling conference, suspend all pending case deadlines, and temporarily stay enforcement of Senate Bill 24-205. On April 27, 2026, the court granted the parties’ motion and stayed the proceedings. Under the terms of the stay, Colorado cannot enforce the law until the court rules on X.AI’s forthcoming motion for a preliminary injunction.

3. Actions against educational institutions

Kleinschmit v. Univ. of Chicago, No. 1:25-cv-01400 (N.D. Ill. 2025): On February 10, 2025, a former professor at the University of Illinois Chicago sued the university, alleging that it unlawfully discriminated against white male faculty candidates and discriminated and retaliated against the plaintiff by firing him after he objected to the school’s “racial hiring programs.” On May 27, 2025, the plaintiff filed an amended complaint, adding new defendants from the university’s administration and adding allegations that the university, as a recipient of federal funds, violated Title VI by intentionally discriminating on the basis of race, color, and ethnicity. On December 17, 2025, the court granted in part and denied in part a motion to dismiss, dismissing the plaintiff’s Section 1981 and 1983 damages claims as barred by the Eleventh Amendment, which prohibits suits for damages in federal court against states and their agencies, and holding that the plaintiff lacked standing for injunctive relief because he was a former university employee who did not seek reinstatement or otherwise express a desire to return to work at the university. The court, however, allowed the discrimination claim under Title VI to proceed. On March 2, 2026, the plaintiff filed a third amended complaint, again bringing claims of racial discrimination and retaliation under Section 1981, as well as claims of racial discrimination under Section 1983 and Title VI.
- Latest update: On April 20, 2026, the university moved to dismiss the plaintiff’s third amended complaint, arguing that it failed to cure the defects identified in the court’s prior order, including the plaintiff’s lack of standing to seek injunctive relief, the defendants’ entitlement to Eleventh Amendment immunity, and the absence of a cognizable basis for liability. On May 12, 2026, the plaintiff opposed the motion, arguing that he had adequately pled standing for prospective injunctive relief based on an ongoing threat of retaliation and continuing discriminatory practices, and that the defendants are not entitled to Eleventh Amendment immunity because the complaint alleges ongoing violations of federal law. The plaintiff further argued that his Title VI claim is properly pled, including because the court upheld the claim in its previous order.

Legislative Updates

R. 8379: On April 20, 2026, U.S. Representative Julia Letlow (R-LA) introduced House Bill 8379, the “Freedom from Ideological Requirements in Employment (‘FIRE’) Act.” The bill would (1) prohibit DEI trainings or endorsement of statements reflecting DEI principles as a condition for Federal hiring or employment and (2) prohibit implementing training courses for the Federal workforce that relate to DEI, “critical theory relating to race and gender,” “intersectionality, sexual orientation, or gender identity,” or any “assertion that a particular race, color, ethnicity, religion, biological sex, or national origin is inherently or systemically superior, inferior, oppressive, oppressed, privileged or underprivileged.” The Act defines DEI as “any practice, training, statement, or principle that asserts” “how systemic racism is embedded in legal systems, policies, and societal structures rather than being solely a product of individual prejudice.”

R. 8445: On April 22, 2026, U.S. Representatives Young Kim (R-CA), Tim Burchett (R-TN), and Byron Donalds (R-FL) introduced House Bill 8445, called the “Stop DEI Act.” The Act would prohibit federal funds from being made available to institutions of higher education that consider race, sex, ethnicity, color, or national origin “in ways that violate the Nation’s civil rights laws.”

R. 8495: On April 24, 2026, U.S. Representative David Joyce (R-OH) introduced House Bill 8495, a broad appropriations bill which, among other things, would prohibit appropriated funds from being used to “implement, administer, apply, or enforce” programs or activities “for the purposes of diversity, equity, and inclusion training or implementation.” The bill also prohibits funds from being used to carry out any program, project, or activity that promotes or advances Critical Race Theory.

Illinois B. 3731: On February 6, 2026, Illinois State Senator William Cunningham (D) and State Representative Robyn Gabel (D) introduced Illinois Senate Bill 3731, the “First 2026 General Revisory Act.” The Act would require cultural diversity and racial and ethnic sensitivity training for State police officers and would amend the Manufacturing Illinois Chips for Real Opportunity (“MICRO”) Act to require employers with at least 100 employees to submit diversity reports on their workforce, board of directors, and vendors. Employers would also be required to submit a vendor diversity report detailing actual contractual spending for minority-owned and women-owned businesses and employers’ goals for the next fiscal year to contract with diverse vendors.

Since the start of 2026, several states have introduced Proxy Advisor Transparency Acts, requiring proxy advisors to disclose when they recommend casting a vote for nonfinancial reasons including diversity, equity, and inclusion. Several of these bills were recently passed into law.
- On April 9, 2026, Kansas Senate Bill 375 became law after the legislature overrode the Kansas governor’s veto. We reported on this legislation in our March 2, 2026 newsletter. The law requires proxy advisors to disclose when they make recommendations “against company management” without conducting financial analysis, such as recommendations based on ESG, DEI, and social credit or sustainability scores.
- On April 10, 2026, Kansas also passed House Bill 2513, partially overriding the governor’s veto. Similar to S.B. 375, the law requires proxy advisors to provide clear, factual disclosures when recommending casting a vote for nonfinancial reasons such as DEI or ESG. Its stated purpose is to prevent fraudulent and deceptive practices.
- On May 4, 2026, Oklahoma House Bill 4429, sponsored by Oklahoma State Representative Kyle Hilbert (R) and Senator Julie Daniels (R)—which we also reported on in our March 2, 2026 newsletter—passed into law. Similar to the Kansas legislation, the law requires proxy advisors to “provide clear, factual disclosures when they recommend casting a vote for a nonfinancial reason,” in order to “prevent fraudulent or deceptive acts and practices.”

The following Gibson Dunn attorneys assisted in preparing this client update: Jason Schwartz, Mylan Denerstein, Anna McKenzie, Cynthia Chen McTernan, Zakiyyah Salim-Williams, Molly Senger, Katherine Smith, Cate McCaffrey, Sameera Ripley, Anna Ziv, Benjamin Saul, Amy Pan, David Offit, Olympia Karageorgiou, Simon Moskovitz, Teddy Okechukwu, Beshoy Shokrolla, Angelle Henderson, Lauren Meyer, Kameron Mitchell, Taylor Bernstein, Jerry Blevins, Chelsea Clayton, Sonia Ghura, Samarah Jackson, Shanelle Jones, Elvyz Morales, Allonna Nordhavn, Felicia Reyes, Eric Thompson, Laura Wang, Taylor-Ryan Duncan, Sam Moan, Shreya Sarin, and Rachel Schwartz.

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, any member of the firm’s Labor and Employment practice group, or the following practice leaders and authors:

Jason C. Schwartz – Partner & Co-Chair, Labor & Employment Group
Washington, D.C. (+1 202-955-8242, jschwartz@gibsondunn.com)

Katherine V.A. Smith – Partner & Co-Chair, Labor & Employment Group
Los Angeles (+1 213-229-7107, ksmith@gibsondunn.com)

Mylan L. Denerstein – Partner & Co-Chair, Public Policy Group
New York (+1 212-351-3850, mdenerstein@gibsondunn.com)

Zakiyyah T. Salim-Williams – Partner & Chief Diversity Officer
Washington, D.C. (+1 202-955-8503, zswilliams@gibsondunn.com)

Gibson Dunn announces release of Edition 16 of Lexology In-Depth: International Investigations.

Gibson Dunn is pleased to announce the release of Edition 16 of Lexology In-Depth: International Investigations. Gibson Dunn partner Stephanie L. Brooker is the Contributing Editor of the publication, which explores the scope of corporate and individual liability and the regulatory and criminal investigations process in the United States and United Kingdom.

Ms. Brooker, partner David C. Ware, of counsel Bryan H. Parr, and associate Kio Bell co-authored the jurisdiction chapter on the United States.

In addition, partners Patrick Doris, Allan Neil, and associate solicitor Victor Tong co-authored the jurisdiction chapter on the United Kingdom.

You can view these informative and comprehensive chapters via the links below:

CLICK HERE to view Lexology In-Depth: International Investigations

CLICK HERE to view the United States chapter

CLICK HERE to view the United Kingdom chapter

The following Gibson Dunn lawyers contributed to this publication: Stephanie Brooker, David C. Ware, Bryan Parr, and Kio Bell on the U.S. chapter; and Patrick Doris, Allan Neil, and Victor Tong on the United Kingdom chapter.

Gibson Dunn has deep experience with investigations, corporate compliance, and white collar defense.

About the Authors:

David C. Ware is a partner in the Washington, D.C. office of Gibson Dunn. He is a member of the firm’s White Collar Defense and Investigations, Securities Enforcement, Securities Litigation, Anti-Money Laundering, and Accounting Firm Advisory and Defense Practice Groups. David’s practice focuses on government investigations and enforcement actions, internal investigations, and litigation in the areas of auditing and accounting, securities fraud, and related aspects of federal regulatory and criminal law. He also counsels clients concerning compliance with SEC and PCAOB rules and standards. Prior to joining Gibson Dunn, David spent nearly six years at the PCAOB’s Division of Enforcement and Investigations, rising to the position of Associate Director. While at the PCAOB, David was responsible for numerous complex and high-profile investigations, including acting as the lead attorney in some of the PCAOB’s most significant enforcement actions.

Patrick Doris is a partner in Gibson Dunn’s Dispute Resolution Group in London, where he specialises in global white-collar investigations, commercial litigation and complex compliance advisory matters. Patrick’s practice covers a wide range of disputes, including white-collar crime, internal and regulatory investigations, transnational litigation, class actions, contentious antitrust matters and administrative law challenges against governmental decision-making. Patrick handles major cross-border investigations in the fields of bribery and corruption, fraud, sanctions, money laundering, financial sector wrongdoing, antitrust, consumer protection and tax evasion. Patrick is recognised by The Legal 500 UK 2025 in the field of Regulatory Investigations and Corporate Crime. He is also ranked as a leading individual in the field of Administrative and Public Law.

Allan Neil is an English qualified partner in the dispute resolution group of Gibson Dunn’s London office. His recent work involves large-scale multi-jurisdictional disputes and investigations (both regulatory and internal investigations) in the financial institutions sector. His work covers investment banking, asset management and compliance matters. Allan was called to the Bar by the Middle Temple in 2001, having been awarded the Queen Mother Scholarship in consecutive years, and named a Blackstone Entrance Exhibitioner. Allan is recognised by The Legal 500 UK 2025 for Commercial Litigation, Banking Litigation: Investment and Retail and Regulatory investigations and corporate crime (advice to corporates), and has been awarded the Client Choice Award 2015 in recognition of his excellence in client service in the area of UK Litigation. He is also recognised in the 2016 Legal Week Rising Stars in Litigation list, which profiles the up-and-coming litigation stars at UK top 50 and top international firms in London. He speaks French and German.

Bryan H. Parr is of counsel in the Washington, D.C. office of Gibson Dunn and a member of the White Collar Defense and Investigations, Anti-Corruption & FCPA, and Litigation Practice Groups. His practice focuses on white-collar defense and regulatory compliance matters around the world. Bryan has extensive expertise in government and corporate investigations, including those involving the Foreign Corrupt Practices Act (FCPA) and anticorruption. He has defended a range of companies and individuals in U.S. Department of Justice (DOJ), SEC, and CFTC enforcement actions, as well as in litigation in federal courts and in commercial arbitrations. He is recognized as a leading corporate crime and investigations lawyer by Chambers & Partners Latin America for his significant activity and experience in the region. He is proficient in Portuguese, French, and Spanish, and works professionally in all three languages.

Victor Tong is an associate in the London office of Gibson Dunn and a member of the firm’s Dispute Resolution Group. He has a broad practice across all areas of commercial dispute resolution, with particular focus on financial services litigation, internal and regulatory investigations and white collar crime. He acts for global financial institutions, listed companies and multinational corporates on complex, high-value and often cross-border matters, including significant commercial and banking litigation, contentious restructuring and insolvency, and investigations before the principal UK and US authorities such as the Financial Conduct Authority, the Serious Fraud Office and the Department of Justice.

Kio Bell is an associate in the Los Angeles office of Gibson Dunn. He is a member of the firm’s White Collar Defense and Investigations, Anti-Money Laundering, and Anti-Corruption & FCPA Practice Groups.

Contact Information:

For assistance navigating these issues, please contact the Gibson Dunn lawyer with whom you usually work, the leaders or members of the firm’s White Collar Defense and Investigations practice group, or the authors:

Stephanie L. Brooker – Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)
David C. Ware – Washington, D.C. (+1 202.887.3652, dware@gibsondunn.com)
Patrick Doris – London (+44 20 7071 4276, pdoris@gibsondunn.com)
Allan Neil – London (+44 20 7071 4296, aneil@gibsondunn.com)
Bryan H. Parr – Washington, D.C. (+1 202.777.9560, bparr@gibsondunn.com)
Victor Tong – London (+44 20 7071 4054, vtong@gibsondunn.com)
Kio Bell – Los Angeles (+1 213.229.7461, kbell@gibsondunn.com)

From the Derivatives Practice Group: This week, the CFTC rescinded a policy stating that it will not accept settlement offers where the defendant continues to deny the allegations in the complaint or administrative order.

New Developments

CFTC Rescinds Policy Regarding Denials of Settlements in Enforcement Actions. On June 3, the CFTC rescinded a policy, codified in Appendix A to Part 10, stating that it will not accept settlement offers where the defendant continues to deny the allegations in the complaint or administrative order. According to the CFTC, rescinding this policy aligns the Commission with the overwhelming majority of federal agencies and gives the Commission more flexibility in settling enforcement actions, which conserves resources, provides certainty, and potentially expedites the return of money to injured investors. [NEW]

CFTC Staff Issues No-Action Position Related to Designated Contract Market Procedures. On June 3, the CFTC’s Division of Market Oversight announced it has issued a no-action letter to Cboe Digital Exchange, LLC, a designated contract market, which addresses certain procedures related to dormancy. The no-action position is time-limited and subject to the terms and conditions in the letter. [NEW]

CFTC Implements Technical Enhancements to Streamline Product Self-Certification Process. On June 1, the CFTC announced the launch of enhancements to its electronic filing system for product self-certifications. According to the CFTC, Exchanges are now able to submit a single set of product certification documents applicable to multiple closely related contract certifications in one consolidated submission. Updated submission instructions regarding this new functionality are available here. [NEW]

CFTC Chairman Selig Announces Dr. Patrick J. Schorno as Chief Economist. On June 1, CFTC Chairman Michael S. Selig announced that Dr. Patrick J. Schorno has been named the agency’s chief economist to serve as economic adviser to the Commission and integrate rigorous economic analysis, regulatory cost-benefit analysis, and research into the CFTC’s mission. Dr. Schorno joins the CFTC from the Public Company Accounting Oversight Board where he served as the deputy chief economist. [NEW]

CFTC Issues Policy Statement Concerning the Listing of Perpetual Contracts. On May 29, the CFTC issued a policy statement describing the views of the Commission concerning the listing of perpetual contracts. This policy statement was issued contemporaneously with an order permitting the listing of a perpetual contract, which references the spot price of bitcoin, by a DCM as a futures contract.

Commission Staff Confirms the Categorization of Certain Crypto Asset Perpetuals as Foreign Futures and Issues No-Action Letter Regarding FCM Transfers of Customer Crypto Assets to Foreign Brokers as Margin. On May 29, the CFTC’s Market Participants Division announced it has issued an interpretation and a no-action position in response to a request from Coinbase Financial Markets, Inc., a registered futures commission merchant. The positions relate to CFM’s plan to offer certain digital commodity derivatives products listed on CFM’s affiliated foreign board of trade, Deribit FZE.

CFTC Approves BTCPERP Contract Submitted by KalshiEX, LLC. On May 29, the CFTC announced it has issued an Order for Approval to KalshiEX, LLC, a designated contract market, for the listing of the BTCPERP Contract, a perpetual contract that references the spot price of bitcoin, as a futures contract. Kalshi submitted the BTCPERP Contract pursuant to Commission Regulation 40.3 for Commission review and approval on May 29, 2026.

CFTC Staff Issues Advisory on 24/7 Trading, Clearing, and Settlement. On May 29, the CFTC’s Division of Clearing and Risk, Division of Market Oversight, and Market Participants Division issued a staff advisory regarding 24/7 trading, clearing, and settlement. According to the CFTC, the divisions seek to encourage responsible innovation in these markets while reminding designated contract markets, swap execution facilities, derivatives clearing organizations, and futures commission merchants of their regulatory obligations pursuant to the Commodity Exchange Act and Commission regulations thereunder.

CFTC Sues to Block State Enforcement in Rhode Island Amid Ongoing Efforts to Preserve Jurisdiction. On May 28, the CFTC moved to intervene in a lawsuit in the U.S. District Court for the District of Rhode Island to halt the state’s efforts to apply state gambling laws against CFTC-registered contract markets. In response to a complaint filed by a CFTC-registered designated contract market threatened with impending unlawful enforcement by the state, Rhode Island filed a complaint of its own in a parallel state case seeking significant civil penalties.

CFTC Joins Gemini Trust Company LLC in Motion for Relief from Judgment. On May 27, the CFTC announced it has joined Gemini Trust Company LLC in a motion for relief from judgment in CFTC v. Gemini Trust Company LLC, originally filed in the U.S. District Court for the Southern District of New York in June 2022. The parties entered into a consent order in January 2025.

CFTC and National Hockey League Sign MOU Related to Integrity in Professional Hockey. On May 21, the CFTC and the National Hockey League (NHL) announced their signing of a Memorandum of Understanding (MOU) intended to protect the integrity of professional hockey and maintain fair and transparent prediction markets. According to the CFTC, under the terms of the MOU, the CFTC and NHL have solidified their intent to share information and coordinate to protect the integrity of both professional hockey and related event contracts offered on CFTC-regulated exchanges.

New Developments Outside the U.S.

GMTF Presents its Findings on EU Gas and Gas Derivative Markets. On June 2, the Gas Market Task Force (GMTF) published a report on the functioning of EU gas and gas derivatives markets. ESMA said that the report suggests further work in several areas to ensure that European gas and gas derivatives markets continue performing as expected and to the benefit of European competitiveness and consumers. [NEW]

ESMA’s Annual Data Report Shows Increased Quality, Wider Use, and Digital Progress. On May 29, ESMA published its annual report on the quality and use of regulatory data. According to ESMA, the report shows that improvements in data quality and data use reinforce each other in a virtuous cycle, and supports more effective supervision and market monitoring across the EU.

ESMA Consults on Revised Guidelines to Support Smoother Allocations and Confirmations under T+1. On May 26, ESMA launched a consultation on the updated guidelines on standardized procedures and messaging protocols. According to ESMA, this review is part of ESMA’s work to support market participants in preparing for the transition to a T+1 settlement cycle.

ESMA Publishes Shortlist of Candidates for Position of Chair. On May 20, ESMA published the shortlist of candidates for the position of Chair: Karen Dortea and Abelskov Carlo Comporti. ESMA has sent the shortlist to the Council of the European Union and the European Parliament. The Council will appoint the Chair following confirmation by the Parliament.

New Industry-Led Developments

ISDA, GDF Respond to the Central Bank of Ireland on DLT and Tokenization. On June 3, ISDA and Global Digital Finance responded to the Central Bank of Ireland’s discussion paper on distributed ledger technology (DLT) and tokenization in financial services. ISDA said the response focused on the potential role of DLT and tokenization within wholesale markets, including their use in collateral and liquidity management, and that the paper also emphasized that any regulatory framework for DLT and tokenization should be assessed through the lens of prudent risk management, with particular attention to liquidity, credit risk, operational resilience and legal certainty. [NEW]

IOSCO Publishes Final Report on Valuing Collective Investment Schemes. On June 1, IOSCO published its Final Report on Valuing Collective Investment Schemes (CIS). According to IOSCO, the paper sets out a comprehensive and updated set of recommendations to further enhance the reliability, consistency, and transparency of valuation practices across global investment funds and updates and consolidates IOSCO’s earlier principles on valuation for collective investment schemes and hedge funds. [NEW]

ISDA, AFME Respond to Dutch Ministry of Finance Consultation on Dividend Stripping. On May 28, ISDA and the Association for Financial Markets in Europe (AFME) responded to the Dutch Ministry of Finance’s consultation on additional anti-dividend stripping measures. ISDA said the associations argued that some proposed measures would add uncertainty, duplicate existing protections, and risk harming liquidity and efficiency in the Dutch equity market. [NEW]

ISDA Letter to EC and ESMA on Technical Issues with Revised Derivatives Transparency Framework. On May 27, ISDA sent a letter to the European Commission and ESMA to highlight several technical issues arising from the interaction between the delegated regulation 2025/1003 on identifying reference data to be used for over-the-counter derivatives for the purposes of public transparency and the draft regulatory technical standards for derivatives transparency (RTS 2) and from areas of the draft RTS 2 that lack clarity.

IOSCO Publishes AI Supervisory Toolkit. On May 25, IOSCO published a Supervisory Toolkit for AI Use in Capital Markets. IOSCO stated that this report provides regulators with a practical toolkit to support the supervision and oversight of AI based systems used by regulated entities.

ISDA, GFXD Respond to ASIC on Proposed Changes to Derivative Transaction Rules. On May 22, ISDA and the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association submitted a joint response to the Australian Securities and Investments Commission’s (ASIC) consultation on proposed changes to the ASIC Derivative Transaction Rules 2024.

IOSCO Publishes Reports on Market Liquidity for Equity Markets and on Extended Trading Hours for Equity Venues. On May 21, IOSCO published its Consultation Report regarding Regulatory Considerations and Good Practices on the Evolution of Market Liquidity during the Trading Day and its Report on Extended Trading Hours.

ISDA, FIA and SIFMA Submit Joint Letter on Sunset of Swaps LTR Rules. On May 20, ISDA, the Futures Industry Association (FIA), and the Securities Industry and Financial Markets Association (SIFMA) submitted a joint letter to the CFTC to request the CFTC to sunset large trader reporting rules (LTR) rules for physical commodity swaps pursuant to Regulation 20.9.

The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, 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 )

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

Alice Yiqian Wang, Washington, D.C. (202.777.9587, awang@gibsondunn.com)

Sripetch v. Securities and Exchange Commission, No. 25-466 – Decided June 4, 2026

Today, the Supreme Court unanimously held that the SEC may obtain an order directing a defendant to disgorge ill-gotten gains to investors without proving that investors suffered pecuniary harm.

“Whatever else traditional equitable principles demand, they do not require a showing of pecuniary loss before a court may issue an award of unjust profits.”

Justice Gorsuch, writing for the Court

Background:

The Securities and Exchange Commission (SEC) brought a civil enforcement action against Petitioner Ongkaruck Sripetch for securities-law violations arising from schemes involving penny-stock companies. The SEC alleged that Sripetch and his associates obtained shares, promoted the companies without disclosing their roles or planned stock sales, engaged in manipulative-matched trading, and obtained millions of dollars in proceeds from the schemes. Sripetch ultimately entered into a consent judgment on liability. The SEC then sought approximately $4 million in disgorgement to the investors involved in Sripetch’s schemes. The district court awarded the disgorgement over Sripetch’s objection.

The Ninth Circuit affirmed the disgorgement order. The court held that the SEC is not required to show pecuniary loss to investors as a precondition to a court ordering disgorgement. In doing so, the Ninth Circuit joined the First Circuit and disagreed with the Second Circuit, which had required such a showing.

Issue:

Whether the SEC must show that an investor suffered a pecuniary loss before it may secure a disgorgement remedy under either 15 U.S.C. §78u(d)(5) or 15 U.S.C. §78u(d)(7).

Court’s Holding:

No. The SEC need not prove investor pecuniary harm to obtain disgorgement of a defendant’s net profits or unjust enrichment in a civil enforcement action, because equitable remedies have long permitted stripping wrongdoers of ill-gotten gains without a showing of pecuniary loss to victims.

What It Means:

The decision preserves one of the SEC’s most powerful monetary remedies. The SEC may continue to seek disgorgement tied to a defendant’s net profits even where identifying individual investors or quantifying their losses would be difficult.
The Court’s ruling limits defendants’ ability to resist disgorgement by arguing that the SEC must prove the same type of economic loss required in private securities-fraud suits. The focus remains on whether the defendant received unjust enrichment as a result of the securities-law violation and whether the disgorgement award is properly limited to that enrichment.
Because the Court only assumed without deciding that disgorgement under Section 78u(d)(7) is an equitable remedy, defendants can still challenge SEC disgorgement requests seeking to provide the funds to the U.S. Treasury, instead of to investors, on the grounds that they constitute a penalty that implicates Seventh Amendment jury-trial concerns—a concern highlighted in Justice Thomas’s concurrence.

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 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	Jeffrey B. Wall +1 202.955.8533 jwall@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: Securities Enforcement

Mark K. Schonfeld
+1 212.351.2433
mschonfeld@gibsondunn.com

This alert was prepared by Salah Hawkins, Benjamin Rice, and Rebecca Roman.