This mid-year update covers the most significant developments across five key areas of anti-money laundering (AML) regulation and enforcement during the first half of 2026.

The first half of the year reflects a continued focus by enforcement authorities on combating fraud and protecting national security, and a willingness to deploy AML tools toward those ends.  The Trump Administration has issued new guidance and proposed rules seeking to centralize aspects of AML supervision and enforcement, created specialized task forces, and sought to enhance interagency coordination on AML regulation and enforcement.  The federal government is also seeking additional information from the private sector, both via new guidance for financial institutions to share information and via a proposed rule.  We close this alert by describing notable judicial decisions affecting AML enforcement, and recent state enforcement developments.

I. Enforcement Focus on National Security and “Debanking”

Enforcement activity in the first half of 2026 illustrates the Trump Administration’s continued focus on ensuring companies have robust, effective AML and countering the financing of terrorism (CFT) programs, its effort to align prosecutions with its announced policy priorities—namely, national security and trade—and its interest in investigating so-called “debanking” in the financial services sector.

a. Corporate Non-Prosecution Agreement for AML Violations

On June 30, 2026, the U.S. Attorney’s Office for the Middle District of Pennsylvania and the Money Laundering, Narcotics, and Forfeiture Section (MNF) of the Criminal Division entered into a non-prosecution agreement (NPA) with EagleBank and its parent company, Eagle Bancorp, Inc., for willfully failing to establish an effective AML/CFT program.[1]  According to the press release issued by the Department of Justice (DOJ), EagleBank knowingly allowed certain favored clients to operate a check kiting scheme, a form of fraud that takes advantage of the delay in check processing, due in part to the then-CEO and Chairman and the then-Chief Credit Officer “repeatedly over[riding] the efforts of compliance personnel to close the accounts and end the illicit conduct.”[2]  EagleBank agreed to pay approximately $9.7 million in fines and forfeiture, strengthen its AML/CFT program, and cooperate and report violations of law for one year.[3] 

Notably, the relevant conduct began nearly two decades ago in 2008, and ended in 2021, and the NPA follows in the wake of other enforcement actions involving the same individuals.  The lead customer involved in fraudulent conduct pleaded guilty to bank fraud in November 2020,[4] and was sentenced to 40 months in prison in 2024.[5]  The Federal Reserve and the Securities and Exchange Commission also collectively fined EagleBank and Eagle Bancorp $22.9 million and the former CEO and Chairman $521,000 for “deficient internal controls over insider lending practices and insufficient third-party risk management controls.”[6]  This history illustrates that control failures can span multiple substantive areas, and companies should think through all potential agencies when resolving such matters.  Finally, this agreement illustrates the symbiotic relationship between the Middle District of Pennsylvania and DOJ’s headquarters money laundering office, the MNF, which have partnered to bring large AML and sanctions investigations in recent years. 

b. National Security Concerns Continue to Drive Enforcement

Two notable enforcement updates illustrate the Administration’s continued focus on national security, and in particular, connections to Iran.

On March 6, 2026, DOJ filed two civil forfeiture complaints in the District of Columbia against more than $15.3 million allegedly used to fund an illicit Iranian oil distribution network.[7]  According to the government, Mohammad Hossein Shamkhani (Shamkhani) operated a network of companies and individuals that sold and shipped Iranian oil and other commodities in violation of U.S. sanctions imposed under the International Emergency Economic Powers Act (IEEPA).[8]  The two complaints target funds tied to specific entities within the network, such as a layered corporate structure intended to “maintain a ‘brand’ that was not publicly perceived to be affiliated with Shamkhani or Iran.”[9]  The case is being handled by MNF, the U.S. Attorney’s Office for the District of Columbia, and the National Security Division’s Counterintelligence and Export Controls Section.[10]

In addition, on March 23, 2026, the U.S. Attorney’s Office for the Southern District of New York announced a settlement resolving a long-running civil forfeiture case that played a significant role in inspiring the Corporate Transparency Act (CTA).  The settlement will result in the payment of about $318 million to hundreds of victims of Iranian state-sponsored terrorism.[11]  The litigation commenced in 2008 when the government sought forfeiture of the interests in the building located at 650 Fifth Avenue in Manhattan, held by the Alavi Foundation and by Assa Corporation.  Pursuant to the settlement, the Alavi Foundation is transferring its interest in the 650 Fifth Avenue partnership to a Delaware-based charitable entity, and the 650 Fifth Avenue partnership is transferring its assets to a newly formed real estate holding company, each distinct from the prior owners.[12]

The 650 Fifth Avenue forfeiture case was cited in connection with debates about the CTA, which required covered companies to report their beneficial owners to FinCEN, thereby limiting the impact of anonymous shell and front companies that could obscure ownership.  The bill’s lead sponsor, then-Representative Carolyn Maloney, promoted the legislation outside 650 Fifth Avenue, pointing to the building’s concealed Iranian ownership as an example of how anonymous shell companies can facilitate terrorist financing, money laundering, and sanctions evasion.[13]  As discussed in our prior updates,[14] the CTA’s beneficial ownership reporting regime has since been substantially narrowed: following litigation and an interim final rule issued in March 2025, the reporting requirement now applies only to foreign companies registered to do business in the United States.[15]

c. DOJ Subpoenas Regarding Alleged “Debanking”

On June 10, 2026, it was reported that the U.S. Attorney’s Office for the District of Columbia had issued subpoenas to several of the nation’s largest banks seeking information about whether the banks had “debanked” clients for political reasons.[16]  In an Executive Order last year, President Trump identified “politicized or unlawful debanking” as an action taken by a financial institution to directly or indirectly adversely restrict or modify access to financial services on the basis of the customer’s political or religious beliefs or lawful business activity.[17]  The Executive Order directed federal banking regulators to identify financial institutions that engaged in “politicized or unlawful debanking,” to take remedial action including fines, and to refer certain debanking decisions to the Attorney General.[18]  According to reports, the subpoenas requested the names of individuals who were allegedly debanked along with information about why the banks closed their accounts.[19]  The U.S. Attorney’s Office reportedly opened its investigations on its own initiative rather than pursuant to an OCC referral, though the two offices are reportedly coordinating.[20]  The government is reportedly evaluating whether the banks’ conduct may have violated laws such as the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.[21]

d. Civil Enforcement

On March 6, 2026, FinCEN assessed an $80 million civil money penalty—the largest Bank Secrecy Act (BSA) penalty ever imposed against a broker-dealer—against Canaccord Genuity LLC for willful BSA violations.[22]  According to FinCEN, Canaccord was well-positioned as a market maker to detect red flags in the securities for which it provided trading services, but its under-resourced AML program was not proportional to the risks of its business model.[23]  As a result, Canaccord allegedly failed to timely detect and report suspicious activity by numerous high-risk customers, including a customer later barred from the penny stock industry by the SEC, a customer who allegedly helped Russian oligarchs move money out of Russia, and a customer implicated in OFAC investigations.[24]

In addition, on April 24, 2026, the OCC issued a consent order against Community Federal Savings Bank, a New York federal savings association, to address alleged deficiencies in the bank’s AML program.[25]  According to the OCC, the bank significantly grew its payment processing line beginning in 2020, generating increased cross-border activity involving foreign financial institutions without developing proportionate controls and risk management processes.[26]  The order states that its findings are largely unrelated to digital-asset-related activities.[27]  The bank committed to several corrective actions, including appointing a compliance committee to oversee those actions, submitting an action plan to bring the bank into compliance with AML laws, hiring a consultant to conduct a BSA-program assessment, and enhancing its AML program.[28]  The bank also agreed to retain a consultant to conduct a SAR look-back of the bank’s prior suspicious activity monitoring and reporting efforts to determine whether additional SARs should be filed or existing filings require correction.[29]

II. Enhanced Focus on Combating Fraud

Enforcement actions and structural changes within the Executive Branch confirm that fraud remains a priority for both FinCEN and DOJ, as well as other agencies,[30] and that these agencies will use AML laws to help combat fraud.  The Administration’s approach reflects three recurring themes: (1) concentrating authority, (2) enhancing coordination where authority remains shared, and (3) seeking to enlist private companies and individuals to help detect and disrupt fraud. 

a. FinCEN Actions

FinCEN has advanced the Administration’s priority of detecting and preventing fraud through several recent actions.  For instance, on January 9, 2026, Secretary of the Treasury Scott Bessent announced a series of actions by FinCEN against money services businesses located in Minnesota.[31]  As of that date, FinCEN had issued four notices of investigation, issued an alert regarding the identification and reporting of fraud related to federal child nutrition programs, and issued a Geographic Targeting Order requiring banks and money transmitters in Minnesota to report additional information.[32]  The IRS also announced it was auditing financial institutions that allegedly facilitated the laundering of Minnesota funds.[33]

On June 12, 2026, FinCEN issued guidance clarifying how financial institutions may share information with one another regarding suspected fraud.[34]  The guidance addresses the permissibility, circumstances, and manner of real-time information sharing under section 314(b) of the USA PATRIOT Act, which encourages voluntary information sharing by creating a safe harbor that shields financial institutions from liability.[35]  The new guidance clarifies that fraud offenses qualify as specified unlawful activities underlying money laundering and therefore fall within the safe harbor, along with the other predicate acts enumerated in 18 U.S.C. § 1956.[36]  In addition, the guidance provides that institutions may share information based on a mere suspicion of fraudulent activity, without identifying specific proceeds of fraud, and that institutions may share information about both attempts to engage or induce others to engage in transactions as well as completed transactions.[37]  When filing a suspicious activity report, institutions are encouraged to note any reliance on section 314(b), enabling FinCEN to identify examples of the program’s benefits.[38]

b. DOJ Fraud Task Forces

Two Executive Orders issued in March 2026 illustrate how DOJ has prioritized prosecution of fraud and related activity.  Although the new task forces are not AML initiatives, they are likely to have significant implications for AML compliance.  First, because fraud remains a principal predicate offense for money laundering, financial institutions can expect greater reliance on BSA reporting, transaction monitoring, and financial intelligence to identify, trace, and recover criminal proceeds.  Second, the additional resources devoted to tracing and recovering fraud proceeds can lead to increased scrutiny of financial institutions serving alleged fraudsters, evolve into parallel BSA or AML compliance investigations, and increase forfeiture risk.  

First, President Trump issued Executive Order 14395, “Establishing the Task Force to Eliminate Fraud,” which created a whole-of-government effort chaired by Vice President Vance to eliminate fraud, waste, and abuse within federal benefit programs.[39]  Consistent with that directive, DOJ established the National Fraud Enforcement Division, headed by Assistant Attorney General Colin McDonald,[40] by combining the Criminal Division’s Tax Section, Health Care Fraud Unit, and Market, Government, and Consumer Fraud Unit into the new Division.[41]  The realignment also incorporates the Criminal Division’s Appellate Section and the MNF to support, advise, and litigate on behalf of the Division.[42]

Second, President Trump signed an Executive Order directed at cybercrime, fraud, and predatory schemes carried out by foreign-based criminal networks targeting Americans.[43]  These investigations are particularly relevant to AML-regulated entities because online fraud schemes typically depend on banks, payment processors, cryptocurrency platforms, and money transmitters to move and conceal criminal proceeds.  The Order directed the Attorney General to “continue to prioritize prosecutions of defendants engaged in cyber-enabled fraud, including scam centers and sextortion schemes, and . . . pursue the most serious, provable offenses encompassed by such fraudulent schemes.”[44] 

The Administration has utilized the Scam Center Strike Force, and collaboration with the private sector, to execute this directive.  These actions underscore DOJ’s increasing reliance on voluntary cooperation from financial institutions, technology companies, and other private-sector participants to identify fraud infrastructure, trace illicit funds, and disrupt criminal networks before charges are filed.  For example, in April 2026, the Strike Force announced its seizure of a Telegram channel used to recruit human trafficking victims to a scam compound in Cambodia, and multiple private-sector partners voluntarily took internal investigative measures to disrupt the fraud operating on their systems.[45]   Similarly, on June 3, 2026, DOJ announced the results of a collaboration with the private sector, after numerous companies identified infrastructure used to defraud Americans and disrupted scam actors.[46]

III. Policy, Rules, and Guidance

The Administration—and FinCEN in particular—has actively advanced its priorities through proposed rules and other agency guidance.  Collectively, these rules and notices demonstrate the Administration’s continued focus on modernizing and reducing regulatory burdens in the AML and sanctions spaces, while also using AML and sanctions tools to pursue other policy priorities, such as combating transnational criminal organizations and countering Iran.

a. Consolidation

On April 7, 2026, FinCEN issued a notice of proposed rulemaking to modernize the BSA and implement provisions of the AML Act of 2020 (Proposal).[47]  The Proposal supersedes FinCEN’s prior 2024 proposed rule to implement provisions of the AML Act of 2020, and would fundamentally reform financial institution programs designed to fight illicit finance.[48]  FinCEN intends the Proposal to modernize the AML/CFT programmatic framework by promoting risk-based programs and consistency across banks and financial institutions, leading to more effective outcomes for financial institutions and law enforcement.  For more information regarding the Proposal, see our separate client alert.

Notably, consistent with other efforts within the Administration to align policies across agencies within the federal government,[49] the Proposal would expand FinCEN’s role by requiring banking regulators to provide FinCEN at least 30 days’ notice, and an opportunity to provide input, before taking any “significant supervisory action,” defined as formal determinations identifying AML/CFT program deficiencies or violations.[50]  It would raise the threshold for enforcement and significant supervisory action by introducing a two-pronged framework distinguishing program “establishment” from “maintenance,” under which actions premised on maintenance failures would be limited to “significant or systemic” failures to implement an effective AML/CFT program.[51]  And it would allow financial institutions room to make reasonable resource-allocation decisions based on risk; the proposed rule “does not contemplate regulatory second-guessing of a financial institution’s reasonable determinations regarding appropriate resource allocation or conclusions regarding specific risks.”[52]

b. FinCEN’s Proposed Whistleblower Rule

On April 1, 2026, FinCEN published a notice of proposed rulemaking that would formalize the whistleblower program codified by the Anti-Money Laundering Act of 2020 and the Anti-Money Laundering Whistleblower Improvement Act of 2022 (Proposed Whistleblower Rule).[53]  The Proposed Whistleblower Rule would allow potential whistleblowers to report original information about a violation of the BSA, IEEPA, Trading With the Enemy Act of 1917 (TWEA), and the Foreign Narcotics Kingpin Designation Act to the Treasury Department, the Department of Justice, or their employer.  If the information results in a monetary sanction exceeding $1,000,000, the whistleblower would qualify for a reward of up to 30% of the monetary sanctions collected.[54] Notably, despite the lack of formal regulations, the Office of the Whistleblower has been active since the passage of the Anti-Money Laundering Act. 

The Proposed Whistleblower Rule only applies to individuals; legal entities are not eligible, nor are certain categories of individuals, including certain government or self-regulatory organization employees, individuals convicted of related criminal violations, and foreign officials.[55]  Notably, the Proposed Whistleblower Rule would also allow an employer’s audit and compliance personnel to become whistleblowers, but these personnel would be subject to a 120-day waiting period, allowing employers with strong compliance programs “the opportunity to review and assess information” and, where appropriate, “voluntarily disclose the information to the government.”[56]  It would prohibit employers from retaliating against whistleblowers, and more generally would prohibit people from impeding potential whistleblowers’ communications with the government, including through confidentiality agreements or other employment contracts.[57]

FinCEN’s proposed rule is consistent with both broader promotion of whistleblower programs and voluntary self-reporting efforts and the Administration’s focus on anti-money laundering laws and trade and economic sanctions laws.[58]  While the final rule is subject to change, the proposal underscores the continuing importance of strong reporting channels and compliance programs.

c. Proposed Rules Implementing the GENIUS Act

In 2026, the Department of the Treasury proposed AML-related rules pursuant to the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act).[59]  In April, FinCEN and the Office of Foreign Assets Control (OFAC) proposed a rule to implement the GENIUS Act’s requirement that permitted payment stablecoin issuers (PPSIs) be treated as financial institutions for the purposes of the BSA and be subject to new sanctions compliance program requirements.[60]  This rule incorporates FinCEN’s separate Proposal, discussed above in Section III.a, revising AML/CFT program obligations[61] but modifies some aspects to address the GENIUS Act’s specific provisions.[62]  It also includes proposed sanctions compliance program requirements under OFAC’s regulations.  In coordination with federal bank regulators, FinCEN also proposed a rule to address PPSIs’ Customer Identification Program (CIP) requirements, which would specifically require that PPSIs establish and maintain a written, risk-based customer identification program appropriate for their size and business.[63]  The proposed CIP rule would require PPSIs to collect and verify information about customers that transact directly with the PPSI.[64]  Finally, the Office of the Comptroller of the Currency (OCC) and Federal Deposit Insurance Corporation (FDIC) proposed rules that would implement the BSA and sanctions compliance standards for PPSIs by incorporating and applying FinCEN and OFAC regulations to PPSIs.[65]  This is consistent with prior proposed rulemakings in which prudential regulators’ proposals have largely mirrored FinCEN’s similar proposed rulemaking.  The rules would also require consultation with FinCEN before initiating a significant AML enforcement or supervisory action, consistent with the FinCEN proposal discussed in Section III.a above.[66] 

d. Additional Alerts on Administration Priorities

FinCEN has also issued alerts that highlight how the Administration is using AML and sanctions tools and authority to advance other priorities.  For example, on May 11, 2026, FinCEN issued its third alert to assist financial institutions in identifying and reporting actors that fund and facilitate procurement networks supporting Iran’s Islamic Revolutionary Guard Corps (IRGC).[67]  Supplementing its June 2025 Iran Advisory and May 2024 advisory on Iran-backed terrorist organizations,[68] the alert describes the IRGC’s prevailing and emerging methods for laundering funds and evading sanctions, including through the use of a “shadow fleet” of vessels to smuggle oil, front companies, layered corporate structures, and webs of financial facilitators (similar to the allegations in the Shamkhani action), and digital assets, noting that Iranian crypto activity has reached billions of dollars per year.[69] 

On May 11, 2026, FinCEN issued a notice urging financial institutions to be vigilant in detecting, identifying, and reporting suspicious activity connected to human trafficking associated with the 2026 Fédération Internationale de Football Association (FIFA) World Cup.[70]  The notice urges that customer-facing staff should be trained to recognize behavioral indicators of trafficking, since a victim’s only outside contact may be at a branch of a financial institution, and reminds financial institutions of section 314(b)’s safe harbor protections for voluntary information sharing.[71] 

IV. Judicial Developments

The first half of 2026 also featured two notable judicial developments. 

First, on April 7, 2026, the U.S. Court of Appeals for the Second Circuit affirmed the conviction of Mustafa Goklu for money laundering and operating an unlicensed money transmitting business under 18 U.S.C. §§ 1956 and 1960.[72]  Goklu ran an operation that exchanged bitcoin and cash for a commission, uncovered through a series of in-person transactions with an undercover agent.[73]  On appeal, Goklu argued that paying cash for bitcoin in a face-to-face transaction is not “money transmitting” under § 1960, but the Second Circuit disagreed and held that bitcoin qualifies as “funds.”[74]  The court also held that Goklu had transferred funds to “another location” within the meaning of FinCEN regulation 31 C.F.R. § 1010.100(ff)(5)(i)(A) when cash and cryptocurrency changed wallets (both physical and digital).[75]  For businesses that buy or sell virtual currency as a commercial activity, the Second Circuit’s ruling in Goklu is a reminder that federal registration obligations can attach even to informal, in-person operations, and that failure to comply risks criminal exposure.

Second, the U.S. District Court for the Eastern District of Texas held that FinCEN lacked the statutory authority to promulgate the Residential Real Estate Rule.[76]  That rule, which had taken effect March 1, 2026, required reporting persons, often the title company responsible for settlement, to report certain non-financed transfers of residential real property to legal entities or trusts.[77]  The court reasoned that 31 U.S.C. § 5318(g)(1) authorized FinCEN to require reporting of “suspicious” transactions, but that FinCEN had not demonstrated that the non-financed residential transfers are categorically suspicious.[78]  Further, the court found that 31 U.S.C. § 5318(a)(2)’s reference to FinCEN’s authority to require financial institutions to maintain compliant “procedures” did not independently grant authority to impose the reporting requirement.[79]  The court vacated the Rule nationwide.[80]  Following the decision, FinCEN advised that reporting persons are not currently required to file real estate reports and are not subject to liability for failing to do so while the order remains in force.[81]  This decision could be stayed or reversed on appeal, so affected businesses should follow the legal developments closely.[82]

V. State Updates

States have continued to be active in the AML space and adjacent areas.

a. WeChat Multi-State Resolution

In March 2026, a bipartisan coalition of state attorneys general secured commitments from WeChat, the China-based messaging platform, to combat money laundering.[83]  Concerned about drug traffickers’ use of WeChat to facilitate laundering proceeds, the coalition sent a public letter to the company demanding action against its role in facilitating such conduct.[84]  WeChat has since publicly committed to comply with law enforcement requests for certain account information, promptly respond to emergency law enforcement requests, preserve data requested during investigations, maintain a dedicated law enforcement contact, and deploy tools to identify and report patterns associated with money laundering and drug trafficking.[85] 

b. Crypto Kiosks and Lenders

States also continue to focus on crypto kiosks and lenders.  Last year, we reported that California’s Department of Financial Protection and Innovation (DFPI) had taken enforcement actions against crypto kiosk operators for allegedly violating the state’s Digital Financial Assets Law (DFAL).[86]  Since then, California has taken additional enforcement actions against crypto kiosk operators and lenders.[87]

Other states have taken similar action.  Connecticut initiated proceedings against Bitcoin Depot for, among other things, failing to have proper AML or KYC policies, procedures, and controls in place to adequately verify ownership of virtual wallets.[88]  Both the District of Columbia and Massachusetts are currently litigating with kiosk operators, largely related to consumer protection measures, and other states have brought actions for failing to register or maintain registration as money transmitters.[89]

 

 

ENDNOTES TO BE MOVED TO WEBSITE ONLY

[1] Press Release, EagleBank Agrees to Pay More than $9.7 Million to Resolve Bank Secrecy Act Investigation (June 30, 2026), available at https://www.justice.gov/opa/pr/eaglebank-agrees-pay-more-97-million-resolve-bank-secrecy-act-investigation.

[2] Id.

[3] Id.

[4] Non-Prosecution Agreement at 23, EagleBank (June 30, 2026), available at https://www.justice.gov/d9/2026-06/eaglebank_signed_non-prosecution_agreement_2026.06.30.pdf.

[5] Press Release, Maryland Resident Sentenced To 40 Months’ Imprisonment For Bank Fraud (June 28, 2024), available at https://www.justice.gov/usao-mdpa/pr/maryland-resident-sentenced-40-months-imprisonment-bank-fraud.

[6] Press Release, Federal Reserve Board announces it has fined EagleBank $9.5 million for violation of the Board’s insider lending regulation and has permanently barred its former CEO and chairman from the banking industry (Aug. 16, 2022), available at https://www.federalreserve.gov/newsevents/pressreleases/enforcement20220816a.htm; Press Release, SEC Charges Eagle Bancorp and Former CEO with Failing to Disclose Related Party Loans (Aug. 16, 2022), available at https://www.sec.gov/newsroom/press-releases/2022-146.

[7] Press Release, United States Files Civil Forfeiture Complaints Against $15M in Funds Allegedly Linked to Iranian Oil Shipping Network (Mar. 6, 2026), available at https://www.justice.gov/opa/pr/united-states-files-civil-forfeiture-complaints-against-15m-funds-allegedly-linked-iranian.

[8] Id.

[9] Id.

[10] Id.

[11] Press Release, U.S. Att’y’s Office for the S.D.N.Y., SDNY Announces Recovery of Hundreds of Millions of Dollars for Victims of Iran-Sponsored Terrorism (Mar. 23, 2026), available at https://www.justice.gov/usao-sdny/pr/sdny-announces-recovery-hundreds-millions-dollars-victims-iran-sponsored-terrorism-0.

[12] Order, In re 650 Fifth Ave. & Related Props., No. 1:08-cv-10934 (S.D.N.Y. Mar. 20, 2026), ECF No. 2500.    Gibson Dunn represented parties involved in the 650 Fifth Avenue settlement.

[13] Pia Koh, Maloney Suppresses Money Laundering with Corporate Transparency Act, PoliticsNY (Dec. 15, 2020), available at https://politicsny.com/2020/12/15/maloney-suppresses-money-laundering-with-corporate-transparency-act/.

[14] For more information on the CTA, see here.

[15] Beneficial Ownership Information Reporting Requirement Revision and Deadline Extension, 90 Fed. Reg. 13,688 (Mar. 26, 2025).

[16] Dylan Tokar & Gina Heeb, Jeanine Pirro’s Prosecutors Probe Big Banks for Alleged ‘Debanking’, Wall St. J. (June 10, 2026), available at https://www.wsj.com/finance/regulation/jeanine-pirros-prosecutors-probe-big-banks-for-alleged-debanking-13568e9b.

[17] Executive Order 14331, Guaranteeing Fair Banking for All Americans (Aug. 7, 2025), available at https://www.whitehouse.gov/presidential-actions/2025/08/guaranteeing-fair-banking-for-all-americans/.

[18] Id.  For more information, see our prior alert on debanking here.

[19] Dylan Tokar & Gina Heeb, Jeanine Pirro’s Prosecutors Probe Big Banks for Alleged ‘Debanking’, Wall St. J. (June 10, 2026), available at https://www.wsj.com/finance/regulation/jeanine-pirros-prosecutors-probe-big-banks-for-alleged-debanking-13568e9b.

[20] Id.

[21] Id.

[22] Press Release, FinCEN Assesses Historic $80 Million Penalty Against Canaccord Genuity LLC for Securities Fraud-Related Bank Secrecy Act Violations (Mar. 6, 2026), available at https://www.fincen.gov/news/news-releases/fincen-assesses-historic-80-million-penalty-against-canaccord-genuity-llc.

[23] Id.

[24] Id.

[25] Consent Order, In the Matter of Community Federal Savings Bank, AA-ENF-2025-21 (OCC Apr. 24, 2026), available at https://www.occ.gov/static/enforcement-actions/eaAA-ENF-2025-21.pdf.

[26] Id. at Art. II ¶¶ 1–2.

[27] Id. at *1 (recitals).

[28] Id. at Art. III–X.

[29] Id. at Art. VIII.

[30] For example, the Director of Enforcement for the Commodity Futures Trading Commission (CFTC) David Miller identified insider trading, market manipulation, market abuse, retail fraud, and willful failures to follow AML and KYC rules as the CFTC’s five enforcement priorities.  Remarks at NYU Law School – CFTC Enforcement Priorities, Insider Trading in the Prediction Markets, and Cooperation with the CFTC (Mar. 31, 2026), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/opamiller1.

[31] Press Release, Secretary Bessent Announces Initiatives to Combat Rampant Fraud in Minnesota (Jan. 9, 2026), available at https://home.treasury.gov/news/press-releases/sb0354.

[32] Id.

[33] Id.

[34] Press Release, FinCEN Issues Guidance to Help Financial Institutions Eliminate Fraud Through Information Sharing (June 12, 2026), available at https://home.treasury.gov/news/press-releases/sb0531.

[35] FinCEN, Section 314(b) Fact Sheet (June 12, 2026), available at https://www.fincen.gov/system/files/shared/314bfactsheet.pdf.

[36] Id.

[37] Id.

[38] Id.

[39] Executive Order 14395, Establishing the Task Force to Eliminate Fraud (Mar. 16, 2026), available at https://www.whitehouse.gov/presidential-actions/2026/03/establishing-the-task-force-to-eliminate-fraud/.

[40] About the National Fraud Enforcement Division, U.S. Dep’t of Justice (updated Apr. 29, 2026), available at https://www.justice.gov/fraud/about-national-fraud-enforcement-division.

[41] Memorandum for the Department of Justice, Creation of the National Fraud Enforcement Division (Apr. 7, 2026), available at https://www.justice.gov/ag/media/1435311/dl?inline.

[42] Id.

[43] Executive Order, Combating Cybercrime, Fraud, and Predatory Schemes Against American Citizens (Mar. 6, 2026), available at https://www.whitehouse.gov/presidential-actions/2026/03/combating-cybercrime-fraud-and-predatory-schemes-against-american-citizens/

[44] Id.

[45] Press Release, Scam Center Strike Force Takes Major Actions Against Southeast Asian Scam Centers Targeting Americans (Apr. 23, 2026), available at https://www.justice.gov/opa/pr/scam-center-strike-force-takes-major-actions-against-southeast-asian-scam-centers-targeting.

[46] Press Release, Scam Center Strike Force Announces Results of U.S. & Private Industry “Disruption Week” (June 3, 2026), available at https://www.justice.gov/opa/pr/scam-center-strike-force-announces-results-us-private-industry-disruption-week.

[47] Anti-Money Laundering and Countering the Financing of Terrorism Programs, 91 Fed. Reg. 18,704 (proposed Apr. 10, 2026), available at https://www.federalregister.gov/documents/2026/04/10/2026-07033/anti-money-laundering-and-countering-the-financing-of-terrorism-programs.

[48] Id. at 18,706.

[49] For example, early in President Trump’s second term, he issued an Executive Order titled “Ensuring Accountability for All Agencies,” which directed independent agencies to submit major regulations for White House review, authorized centralized review of use of funds, and centralized interpretations of law.  See our prior client alert for more detail.  The National Fraud Enforcement Division and Scam Center Strike Force, supra Section II, are also examples of other consolidation and specialization. 

[50] Anti-Money Laundering and Countering the Financing of Terrorism Programs, 91 Fed. Reg. 18,704, 18,711 (proposed Apr. 10, 2026) (to be codified at 31 C.F.R. pts. 1010, 1020-1030).

[51] Id.

[52] Id. at 18,717.

[53] Whistleblower Incentives and Protections, 91 Fed. Reg. 16,328 (proposed Apr. 1, 2026), available at https://www.federalregister.gov/documents/2026/04/01/2026-06271/whistleblower-incentives-and-protections.

[54] Id. at 16,333–34 (covered actions), 16,338–39 (amount of award).

[55] Id. at 16,332, 16,335.

[56] Id. at 16,332.

[57] Id. at 16,341–42.

[58] Memorandum, U.S. Department of Justice, Department of Justice Corporate Whistleblower Awards Pilot Program (May 12, 2025), available at https://www.justice.gov/criminal/media/1400041/dl?inline.

[59]  For more information about the GENIUS Act, see Gibson Dunn’s comprehensive client alert.

[60] Permitted Payment Stablecoin Issuer Anti-Money Laundering/Countering the Financing of Terrorism Program and Sanctions Compliance Program Requirements, 91 Fed. Reg. 18,582 (proposed Apr. 10, 2026), available at https://www.federalregister.gov/documents/2026/04/10/2026-06963/permitted-payment-stablecoin-issuer-anti-money-launderingcountering-the-financing-of-terrorism.

[61] FinCEN, Fact Sheet: Proposed Rule to Implement the GENIUS Act’s Anti-Money Laundering Obligations and Sanctions Compliance Program Requirements at 2, available at https://www.fincen.gov/system/files/2026-04/FactSheet-PPSI-program-NPRM.pdf.

[62] 91 Fed. Reg. at 18,597. 

[63] FinCEN, Fact Sheet: Proposed Rule to Implement GENIUS Act Customer Identification Program Requirements at 1, available at https://www.fincen.gov/system/files/2026-06/GENIUS-CIP-NPRM-FactSheet.pdf.

[64] Permitted Payment Stablecoin Issuer Customer Identification Program, 91 Fed. Reg. 37,234, 37,240, 37,242 (proposed June 22, 2026) (to be codified at 31 C.F.R. pt. 1033), available at https://www.federalregister.gov/documents/2026/06/22/2026-12460/permitted-payment-stablecoin-issuer-customer-identification-program.  Comments are due August 21, 2026.  Id. at 37,244.

[65] Permitted Payment Stablecoin Issuer Anti-Money Laundering/Countering the Financing of Terrorism and Sanctions Compliance Risk Management, 91 Fed. Reg. 37,840, 37,841 (proposed June 24, 2026) (to be codified at 12 C.F.R. pts. 4, 15, 19), available at https://www.federalregister.gov/documents/2026/06/24/2026-12692/permitted-payment-stablecoin-issuer-anti-money-launderingcountering-the-financing-of-terrorism-and; Bank Secrecy Act and Sanctions Compliance Standards for FDIC-Supervised Permitted Payment Stablecoin Issuers, 91 Fed. Reg. 34,171 (proposed June 5, 2026), available at https://www.fdic.gov/board/bank-secrecy-act-and-sanctions-compliance-standards-fdic-supervised-permitted-payment.

[66] Id. at 37,841.  To that end, the OCC proposal contemplates permitting disclosure of non-public OCC supervisory information to FinCEN, and invites comments regarding the contours of such authorization.  Id. at 37,842.

[67] FinCEN Issues Alert to Stop Money Laundering by Iranian Revolutionary Guard Corps (May 11, 2026) (IRGC Alert), available at https://www.fincen.gov/news/news-releases/fincen-issues-alert-stop-money-laundering-iranian-revolutionary-guard-corps.

[68] Id. at 1; see FinCEN Issues Advisory Highlighting Iranian Oil Smuggling, Shadow Banking, and Weapons Procurement Typologies (June 6, 2025), available at https://www.fincen.gov/news/news-releases/fincen-issues-advisory-highlighting-iranian-oil-smuggling-shadow-banking-and; FinCEN Issues Alert to Stop Money Laundering by Iranian Revolutionary Guard Corps (May 11, 2024), available at https://www.fincen.gov/news/news-releases/fincen-issues-alert-stop-money-laundering-iranian-revolutionary-guard-corps.

[69] IRGC Alert at 3–7.

[70] FinCEN Issues Notice on the Threat of Human Trafficking During the 2026 FIFA World Cup (May 11, 2026) (Trafficking Notice), available at https://www.fincen.gov/news/news-releases/fincen-issues-notice-threat-human-trafficking-during-2026-fifa-world-cup.

[71] Trafficking Notice at 2; see also 31 C.F.R. § 1010.540 (2025).

[72] United States v. Goklu, 173 F.4th 16, 25 (2d Cir. 2026).

[73] Id. at 20–21.

[74] Id. at 24–26.  The Second Circuit’s decision is consistent with a 2025 First Circuit decision, United States v. Freeman, 147 F.4th 1 (1st Cir. 2025), and the overwhelming weight of district court decisions.

[75] Id. at 25. 

[76]  Flowers Title Cos. v. Bessent, No. 6:25-cv-127-JDK, slip op. at 18–19 (E.D. Tex. Mar. 19, 2026).

[77]  Anti-Money Laundering Regulations for Residential Real Estate Transfers, 89 Fed. Reg. 70,258 (Aug. 29, 2024).

[78] Flowers Title Cos., slip op. at 12.

[79] Id. at 15–17.

[80] Id. at 18–19.  Other courts had previously upheld the Rule, though the decision in Corley was mooted by Flowers.  Fidelity Nat’l Fin., Inc. v. Bessent, No. 3:25-cv-554-WWB-SJH, slip op. at 12 (M.D. Fla. Feb. 19, 2026); Corley v. U.S. Dep’t of the Treasury, No. 5:25-cv-086-H (N.D. Tex. Feb. 25, 2026).

[81] Residential Real Estate Rule, Fin. Crimes Enf’t Network, available at https://www.fincen.gov/rre (last visited June 30, 2026).

[82]  As of June 30, 2026, Fidelity National Title Insurance Company’s opening brief before the Eleventh Circuit is due July 31, 2026.  For more information about the decision, please see Gibson Dunn’s recent client alert.

[83] Press Release, Attorney General Jeff Jackson of North Carolina (Mar. 11, 2026), available at https://ncdoj.gov/attorney-general-jeff-jackson-secures-new-commitments-from-wechat-to-combat-fentanyl-money-laundering/.

[84] Press Release, Attorney General Alan Wilson of South Carolina (Mar. 11, 2026), available at https://www.scag.gov/about-the-office/news/attorney-general-alan-wilson-secures-new-commitments-from-wechat-to-combat-fentanyl-money-laundering/.

[85] Press Release, New Hampshire Department of Justice (Mar. 13, 2026), available at https://www.doj.nh.gov/news-and-media/attorney-general-formella-secures-wechat-commitments-presses-chinese-based-sister.

[86] Gibson Dunn, 2025 Year-End Developments in Anti-Money Laundering (Jan. 12, 2026), https://www.gibsondunn.com/2025-year-end-developments-in-anti-money-laundering/.

[87]  For example, this year, DFPI has entered consent orders with or ordered penalties against Evergreen ATM, LLC (d/b/a Getcoins), Anh Management, LLC (d/b/a Hermes Bitcoin), Coinme, Inc., RockItCoin, and LSGT Services, LLC (Coinhub).  See Consent Order, Comm’r of Fin. Prot. & Innovation v. Evergreen ATM, LLC dba Getcoins (Jan. 16, 2026), available at https://dfpi.ca.gov/wp-content/uploads/2026/01/Consent-Order-Evergreen-ATM_-LLC-dba-Getcoins.pdf; Press Release, Cal. Dep’t of Fin. Prot. & Innovation, DFPI Shuts Down Crypto Kiosk Operator for Cheating Consumers and Violating State Laws (May 18, 2026), https://dfpi.ca.gov/press_release/dfpi-shuts-down-crypto-kiosk-operator-for-cheating-consumers-and-violating-state-laws/; Press Release, Cal. Dep’t of Fin. Prot. & Innovation, DFPI Orders Coinme to Provide $175,000 in Consumer Refunds (Feb. 17, 2026), available at https://dfpi.ca.gov/press_release/dfpi-orders-coinme-to-provide-175000-in-consumer-refunds/; Consent Order, Comm’r of Fin. Prot. & Innovation v. RockItCoin, LLC (Jan. 13, 2026), available at https://dfpi.ca.gov/wp-content/uploads/2026/01/Consent-Order-RockitCoin_-LLC.pdf; Consent Order, Comm’r of Fin. Prot. & Innovation v. LSGT Servs. (Oct. 30, 2025), available at https://dfpi.ca.gov/wp-content/uploads/2025/10/Consent-Order-LSGT-Services_-LLC-dba-Coinhub.pdf.

[88] In the Matter of Bitcoin Depot Operating LLC d/b/a Bitcoin Depot f/k/a Lux Vending LLC (Mar. 9, 2026), available at https://portal.ct.gov/-/media/dob/enforcement/consumer-credit/2026-cc-orders/bitcoin-depot-operating-llc–ss-temp-cd-rest-disg-noi-rev–ref-to-renewcdcp.pdf.

[89] See, e.g., Press Release, AG Campbell Sues Bitcoin Kiosk Operator For Facilitating Crypto Scams Against Massachusetts Consumers (Feb. 3, 2026), available at https://www.mass.gov/news/ag-campbell-sues-bitcoin-kiosk-operator-for-facilitating-crypto-scams-against-massachusetts-consumers; Press Release, Attorney General Schwalb Sues Crypto ATM Operator for Financially Exploiting District Residents (Sept. 8, 2025), available at https://oag.dc.gov/release/attorney-general-schwalb-sues-crypto-atm-operator; In the Matter of GPD Holdings LLC d/b/a CoinFlip (Feb. 19, 2026), available at https://www.dob.texas.gov/sites/default/files/files/Laws-Regulations/orders/2026-001.pdf.

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The following Gibson Dunn lawyers assisted in preparing this update: Stephanie Brooker, M. Kendall Day, Amy Feagles, Ella Alves Capone, Sam Raymond, Rachel Jackson, and Akila Bhargava.

Gibson Dunn has deep experience with issues relating to the Bank Secrecy Act, other AML and sanctions laws and regulations, and the defense of financial institutions more broadly. For assistance navigating white collar or regulatory enforcement issues involving financial institutions, please contact any of the authors, the Gibson Dunn lawyer with whom you usually work, or any of the leaders and members of the firm’s Anti-Money Laundering / Financial Institutions, Financial Regulatory, White Collar Defense & Investigations, or Sanctions & Export Enforcement practice groups:

Anti-Money Laundering / Financial Institutions:
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)

White Collar Defense and Investigations:
Stephanie Brooker – Washington, D.C. (+1 202.887.3502, sbrooker@gibsondunn.com)
Winston Y. Chan – San Francisco (+1 415.393.8362, wchan@gibsondunn.com)
Amy Feagles – Washington, D.C. (+1 202.887.3699, afeagles@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
F. Joseph Warin – Washington, D.C. (+1 202.887.3609, fwarin@gibsondunn.com)

Global Fintech and Digital Assets:
M. Kendall Day – Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)
Jeffrey L. Steiner – Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)
Sara K. Weed – Washington, D.C. (+1 202.955.8507, sweed@gibsondunn.com)

Global Financial Regulatory:
William R. Hallatt – Hong Kong (+852 2214 3836, whallatt@gibsondunn.com)
Michelle M. Kirschner – London (:+44 20 7071 4212, mkirschner@gibsondunn.com)
Jeffrey L. Steiner – Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)

Sanctions and Export Enforcement:
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
Adam M. Smith – Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

From the Derivatives Practice Group: This week, the CFTC issued a final order sunsetting the routine position-reporting requirements of Part 20, the large trader reporting rules for physical commodity swaps

New Developments 

CFTC Sunsets Routine Large Trader Reporting Requirements for Physical Commodity Swaps. On July 17, the CFTC issued a final order sunsetting the routine position-reporting requirements of Part 20, the large trader reporting rules for physical commodity swaps. Under the order, clearing organizations, clearing members, and swap dealers will no longer be required to file the daily and event-based position reports currently required under Part 20. [NEW]

Chairman Selig Announces CFTC Agricultural Advisory Committee to Meet July 29 in Washington. On July 15, CFTC Chairman Michael S. Selig, sponsor of the Agricultural Advisory Committee (AAC), announced that the AAC will host its first meeting of 2026 at 1:00 PM EST on July 29, 2026, at CFTC Headquarters. This meeting is open to the public and will be streamed live on CFTC.gov. [NEW]

CFTC Stays KalshiEX Rule Change and Exercises Emergency Authority to Order Fulfillment of Pending Trades. On July 14, the CFTC exercised its authority to stay an emergency rule change proposed by KalshiEX, LLC in response to a Michigan state court order directing the company to cancel certain previously executed trades involving Michigan residents. The CFTC also exercised its emergency authority to order KalshiEX, LLC to fulfill the open trades in accordance with its normal practices. [NEW]

CFTC Approves Final Rule Amending Margin Requirements for Uncleared Swaps. On July 13, the CFTC approved a final rule that amends margin requirements for uncleared swaps for swap dealers and major swap participants who are not subject to prudential regulator margin rules. The CFTC said the amendments enhance market efficiency, promote global harmonization, and support responsible financial innovation, while maintaining robust risk management standards. [NEW]

CFTC to Stay Self-Certified Contract on 24/7 Trading for Crude Oil Futures. On July 9, the CFTC announced that it will exercise its authority to stay the listing of a contract that would have allowed the Chicago Mercantile Exchange (CME) to initiate 24/7 trading on crude oil futures as soon as July 10. The CFTC’s regulations offer exchanges two methods to list contracts — self certification under 40.2 or to seek Commission review and approval under 40.3. CME made simultaneous, but separate filings under both provisions.

New Developments Outside the U.S.

ESMA Launches Data Collection Under the First Phase of ESAP. On July 10, ESMA launched the collection of information from Officially Appointed Mechanisms (OAMs) and National Competent Authorities (NCAs) for the first phase of implementation of the European Single Access Point (ESAP). Starting July 10, OAMs and NCAs will start providing ESAP the information and the metadata collected from financial entities.

ESMA Publishes First Market Capitalization Data for EU Member States. On July 10, ESMA published annual market capitalization and market capitalization ratios of EU Member States for 2024 and 2025. According to ESMA, the data provides clarity on Member States’ position within the framework and helps authorities and market participants prepare for and implement these requirements in a timely manner.

ESMA Publishes Report on EU Carbon Markets. On July 9, ESMA published its third annual market report on EU carbon markets. The report showed that financial intermediaries are central to the functioning of the EU carbon market. According to ESMA’s report, they provide liquidity, act as counterparties to non-financial firms, and help compliance entities access allowances and manage price risk.

ESMA Publishes Technical Standards on CCP Admission Criteria Elements. On July 8, ESMA published its Final Report on the Regulatory Technical Standards concerning the central counterparties’ (CCPs) admission criteria elements, following the review of the European Market Infrastructure Regulation. ESMA conducted a public consultation on the draft RTS in the last quarter of 2025 and held a public hearing in November 2025. The Final Report considers the feedback received during this process.

ESMA Launches Common Supervisory Action on CASPs’ Digital Operational Resilience for Custody. On July 8, ESMA announced it is launching a Common Supervisory Action (CSA) focusing on the digital operational resilience of Crypto-Asset Service Providers (CASPs), with a specific emphasis on custody services. According to ESMA, the CSA will assess the maturity of CASPs’ digital operational resilience frameworks in relation to custody activities. It will focus on risks inherent to distributed ledger technology (DLT), including governance arrangements, key and storage management, transaction controls, incident detection and response, smart contract risks, and dependencies on third-party providers.

ESAs Support ESRB Warning on Systemic Cyber Risks from Frontier AI Models. On July 7, the European Supervisory Authorities announced that they welcomed and supported European Systemic Risk Board’s (ESRB) warning on the systemic cyber risks posed by frontier AI models. The ESRB urged all EU stakeholders, including financial institutions, to enhance their cybersecurity capacities and encouraged relevant authorities to reflect these risks in their supervisory and oversight work.

ESMA Selects Etrading Software (Netherlands) B.V. as Consolidated Tape Provider for OTC Derivatives. On July 6, ESMA selected Etrading Software (Netherlands) B.V. as the Consolidated Tape Provider for over-the-counter (OTC) derivatives. ESMA stated that this constitutes an important step in improving transparency for OTC derivatives markets under the Markets in Financial Instruments Regulation.

ESMA Publishes Preliminary Findings on the Active Account Requirement and the First Annual Report of the Joint Monitoring Mechanism. On July 6, ESMA published the Interim Report of the Effectiveness of the Active Account Requirement and the First Annual Report of the Joint Monitoring Mechanism. The Interim Report provides preliminary findings on the Active Account Requirement (AAR) implementation during 2025 and early 2026. The Annual Report addresses the Joint Monitoring Mechanism, which plays a key role in monitoring developments and assessing financial stability risks across clearing members and clients.

New Industry-Led Developments

HMT Lays SI Granting UK EMIR Article 25(1) Equivalence to Several Jurisdictions. On July 13, the UK Treasury (HMT) laid before Parliament a statutory instrument (SI) setting out UK European Market Infrastructure Regulation (EMIR) Article 25(1) equivalence determinations in respect of the regulatory framework for CCPs established in Australia, Hong Kong, India, Japan, South Africa, the United Arab Emirates and the US. The statutory instrument will come into force on August 3. [NEW]

UK Digital Markets Champion Publishes First Report on Wholesale Markets Tokenization. On July 13, Christopher Woolard CBE, the UK’s Wholesale Markets Digital Champion, published his first report on the future of UK wholesale financial markets. The report recommends that the Bank of England consider broader acceptability of tokenized collateral in the market (for example, for use in central counterparties). [NEW]

ISDA Comments on EP’s MISP Draft Reports. On July 15, ISDA shared comments with policymakers in the European Union on the European Parliament’s (EP) draft reports by Member of the European Parliament (MEP) Markus Ferber and MEP Eero Heinäluoma on the Market Integration and Supervision Package (MISP). According to ISDA, its commentary discusses amendments in relation to the European Securities and Markets Authority’s mandate and powers, the Markets in Financial Instruments Regulation transparency, and the European Market Infrastructure Regulation transaction reporting, among other topics. [NEW]

ISDA Publishes Report on Key Trends in the Size and Composition of OTC Derivatives Markets. On July 9, ISDA published a report outlining the latest data from the Bank for International Settlements OTC derivatives statistics, which showed an increase in notional outstanding of OTC derivatives during the second half of 2025 compared to the same period in 2024. Notional outstanding rose across all major asset classes, including interest rate derivatives, foreign exchange, equity and commodity derivatives.

ISDA and SIFMA Submit Letter on SEC Security-Based Swap Dealer Thresholds. On July 8, ISDA and the Securities Industry and Financial Markets Association (SIFMA) submitted a comment letter to the SEC in response to the staff report on the definitions of “security-based swap dealer” and “major security-based swap participant.” The associations recommend maintaining the current de minimis thresholds for both credit default swap (CDS) and non-CDS security-based swap activity, noting that the SEC’s data shows the existing framework already captures the vast majority of market activity.

ISDA Responds to RBI Consultation on SA-CCR. On July 8, ISDA responded to the Reserve Bank of India’s (RBI) consultation on draft amendment directions on the standardized approach for counterparty credit risk (SA-CCR). According to ISDA, it broadly welcomes the RBI’s move to SA-CCR and updated capital treatment for exposures to central counterparties, noting the draft directions closely track standards from the Basel Committee on Banking Supervision.

ISDA and GDF Publish Tokenization Report. On July 7, ISDA and Global Digital Finance published a report that examines the viability of using tokenized money market funds as collateral for derivatives within existing US legal, regulatory and operational frameworks.

ISDA and GDF Respond to FCA and BOE on Future of Tokenization. On July 6, ISDA and Global Digital Finance (GDF) submitted a joint response to a call for input on the future of tokenization by the Financial Conduct Authority (FCA) and Bank of England (BOE). According to ISDA, tokenization presents a significant opportunity for the derivatives market, with potential benefits that include an expanded pool of eligible collateral, reduced risk during market stress and improved collateral management.

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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)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

State AGs have become primary enforcement actors in many fields, including consumer protection, antitrust, and emerging technology. Companies should expect the current State AG enforcement model to be structurally distinct from the one they navigated even three years ago, with Democratic and Republican coalitions taking often aggressive enforcement postures. Companies’ compliance and litigation strategies should be calibrated to that structure.

State Attorneys General (State AGs) are increasingly taking a more expansive approach to litigation, investigations, and enforcement actions. Many State AGs are benefiting from increased enforcement budgets and staffing.[1] Those enhanced resources have been matched by an influx of experienced legal talent. As the New York Times reported in May 2026, thousands of federal lawyers have departed federal agencies since January 2025, with many moving to Democratic State AG offices and advocacy groups challenging the administration’s policies in court. 

With these added resources, State AGs are increasingly targeting the private sector across industries. Three approaches have emerged. First, Democratic State AGs are seeking to serve as a check on federal policy, including through direct litigation against the Trump administration. Second, Republican State AGs are acting as partners to the federal government in enforcing the administration’s priorities. Third, State AGs of both parties have aligned to target certain priority issues, such as youth online safety, artificial intelligence, pharmacy benefit managers, and prediction markets.

Democratic State Attorneys General: A Check on Federal Policy

“[States] have concurrent jurisdiction with the federal government. If the federal government fails to act, [states] can act.” California Attorney General Rob Bonta made that statement in an interview with Bloomberg in March 2026. Attorney General Bonta is not alone. Democratic State AGs have been particularly active in filing suits against the Trump administration. The Progressive State Leaders Committee reports that since the start of President Trump’s second term, State AGs have filed at least 115 cases against the Trump administration, on track to surpass the 138 filed during his first term. That pace outstrips the 78 multistate suits filed against the Obama administration and the 76 filed against the George W. Bush administration.

Our review of 70 State AG litigation matters initiated on or after January 20, 2025, and involving the Trump administration reveals that all 24 Democratic State AG offices—the 23 states with Democratic AGs and the District of Columbia—have participated in at least one such filing. A core coalition of 18 offices appears in a substantial majority of cases, with California, Illinois, Maryland, New Jersey, New York, Oregon, Rhode Island, and Washington each joining at least 40 matters. California (32 lead or co-lead positions), New York (21), Washington (19), Massachusetts (15), Illinois (13), and Rhode Island (13) most frequently anchor these coalitions, and approximately 86 percent of the 70 filings are multistate.

Democratic State AGs have challenged administration actions or filled perceived enforcement gaps on several fronts, including tariffs, environmental regulations, and consumer protection.[2

Tariffs

After President Trump instituted his signature tariff policies, Oregon Attorney General Dan Rayfield led a twelve-state coalition in filing a lawsuit challenging the President’s authority to impose tariffs under the International Emergency Economic Powers Act. The Democratic State AGs claimed that the literature cited by the administration concluded that “nearly all of the cost of tariffs (95%) carries over to domestic purchasers.” Likewise, according to an analysis from the Federal Reserve Bank of New York, U.S. businesses and consumers shouldered nearly 90 percent of the tariffs’ costs. In February 2026, the U.S. Supreme Court struck down the tariffs and sent the case back to the U.S. Court of International Trade for further proceedings.

Following the Supreme Court’s ruling, President Trump issued a global 10 percent tariff on nearly every country under Section 122 of the Trade Act of 1974. In response, Democratic State AGs from 22 states, joined by the governors of Pennsylvania and Kentucky, filed a multistate lawsuit to enjoin these new tariffs, again alleging they violate the Constitution’s separation of powers. In May 2026, the U.S. Court of International Trade invalidated those tariffs for the State of Washington and two private plaintiffs and found that the remaining states lack standing. Shortly after, the Trump administration appealed the decision, and further judicial proceedings will determine whether the federal government can continue to collect the tariffs and whether refunds are required.

Environmental Regulation

On Inauguration Day, President Trump issued Executive Order (EO) 14156, titled “Declaring a National Energy Emergency,” declaring that the United States has insufficient domestic energy production and infrastructure. The EO also ordered the U.S. Army Corps of Engineers to expedite permitting for energy projects. Fifteen Democratic State AGs are challenging the order for bypassing the environmental review process required under the Clean Water Act, the Endangered Species Act, and the National Historic Preservation Act. They allege that no genuine national emergency justifies shortening the review and that the order’s emergency declaration is “arbitrary and capricious.” The State AGs amended their complaint in January 2026, adding the U.S. Department of the Interior as a defendant and challenging its actions to bypass requirements under the National Environmental Policy Act, the Endangered Species Act, and other laws when permitting fossil fuel and other energy projects. The defendants have since moved to dismiss and that motion is pending.

The Consumer Financial Protection Bureau

Under the Trump administration, the Consumer Financial Protection Bureau (CFPB) has experienced funding cuts, mass layoffs, and a pause in enforcement actions and investigations. In February 2025, the Trump administration issued a stop-work order to CFPB employees, and in April 2025, the agency sent more than 1,400 reduction-in-force notices. While the U.S. Court of Appeals for the District of Columbia Circuit considers the CFPB layoffs en banc, Democratic State AGs are attempting to fill the gaps.

Democratic State AGs are opposing changes to the CFPB sought by the Trump administration. In February 2025, 22 Democratic State AGs and the District of Columbia’s Attorney General submitted an amicus brief opposing the Trump administration’s stop-work order and mass layoffs. The same coalition filed an amicus brief in May 2025, when the case reached the District of Columbia Circuit. In December 2025, this same coalition, minus Washington, filed a lawsuit challenging the Trump administration’s attempt to defund the CFPB.

Democratic State AGs also are stepping into areas historically the focus of CFPB enforcement. In May 2025, New York Attorney General Letitia James filed a lawsuit against a major consumer bank after the CFPB voluntarily dropped a similar case. AG James alleges that the bank marketed a savings account as a high-rate account, but froze that account’s rate while launching a similarly-named savings account with a higher interest rate, allegedly unlawfully operating a two-tier system of savings accounts that harmed existing customers with the lower-rate savings accounts. After a related class action suit resulted in a proposed settlement, James led a coalition of 18 bipartisan State AGs in filing an amicus brief, arguing that the proposed class action settlement failed to provide consumers with appropriate restitution. In April 2026, the court approved a revised classwide settlement requiring the bank to pay $425 million into a non-reversionary common fund and to comply with injunctive terms. Due to the settlement, James has stated she will voluntarily dismiss her lawsuit.

Pricing Practices

Pricing practices, such as algorithmic pricing, so-called “surveillance” pricing, and junk fees have emerged as a Democratic State AG enforcement priority. For example, in January 2026, New York Attorney General Letitia James opened an investigation into an online grocery delivery platform under New York’s Algorithmic Pricing Disclosure Act, a first-of-its-kind statute that took effect November 10, 2025, and requires companies to clearly disclose when they are using consumers’ personal data to set prices. The same month, California Attorney General Rob Bonta launched an investigative sweep targeting “surveillance pricing” practices in the retail, grocery, and hotel sectors. Bonta’s announcement explicitly framed the sweep as a response to the Trump administration’s purported “abandonment of critical consumer protection work.” In 2025, California Governor Gavin Newsom announced his decision to restructure state government resources to create a Business and Consumer Services Agency “dedicated to business regulation and consumer protection.” Governor Newsom recently appointed Rohit Chopra, former Director of the Consumer Financial Protection Bureau and Commissioner of the Federal Trade Commission, to lead the newly created agency. The agency launched on July 1, 2026.

Republican State Attorneys General: A Partner in Federal Policy

While Democratic State AGs are filing lawsuits against the federal government and filling perceived enforcement gaps, Republican State AGs are seeking to act in tandem with the administration. Many of their lawsuits, investigations, and enforcement actions complement the administration’s policy agenda. In the same review of 70 active State AG litigations initiated on or after January 20, 2025, 26 Republican AG offices–25 of the 27 states with Republican AGs plus Guam–have joined at least one filing in support of administration policy, with New Hampshire and Pennsylvania as the only Republican AG offices to not yet have participated. The Republican coalition is equally consistent in composition: nine states–Florida, Indiana, Kansas, Louisiana, Missouri, Montana, Nebraska, Oklahoma, and South Dakota–have appeared in all of our tracked filings. Texas, while not consistently appearing in Republican-coordinated multistate filings, has been independently aggressive in pursuing affirmative enforcement against private parties, most notably securing a $1.375 billion settlement with a major internet search platform over data privacy violations in May 2025, alongside investigations and enforcement actions on DEI and ESG matters discussed below. 

Diversity, Equity, and Inclusion (DEI)

Following EO 14151, titled “Ending Radical and Wasteful Government DEI Programs and Preferencing,” and EO 14173, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” the Texas and Florida AGs issued formal legal opinions asserting that DEI and affirmative action measures constitute unlawful discrimination on the basis of race and sex. Florida AG James Uthmeier wrote in his legal opinion that various Florida laws that promote affirmative action in hiring practices, race-based preferences in government contracting, and quotas are unconstitutional. Texas AG Ken Paxton’s opinion likewise asserts that various Texas laws unconstitutionally discriminate on the basis of race and sex—for example, by promoting affirmative action and DEI policies, and through programs such as the “Historically Underutilized Business” and “Disadvantaged Business Enterprise” programs, which create race- and sex-based classifications. Paxton goes further, warning that private companies that engage in DEI programs, such as hiring and promoting based on protected class, establishing affinity groups, or mandating diversity training, could expose themselves to liability.

Republican State AGs have also targeted specific employers that engage in DEI-related practices. For example, 19 State AGs sent a warning letter to a large national wholesale retailer demanding that it terminate DEI-related policies.

Environmental, Social, and Governance

In November 2025, the Federal Trade Commission (FTC) opened an investigation into two major proxy advisory firms to determine if they violated antitrust laws by colluding to steer clients toward Environmental, Social, and Governance (ESG) policies.

Republican State AGs also are backing the administration’s rollback of ESG policies. Shortly after the FTC opened its November 2025 investigation, Attorney General Uthmeier filed suit against the two proxy firms. The suit alleges that the firms violated Florida’s consumer protection and antitrust laws by steering shareholders and corporate boards toward ESG policies, which Attorney General Uthmeier characterizes as race- and gender-based quotas and climate mandates, over financial performance. Uthmeier’s lawsuit followed Attorney General Paxton’s Civil Investigative Demands into the same firms to determine if they violated Texas consumer protection laws. In May 2026, Paxton sued one of the firms for allegedly presenting its recommendations as objective while prioritizing ESG considerations over shareholders’ financial interests. Nebraska, Iowa, and West Virginia AGs filed parallel suits the same day.

State Attorneys General Working Across the Aisle

While Democratic and Republican State AGs pursue partisan investigations and lawsuits, several issues cross the political aisle. They include youth online safety, artificial intelligence (AI), pharmacy benefit managers (PBMs), and prediction markets.

Youth Online Safety and Artificial Intelligence

Both Democratic and Republican AGs have focused on online safety for youth and preserving state authority to enact laws and regulations affecting children online. 

A bipartisan coalition of State AGs has been pursuing multistate litigation against a major social media platform alleging that the platform’s design contributed to youth mental-health harms. Several states have also pursued independent actions against social media platforms and other tech companies over related alleged youth-safety issues, as well as alleged violations of children’s privacy laws.

In February 2026, a bipartisan coalition of 40 State and Territory AGs sent a letter to Congress in support of the U.S. Senate’s Kids Online Safety Act (KOSA), S. 1748. The AGs’ letter notes a preference for the Senate bill over the corresponding House bill because the House bill expressly preempts state laws addressing youth online safety. Additionally, a bipartisan group of 44 State and Territory AGs issued a letter to 13 companies in August 2025, outlining the AGs’ concerns about minors’ use of AI chatbots and the need to protect them from allegedly inappropriate content. 

Pharmacy Benefit Managers

In April 2026, 45 State and Territory AGs submitted a comment letter in support of the U.S. Department of Labor’s (DOL) proposed rule requiring additional transparency for PBMs that serve self-funded employer healthcare plans under the Employee Retirement Income Security Act of 1974. The State AGs support DOL’s proposal to require PBMs to disclose their fees and revenue twice a year. The comment letter also urges DOL to clarify its proposed rule to make clear it would not preempt any state PBM transparency laws, especially since all 50 states have enacted PBM laws. Lastly, the comment letter calls for DOL to partner with State AGs to enforce PBM transparency.

Prediction Markets

State AGs across the political spectrum have been actively asserting state regulatory authority over prediction markets and event contracts. In April 2026, a bipartisan coalition of 41 State and Territory AGs, led by New Jersey AG Jennifer Davenport, filed a formal comment letter with the U.S. Commodity Futures Trading Commission (CFTC), urging the agency to confirm through rulemaking that it lacks jurisdiction over sports-related event contracts and that such activity remains subject to state gambling laws. Maryland AG Anthony Brown, who joined the coalition of 41 State and Territory AGs, issued a statement on the group’s outreach to the CFTC and recounted efforts since April 2025 to coordinate states’ strategy regarding prediction markets enforcement. 

Democratic State AGs in Massachusetts, Michigan, and Arizona have filed civil enforcement actions or issued cease-and-desist orders against an online prediction market, alongside parallel actions by state gaming regulators in Illinois, Nevada, and other states, generally alleging that the platforms’ sports event contracts constitute unlicensed sports wagering or illegal gambling under state gaming laws. In response to cease and desist orders, platform operators have also filed lawsuits seeking declaratory and injunctive relief on the ground that the Commodity Exchange Act (CEA) gives the CFTC exclusive jurisdiction over event contracts traded on CFTC-registered Designated Contract Markets (DCMs) and accordingly preempts the application of state gambling laws to those contracts. The CFTC, together with the U.S. Department of Justice, filed parallel suits on April 2, 2026 against Arizona, Connecticut, and Illinois, seeking declaratory judgments in federal district court in each state that the CEA preempts those states’ enforcement actions against CFTC-registered DCMs and permanent injunctions against the underlying state proceedings, and has since filed additional suits against other states. The CFTC has also obtained emergency relief in the Arizona action, where the State has filed criminal charges against a DCM operator. The U.S. Court of Appeals for the Third Circuit became the first federal appellate court to rule on the question in KalshiEX LLC v. Flaherty, No. 25-1922 (3d Cir. Apr. 6, 2026), holding, in a 2-1 decision, that sports-related event contracts are “swaps” under the CEA and that the CEA preempts state gambling laws as applied to such contracts on a CFTC-registered DCM. Parallel appeals are pending in the Fourth, Sixth, and Ninth Circuits, with several commentators anticipating Supreme Court review.

[1] For example, in Fiscal Year 2026, the Illinois legislature approved $85.7 million—a $15.7 million or 22.4 percent increase—for the State AG’s office. In late 2024, the California legislature convened a special session to set aside $25 million for the California Department of Justice and other state agencies specifically to “challenge and defend against unlawful federal actions.” And for Fiscal Year 2026, Utah Attorney General Derek Brown received $4.1 million in new ongoing appropriations to help retain attorneys and hire more staff. 

[2] While the subject-matter areas discussed here are illustrative of the Democratic State AG enforcement actions, they are by no means exhaustive. In our review of 70 State AG actions involving the Trump administration, other federal funding and agency-structure challenges (20), immigration and citizenship matters (11), healthcare and LGBTQ-related litigation (10), and education and research funding disputes (10) also account for a large share of the Democratic AG docket.

State AGs have become primary enforcement actors in many fields, including consumer protection, antitrust, and emerging technology. Companies should expect the current State AG enforcement model to be structurally distinct from the one they navigated even three years ago, with Democratic and Republican coalitions taking often aggressive enforcement postures. Companies’ compliance and litigation strategies should be calibrated to that structure.

Gibson Dunn’s State Attorneys General Practice Group assists clients in responding to subpoenas and civil investigative demands, interfacing with state or local grand juries, representing clients in civil and criminal proceedings, and taking cases to trial.

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The following Gibson Dunn lawyers prepared this update: Mylan L. Denerstein, Natalie J. Hausknecht, Poonam G. Kumar, Prerak Shah, James L. Zelenay Jr., Alyssa B. Kuhn, Zoey G. Clark, Andrew M. Kasabian, and Kate M. Googins.

Gibson Dunn lawyers are closely monitoring developments and are available to discuss these issues as applied to your particular business. If you have questions, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following members of Gibson Dunn’s State Attorneys General (AG) practice group, who are here to assist with any AG matters:

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

Antitrust & Competition:
Eric J. Stock – New York (+1 212.351.2301, estock@gibsondunn.com)

Climate Change & Environmental:
Rachel Levick – Washington, D.C. (+1 202.887.3574, rlevick@gibsondunn.com)

Consumer Litigation & Products Liability:
Christopher Chorba – Los Angeles (+1 213.229.7396, cchorba@gibsondunn.com)

Consumer Protection:
Gustav W. Eyler – Washington, D.C. (+1 202.955.8610, geyler@gibsondunn.com)
Svetlana S. Gans – Washington, D.C. (+1 202.955.8657, sgans@gibsondunn.com)
Natalie J. Hausknecht – Denver (+1 303.298.5783, nhausknecht@gibsondunn.com)
Ashley Rogers – Dallas (+1 214.698.3316, arogers@gibsondunn.com)

DEI & ESG:
Stuart F. Delery  – Washington, D.C. (+1 202.955.8515,sdelery@gibsondunn.com)
Mylan L. Denerstein – New York (+1 212.351.3850, mdenerstein@gibsondunn.com)

False Claims Act & Government Fraud:
Winston Y. Chan – San Francisco (+1 415.393.8362, wchan@gibsondunn.com)
Jonathan M. Phillips – Washington, D.C. (+1 202.887.3546, jphillips@gibsondunn.com)
Jake M. Shields – Washington, D.C. (+1 202.955.8201, jmshields@gibsondunn.com)
James L. Zelenay Jr. – Los Angeles (+1 213.229.7449, jzelenay@gibsondunn.com)

Labor & Employment:
Jason C. Schwartz – Washington, D.C. (+1 202.955.8242, jschwartz@gibsondunn.com)
Katherine V.A. Smith – Los Angeles (+1 213.229.7107, ksmith@gibsondunn.com)

Privacy & Cybersecurity:
Ryan T. Bergsieker – Denver (+1 303.298.5774, rbergsieker@gibsondunn.com)
Cassandra L. Gaedt-Sheckter – Palo Alto (+1 650.849.5203, cgaedt-sheckter@gibsondunn.com)
Vivek Mohan – Palo Alto (+1 650.849.5345, vmohan@gibsondunn.com)

Securities Enforcement:
Tina Samanta – New York (+1 212.351.2469, tsamanta@gibsondunn.com)
Lauren Cook Jackson – Washington, D.C. (+1 202.955.8293, ljackson@gibsondunn.com)

Tech & Innovation:
Ashlie Beringer – Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)

White Collar & Litigation:
Collin Cox – Houston (+1 346.718.6604,ccox@gibsondunn.com)
Trey Cox – Dallas (+1 214.698.3256,tcox@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
Allyson N. Ho – Dallas (+1 214.698.3233,aho@gibsondunn.com)
Poonam G. Kumar – Los Angeles (+1 213.229.7554, pkumar@gibsondunn.com)
Prerak Shah – Houston (+1 346.718.6677, pshah@gibsondunn.com)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

Maniago v. Desert Cardiology Consultants’ Medical Group, S290188 –
Decided July 16, 2026

The California Supreme Court held today that a party seeking review of an interlocutory order that does not fully resolve all claims, such as an order sustaining a demurrer with leave to amend, may not expedite appellate review by voluntarily dismissing the unresolved claims.

“We hold that when, as here, the plaintiffs voluntarily dismiss their action before the court has reached a final resolution regarding any of the claims pleaded in the complaint, the effect of the dismissal is to terminate the action entirely, thus forfeiting the right to appeal.”

Justice Groban, writing for the Court

Background:

Under the one-final-judgment rule, California appellate courts typically lack jurisdiction over appeals from interlocutory orders. Plaintiffs Glenn and Geneanne Maniago tried to circumvent that rule by voluntarily dismissing their complaint after two of their five claims survived a demurrer and they were granted leave to amend the three others. Unhappy with the trial court’s demurrer order, the Maniagos voluntarily dismissed their entire complaint with prejudice before the time to amend had expired, explaining that the dismissal was “solely for the purpose of expediting an appeal.”

The Court of Appeal held that it lacked jurisdiction over the appeal, reasoning that voluntary dismissal of live claims, with the hopes of reviving them after a successful appeal, does not create appellate jurisdiction to review a nonfinal order. The California Supreme Court granted review to resolve the issue. 

Issue Presented:

Is a voluntary dismissal with prejudice an appealable order if it was entered after an adverse ruling by the trial court in order to expedite an appeal of the ruling? 

Court’s Holding:

No. The voluntary dismissal of claims that have not been resolved results in termination of the action and forfeiture of appellate rights, not appellate jurisdiction.

What It Means:

• The decision tells a cautionary tale for parties hoping to sek review of interlocutory orders: strategic attempts to manufacture appellate jurisdiction may well backfire, leading to forfeiture rather than creation of appellate rights.
• The decision disapproves prior precedent to the extent it suggested that a party may create appellate jurisdiction by voluntarily dismissing an action after the issuance of an interlocutory order that does not finally resolve each claim.
• The Court emphasized, however, that parties seeking review of interlocutory orders are not without options. The Maniagos, for instance, could have (1) filed a petition for a writ of mandate or (2) abandoned the claims that were not subject to the demurrer order and requested a judicial order of dismissal of their remaining claims after the deadline to amend had passed.
• The Court specifically reserved the question whether appellate courts have jurisdiction over appeals arising from a voluntary dismissal after interlocutory orders fully resolve an action but no final judgment is entered.

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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 California 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	Michael J. Holecek +1 213.229.7018 mholecek@gibsondunn.com

This alert was prepared by Daniel R. Adler, Matt Aidan Getz, and Allison Roy Kawachi.

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

This FLSA litigation and regulatory update summarizes recent key legal opinions and developments to assist employers navigating the evolving wage-and-hour litigation landscape.

Introduction

Wage-and-hour litigation under the Fair Labor Standards Act remains among the highest-volume categories of federal employment litigation, and collective actions continue to impose substantial aggregate exposure on employers.  Because these claims aggregate wages across large employee groups and carry liquidated damages and mandatory fee-shifting, they remain attractive targets for the plaintiffs’ bar.  This risk merits attention from any employer with a sizable workforce or significant reliance on independent contractors whose classification could be challenged.

Over the past several quarters, however, courts and the current Department of Labor have moved to narrow the avenues for aggregate wage-and-hour liability.  By limiting the reach of court-authorized notice, federal courts have increasingly tightened the procedural pathways through which nationwide collective actions proceed.  They have also begun to narrow the universe of cognizable claims, with the Third Circuit recently holding that the FLSA affords no remedy for “overtime gap time” and channeling such claims toward state law.  Courts have also trimmed overtime exposure in the transportation sector and for employers with exempt employees who do not record their hours, with the Seventh Circuit applying the Motor Carrier Act exemption to intrastate delivery drivers, and the Fifth Circuit holding that an employer’s failure to maintain a timekeeping system does not constitute constructive knowledge of an exempt employee’s hours worked.  And a recent decision out of the Western District of Washington is the latest to enforce a private severance agreement as a valid release of FLSA claims, even without approval from a court or the Department of Labor—a sign that courts are increasingly willing to provide employers with the benefits memorialized in employee agreements.  The picture is not uniformly one of retrenchment, though: the Supreme Court declined to resolve a circuit split on the proper standard for authorizing notice in collective actions, leaving the lenient two-step process in place for most of the nation.

In parallel, the Department of Labor has adopted a more cooperative enforcement posture, retreating from the prior administration’s more expansive regulatory positions on overtime exemptions and independent-contractor classification.  As a result, defenses and forum considerations have taken on heightened strategic importance, even as substantive exposure—particularly under state law—continues to evolve.

I. Recent Litigation Activity

A. Personal Jurisdiction Over Out-of-State Opt-In Plaintiffs

Unlike Rule 23 class actions, collective actions proceed on an opt-in basis:  a worker becomes a party only by affirmatively filing written consent.  A growing majority of circuits has held that, because opt-in plaintiffs are real parties in interest asserting their own claims, the personal-jurisdiction analysis of Bristol-Myers Squibb Co. v. Superior Court, 582 U.S. 255 (2017), applies on a claim-by-claim basis in FLSA collective actions.  The practical effect is that a court cannot exercise specific personal jurisdiction over the claims of out-of-state opt-ins against an employer that is not subject to general jurisdiction in the forum.

Most recently, on May 4, 2026, the Second Circuit joined this majority in Provencher v. Bimbo Foods Bakeries Distribution LLC, 175 F.4th 180 (2d Cir. 2026), holding that a district court in Vermont could not authorize notice to proposed Connecticut and New York opt-ins where the defendant was incorporated in Delaware and headquartered in Pennsylvania and the out-of-state workers’ claims did not arise from the defendant’s contacts with Vermont.  The Second Circuit joined the Third, Sixth, Seventh, Eighth, and Ninth Circuits in applying Bristol-Myers to collective actions.  See Fischer v. Fed. Express Corp., 42 F.4th 366 (3d Cir. 2022); Canaday v. Anthem Cos., 9 F.4th 392 (6th Cir. 2021); Vanegas v. Signet Builders, Inc., 113 F.4th 718 (7th Cir. 2024); Vallone v. CJS Sols. Grp., LLC, 9 F.4th 861 (8th Cir. 2021); Harrington v. Cracker Barrel Old Country Store, Inc., 142 F.4th 678 (9th Cir. 2025).  The First Circuit remains the lone outlier.  See Waters v. Day & Zimmermann NPS, Inc., 23 F.4th 84 (1st Cir. 2022).  The Fourth, Fifth, Tenth, Eleventh, and D.C. Circuits have not squarely resolved the question at the circuit level, and district courts within them are often divided.

Why this matters:  Because the Second Circuit encompasses some of the highest-volume FLSA filing venues in the country, Provencher in particular reduces the settlement leverage historically available to plaintiffs suing employers headquartered elsewhere.

B. Third Circuit Holds the FLSA Provides No Remedy for “Overtime Gap Time”

The Third Circuit held on June 3, 2026, that the FLSA provides no remedy for so-called “overtime gap time”—that is, unpaid straight-time wages for non-overtime hours worked during a workweek in which the employee also worked overtime.  See Sec’y U.S. Dep’t of Lab. v. Comprehensive Healthcare Mgmt. Servs. LLC, No. 24-2842, 2026 WL 1582064 (3d Cir. June 3, 2026).  The Secretary had obtained a $35.8 million judgment on behalf of nearly 6,000 nursing-facility employees, a portion of which compensated overtime gap time.  Id. at *1.  Reasoning that the FLSA’s text guarantees only a minimum wage and overtime pay—and does not require payment for non-overtime hours so long as the employee’s average wage satisfies the minimum-wage floor—the court reversed the gap-time portion of the award.  Id. at *4.  In doing so, it joined the Second Circuit, see Lundy v. Catholic Health System of Long Island, Inc., 711 F.3d 106 (2d Cir. 2013), and split from the Fourth Circuit, see Conner v. Cleveland County, 22 F.4th 412 (4th Cir. 2022), which had recognized such claims; the Supreme Court previously declined to review the question.

Why this matters:  The decision forecloses overtime-gap-time claims under federal law in the Third Circuit and deepens an existing circuit split.  Employers should anticipate that plaintiffs will increasingly pursue gap-time theories under state wage-and-hour laws, many of which require payment for all hours worked and are unaffected by this ruling.

C. Seventh Circuit Holds that Intrastate Drivers Moving Interstate Goods Are Exempt

On April 2, 2026, the Seventh Circuit held that drivers who operate exclusively intrastate routes may still fall within the Motor Carrier Act (MCA) exemption to the FLSA’s overtime requirement, 29 U.S.C. § 213(b)(1), so long as the goods they carry remain in a continuous interstate journey.  See Stingley v. Laci Transport, Inc., 172 F.4th 525, 530–32 (7th Cir. 2026).  Plaintiffs were shuttle truck drivers who moved automobile parts entirely within Illinois, ferrying them between storage lots and a Ford assembly plant in Chicago.  Although the drivers never crossed state lines, the parts were manufactured out of state, delivered by interstate carriers to the storage lots, and then shuttled to the plant as production required.  The court held that the temporary staging at the storage lots did not interrupt the interstate journey because the lots were not the goods’ final destination.  It rejected the drivers’ attempt to treat the lots and the plant as a single endpoint and affirmed the district court’s grant of summary judgment for the employers.

Stingley represents only the latest expansion of the MCA exemption’s reach.  The Ninth Circuit is poised to address the same continuous-journey question in the last-mile context in Madero v. McLane Foodservice, Inc., Nos. 25-1341 & 25-1798.  Litigants—including in Madero—now also invoke by analogy the Supreme Court’s recent decision in Flowers Foods, Inc. v. Brock, 146 S. Ct. 1358 (2026), where the Court held that last-mile drivers delivering goods that have moved interstate are engaged in interstate commerce and therefore fall within the Federal Arbitration Act’s exemption for transportation workers.  The MCA exemption also faces a legislative threat:  the bipartisan Guaranteeing Overtime for Truckers Act, S. 893, 119th Cong. (2025)—although seemingly stalled in the Senate—would repeal the motor-carrier overtime exemption and make drivers eligible to earn overtime.

Why this matters:  For employers in trucking, logistics, and distribution, Stingley offers a strong overtime defense wherever local or last-mile drivers handle goods that originated out of state, which describes much of the modern supply chain.  Employers relying on the exemption should document the interstate nexus of the goods their drivers move and watch these developments closely, as a contrary ruling in Madero could reopen significant overtime exposure.

D. Supreme Court Declines to Resolve Circuit Split Over Collective-Action Notice

On January 12, 2026, the Supreme Court denied certiorari in Eli Lilly & Co. v. Richards, No. 25-476, declining to resolve a deepening split over the showing a plaintiff must make before a court authorizes notice to potential opt-in plaintiffs in an FLSA collective action under 29 U.S.C. § 216(b).  The petition had asked the Court to overrule Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165 (1989)—which authorizes court-facilitated notice—or, failing that, to prescribe a uniform evidentiary standard.  On February 23, 2026, the Court also denied cross-petitions in Cracker Barrel Old Country Store v. Harrington, Nos. 25-534 and 25-559, on functionally identical questions.

As a result of these denials, a fractured landscape remains in place.  Most circuits continue to follow the lenient two-step approach traced to Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987), under which a plaintiff can obtain conditional certification and court-authorized notice on a modest factual showing, often before meaningful discovery—an early, low bar that has historically pressured employers toward settlement.  Three circuits, however, have abandoned that approach for more demanding, employer-friendly tests:  the Fifth Circuit requires the plaintiff to prove similarity at the outset, see Swales v. KLLM Transp. Servs., L.L.C., 985 F.3d 430, 441 (5th Cir. 2021); the Sixth Circuit requires a “strong likelihood” that the proposed members are similarly situated before issuing notice, Clark v. A&L Homecare & Training Ctr., LLC, 68 F.4th 1003, 1011 (6th Cir. 2023); and the Seventh Circuit, in the decision the Court left undisturbed, requires a “material factual dispute” over similarity and permits the employer to introduce rebuttal evidence before notice issues, see Richards v. Eli Lilly & Co., 149 F.4th 901, 913 (7th Cir. 2025).  By denying review, the Court left these competing standards—and the forum-dependent outcomes they may produce—firmly in place.

Why this matters:  For now, the circuits remain split.  That divergence elevates the importance of forum:  plaintiffs will keep steering collective actions toward Lusardi jurisdictions, while employers will press for the heightened standards—and, where available, for transfer—in the others.  Because the Supreme Court has now passed on the question, the split is likely to persist absent further percolation or a future grant, and multi-state employers should expect inconsistent certification outcomes for similar claims.

E. Misclassification Alone Does Not Establish Liability, Confirms Fifth Circuit

On February 6, 2026, the Fifth Circuit in Merritt v. Texas Farm Bureau, held that an employee who successfully shows he was misclassified cannot recover overtime without proving his employer had actual or constructive knowledge of overtime hours worked.  See 166 F.4th 490, 493–94 (5th Cir. 2026).  Plaintiff—manager of a team of insurance agents and classified as an independent contractor—set his own schedule, earned a commission rather than an hourly wage, worked largely off-site, and was not required to record or report his time worked.  After the district court determined that Merritt had been misclassified and was owed at least 816 hours of overtime, a jury found that the employer neither knew nor had reason to know that he was working overtime, and it returned a verdict for the employer, and the plaintiff appealed.  The Fifth Circuit affirmed.  Although employers are required to keep records of hours worked and only in the absence of such records does the burden shift to the employee to establish that he or she performed uncompensated work, see Tyson Foods, Inc. v. Bouaphakeo, 577 U.S. 442, 456 (2016), the Fifth Circuit confirmed that the employee must also show that the employer had actual or constructive knowledge of that uncompensated work, and held that the absence of a timekeeping system, without more, does not establish constructive knowledge, see 166 F.4th at 493.

Why this matters:  For businesses that engage workers as independent contractors—especially autonomous, commission-based, or remote workers who set their own hours—Merritt preserves a meaningful second line of defense even if a classification is later rejected.  But the ruling cuts both ways:  more rigorous tracking of exempt workers’ hours, while strengthening compliance with the requirement to maintain timekeeping records, also increases the employer’s knowledge—and thus its potential liability—for any overtime those records reveal.

F. Western District of Washington Enforces FLSA Release Without Prior Court Approval

On February 5, 2026, the Western District of Washington granted summary judgment to an employer, holding that a former hourly employee’s FLSA claim was barred by a private separation agreement releasing his wage-and-hour claims—even though no court or the Department of Labor had approved the release.  See Lomibao v. AGC Biologics, Inc., 823 F. Supp. 3d 1224, 1238 (W.D. Wash. 2026).  The court rejected the plaintiff’s contention that FLSA rights can never be waived by contract, finding no statutory text or binding Ninth Circuit authority establishing a categorical bar to waiver.  See id. at 1234.  Because the release resolved a “bona fide dispute” as required for a valid FLSA waiver and the plaintiff identified no disputed facts bearing on contract formation, the court found no genuine issue of material fact, enforced the release, and dismissed the plaintiff’s FLSA and parallel state-law claims.  See id. at 1234–35, 1242–43.

Although both the Second and Eleventh Circuits have invalidated private releases or settlements in the absence of court or Department of Labor approval, see Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015); Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1353 (11th Cir. 1982), Lomibao is the latest in a string of district-court decisions out of the Third, Fifth, Sixth, Ninth, and Tenth Circuits where, in the absence of Circuit authority to the contrary, courts have enforced private releases of FLSA claims without court or agency approval.  See 823 F. Supp. 3d at 1236–37 & n.17 (collecting cases).

Why this matters:  The line of cases enforcing private release of FLSA claims offers employers a realistic path to finality without agency or judicial approval.  Employers should ensure that any separation agreement rests on a bona fide wage dispute and is executed knowingly and voluntarily, with an express release of wage claims, a recitation that the employee has been paid for all hours worked, a recommendation to seek the advice of counsel, and adequate consideration and revocation periods.

II. Regulatory and Policy Context

The litigation trends described above are unfolding against a regulatory backdrop in which the Department of Labor has withdrawn from several of the prior administration’s more expansive positions and has emphasized cooperative compliance over adversarial enforcement.

A. Overtime Salary Threshold

Among the requirements for the executive, administrative, professional, computer, and highly-compensated-employee (HCE) exemptions is that the employee earn a salary above a minimum threshold set by Department regulation.  The Department has now formally closed out its 2024 rule raising that threshold.  The 2024 rule had increased the salary threshold initially to the equivalent of $43,888 annually, with a further scheduled increase to $58,656, and the HCE threshold to $132,964, with a further scheduled increase to $151,164.  Before those second increases took effect, however, the Eastern District of Texas vacated the rule nationwide.  See Texas v. U.S. Dep’t of Labor, 756 F. Supp. 3d 361 (E.D. Tex. 2024).

The matter has now been resolved at the federal level.  After the Fifth Circuit dismissed the related appeals in early May 2026, the Department announced a technical amendment nullifying the 2024 rule and confirming that the operative regulations are those that were in effect on June 30, 2024.  The practical result is that the salary threshold returns to its prior level of $684 per week ($35,568 annually), and the HCE threshold returns to its prior level of $107,432.  See 91 Fed. Reg. 27833, 27834 (May 15, 2026) (codified at 29 C.F.R. pt. 541).  The Department had previously indicated in a court filing that it would determine how to proceed with the overtime rule by June 30, 2026; the technical amendment resolves that question ahead of schedule.

Why this matters: The applicable federal thresholds ($35,568 and $107,432) are unchanged in practical terms, but their legal footing is now more secure, resting on the closure of the appellate challenges and an affirmative regulatory action rather than a single district-court vacatur.  Employers should bear in mind that several states maintain higher salary thresholds unaffected by the federal reversion, and that the duties tests remain the operative inquiry for exempt status.

B. Joint-Employer Standard

Joint-employer status determines when two or more businesses share legal responsibility for the same worker’s wage-and-hour obligations—a question that arises most often in staffing-agency, subcontracting, and franchise arrangements.  The stakes are substantial:  entities deemed joint employers are jointly and severally liable for unpaid wages, overtime, and related damages, and the worker’s hours are aggregated across them for overtime purposes.  This area has lacked a uniform federal standard since the 2020 joint-employer rule was rescinded in 2021, leaving courts to apply varying tests.

The Department has now moved to fill that void.  On April 22, 2026, the Wage and Hour Division announced a notice of proposed rulemaking—published in the Federal Register on April 23, 2026—that would establish a single, nationwide standard for joint-employer status under the FLSA, the Family Medical Leave Act, and the Migrant Seasonal Agricultural Worker Protection Act.  See Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act, 91 Fed. Reg. 21878 (proposed Apr. 23, 2026) (to be codified at 29 C.F.R. pts. 500, 780, 791, 825).  At the center of the proposed rule is the distinction between “vertical” and “horizontal” joint employment.  The proposal largely restores the control-focused, four-factor framework of the 2020 rule for “vertical” joint employment, wherein two employers simultaneously benefit from the work performed—examining whether the putative joint employer hires or fires the worker, supervises or controls schedules or conditions of employment, determines pay, and maintains employment records—while pulling back on the features of the 2020 rule that drew the most judicial scrutiny.  Notably, the proposed rule acknowledges that reserved and indirect control are relevant while assigning greater weight to control actually exercised.   Analysis of “horizontal” joint employment under the proposed rule turns instead on the degree of association between the allegedly joint employers; employers are likely to be “sufficiently associated” if they arrange to share the employee’s services, one employer acts in the interest of the other, or they share control of the employee.  The comment period closed June 22, 2026.

Why this matters:  A joint-employer finding exposes an entity to joint-and-several liability for wage-and-hour violations and aggregates hours across employers for overtime purposes.  Employers operating through staffing agencies, franchise arrangements, or subcontracting structures should evaluate their arrangements against the proposed four-factor framework—particularly any reserved contractual control rights.

C. Independent-Contractor Classification

Whether a worker is an employee or an independent contractor is a threshold question under the FLSA:  the statute’s minimum-wage and overtime protections apply to employees but not to independent contractors.  The governing inquiry is the judicially developed “economic realities” test, which asks whether the worker is economically dependent on the hiring entity or is in business for themselves.  In recent years the applicable regulatory framework has shifted repeatedly between administrations, and this year has brought another move.

The substantive standards have shifted with each iteration.  The Biden Administration’s 2024 rule applied a six-factor “totality of the circumstances” test in which no single factor controlled, an approach widely viewed as making it harder to classify workers as contractors because it gave weight to factors that often point toward employee status—such as the worker’s economic dependence on the business.  The framework favored by the current Department is more streamlined:  it elevates two “core” factors—the degree of control the worker exercises over the work and the worker’s opportunity for profit or loss—over the remaining considerations.  This two-factor framework traces back to the first Trump Administration’s 2021 rule and, before that, to the Department’s longstanding guidance in Fact Sheet #13, which listed the multi-factor “economic realities” test developed by courts.  The Department views this approach as more predictable for businesses and more favorable to contractor classification.

The Department has moved in two steps to restore that approach.  First, at the enforcement level, it instructed its investigators in May 2025 to stop applying the 2024 rule and to revert to the Fact Sheet #13 framework.  See U.S. Dep’t of Labor, Wage & Hour Div., Field Assistance Bulletin No. 2025-1, FLSA Independent Contractor Misclassification Enforcement Guidance (May 1, 2025).  Then, on February 26, 2026, it announced a proposed rule—published in the Federal Register on February 27, 2026—that would formally rescind and replace the 2024 rule with the more streamlined, control-and-opportunity-focused standard.  See Employee or Independent Contractor Status Under the Fair Labor Standards Act, 91 Fed. Reg. 9932 (proposed Feb. 27, 2026) (to be codified at 29 C.F.R. pts. 500, 795, 825).  The 60-day comment period closed on April 28, 2026, and a final rule is pending.

Why this matters:  Although the proposed rule would ease the federal classification standard, it would not reduce private-litigation exposure.  Until a final rule is issued, the 2024 rule remains in effect for purposes of private litigation, and private plaintiffs continue to bring misclassification collectives under the economic-realities test regardless of the Department’s enforcement posture.  State-law standards—most notably California’s ABC test—are still stricter and remain unaffected by the federal rulemaking.  Employers should continue to document the factual basis for contractor classifications carefully, evaluating each arrangement on its merits rather than relying on the favorable federal trend.

D. Cooperative Enforcement and the PAID Program

Beyond these specific rulemakings, the Department has adopted a broadly cooperative enforcement posture that creates meaningful opportunities for employers to address compliance gaps proactively.  Most significantly for employers, the Department revived the Payroll Audit Independent Determination (PAID) program in July 2025.  PAID permits an employer to self-identify potential FLSA (and certain FMLA) violations, calculate and pay the back wages owed, and obtain a Department-supervised release of the affected employees’ claims.  This mechanism is consequential because FLSA rights generally cannot be extinguished through an ordinary private settlement; apart from litigation and judicially approved settlements, a Department-supervised resolution is one of the few avenues through which an employer can obtain a valid release of FLSA claims.

Two related developments reinforce this posture.  In Field Assistance Bulletin No. 2025-3, the Department directed the Wage and Hour Division to no longer pursue pre-litigation liquidated damages in investigations and settlements—removing a significant cost from cooperative resolution.  U.S. Dep’t of Labor, Wage & Hour Div., Field Assistance Bulletin No. 2025-3, Prohibition on Seeking Liquidated Damages in Administrative Settlements under the FLSA (June 27, 2025).  The Department has also resumed issuing opinion letters addressing recurring compliance questions, providing employers a renewed channel for advance guidance.

Why this matters:  For an employer that identifies a wage-and-hour exposure through self-audit, the PAID program offers a rare opportunity to resolve it with finality and without liquidated damages.  Eligibility is limited—an employer generally cannot use PAID for practices already under investigation or in litigation, and a complaint filed before a PAID submission will foreclose participation—so employers weighing the program should evaluate it promptly.  Because the release obtained through PAID is limited to the identified violations and the participating employees, counsel should scope any self-audit and resulting disclosure with care.

Closing

Several of these issues should see further movement in the coming months, including the Ninth Circuit’s pending decision on the Motor Carrier Act exemption and the Department of Labor’s pending independent-contractor and joint-employer rules.  We will continue to monitor these developments and provide updates as additional decisions are issued and new matters progress.

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The following Gibson Dunn lawyers prepared this update: Rachel Robertson, Megan Cooney, Naima Farrell, Savannah Hundt, Tommy McCormac, and Alana Bevan.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders of the firm’s Labor & Employment practice group:

Karl G. Nelson – Partner, Labor & Employment Practice Group,
Dallas (+1 214.698.3203, knelson@gibsondunn.com)

Rachel W. Robertson – Partner, Labor & Employment Practice Group,
Dallas (+1 214.698.3273, rrobertson@gibsondunn.com)

Jason C. Schwartz – Co-Chair, Labor & Employment Practice Group,
Washington, D.C. (+1 202.955.8242, jschwartz@gibsondunn.com)

Katherine V.A. Smith – Co-Chair, Labor & Employment Practice Group,
Los Angeles (+1 213.229.7107, ksmith@gibsondunn.com)

KEY TAKEAWAYS

• The beginning of month to the end of month action saw eight formal announcements (including a hostile offer and a mandatory offer) hit the back of the net.
• Intertek is set to be the third substitution from the FTSE 100 this year following EQT’s near record transfer offer. Will SEGRO make it four?
• In injury time, Apollo surprised Castlelake with a late strike, leaving the easyJet trophy up in the air.

8 (-33% vs. June 2025 firm offers) Firm Offers Announced	40% (+3% vs. 2025 average) Avg. Bid Premium
£13.87B (+£13.77B vs. May 2026) Total Deal Value	£410.05M (+£381.05M vs. May 2026) Median Deal Size

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Tate & Lyle plc	Deal Size: £2.7B
Bidders: Ingredion Incorporated Not “three lions on the shirt” but one lion on the tin (or it was). Ingredion Incorporated’s £2.7 billion recommended cash offer for Tate & Lyle plc (and the world’s oldest logo) on 8 June kick-starting the action

Read More

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Ramsdens Holdings plc

Deal Size: £206M

Bidders: FirstCash Holdings, Inc. FirstCash Holdings, Inc. emerged as a “Golden boot” contender with its £206 million recommended cash offer for pawnbroker group Ramsdens Holdings plc on 23 June. This follows its successful £297 million strike for H&T Group plc last year. Although some investors on the Ramsdens bench (6.8% holder Downing) are reportedly not happy with the terms management has agreed to.

Read More

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Intertek Group plc	Deal Size: £9.5B
Bidders: EQT, ADIA, and Mubadala Is “P2P-ball” the new “Pep (Guardiola)-ball”? EQT’s patient build-up play proved successful, announcing a £9.5 billion recommended cash offer for Intertek Group plc on 18 June. Assists from co-investors ADIA and Mubadala are helping to make it the second largest PE takeover in a UK tournament.

Read More

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Alternative Income REIT plc	Deal Size: £57.5M
Bidders: Glenstone REIT plc Glenstone REIT plc went for the more direct approach with a shot from the halfway line, announcing a hostile £56 million cash offer for Alternative Income REIT plc on 12 June. Shooting again after the initial rebound with an increased final £57.5 million cash offer on 6 July.

Read More

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Bluefield Solar Income Fund Limited	Deal Size: £548M
Bidders: Drax Group plc Bringing renewed energy from the bench was Drax Group plc’s £548 million recommended cash offer for Bluefield Solar Income Fund Limited (which also constitutes a significant transaction for UK LR purposes).

Read More

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JUNE AT A GLANCE

Offers Announced: June firm offers reach 8, up from spring lows but below the June 2025 peak

As at 30 June 2026.

Offers by Sector (YTD): Financial and tech drive June activity, together making up a third of all offers

As at 30 June 2026.

Bid Premia As at 30 June 2026.	Financial Advisor Fees (% deal value) As at 30 June 2026.

Public M&A

WHAT’S HAPPENED: JUNE 2026

Passengers for easyJet flight GBP715 – please note late gate change and await further announcements

Throughout June, discussions between Castlelake and easyJet plc (or rather the lack of them) followed the “major transaction price discovery playbook”. Indicative proposals of 560 pence (12 June), 600 pence (17 June) and 625 pence (20 June) led up to a proposal of 650 pence (25 June) which finally unlocked diligence access to “limited commercial information”. On the back of this, Castlelake put forward a further improved proposal of 690 pence which the easyJet board announced on 5 July that it “would be minded to recommend”. But not any more. Castlelake’s holiday getaway plans have been grounded by a surprise 715 pence proposal from Apollo which values easyJet at £5.7 billion (comfortably more than the market cap of a number (almost a quarter) of current FTSE 100 companies). Understandably, the easyJet board has switched runways and is now “minded to recommend” the Apollo proposal instead.

There are several parallels between the two potential bids. Both indicate that they would include a stub equity alternative. This could provide optionality for former founder Stelios Haji-Ioannou, who continues to hold a 15% stake, or for investors concerned that any offer will likely be held on the runway for some time awaiting regulatory clearance and wondering what they are going to get by way of complimentary drinks and snacks to compensate for this. Also, in more than a nod to those regulatory hurdles, easyJet has extracted commitments from both potential bidders as to the steps they will agree to take in order to satisfy any relevant merger control and other relevant clearances.

Key Takeaways:
Castlelake has a “put-up or shut-up” deadline of 3 August. Similarly, Apollo currently has until 7 August. To be seen if and how Castlelake responds.

Let the train take the strain

Saba Capital Management and its affiliated funds have a significant interest in IP Group plc. It is not a surprise then, to see an announcement calling for engagement from the IP Group board. Except the rallying cry came from a very different investor, the Railways Pension Trustee Company (“Railpen”).

On 22 June, Railpen (which has an 18.4% shareholding) announced it had put an indicative proposal to IP Group which had been rejected. The proposal was as innovative as the companies IP Group invests in, comprising three elements: (i) 59 pence in cash; (ii) a dividend in specie of IP Group’s shareholding in Oxford Nanopore Technologies plc (valued at approx. 10.7 pence per IP Group share); and (iii) a contingent value right (CVR) of up to 5 pence linked to the value realised from any disposal of IP Group’s 56% shareholding in unlisted regenerative medicine producer Istesso.

CVRs linked to a disposal, while not common, have been used before. Greencore’s offer for Bakkavor which completed at the start of this year included a CVR linked to the sale of Bakkavor’s US business (which is still in process). However, an in specie distribution of shares held by the target is an even rarer beast. Ganfeng International’s offer for Bacanora Lithium plc in 2021 being one of the few other examples. There the consideration comprised cash and an in specie distribution of shares held by Bacanora in Zinnwald Lithium plc.

Railpen wants to build a third-party venture and scale-up manager which could be backed by a consortium of pension funds with direct involvement in how UK pension capital is deployed. Admirable intentions and substantive progress would appear to have been made from when Railpen first approached the IP Group board in late 2025. There is now a consortium, the Pensions Growth Alliance Consortium, with funding to finance an offer. But after three indicative proposals Railpen is attempting the “railroad” approach. Other investors’ views will be telling as the issue does not appear to be lack of interest or engagement from the target, more the price.

Key Takeaways:
Railpen’s proposal combines several innovative approaches (including a CVR and dividend in specie) to try to unlock value, rather than simply offering cash upfront. But it still may not be enough to avoid talks hitting the buffers.

LOOKING AHEAD

There go SEGRO’s summer plans?

After losing out to Brookfield Asset Management in the battle to acquire Tritax EuroBox plc, SEGRO plc now finds itself in the unwanted position of being the hunted rather than hunter. On 24 June, NYSE listed Prologis, Inc., the world’s largest logistics REIT, and announced it had put an indicative all-share proposal to the SEGRO board which valued SEGRO at approximately £12.6 billion.

If the combination went ahead, SEGRO shareholders would hold approximately 10.5% of the enlarged entity. Less a case of big fish, little fish and more a case of large logistics warehouse developer, even larger logistics warehouse developer. SEGRO’s data centre pipeline is highlighted as being of particular attraction.

The chapter in the price discovery playbook (which EQT and Castlelake have been thumbing through) on all-paper offers is still under development. And Prologis has not added to it – going public after its first rejection from the SEGRO board. It is not even clear yet whether Prologis would seek a customary secondary listing for the consideration shares. The “put-up or shut-up” deadline is 22 July. To be seen if SEGRO attempts to sit it out or change its holiday plans.

Key Takeaways:
By going public, Prologis has started the PUSU countdown. Will SEGRO choose to emulate Rightmove plc (and others) and “park the bus” defensively, content to run down the clock?

P2P Financing

The European debt markets remained extremely favourable for borrowers in June, with large volumes of deals completed across the Term Loan B, high yield bond and private credit markets, while pricing continued to trend lower.

The most eye-catching financing for a UK public bid was the approximately £5 billion of committed debt backing EQT’s £9.5 billion (enterprise value £10.9 billion) offer for Intertek plc. EQT, bidding alongside Abu Dhabi’s ADIA and Mubadala, secured a €/$ Term Loan B equivalent to £3.565 billion (priced at E/S +350bps), an £865 million bridge-to-bond facility, a delayed draw term loan to fund future acquisitions and an £800 million revolving credit facility. The financing was arranged by Barclays, Crédit Agricole, Deutsche Bank and Morgan Stanley.

The financing documents are markedly sponsor-friendly, featuring aggressive provisions such as high-water marking for EBITDA-based tests, uncapped EBITDA adjustments for acquisitions and synergies, and generous, flexible baskets for debt incurrence and sponsor distributions. They also include a portability feature, which could permit a future sale of Intertek while leaving the debt in place, subject to satisfaction of a “no higher than opening first lien net leverage” condition.

The bidders also appear to have obtained a dispensation from the Takeover Panel permitting them to redact the amount of the agreed margin flex, although this may change if syndication has not been completed by the time the Scheme Document is issued. Other disclosed flex rights include the potential introduction of a 1% soft call on repricing within six months, an extension of the margin ratchet holiday from three to six months, removal of the high-water marking or portability provisions, a 30% cap on synergy add-backs and the tightening of certain baskets. However, these changes may be exercised only if syndication stalls and are balanced by a reverse flex right in favour of the sponsor in the event of “material over-subscription”.

Perhaps the clearest indication of today’s highly competitive financing market is the borrower’s ability either to bring in private credit funds to provide up to £1 billion of the facilities in place of the arranging banks or, at any time before syndication begins, to replace the facilities entirely with a private credit financing. If the latter occurs, the arrangers would receive a break fee of 0.25% of the cancelled commitments if the replacement occurs within 60 days of announcement, rising to 50% of the arrangement fee thereafter. This is a striking illustration of the increasingly intense competition between banks and private credit providers for sponsor-backed leveraged financings.

Key Takeaways:
Debt markets are wide open to bidders with excellent pricing and terms available.

Equity Capital Markets

The headline story in June was the landmark US IPO of Space Exploration Technologies Corp. (“SpaceX”) which involved the first use of the UK’s new public offer platform (“POP”) regime to extend the IPO to UK retail investors. Gibson Dunn was lead counsel to SpaceX on the US IPO, including in relation to the UK retail offer.

The POP regime, introduced by the Public Offers and Admissions to Trading Regulations 2024, came into force in January as part of the broader reforms replacing the UK Prospectus Regulation. The regime involves an FCA-authorised POP operator undertaking due diligence, producing a disclosure summary and facilitating the offer to retail investors. Under the prior regime, an FCA-approved prospectus would have been required. Prospectuses are now only required (and are only possible) in relation to IPOs involving UK listings, and certain follow-on UK admissions to trading.

The IPO involved the issuance of 638,888,888 shares (including the full exercise by the underwriters of their overallotment option) at a fixed price of $135 per share. The IPO closed on 15 June, with total gross proceeds of approximately $85.7 billion. UK retail investors were allocated 2,696,175 shares, amounting to gross proceeds of approximately $364 million. The SpaceX shares began trading on the Nasdaq Global Select Market and Nasdaq Texas on 12 June, under the ticker symbol “SPCX”.

June also saw equity placings on the LSE’s main market by WH Smith plc (approx. £106 million gross proceeds) and Ceres Power Holdings plc (approx. £103 million gross proceeds).

On the regulatory front, the LSE published AIM Notice 62 on 4 June, setting out proposed changes to the AIM Rules for Companies (“AIM Rules”) and the AIM Disciplinary Procedures and Appeals Handbook. The amendments are designed to give effect to proposals set out in the LSE’s November 2025 Feedback Statement on the future development of AIM. The LSE also published AIM Notice 63, detailing proposed administrative and clarificatory amendments to the AIM Rules for Nominated Advisers (“Nomad Rules”) and highlighting the publication of a new Nominated Adviser Technical Note. The key proposed changes to the AIM Rules include: (i) reducing perceived unnecessary burdens relating to admission (including the removal of the working capital statement requirement, expanding accepted accounting standards, permitting incorporation by reference and clarifying the nature of lock-in arrangements); (ii) enabling AIM companies to access retail investors through a new ‘Capital Access Window’ involving a voluntary temporary suspension during equity fundraisings; (iii) supporting AIM company acquisition activity by increasing the class test threshold for substantial transactions from 10% to 25% and updating the reverse takeover framework; (iv) providing greater flexibility to support innovative and founder-led companies; and (v) attracting international companies through a new ‘Express Market’ route and providing an accelerated admissions process for certain main market companies. Comments on the proposed changes were due by 2 July.

Key Takeaways:
SpaceX IPO marks the first use of the UK Public Offer Platform regime.

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ABOUT THE UK PUBLIC M&A TEAM

Gibson Dunn’s London Public M&A team advises bidders, targets and financial advisers on UK takeover transactions. We publish this monthly tracker to share what we’re seeing in the market. If you’d like to discuss any of the trends covered here, we’d be glad to hear from you.

Key Contacts:

Will McDonald Partner, London	Chris Haynes Partner, London	David Irvine Partner, London	Kavita Davis Partner, London
James Addison Of Counsel, London	Thomas Barker Of Counsel, London	Lauren Richardson Associate, London	Pete Usher Associate, London
Joe Newitt Senior Counsel, London	Lindsay Edkins Senior Counsel, London	Libby Sycamore Associate, London

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

When structured effectively, these transactions can create significant value for both sides. Achieving that alignment, however, requires navigating considerable complexity.

Interest in operational real estate transactions is growing fast. Investors are looking for exposure not only to real estate assets but also to the platforms that originate, manage and scale them. Managers, in turn, are seeking reliable capital to support growth, accelerate fundraising and — increasingly — provide liquidity or succession solutions for founders. Both sides see the appeal. The challenge is execution.

The result has been the continued growth of operational real estate transactions, arrangements that combine a capital commitment to a real estate strategy with some form of participation in the management platform itself. When structured effectively, these transactions can create significant value for both sides. Achieving that alignment, however, requires navigating considerable complexity.

A capital-raising transaction, through which an investor funds a particular investment strategy; a joint venture arrangement, governing the ongoing relationship between investor and management team; and, where the acquisition (or future acquisition) of a stake in the management business is involved, an M&A transaction. The complexity lies not in negotiating each workstream in isolation, but in ensuring they operate cohesively, economics agreed in the fundraising documents may affect the value of the management business, and governance rights at the manager level may influence future fundraising flexibility.

The operational component of these transactions typically takes one of three forms.

Economic Participation

The simplest structure gives the investor an economic interest in the real estate manager’s success without conferring ownership. This may take the form of a share of management fees generated from future investors and/or participation in the manager’s carried interest or performance fee, a seed or cornerstone investor negotiating entitlement to a portion of the economics as the platform grows.

These arrangements preserve the manager’s ownership and operational independence while offering the investor enhanced alignment. They still require careful thought around tax treatment and the mechanics of calculating and distributing revenue streams.

Options and Warrants: A Pathway to Future Ownership

A second approach gives the investor the right to acquire an ownership interest at a later date, typically through an option or warrant, deferring dilution and governance changes until the relationship has matured.

Deferring ownership does not eliminate complexity. The parties must agree how the manager will be valued at exercise, what protections the investor receives in the interim, and how future fundraising or equity issuances may affect the prospective stake. Pre-emption and anti-dilution protections are essential to prevent that stake being eroded before the option is exercised. Many of the issues present in a full M&A transaction arise from the outset.

Day-One Equity: A Full M&A Transaction

The most comprehensive structure involves the investor acquiring an ownership interest at closing, whether through a primary subscription, acquisition of an existing stake from founders or existing shareholders, or a combination. Increasingly, these transactions are used to facilitate founder liquidity and succession planning as much as platform growth.

The transaction takes on the characteristics of a private equity deal: comprehensive due diligence of the management business, negotiation of a purchase or subscription agreement, and, particularly on larger transactions, obtaining W&I insurance. The parties must also negotiate the joint venture agreement governing their future relationship, which may range from limited protective rights to board representation and consent rights over key decisions, the right balance depending on the size of the stake and the maturity of the management platform.

On 7 July 2026, the Dubai Financial Services Authority (DFSA) published Consultation Paper No. 173 (CP 173), proposing a welcome overhaul of the Dubai International Financial Centre (DIFC) collective investment fund framework. The proposals mark the most significant review of the regime since 2010.

CP 173 proposes amendments to the Collective Investment Law No. 2 of 2010 (CIL), the Investment Trust Law No. 5 of 2006, the Regulatory Law 2004 and seven Rulebook modules, including the Collective Investment Rules (CIR). The direction of travel is clear and, for the most part, market-friendly: a shift away from prescriptive, classification-based regulation towards a risk-based, disclosure-led framework for professional investor funds, with core standards applied horizontally across all fund managers.

More detail on these and the other key proposals are set out below. Unless defined in this alert, capitalised terms have the meanings given to them in the DFSA Rules.

Reduced Regulatory Prescription for Professional Investor Funds

The DIFC regime currently sorts funds into fixed specialist classes (including private equity funds, hedge funds, credit funds, property funds, money market funds and others) each carrying its own layer of prescriptive additional requirements. This is in addition to the overarching regulatory classifications of Qualified Investor Fund (QIFs)[1], Exempt Fund[2] and Public Fund[3]. These additional strategy specific requirements are somewhat unusual by reference to global practice for professional investor funds, and the DFSA’s benchmarking has led them to the view that certain of these requirements are unnecessarily onerous in this context. CP 173 therefore proposes to substantially limit the application of the specialist class framework in three key respects:

1. Broadening the scope for Master/Feeder structures by:

a. expanding the definition of Master Fund (to include those which may accept direct subscriptions from institutional and professional investors alongside its Feeder Funds), and

b. removing two eligibility criteria that have effectively prevented the establishment of public Feeder Funds in the DIFC:

i. the requirement that the Master Fund’s units be offered regularly by at least three market makers, and

ii. the 20% cap on a Feeder Fund’s holding of the Master Fund’s units.

2. Entirely removing the dedicated money market fund and private equity fund requirements for Exempt Funds.
3. Reducing the specialist class requirements applicable to credit funds that are Exempt Funds or QIFs (see further details below). In particular, draft amendments delete the prohibition on cross-border trade finance, and on lending to the fund manager and its related parties, to other funds and fund managers, and to financial institutions. This opens the door to fund financing strategies in the DIFC, such as NAV lending to other investment funds (noting that lending to a borrower that intends to on-lend remains prohibited).

This is a welcome development that reduces regulatory prescription and alleviates some of the complexity previously associated with the multiple layers of fund classification, at least for professional investor funds.

The rigid specialist classifications also sit poorly with hybrid and multi-strategy investing, and the DFSA is clearly aiming to facilitate the growth of this segment of the funds market. The requirement that 90% of Fund Property be used to Provide Credit for a fund to be constituted as a Credit Fund (accommodating hybrid and multi-strategy deployment) has been removed, paving the way for hybrid debt/equity investing strategies. Correlating to the removal or dilution of specialist class requirements, the elevated base capital requirement, application and annual fees for credit-focused managers will be removed, with the standard rates now applying to such managers.

Strategies Still Drive Certain Regulatory Exemptions and Requirements

However, the notion of specialist classes does remain, in substance. Public Funds will continue to be subject to the specialist class requirements, commensurate with the DFSA’s risk based approach and enhanced regulation for potentially retail products. Certain professional investor funds (e.g., credit funds) will remain subject to specialist requirements (e.g., prohibitions on certain investment activity, additional risk monitoring and reporting requirements).

Certain professional investor funds will continue to have to meet the DFSA’s definition of a relevant strategy to avail certain exemptions. For example:

1. a product will have to be a ‘venture capital fund’ (as defined by the DSFA) in order for the manager to avail the venture capital fund manager (VCFM) regime, which entails substantially reduced fees and relief from capital, internal audit, valuation and reporting requirement, and
2. the private equity fund definition continues to drive the permission for a sponsor to invest in its own fund without needing an additional regulatory permission[4] (CP 173 would extend this to venture capital funds), yet the revised private equity fund definition would capture only a fund that invests in unlisted companies with a view to potentially acquiring control of them. The control limb is new, arguably narrows the existing exemption and sits oddly with market reality. Growth equity and minority investment strategies, for example, involve no intention to acquire control, and would, on this drafting, fall outside the definition. Sponsors may wish to press for its removal or clarification.

Team and Sponsor Investment

The expansion of the abovementioned exemption for sponsor investment into their funds is welcome, but could go further to apply in relation to other strategies, and the rules could clarify that this includes funds domiciled outside the DIFC. Whether the exclusion accommodates customary GP commitments (as opposed to an investment from the regulated fund manager itself) would also benefit from clarification.

In another welcome development for sponsors, employees directly involved in a fund’s investment management, whether executing investment decisions or providing investment advice to the fund manager, would be permitted to invest in the private funds their employer manages either directly or through employee investment vehicles.

• Direct employee investment has historically been difficult as these employees may not otherwise meet the minimum subscription amounts or the Professional Client net asset threshold, meaning that their investment in the fund could result in the fund losing its QIF or Exempt Fund status. Those thresholds would be disapplied for employees who meet the experience criteria in the Conduct of Business module[5], whether employed by the fund manager itself or by a DFSA-Authorised Firm appointed by the fund manager to manage the fund’s assets.
• Dedicated employee investment vehicles (if established in the DIFC) have not historically been excluded from the definition of a Collective Investment Fund, which limited the use of the DIFC as a jurisdiction for these structures. This would also be changed, allowing sophisticated managers to offer global standard executive compensation arrangements and structures in and from the DIFC.

Some points for clarification remain: the relief appears limited to employees of the (DFSA-regulated) fund manager or its DFSA-licensed delegate, and it is unclear whether it is broad enough to cover non-DIFC affiliates, which is relevant given the rise of international sponsors establishing a DIFC office, but who may also have investment staff sitting outside the DIFC. We also expect some market participants to argue in favour of certain senior, but non investment, functions to be eligible for this participation exemption.

CIL Modifications

Various other technical amendments are proposed, most notably that the DFSA be granted power to waive or modify provisions of the CIL itself, mirroring the DFSA’s existing power under the Markets Law. This is more consequential than it may appear: it would, for the first time, allow waivers to be sought from requirements hard-wired into the CIL. For example, the current ability of investors to remove a fund manager or terminate a fund on a no-fault basis, which is a provision sponsors routinely negotiate elsewhere but which has to date been beyond the DFSA’s reach.

New “Horizontal” Application of Previously Specialist Class Rules

It is important to note that while certain fund-level regulations have been reduced or removed, certain requirements previously applicable to specialist classes have now been reallocated and will apply to any fund based on its activity, rather than its label.

Managers of QIFs and Exempt Funds, regardless of their investment strategy, will now be required to calculate borrowing limitations in a reasonable and prudent manner and to disclose the expected maximum level of borrowing and the basis of its determination. This is similar to the EU’s Alternative Investment Fund Managers Directive (AIFMD) requirement to set and disclose a maximum level of leverage, albeit framed around borrowing rather than leverage more broadly.

The prime brokerage safeguards currently confined to hedge funds would apply to any QIF or Exempt Fund that permits its prime broker to pool, rehypothecate or use fund assets as collateral. Nothing obliges a fund to appoint a prime broker, and in practice this will continue to bite mainly on hedge-style strategies.

The most operationally significant of the new horizontal requirements is that every fund manager must ensure functional separation and independence between fund valuation and asset pricing, on the one hand, and the investment management process, on the other. This previously only applied in respect of a hedge fund, and the shift is an echo of the valuation independence requirement in Article 19 of AIFMD. The accompanying guidance indicates that personnel involved in determining the net asset value should generally not be involved in investment management, and points to delegating NAV calculation to a suitably competent third-party fund administrator as an effective method of segregation. That guidance sits uneasily with practice, as administrators of private funds typically compute the NAV from asset values supplied by the manager rather than valuing the assets themselves, so delegation alone is unlikely to deliver the segregation contemplated. The practical effect, particularly for private equity and venture capital managers whose deal teams drive valuations, is a need for valuation personnel or a valuation committee, independent of the deal team. Managers should assess their valuation governance now and may wish to raise the workability of the guidance in consultation responses.

Abolition of the External Fund Manager Regime

Citing limited supervisory reach over non-DIFC entities and strong demand for full DFSA authorisation, the DFSA proposes to remove the external fund manager (EFM) regime, which permitted non-DIFC managers to manage Domestic Funds. In future, such managers would require a presence in the DIFC and appropriate DFSA licensing. DFSA regulated fund managers will remain able to manage funds domiciled outside the DIFC. The particular utility of the EFM regime has, in our experience, been to facilitate cross border structures where a fund complex has need of a DIFC feeder, parallel or alternative investment vehicle. Closing that avenue, particularly in the context of professional investor funds, is understandable in the context of desire for regulatory oversight but may reduce the attractiveness of the DIFC as a centre for cross border financial activity and arrangements.

Licensing Clarity for Delegated Portfolio Managers

CP 173 would clarify that an authorisation for Managing Assets covers Dealing in Investments as Agent and Arranging Deals in Investments, to the extent necessary for the investment management of Fund Property delegated by a fund manager. DIFC investment managers holding those authorisations solely for delegated fund mandates should consider applying to remove them once the changes take effect. The clarification is confined to delegated fund mandates. The drafting, however, appears to confirm that a manager acting for an investor directly under a separately managed account (SMA) would continue to require Dealing in Investments as Agent and Arranging Deals in Investments alongside Managing Assets, which exacerbates a regulatory arbitrage that already exists due to the different regulatory treatment of commingled funds and “funds-of-one” (e.g., the inability of the latter to avail private credit fund status). Given the rise in bespoke investment structuring solutions, particularly prevalent for the sovereign investor base in this region, arbitrage between fund mandates and single investor mandates should be reviewed to avoid misaligned incentives, and to reduce complexity.

On the Horizon: Tokenisation and Retail LTIFs

Part II of CP 173 invites early feedback on two possible future workstreams: (i) enhancements to the tokenisation framework, including whether the CIR unit registration rules accommodate fully digital registers, the use of tokenised money market funds as collateral in non-centrally cleared derivative transactions, and the holding of Crypto Tokens for fund operational purposes; and (ii) a potential long-term investment fund regime for retail investors, drawing on the EU ELTIF and UK LTAF models, with questions posed on investor access, redemption mechanics and investor awareness.

Next Steps

Firms holding waivers or modifications of Rules proposed to be amended or deleted should assess the impact and engage with the DFSA’s supervision team where necessary. The consultation paper and draft legislative instruments are available here.

Comments on CP 173 are due by 7 September 2026 via the DFSA’s online response form, and a general transition period of three months is proposed for the changes once made.

[1] $500k initial subscription, Professional Client only, private placement.

[2] $50k initial subscription, Professional Client only, private placement.

[3] Open to Retain Clients and/or marketing by general solicitation.

[4] Namely, Dealing in Investments as Principal – GEN 2.7.5.

[5] either: (i) the individual is, or has been, in the previous two years, an Employee in a relevant professional position of a DFSA regulated firm or a Regulated Financial Institution; or (ii) the individual appears, on reasonable grounds, to have sufficient experience and understanding of relevant financial markets, products or transactions and any associated risks, following the analysis set out in Rule 2.4.3 of the Conduct of Business module.

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The following Gibson Dunn lawyers prepared this update: Carolyn Abram and Ryan Nash.

Gibson Dunn’s lawyers are available to assist with 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 Investment Funds practice group, or the authors:

Carolyn Abram – Dubai (+971 4 318 4647, cabram@gibsondunn.com)

Ryan Nash – Dubai (+971 4 318 4667, rnash@gibsondunn.com)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

From the Derivatives Practice Group: This week, the CFTC announced that it will exercise its authority to stay the listing of a contract that would have allowed the Chicago Mercantile Exchange to initiate 24/7 trading on crude oil futures.

New Developments

CFTC to Stay Self-Certified Contract on 24/7 Trading for Crude Oil Futures. On July 9, the CFTC announced that it will exercise its authority to stay the listing of a contract that would have allowed the Chicago Mercantile Exchange (CME) to initiate 24/7 trading on crude oil futures as soon as July 10. The CFTC’s regulations offer exchanges two methods to list contracts — self certification under 40.2 or to seek Commission review and approval under 40.3. CME made simultaneous, but separate filings under both provisions. [NEW]

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.

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 Developments Outside the U.S.

ESMA Launches Data Collection Under the First Phase of ESAP. On July 10, ESMA launched the collection of information from Officially Appointed Mechanisms (OAMs) and National Competent Authorities (NCAs) for the first phase of implementation of the European Single Access Point (ESAP). Starting July 10, OAMs and NCAs will start providing ESAP the information and the metadata collected from financial entities. [NEW]

ESMA Publishes First Market Capitalization Data for EU Member States. On July 10, ESMA published annual market capitalization and market capitalization ratios of EU Member States for 2024 and 2025. According to ESMA, the data provides clarity on Member States’ position within the framework and helps authorities and market participants prepare for and implement these requirements in a timely manner. [NEW]

ESMA Publishes Report on EU Carbon Markets. On July 9, ESMA published its third annual market report on EU carbon markets. The report showed that financial intermediaries are central to the functioning of the EU carbon market. According to ESMA’s report, they provide liquidity, act as counterparties to non-financial firms, and help compliance entities access allowances and manage price risk. [NEW]

ESMA Publishes Technical Standards on CCP Admission Criteria Elements. On July 8, ESMA published its Final Report on the Regulatory Technical Standards concerning the central counterparties’ (CCPs) admission criteria elements, following the review of the European Market Infrastructure Regulation. ESMA conducted a public consultation on the draft RTS in the last quarter of 2025 and held a public hearing in November 2025. The Final Report considers the feedback received during this process. [NEW]

ESMA Launches Common Supervisory Action on CASPs’ Digital Operational Resilience for Custody. On July 8, ESMA announced it is launching a Common Supervisory Action (CSA) focusing on the digital operational resilience of Crypto-Asset Service Providers (CASPs), with a specific emphasis on custody services. According to ESMA, the CSA will assess the maturity of CASPs’ digital operational resilience frameworks in relation to custody activities. It will focus on risks inherent to distributed ledger technology (DLT), including governance arrangements, key and storage management, transaction controls, incident detection and response, smart contract risks, and dependencies on third-party providers. [NEW]

ESAs Support ESRB Warning on Systemic Cyber Risks from Frontier AI Models. On July 7, the European Supervisory Authorities announced that they welcomed and supported European Systemic Risk Board’s (ESRB) warning on the systemic cyber risks posed by frontier AI models. The ESRB urged all EU stakeholders, including financial institutions, to enhance their cybersecurity capacities and encouraged relevant authorities to reflect these risks in their supervisory and oversight work. [NEW]

ESMA Selects Etrading Software (Netherlands) B.V. as Consolidated Tape Provider for OTC Derivatives. On July 6, ESMA selected Etrading Software (Netherlands) B.V. as the Consolidated Tape Provider for over-the-counter (OTC) derivatives. ESMA stated that this constitutes an important step in improving transparency for OTC derivatives markets under the Markets in Financial Instruments Regulation. [NEW]

ESMA Publishes Preliminary Findings on the Active Account Requirement and the First Annual Report of the Joint Monitoring Mechanism. On July 6, ESMA published the Interim Report of the Effectiveness of the Active Account Requirement and the First Annual Report of the Joint Monitoring Mechanism. The Interim Report provides preliminary findings on the Active Account Requirement (AAR) implementation during 2025 and early 2026. The Annual Report addresses the Joint Monitoring Mechanism, which plays a key role in monitoring developments and assessing financial stability risks across clearing members and clients. [NEW]

ESMA Launches Common Supervisory Action with NCAs on the Risk Management Function. On July 3, ESMA launched a Common Supervisory Action (CSA) on risk management function of Undertakings for Collective Investment in Transferable Securities (UCITS) management companies and Alternative Investment Fund Managers (AIFMs) across the European Union. The CSA will be conducted throughout 2026 and 2027, in close collaboration with National Competent Authorities (NCAs). [NEW]

ESMA Identifies Up to €1 Billion in Potential Annual Savings from Simplifying EU Transaction Reporting. On July 2, ESMA published its final report on the simplification of transaction reporting, which it said set out a clear path towards a “Report Once” approach. According to ESMA, its review confirms that the main drivers of cost and complexity include frequent and unsynchronized regulatory changes, duplication of reporting across frameworks and channels, and dual-sided reporting and associated reconciliation processes.

ESMA Fines Moody’s Germany for Misreporting. On July 2, ESMA fined Moody’s Deutschland GmbH (Moody’s Germany) a total of EUR 2,145,000, for committing four breaches of the Credit Rating Agencies Regulation. The breaches were found to have resulted from negligence on the part of Moody’s Germany. In calculating the fine, ESMA considered both aggravating and mitigating factors provided in the CRA Regulation.

ESMA Recognizes Clearing Corporation of India Limited as a Tier 1 Third-country CCP. On July 1, ESMA recognized the Clearing Corporation of India Limited (CCIL) as a Tier 1 third-country central counterparty under the European Market Infrastructure Regulation. The recognition allows CCIL to provide clearing services to EU clearing members and trading venues, including banks, investment firms, and other counterparties.

ESMA Consults on Simplifying EU Taxonomy Disclosure Framework. On July 1, ESMA launched a consultation regarding technical advice to the European Commission on selected KPIs under the Taxonomy Disclosures Delegated Act. ESMA’s consultation focuses on simplification and reduction of reporting burdens for market participants and builds on recent simplification efforts under the Commission’s Omnibus package.

ESMA Appoints Peter Tkáč as the New Member of its Management Board. On July 1, ESMA appointed Peter Tkáč, Národná Banka Slovenska, Slovakia, as the new member of its Management Board. The Management Board, chaired by Verena Ross, Chair of ESMA, is responsible for ensuring that the Authority carries out its mission and performs the tasks assigned to it under its founding Regulation.

New Industry-Led Developments

ISDA Publishes Report on Key Trends in the Size and Composition of OTC Derivatives Markets. On July 9, ISDA published a report outlining the latest data from the Bank for International Settlements OTC derivatives statistics, which showed an increase in notional outstanding of OTC derivatives during the second half of 2025 compared to the same period in 2024. Notional outstanding rose across all major asset classes, including interest rate derivatives, foreign exchange, equity and commodity derivatives. [NEW]

ISDA and SIFMA Submit Letter on SEC Security-Based Swap Dealer Thresholds. On July 8, ISDA and the Securities Industry and Financial Markets Association (SIFMA) submitted a comment letter to the SEC in response to the staff report on the definitions of “security-based swap dealer” and “major security-based swap participant.” The associations recommend maintaining the current de minimis thresholds for both credit default swap (CDS) and non-CDS security-based swap activity, noting that the SEC’s data shows the existing framework already captures the vast majority of market activity. [NEW]

ISDA Responds to RBI Consultation on SA-CCR. On July 8, ISDA responded to the Reserve Bank of India’s (RBI) consultation on draft amendment directions on the standardized approach for counterparty credit risk (SA-CCR). According to ISDA, it broadly welcomes the RBI’s move to SA-CCR and updated capital treatment for exposures to central counterparties, noting the draft directions closely track standards from the Basel Committee on Banking Supervision. [NEW]

ISDA and GDF Publish Tokenization Report. On July 7, ISDA and Global Digital Finance published a report that examines the viability of using tokenized money market funds as collateral for derivatives within existing US legal, regulatory and operational frameworks. [NEW]

ISDA and GDF Respond to FCA and BOE on Future of Tokenization. On July 6, ISDA and Global Digital Finance (GDF) submitted a joint response to a call for input on the future of tokenization by the Financial Conduct Authority (FCA) and Bank of England (BOE). According to ISDA, tokenization presents a significant opportunity for the derivatives market, with potential benefits that include an expanded pool of eligible collateral, reduced risk during market stress and improved collateral management. [NEW]

ISDA Publishes Joint Association Letter on Enhancing EU Legislative and Supervisory Framework. On July 1, ISDA and 11 other trade associations published a statement on enhancing the EU legislative and supervisory framework to support market competitiveness. The statement calls for embedding a competitiveness objective within ESMA’s mandate, thus ensuring regulatory decisions fully reflect their impact on market attractiveness. It also urges better sequencing of EU financial legislation.

ISDA Responds to CPMI-IOSCO Consultation on Margin Proposals. On June 29, ISDA submitted a response to a consultation from the Committee on Payments and Market Infrastructures (CPMI) and IOSCO on updated guidance and public quantitative disclosures to implement the 2025 margin proposals.

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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)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

We are pleased to provide you with the June 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.

European Union

06/26/2026

EDPB | One-Stop-Shop Case Digest | Data Subject Rights

The European Data Protection Board (EDPB) published an updated One-Stop-Shop (OSS) case digest on the right to object and the right to erasure.

The case digest is based on the key One-Stop-Shop (OSS) decisions and provides insights into how EU supervisory authorities assess organizations’ internal procedures for handling data subject requests. The updated version incorporates hundreds of new OSS decisions adopted since the publication of the original digest, including cases concerning objections to direct marketing and requests for the deletion of user accounts or online profiles. It identifies recurrent infringements and summarizes corrective measures imposed by EU supervisory authorities.

For more information: EDPB Website

06/24/2026

EDPB | Contact Form | GDPR Enforcement

The European Data Protection Board (EDPB) launched a dedicated contact form for stakeholders to report possible inconsistencies in GDPR interpretation across Europe.

The form allows stakeholders to flag alleged divergences between national positions, or between national positions and EDPB guidance. The initiative follows the EDPB’s Helsinki Statement on enhanced clarity, support and engagement, and is intended to support more consistent GDPR enforcement across Europe. The EDPB will not respond to individual submissions but plans to regularly compile and discuss the information at Board level to consider possible consistency measures.

For more information: EDPB Website

06/18/2026

CJEU | Judgment | Parallel Exercise of GDPR Complaint and Judicial Remedies

The Court of Justice of the European Union (CJEU) ruled that a supervisory authority cannot reject a GDPR complaint solely because court proceedings on the same subject matter are already pending.

The CJEU held that Article 77(1) and Article 79(1) GDPR must be interpreted as precluding a supervisory authority, with which a complaint has been lodged under Article 77(1), from rejecting that complaint on the sole ground that judicial proceedings under Article 79(1) concerning the same subject matter have already been brought, even where the decision given in those proceedings is not yet final. The ruling confirms that the administrative remedy before a supervisory authority and the judicial remedy against a controller or processor may be exercised in parallel and independently of each other.

For more information: CJEU Website

06/10/2026

EDPB | Public Consultation | Data Breach Notification Template

The European Data Protection Board (EDPB) has adopted a draft template for personal data breach notifications, which is now subject to public consultation.

The template is intended to harmonize data breach notification processes across supervisory authorities and assist organizations in ensuring that notifications contain all information required under Article 33 GDPR. Following the consultation period, which runs until 5 August 2026, the EDPB will determine the timeline for implementation by supervisory authorities.

For more information: EDPB Website

06/03/2026

European Supervisory Authorities | Report | Major ICT-Related Incidents under DORA

The European Supervisory Authorities (ESA) published their first annual overview of major ICT-related incidents under the Digital Operational Resilience Act (DORA).

As a reminder, the ESAs comprise the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA). The report analyzes 3,383 major ICT-related incidents reported by financial entities, with around one third involving a cross-border impact. The ESAs found that system failures and external events were the main drivers, while only 10% of reported incidents related to cybersecurity. The authorities called attention to third-party risk management, oversight of outsourced services, coordination with providers during incident response and recovery, and resilience against risks linked to advanced AI-driven tools.

For more information: ESMA Website

Belgium

05/29/2026

Belgian Supervisory Authority (APD) | Investigation Findings | AI Chatbots, Innovation and Data Protection

The APD published findings from an Inspection Service investigation into an AI conversational smartphone application.

The APD found that developers and operators of AI chatbots prioritized product development, user experience, and scalability over GDPR and privacy compliance. It identified concerns around free-text interactions containing sensitive personal data, data minimization, purpose limitation, storage periods, transparency on internal processing, model retraining and sharing with external providers. The authority recommended clearly allocating roles within complex AI ecosystems, conducting DPIAs before deployment and integrating data protection requirements from the design phase.

For more information: APD Website [FR]

France

06/30/2026

French Supervisory Authority (CNIL) | Recommendation | Location Data from Connected Vehicles

The CNIL has published a Recommendation on the use of location data from connected vehicles by professionals to provide greater transparency for users.

The Recommendation’s objective is to provide a clear and up-to-date framework to support stakeholders in the connected-vehicle ecosystem, including manufacturers, fleet managers, telematics providers and data aggregators. It recalls the legal requirements governing the collection and use of personal data and provides practical guidance on transparency, data minimization, retention, security and the exercise of users’ rights. In particular, the Recommendation helps stakeholders identify the purposes for which user consent is required, or may be exempted, under Article 82 of the French Data Protection Act (Loi Informatique et Libertés). The Recommendation also addresses the management of individuals’ rights where different individuals may use the same vehicle, including through authenticated user profiles.

For more information: CNIL Website and Recommendation [FR]

06/19/2026

CNIL | Guidance | Data Security

The CNIL published updated guidance on essential security measures to help organizations protect personal data and business activity.

The guidance lists baseline measures, including strong passwords, password managers, multi-factor authentication, phishing vigilance, official software sources, automatic updates, regular offline backups, antivirus and firewall tools, device encryption, separation of personal and professional uses, travel precautions and staff training. It also links data security to GDPR minimization and retention principles and recalls breach response steps, including notifying the CNIL where personal data is affected.

For more information: CNIL Website  [FR]

06/10/2026

CNIL | Guidance | Commercial Prospecting Rules

The CNIL has published guidance on consent, information and opt-out requirements for commercial prospecting.

The guidance recalls that commercial prospecting by email, SMS/MMS and automated calls generally requires prior consent for individuals, subject to limited exceptions. By contrast, B2B prospecting may rely on legitimate interest where the solicitation relates to the recipient’s professional activity and the recipient is given a simple and free opt-out. The CNIL also explains that, from 11 August 2026, commercial telephone prospecting to consumers will require prior consent unless the call concerns an ongoing contract, with further implementing texts expected.

For more information: CNIL Website [FR]

06/10/2026

CNIL | Guidance | Transfer of Consumer Data to Partners for Prospecting

The CNIL has published guidance on the conditions under which consumers’ contact data may be transferred to partners for commercial prospecting purposes.

The CNIL states that organizations transferring customer or prospect data to partners must comply with GDPR obligations, including data minimization, retention, security, facilitation of rights and proof of valid consent where required. For partner prospecting by email, SMS, automated call or telephone where consent is required, the organization transferring the data must obtain prior consent and inform individuals of partner identities and purposes, including through an exhaustive and updated partner list.

For more information: CNIL Website [FR]

Germany

06/24/2026

German Parliament | Legislation | IP Address Retention

The German Bundestag held the first reading of the Federal Government’s bill introducing a three-month retention obligation for IP addresses.

The bill would require internet access providers to retain the IP addresses assigned to their customers, together with the associated port numbers, for three months. The aim is to enable law enforcement and other authorized authorities to reliably identify the holder of an internet connection. Following the debate on 24 June 2026, the bill was referred to the parliamentary committees, with the Committee on Legal Affairs and Consumer Protection taking the lead in further discussions.

For more information: German Parliament [DE]

06/22/2026

Federal Office for Information Security (BSI) | IT Security Information Note | AI-Driven Cyber Risks

The BSI published an IT security information note on the impact of AI developments on organizational cybersecurity.

The BSI warned that AI developments are changing the cyber threat landscape and reducing the time available for defensive response, including by accelerating vulnerability discovery, analysis and exploitation. The note recommends reducing attack surfaces, improving patch management, strengthening detection and incident response, applying standard controls such as least privilege, multi-factor authentication and backups, and adopting an “assume breach” posture for exposed systems and newly patched weaknesses.

For more information: BSI press release and Note [DE]

06/18/2026

German Data Protection Conference (DSK) | Position Paper | Modernization of Data Protection Supervision and Data Protection Law

The independent data protection authorities of the German Länder have adopted the “Stuttgart Impulses for the Modernization of Data Protection” and opened them for consultation.

The position paper, adopted in the context of the 111th Data Protection Conference (DSK), sets out ten proposals to modernize data protection supervision while retaining supervision within Germany’s federal structure. Key proposals include creating a statutory basis for the DSK in the Federal Data Protection Act (BDSG), binding majority decisions of the DSK for the non-public sector, establishing a single point of contact for companies and research institutions operating in several Länder, and recognizing decisions taken by one supervisory authority in matters spanning several Länder. The paper also contains core positions on substantive data protection law, including strengthening the protection of children online and facilitating research in the public interest.

For more information: LfDI Baden-Württemberg [DE]

06/09/2026

Regional Court Berlin | Judgment | Reduction of GDPR Fine in Tenant Data Case

The Regional Court of Berlin upheld the GDPR liability of a listed German real estate company for failing to delete former tenants’ data, while reducing the fine imposed by the Berlin DPA.

The proceedings arose from a 2019 fining decision by the Berlin Commissioner for Data Protection and Freedom of Information, which found that the company had used an archive system that did not allow personal data of former tenants to be deleted once no longer required. The court found infringements of the principles of data minimization and storage limitation, but reduced the fine from EUR 14,5 million to EUR 900,000, taking into account, in particular, that the violations occurred during the GDPR’s introduction phase and that the company had cooperated with the authority.

For more information: Regional Court Berlin [DE]

Norway

06/03/2026

Datatilsynet | GDPR Complaint | “Consent or Pay” Model

Datatilsynet confirmed that the Norwegian Consumer Council and a privacy advocacy organization had filed a complaint against a major Norwegian media group over its “consent or pay” model.

The complaint relates to the group’s implementation of the model across several of its news outlets, where readers must either consent to tracking and behavioural advertising or pay a monthly fee for an ad-free, privacy-respecting alternative. The complainants argue that consent to tracking cannot be regarded as freely given and therefore valid under the GDPR when the alternative is payment. Datatilsynet confirmed receipt of the complaint, noted that it had also received several other complaints and more than 100 tips concerning the model, and stated that it will assess the legality of the arrangement as part of its ongoing review.

For more information: NCC press release and Complaint

06/01/2026

Datatilsynet | Enforcement | Fine for Invalid Customer Club Consent

Datatilsynet fined a major Nordic consumer electronics retailer NOK 20 million (€1,832,094) for processing personal data in its customer club without valid consent.

The authority found several GDPR infringements following a June 2022 audit of the retailer’s Nordic and Norwegian entities, including failure to obtain valid consent, failure to assess new processing purposes, insufficient assessment of legitimate interests and failure to respond to data subject rights requests within the GDPR deadline. Datatilsynet found that more than six million customer club members in the Nordic region were affected.

For more information: Datatilsynet Website and Decision [NO]

Portugal

06/22/2026

National Cybersecurity Centre | Regulation | NIS2 Implementation

The Portuguese CNCS published Regulation No. 756/2026 implementing the national Cybersecurity Legal Framework established by the Decree-Law No. 125/2025 transposing the NIS 2 Directive.

The regulation implements Decree-Law No. 125/2025, and applies to essential entities, important entities and relevant public entities within the regime. It defines rules for the electronic platform used for identification, qualification, communications and notifications with cybersecurity authorities, and addresses compliance levels, risk-management duties, incident notification and governance contacts.

For more information: Regulation No. 756/2026 [PT]

Spain

06/18/2026

AEPD and Belgian APD | Recommendations | Data Protection in Video Games

The Spanish (AEPD) and Belgian (APD) supervisory authorities published Joint Recommendations on GDPR compliance in the video game sector.

The Recommendations set out GDPR best practices for organisations involved in the development, publishing, distribution, and operation of video games. It examines how personal data is processed throughout the gaming lifecycle (including account creation, telemetry, behavioural analytics, profiling, and automated decision-making) identifies associated privacy risks, and provides lifecycle-based recommendations and role-specific checklists to help industry participants embed data protection by design and maintain GDPR compliance.

For more information: AEPD Website [ES]

United Kingdom

06/23/2026

ICO | Enforcement | Unlawful Marketing Texts

The ICO fined a debt-solutions marketing firm £300,000 (€348,236) for sending more than 5.5 million unlawful direct marketing texts.

The ICO found that over three years the firm sent 5,575,715 unsolicited direct marketing texts promoting debt solutions to people who had been refused loans, generating more than 60,000 complaints to the ICO and the 7726 spam-reporting service. The messages included fabricated bailiff threats designed to pressure recipients, and the ICO found breaches of Regulations 22 and 23 PECR and issued an enforcement notice requiring the firm to stop sending marketing messages without valid consent.

For more information: ICO Website

06/19/2026

ICO | Guidance Update | Data (Use and Access) Act 2025

The ICO updated its guidance to reflect that all data protection provisions of the Data (Use and Access) Act 2025 are now in force.

The updated guidance summarizes the DUAA changes affecting organizations using personal information, including amendments to the UK GDPR, Data Protection Act 2018 and PECR. The ICO explains new complaint-handling requirements, including an electronic complaints route, acknowledgement within 30 days and a response without undue delay, alongside changes on automated decision-making, direct marketing, archiving, cookies, children’s online services and ICO powers.

For more information: ICO Website

06/15 /2026

UK Government | Proposed Legislation | Introduction of a Social Media Ban

On 15 June, the UK Government announced its intention to introduce new restrictions preventing social media platforms from offering services to children under 16.

The proposal follows Australia’s move last year to introduce a similar under-16 social media ban and would require services to deploy highly effective age assurance measures to prevent children under 16 from accessing social media platforms. The Government also announced additional functionality-based restrictions, including restrictions on under-16s using livestreaming features and receiving communications from unknown adults across relevant online services, as well as certain default settings for users aged 16/17. The proposal also includes additional measures for AI chatbot services. In particular, AI “romantic companion” chatbots are expected to be subject to a minimum age requirement of 18, with similar intimate functionalities restricted for under-18s across AI chatbot services more broadly. The new requirements are expected to be implemented through secondary legislation under the Online Safety Act 2023. The Government intends to bring the proposals before Parliament in Q4 2026, with the measures expected to begin coming into force from Q2 2027. Ofcom is also expected to publish a report in October setting out its assessment of age assurance technologies and their application to services used by under-16s.

For more information: UK Government Press Release

06/11/2026

ICO | Guidance | Consumer Internet of Things Products and Services

The ICO published updated guidance for organizations developing and offering consumer IoT products and services.

The guidance covers UK GDPR and PECR issues for consumer IoT products, including accountability, controller and processor roles, lawful basis and consent, fairness where AI is used, transparency in multi-user settings, accuracy, security, privacy-enhancing technologies and data subject rights. The ICO also published its consultation response summary, noting changes on repeated consent requests, embedded third-party services, telemetry and diagnostic data, accessibility, voice ID, generative AI and children’s protections.

For more information: ICO Website

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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)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

This edition of Gibson Dunn’s Federal Circuit Update for May 2026 summarizes the current status of a recent decision and petitions pending before the Supreme Court, Federal Circuit news, and recent Federal Circuit decisions concerning indefiniteness, attorneys’ fees, and standing.

Federal Circuit News

Supreme Court:

Hikma Pharmaceuticals USA Inc. v. Amarin Pharma, Inc. (US No. 24-889):  The Supreme Court held that Amarin failed to state a claim for active inducement in violation of 35 U.S.C. § 271(b) and reversed and remanded the case to the Federal Circuit.  The original Federal Circuit opinion was summarized in our June 2024 update.

Amarin develops a drug called Vascepa®, which was approved for the treatment of severe hypertriglyceridemia, a condition of very high blood triglyceride levels (“the SH indication”).  Amarin then obtained approval for a second use—to treat cardiovascular risk in hypertriglyceridemia patients (“the CV indication”) and obtained two method-of-use patents for the CV indication.  Hikma, a generic drug manufacturer, then sought approval of a skinny label that included the SH indication and removed the CV limitation of use that had been included when Vascepa® was only approved for the SH indication.  Hikma also issued several press releases advertising its product as a generic version of Vascepa® and touting Vascepa®’s sales, which included sales for all uses of Vascepa® including the CV indication.  Amarin filed suit alleging Hikma actively induced others to infringe Amarin’s patents.  The district court granted Hikma’s motion to dismiss and explained that none of Hikma’s statements amounted to active steps to encourage infringement.  The Federal Circuit reversed reasoning that while the label alone does not induce infringement, a physician could read the label, website, and press releases as encouragement to prescribe Hikma’s generic for any of its approved uses.

The Supreme Court (9-0) reversed.  The Court held that “inducement cannot be based on ‘vague’ language ‘combined with how others may act.’”  While there could be “active inducement through implicit encouragement,” “the necessary inducement must be ‘clear’ to the relevant audience and ‘affirmative.’”  The Court determined that Amarin’s complaint fell short of this, alleging no more than “sheer possibility” that “Hikma actively induced infringement of Amarin’s CV-indication patents.”  The Court therefore held that Amarin failed to state a claim for active inducement under § 271(b) and therefore its complaint cannot withstand Hikma’s motion to dismiss.

Noteworthy Petitions for a Writ of Certiorari:

There was a potentially impactful petition filed before the Supreme Court since our last update:

• Sunoco Partners Marketing & Terminals L.P. v. Powder Springs Logistics, LLC (US No. 25-1387):  The questions presented are:  (1) “Whether the Federal Circuit’s standard for recovery of lost profits damages violates 35 U.S.C. § 284.”  (2) “Whether Rule 702 requires courts to exclude expert testimony when record evidence is contrary to a critical fact upon which the expert relied, as the Federal Circuit holds, or whether juries should determine whether facts upon which an expert relied are true, as all other Circuits have held.”  The response brief is due July 16, 2026.

We provide an update below of the petitions pending before the Supreme Court, which were summarized in our April 2026 update:

• In Google LLC v. VirtaMove, Corp. (US No. 25-1230), after the respondent waived its right to file a response, the Court requested a response.  The response brief is due July 13, 2026.  Seven amicus briefs have been filed.
• The Court denied the petitions in Polar Electro Oy v. Firstbeat Technologies Oy (US No. 25-1268), Hyatt v. Squires (US No. 25-1049), Dolby Laboratories Licensing Corp. v. Unified Patents, LLC (US No. 25-1011), and Finesse Wireless LLC v. AT&T Mobility LLC (US No. 25-953).

Federal Circuit News:

Judge Bryson receives the 2026 American Inns of Court Professionalism Award.  On May 27, 2026, the Federal Circuit announced that Judge Bryson received the 2026 American Inns of Court Professionalism Award.  The full article is here.

Federal Circuit Center Innovation & Law’s America250 Event.  On June 29, 2026, the Federal Circuit announced it has released the final wave of free timed-entry tickets to the event being held on July 3, 2026.  The full article is here.

Key Case Summaries (May 2026)

Enviro Tech Chemical Services, Inc. v. Safe Foods Corp., No. 24-2160 (Fed. Cir. May 4, 2026):  Enviro sued Safe Foods asserting infringement of Enviro’s patent directed to methods for treating poultry for increasing the weight of poultry using peracetic acid.  Specifically, claim 1 recites a method, including “altering the pH of the peracetic acid-containing water to a pH of about 7.6 to about 10 by adding an alkaline source.”  The district court determined that the intrinsic evidence did not inform a skilled artisan as to the scope of the term “about” with reasonable certainty and held that the claims were indefinite

The Federal Circuit (Lourie, J., joined by Prost and Burroughs (district court judge sitting by designation), JJ.) affirmed.  The Court reasoned that words like “about” and “approximately” may be used to avoid strict numerical boundaries and are not inherently indefinite.  However, when those words are used, the parameter’s range must be “reasonably certain” based on the technical facts of the particular case.  The Court then held that nothing in the claims, the specification, or the prosecution history provided any guidance as to the boundaries of “about” or explain what it means and therefore rendered the claims indefinite.

mCom IP, LLC et al. v. City National Bank of Florida, No. 24-2089 (Fed Cir. May 15, 2026):  mCom sued City National, asserting infringement of its patent directed to unifying a financial institution’s e-banking touch points into a common point of control.  mCom had previously sued an entity named NRC Corporation, and during that litigation, Unified Patents had filed inter partes review (IPR) petitions challenging most of the claims of mCom’s patent.  The Patent Trial and Appeal Board (Board) ultimately held that all the challenged claims were unpatentable as obvious.  mCom then sued City National asserting the few claims that had not been challenged in the IPR.  The district court granted City National’s motion to dismiss, which argued that the remaining claims were invalid because they were not patentably distinct from the claims invalidated by the IPRs.  City National then moved for attorneys’ fees under 35 U.S.C. § 285 and 28 U.S.C. § 1927, which the district court also granted.

The Federal Circuit (Taranto, J., joined by Dyk and Mayer, JJ.) affirmed-in-part and reversed-in-part .  The Court first held that the district court correctly concluded the claims were invalid based on the same obviousness grounds as those the Board relied upon in the IPR.  The Court reversed the award of fees, holding that it was not unreasonable for mCom to bring the case given the higher burden of persuasion of invalidity before the district court than before the Board.

A.L.M. Holding Company v. Zydex Industries Private Ltd., No. 25-1317 (Fed. Cir. May 19, 2026):  ALM owns patents directed to warm-mix asphalt paving methods and compositions.  ALM licensed certain limited rights to Ingevity, such as the ability to sublicense subject to ALM’s approval, for a minimum annual royalty.  ALM retained certain rights, such as use of the patents and the right to sue.  When ALM sued Zydex for patent infringement, Zydex moved to dismiss for lack of standing.  The district court granted the motion.

The Federal Circuit (Chen, J., joined by Cunningham and Stark, JJ.) reversed and remanded.  The Court held that ALM retained a right to sue as well as a right to royalties.  Moreover, the Court also held that ALM retained a sublicensing veto that prevents Invenvity from granting sublicenses without ALM’s approval.  These rights together confirm that ALM retains an exclusionary right, establishing that it has retained a concrete stake in excluding unauthorized practice of the patents and a mechanism to enforce that interest.  The Court held that ALM therefore demonstrated a concrete injury in fact sufficient to confer constitutional standing.

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The following Gibson Dunn lawyers prepared this update: Blaine Evanson, Jaysen Chung, Audrey Yang, and Julia Tabat.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups, or the following authors:

Blaine H. Evanson – Orange County (+1 949.451.3805, bevanson@gibsondunn.com)
Audrey Yang – Dallas (+1 214.698.3215, ayang@gibsondunn.com)

Appellate and Constitutional Law:
Thomas H. Dupree Jr. – Washington, D.C. (+1 202.955.8547, tdupree@gibsondunn.com)
Allyson N. Ho – Dallas (+1 214.698.3233, aho@gibsondunn.com)
Julian W. Poon – Los Angeles (+ 213.229.7758, jpoon@gibsondunn.com)
Jeffrey B. Wall – Washington, D.C. (+1 202.955.8533,jwall@gibsondunn.com)

Intellectual Property:
Kate Dominguez – New York (+1 212.351.2338, kdominguez@gibsondunn.com)
Josh Krevitt – New York (+1 212.351.4000, jkrevitt@gibsondunn.com)
Jane M. Love, Ph.D. – New York (+1 212.351.3922, jlove@gibsondunn.com)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

From the Derivatives Practice Group: This week, ESMA published a report relating to transaction reporting simplification, while ISDA published a joint association letter for enhancing the EU’s legislative and supervisory framework.

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.

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.

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.

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 Developments Outside the U.S.

ESMA Identifies Up to €1 Billion in Potential Annual Savings from Simplifying EU Transaction Reporting. On July 2, ESMA published its final report on the simplification of transaction reporting, which it said set out a clear path towards a “Report Once” approach. According to ESMA, its review confirms that the main drivers of cost and complexity include frequent and unsynchronized regulatory changes, duplication of reporting across frameworks and channels, and dual-sided reporting and associated reconciliation processes. [NEW]

ESMA Fines Moody’s Germany for Misreporting. On July 2, ESMA fined Moody’s Deutschland GmbH (Moody’s Germany) a total of EUR 2,145,000, for committing four breaches of the Credit Rating Agencies Regulation. The breaches were found to have resulted from negligence on the part of Moody’s Germany. In calculating the fine, ESMA considered both aggravating and mitigating factors provided in the CRA Regulation. [NEW]

ESMA Recognizes Clearing Corporation of India Limited as a Tier 1 Third-country CCP. On July 1, ESMA recognized the Clearing Corporation of India Limited (CCIL) as a Tier 1 third-country central counterparty under the European Market Infrastructure Regulation. The recognition allows CCIL to provide clearing services to EU clearing members and trading venues, including banks, investment firms, and other counterparties. [NEW]

ESMA Consults on Simplifying EU Taxonomy Disclosure Framework. On July 1, ESMA launched a consultation regarding technical advice to the European Commission on selected KPIs under the Taxonomy Disclosures Delegated Act. ESMA’s consultation focuses on simplification and reduction of reporting burdens for market participants and builds on recent simplification efforts under the Commission’s Omnibus package. [NEW]

ESMA Appoints Peter Tkáč as the New Member of its Management Board. On July 1, ESMA appointed Peter Tkáč, Národná Banka Slovenska, Slovakia, as the new member of its Management Board. The Management Board, chaired by Verena Ross, Chair of ESMA, is responsible for ensuring that the Authority carries out its mission and performs the tasks assigned to it under its founding Regulation. [NEW]

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.

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]

New Industry-Led Developments

ISDA Publishes Joint Association Letter on Enhancing EU Legislative and Supervisory Framework. On July 1, ISDA and 11 other trade associations published a statement on enhancing the EU legislative and supervisory framework to support market competitiveness. The statement calls for embedding a competitiveness objective within ESMA’s mandate, thus ensuring regulatory decisions fully reflect their impact on market attractiveness. It also urges better sequencing of EU financial legislation. [NEW]

ISDA Responds to CPMI-IOSCO Consultation on Margin Proposals. On June 29, ISDA submitted a response to a consultation from the Committee on Payments and Market Infrastructures (CPMI) and IOSCO on updated guidance and public quantitative disclosures to implement the 2025 margin proposals. [NEW]

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.

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.

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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)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

Companies will be able to take advantage of a high-velocity, more flexible mechanism to optimize balance sheets and have the ability to more nimbly conduct liability management exercises in a single calendar week, while reducing exposure to market and interest rate volatility.

In a major regulatory development for issuers and liability management practitioners, the U.S. Securities and Exchange Commission’s (SEC) Division of Corporation Finance, acting via delegated authority, has issued a significant Exemptive Order materially expanding the framework for abbreviated tender and exchange offers for non-convertible debt securities.  As a result, companies will be able to take advantage of a high-velocity, more flexible mechanism to optimize balance sheets and have the ability to more nimbly conduct liability management exercises in a single calendar week while reducing exposure to market and interest rate volatility.  This Exemptive Order, effective June 30, 2026 (the “2026 Exemptive Order”),[1] supersedes the long-standing January 23, 2015 No-Action Letter (the “2015 Letter”),[2] which previously governed the market for abbreviated non-convertible debt tender offers.

Introduction: Regulatory Context

Under Exchange Act Rule 14e-1(a), all tender offers—whether for equity or debt—must remain open for a minimum of 20 business days, and Rule 14e-1(b) generally requires an offer to remain open for at least 10 business days after certain changes in the offer, including a change in consideration.[3]

Recognizing that debt transactions serve different commercial purposes, have different timing considerations, and present fewer investor protection risks than equity tender offers, the SEC staff has taken various no-action positions since 1986 that permitted shorter offering periods for non-convertible debt.[4]

Following the SEC’s recent April 2026 “Equity Order” (which shortened the period that certain friendly equity tender offers must remain open to 10 business days, as discussed in more detail on our Client Alert dated April 20, 2026),[5] the SEC states that the 2026 Exemptive Order is intended to address market inefficiencies, better reflect modern technological advancements, reduce interest rate exposure, and expand structural flexibility for corporate debt management.

Overview of the Baseline 2015 No-Action Letter Framework

For over a decade, the 2015 Letter served as the standard playbook for fast-track debt liability management.[6]  It permitted an offeror to conduct a tender or exchange offer for non-convertible debt securities in an abbreviated five business day window, provided that a rigid set of criteria was met:

• “Any and All” Only: The relief was strictly confined to offers to acquire “any and all” of the target debt; partial tender offers or tiered caps were entirely excluded from the abbreviated timeline.
• Prohibition on Consent Solicitations: The offer could not be coupled with any solicitation of consents to amend the underlying indenture or agreements governing the terms of the target debt.
• Restrictive Exchange Offers: While exchange offers for “Qualified Debt Securities” were permitted, they were restricted to offers to Qualified Institutional Buyers (QIBs) and non-U.S. persons.  Crucially, offerors were required to provide a concurrent, fixed cash option to retail or non-eligible holders to prevent them from being locked out of the transaction’s economic benefits.
• Maturity Restrictions: Any new “Qualified Debt Securities” issued in an exchange offer were required to be identical in all material respects to the target debt and to possess a longer weighted average life to maturity than the target debt.
• Strict Financing Caps: The abbreviated offer could not be financed with the proceeds of any “Senior Indebtedness” (debt senior in payment right, possessing extra guarantors/collateral, or having a shorter maturity than the target debt).
• Notice Requirements: Offerors were required to issue a press release by 10:00 a.m., Eastern Time, on the first day of the offer, file a Current Report on Form 8-K before 12:00 noon, Eastern Time, on the same day, and provide a mandatory two-business-day guaranteed delivery procedure.

The Paradigm Shift: Key Changes Introduced by the 2026 Exemptive Order

The 2026 Exemptive Order goes far beyond simply re-authorizing the no-action position under the 2015 Letter; it meaningfully transforms the abbreviated debt tender offer landscape by removing decades-old structural restrictions, shortening extension windows, and providing greater legal certainty.

1. Shift from “No-Action” Comfort to a Binding “Exemptive Order”

While the 2015 framework was established through a standard staff “no-action” position (which merely states that the staff will not recommend enforcement action and does not bind courts or third parties), the 2026 relief is provided by a formal Exemptive Order issued by the Division under delegated Commission authority.  This provides across-the-board statutory exemptive relief and protection for any compliant offer from claims that the offer violated Exchange Act Rules 14e-1(a) and (b).

2. Authorization of Partial Tender Offers for Non-Convertible Debt Securities

In an important change, the 2026 Exemptive Order permits partial tender offers (offers for less than 100% of the outstanding class or series) for non-convertible debt securities to be completed in five business days.  If an offer is oversubscribed, the offeror must accept the securities on a pro-rata basis.  Offerors must use commercially reasonable efforts to announce the final proration factor via a widely disseminated press release by 10:00 a.m., Eastern Time, on the next business day following expiration of the offer.

3. Concurrent Consent Solicitations Now Permitted (with a Cap)

While the 2015 Letter barred combining an abbreviated tender offer timeline with solicitation of approval of an indenture amendment, the 2026 Exemptive Order allows consent solicitations to run concurrently with a 5-business-day offer, provided that the proposed amendment does not require the consent of holders of more than a simple majority of the outstanding principal amount.

This enables offerors to conform standard covenants or execute exit consents—both important tools in liability management exercises—on an accelerated schedule, though protective amendments requiring supermajority or unanimous debt holder approval remain excluded.

4. Streamlined Exchange Offers and Expanded Institutional Pool

The 2026 Exemptive Order simplifies and expands the use of fast-track exchange offers in two ways:

• Inclusion of IAIs: The pool of “Eligible Exchange Offer Participants” has been expanded to include Institutional Accredited Investors (IAIs) under Securities Act Rule 163B(c)(2), alongside QIBs and non-U.S. persons.
• Elimination of the Retail Cash Option: The 2015 Letter required issuers to provide a concurrent cash option for holders who were not Eligible Exchange Offer Participants and, therefore, could not receive the new securities. This restriction has been eliminated.  Offerors can now conduct abbreviated exchange offers solely to Eligible Exchange Offer Participants, without the need to extend a concurrent cash option to all holders.

5. More Flexible “Qualified Debt Securities” Rules

The definition of what constitutes a “Qualified Debt Security” in an exchange offer has been relaxed:

• No Maturity Duration Minimum: The 2026 Exemptive Order removes the requirement that the newly issued debt must have a longer weighted average life to maturity than the old debt. Offerors can now use 5-business-day exchange offers to shorten maturities or roll long-term debt into shorter-term notes.
• Pari Passu Comparison Permitted: The new securities no longer need to be identical in all material respects to the target debt; instead, the new securities may also be substantially similar in all material respects to the issuer’s most recent issuance of debt securities that are pari passu to the subject securities.

6. Elimination of Financing Restrictions

The 2015 Letter’s prohibition against funding the tender offer with “Senior Indebtedness” has been eliminated.

Offerors are not subject to restrictions under the new framework regarding how they source or structure the capital used to fund the transaction.

7. Shorter Windows for Material Amendments

The 2026 Exemptive Order accelerates the timeline required to communicate changes to investors before the offer expires:

• Consideration / Percentage Changes: Any change in consideration or percentage of securities sought (beyond a standard 2% acceptance buffer) must be announced by 9:00 a.m., Eastern Time, at least three business days prior to the expiration of the offer. Under the 2015 Letter, offers had to remain open for a full five business days after the announcement.
• Other Material Changes: Any other material modification must be announced by 9:00 a.m., Eastern Time, at least two business days prior to the expiration of the offer (down from three business days under the 2015 Letter requirement).

8. Elimination of Mandatory Guaranteed Delivery and Form 8-K Noon Deadline

The 2026 Exemptive Order removes the 2015 Letter requirements to provide a 2-day guaranteed delivery option and to file a Current Report on Form 8-K by 12:00 noon, Eastern Time, on the first day of the offer.  Instead, commencement is conditioned on issuance of a widely disseminated press release by 10:00 a.m., Eastern Time, that contains certain required information about the offer and an active hyperlink to a website hosting all tender materials.

9. Extended Intraday Pricing Window

For formula-based or spread-based pricing models linked to benchmarks (e.g., UST, SOFR), the 2015 Letter rules forced offerors to lock in the final price and interest rate by 2:00 p.m., Eastern Time, on the expiration day.  The 2026 Exemptive Order eliminates this cliff, allowing the final exact consideration and interest rate to be fixed no later than the time the offer expires.

10. Clearer Restrictive Windows

The 2015 Letter restricted abbreviated offers from being “made in anticipation of or in response to, or concurrently with” a change of control or certain other extraordinary corporate events involving the issuer.  The 2026 Exemptive Order replaces this ambiguous standard with a much clearer rule: an abbreviated offer cannot be “commenced within ten business days after the first public announcement or the consummation” of a change of control or other type of extraordinary transaction involving the issuer, such as a merger (or similar business combination), reorganization or liquidation, or a sale of all or substantially all of the issuer’s assets.

Comparison Table: 2015 Framework and 2026 Framework

Feature / Condition	2015 No-Action Letter Framework	New 2026 Exemptive Order Framework
Legal Nature of Relief	Non-binding Staff No-Action Position	Binding Commission Exemptive Order
Offer Volume Scope	Strict “Any and All” requirement	Permits Partial Offers (with mandatory pro-rata allocation)
Consent Solicitations	Broadly Prohibited	Permitted (if amendment requires approval of a simple majority of the outstanding principal amount)
Exchange Offer Pool	Restricted to QIBs and Non-U.S. Persons	Expanded to include Institutional Accredited Investors (IAIs)
Retail Cash Option Proviso	Mandatory for non-eligible exchange holders	Eliminated (exchange offer made to only institutional holders allowed)
Weighted Average Life	New debt must have longer term to maturity than target debt	Eliminated (new debt can have shorter term maturity than target debt)
Qualified Debt Basis	Must be identical in all material respects to subject debt	Can be substantially similar in all material respects to subject debt or recent pari passu debt
Financing Restrictions	Prohibited from using “Senior Indebtedness”	Eliminated (no restrictions on capital sourcing)
Consideration Change Extension	Requires at least 5 business days from announcement	Shortened to 3 business days (notice by 9:00 a.m., Eastern Time)
Other Material Change Extension	Requires at least 3 business days from announcement	Shortened to 2 business days (notice by 9:00 a.m., Eastern Time)
Guaranteed Delivery Mandate	Required (2-business-day look-forward)	Eliminated (at offeror’s option)
Announcement	Requires hyperlinked press release by 10:00 a.m., Eastern Time, on commencement date	Expanded to include procedures for proration, if applicable (notice by 10:00 a.m., Eastern Time, on commencement date)
SEC Filing Mandates	Form 8-K required before 12:00 noon, Eastern Time, on commencement day	Eliminated (Form 8-K no longer required); 10 a.m., Eastern Time, hyperlinked press release required
Intraday Pricing Lock	Strict deadline of 2:00 p.m., Eastern Time, on Expiration Day	Flexible up to the exact Expiration Time of the offer
M&A / Corporate Blackout	Vague “in anticipation of / concurrent with” test	10-business-day restriction post-commencement of a deal

Practical Implications for Issuers and Market Participants

• Strategic Liability Management: The inclusion of partial offers and simple-majority consent solicitations fundamentally shifts how corporate treasurers will approach refinancing. Issuers can now execute highly targeted, capped buybacks or quick covenant-clearing exercises over a single calendar week, drastically lowering execution risk in highly volatile interest rate environments.
• Unlocking Accelerated Exchange Offers: By removing the requirement to provide a concurrent retail cash option and eliminating the rule that new debt must have a longer maturity than the target debt, the SEC has facilitated a path forward for institutional debt swaps. Companies can now opportunistically shorten their debt maturities or swap into pari passu tranches on an abbreviated five-day
• Operational Compliance Adjustments: While the removal of the rigid noon, Eastern Time, Form 8-K deadline and the 2:00 p.m., Eastern Time, pricing lock simplifies logistics, practitioners must ensure careful technological coordination. The press release required to be issued by 10:00 a.m., Eastern Time, on the commencement day must contain an active, working hyperlink directly to the offering materials.  Infrastructure and website staging must be verified prior to the 10:00 a.m., Eastern Time, wire launch to maintain compliance with the 2026 Exemptive Order.

Key Takeaways and Client Action Items

• Review Outstanding Debt Portfolios: Evaluate your current capital structure for opportunities to execute partial repurchases or debt-for-debt swaps that were previously economically unfeasible due to the 20-business-day rule or the 2015 Letter “any-and-all” restriction.
• Utilize Accelerated Consent Solicitations: Consider matching minor or operational indenture modifications with abbreviated tender offers to incentivize holder participation without triggering long solicitation windows.
• Coordinate Closely with Dealer Managers and Information Agents: Ensure that your transaction team is prepared to adhere to the strict 9:00 a.m., Eastern Time, windows for potential pricing or material modifications, keeping in mind the newly compressed three-day and two-day minimum periods that the changed offer must remain open before expiration.
• Implement Strict 10-Business-Day Deal Blackouts: Ensure that any planned liability management transaction does not accidentally launch within 10 business days of a material acquisition, asset sale, or merger announcement or consummation.

Gibson Dunn attorneys remain available to assist with any questions you may have regarding the interpretation and application of the 2026 Exemptive Order.

[1] SEC Division of Corporation Finance, Exemptive Order for Tender or Exchange Offers for Non-Convertible Debt Securities (Jun. 30, 2026).

[2] See SEC No-Action Letter, Cahill Gordon & Reindel LLP (Jan. 23, 2015).

[3] See 17 C.F.R. § 240.14e-1(a) and 17 C.F.R. § 240.14e-1(b).

[4] See SEC No-Action Letter, Goldman, Sachs & Co. (Mar. 26, 1986); SEC No-Action Letter, Salomon Brothers Inc. (Mar. 12, 1986); SEC No-Action Letter, Salomon Brothers Inc. (Oct. 1, 1990); SEC No-Action Letter, Cahill Gordon & Reindel LLP (Jan. 23, 2015).

[5] See Gibson Dunn Client Alert, SEC Staff Issues Exemptive Relief Allowing 10-Business Day Equity Tender Offers.

[6] See James Moloney, Sean Sullivan, Todd Trattner, Five Day Tender Offers: Conditions and Timelines, Deal Lawyers (March-April 2015).

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The following Gibson Dunn lawyers prepared this update: Mellissa Campbell Duru, Andrew L. Fabens, Hillary H. Holmes, Sebastian L. Fain, Alisa Babitz, and Rodrigo Surcan.

Please view this and additional information on Gibson Dunn’s Securities Regulation & Corporate Governance Monitor.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding the SEC’s announcement, or federal securities laws and regulations more generally. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Capital Markets or Securities Regulation & Corporate Governance practice groups:

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)

Securities Regulation & Corporate Governance:
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

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

KEY TAKEAWAYS

• The Supreme Court declined to stay the reinstatement of Federal Reserve Governor Lisa D. Cook, allowing her to remain in office pending further judicial proceedings. Read more about that decision here.
• At its June board meeting, the Federal Deposit Insurance Corporation (FDIC) Board approved three proposed rules:
  • revising the current resolution planning rule by, among others, raising the threshold for “resolution submissions“ by covered insured depository institutions from $50 billion to $100 billion and streamlining filing requirements;
  • revising deposit insurance assessments, including raising the small/large institution threshold from $10 billion to $30 billion, reducing base deposit insurance assessment rate schedules, and introducing an optional downward “resolution readiness adjustment” for large and highly complex institutions; and
  • amending its regulations on the disclosure of confidential supervisory information (CSI) to allow banks to share CSI with third parties for business purposes, subject to a confidentiality agreement, without prior FDIC approval.

Comments on all three proposals are due by August 31, 2026.

• The federal regulatory agencies charged with GENIUS Act implementation continued their rulemaking efforts, jointly issuing a proposed rule under the GENIUS Act to establish customer identification program requirements for “permitted payment stablecoin issuers.” Comments on the proposal are due by August 21, 2026.
• The New York State Department of Financial Services (NYDFS) proposed a regulation governing authorized payment stablecoin issuers that builds on the NYDFS’ existing framework and incorporates federal requirements under the GENIUS Act, positioning New York’s framework for Treasury certification as “substantially similar” to the federal regime.

DEEPER DIVES

FDIC Proposes to Streamline and Narrow Resolution Planning Rule. On June 25, 2026, the FDIC Board approved a proposed rule revising resolution planning requirements applicable to covered insured depository institutions (CIDIs) with $50 billion or more in total assets. The proposal would raise the applicability threshold from $50 billion to $100 billion, rename filings as “resolution submissions,” move all CIDIs to a three-year filing cycle, and obtain material change information through a notice of extraordinary event process rather than interim supplements. The proposal would eliminate more than half of the rule’s content requirements, including CIDI-generated strategy development and valuation analysis, failure-scenario and optionality analyses, the public section, capabilities testing, and the credibility-determination/feedback construct. It would retain, with revisions, core content on deposits, corporate structure, key personnel, and information systems, and add new operational content to aid FDIC execution of a resolution, like an organizational chart, a mapping of IT architecture and deposit/loan processing cut-off times, sweep account and foreign branch fund-movement controls, and information on QFCs. The FDIC Board separately exempted CIDIs from October 2026 and 2027 filings, and initial submissions under a final rule would be due no earlier than 270 days after its effective date. Comments on the proposal are due by August 31, 2026.

• Insights. The proposal completes a philosophical reversal of the 2024 final rule. The FDIC estimates that the threshold increase raising the bar to $100 billion would reduce the list of CIDIs subject to the rule from 48 to 32. The retained IT-architecture mapping, QFC, and deposit-operations data demand real investment in data readiness, and the FDIC is re-allocating its capabilities expectations by creating a “resolution readiness adjustment” in its companion deposit insurance assessment proposal giving favorable assessment rate treatment to institutions that can rapidly populate a virtual data room (VDR) and grant the FDIC access to their systems and service providers. Comptroller Gould, who in January urged outright elimination of the resolution plan process, stated that the proposal does not go far enough, specifically inviting comment on whether the digital-asset information requirements could be used “by a future Administration to chilling effect” and signaling he will seek FDIC structural and staffing changes to curb incentives to “perpetuate or expand” what he called “the compliance exercise known as resolution planning.”

FDIC Proposes to Lower Deposit Insurance Assessments and Add a Resolution Readiness Adjustment. On June 25, 2026, the FDIC Board approved a proposed rule that would amend the deposit insurance assessment regulations to increase the asset threshold in the definitions of “small” and “large” institutions from $10 billion to $30 billion, decrease initial base assessment rate schedules by 2 basis points for small institutions and by 1 basis point for large and highly complex institutions, and create a downward “resolution readiness adjustment” of up to 1 basis point for large and highly complex institutions that elect to participate, comprising 0.5 basis points for passing virtual data room (VDR) testing and 0.5 basis points for providing the FDIC temporary access to specified third-party service providers and internal systems. Comments on the proposal are due by August 31, 2026.

• Insights. The proposal is the pricing half of the FDIC’s paired resolution readiness overhaul. The resolution planning proposal strips capabilities testing and the credibility-determination construct out of the resolution planning rule and the deposit insurance assessment proposal embeds that expectation into deposit insurance pricing, converting VDR readiness and advance systems access from a compliance mandate into a priced, opt-in incentive. FDIC staff estimate the changes would reduce industry assessments by roughly $4 billion per year and the threshold increase would shift roughly 76 institutions from the large institution to the small institution assessment framework.

FDIC Proposes Overhaul of CSI Rules. On June 25, 2026, the FDIC Board approved a proposed rule that would liberalize certain of its regulations governing the disclosure of confidential supervisory information (CSI), which, as noted by the FDIC, have not been significantly revised in roughly 30 years. Under the proposal, insured depository institutions (and, reciprocally, their FDIC-examined service providers and parent holding companies) would be permitted to disclose FDIC confidential information without first obtaining FDIC authorization, so long as the disclosure is “necessary or appropriate for business purposes” and, in applicable cases, the recipient is subject to a “qualifying confidentiality agreement.” Eligible recipients would include affiliates, directors, officers, and employees (no confidentiality agreement required); and external legal counsel, accountants, auditors, majority shareholders, qualifying service providers, certain prospective officers with a pending employment offer, and potential merger counterparties that are themselves insured depository institutions (qualifying confidentiality agreement required). The proposal would also permit disclosure of information more than 25 years old. Comments on the proposal are due by August 31, 2026.

• Insights. The reform tracks a broader, cross-agency push on CSI. Vice Chair for Supervision Bowman flagged the same concerns in her January 2026 remarks, observing that the breadth of the CSI designation has chilled even beneficial sharing, such as fraud prevention coordination among banks, and can be used to shield abusive supervisory conduct; she signaled the Fed is reviewing approaches to better define CSI, including creating limited-use cases exempt from the definition. Comptroller Gould voted for the proposal but expressly urged that it go further. In his statement at the FDIC board meeting, he supported allowing banks to disclose CSI without agency approval when necessary or appropriate for business purposes, but added that he believes the final rule should go further and encouraged commenters to identify other ways the FDIC could reasonably expand access to CSI. The recent Hagerty letter to Bowman, Gould, Hill, and Vought urging CSI reform signals congressional appetite along the same lines. It will be worth watching whether the Federal Reserve and/or OCC follow with parallel or even broader proposals; if the agencies don’t move in tandem, institutions will continue to navigate a patchwork, particularly for information that is jointly CSI of more than one regulator. Two structural limits on the proposal’s reach merit attention: first, the enumerated-recipient approach is oriented toward the institution’s own advisors and counterparties, and it is not obvious how the “qualifying service provider” and “necessary or appropriate for a business purpose” framing would treat parties like securities underwriters in a capital-raising context; and second, the proposal’s liberalization does not extend to the litigation or investigation context.

OTHER NOTABLE ITEMS

NYDFS Proposes GENIUS Act-Aligned Stablecoin Regulation. On June 9, 2026, the NYDFS proposed a regulation building on its June 2022 guidance to position New York’s framework for Treasury certification as a “substantially similar” state regime under the GENIUS Act. The proposal retains the existing NYDFS requirements, including 1:1 reserve backing, full redeemability, permissible reserves, and independent audits, and adds provisions including per-custodian reserve concentration limits, monthly CEO/CFO certifications, and two-business-day redemption. Existing New York issuers would have 12 months to comply. A 10-day pre-proposal comment period opened June 9, followed by a 60-day formal period after publication in the State Register.

OCC Clarifies National Bank Act Preemption of State Money Transmission Licensing Statutes. On June 9, 2026, the OCC released Interpretive Letter No. 1192, confirming that the National Bank Act preempts state money transmission licensing laws, noting that such conclusion “is clear and unambiguous under applicable law and longstanding precedent.”

Federal Reserve Releases 2026 Stress Test Results. On June 24, 2026, the Federal Reserve released the results of its annual bank stress test. The Board reported that the 32 tested banks remained above minimum capital requirements under the severely adverse scenario.

Agencies Propose CIP Requirements for Stablecoin Issuers. On June 18, 2026, FinCEN, together with the OCC, Federal Reserve, FDIC, and NCUA, proposed a joint rule implementing the GENIUS Act’s directive to treat permitted payment stablecoin issuers (PPSIs) as financial institutions under the Bank Secrecy Act and require them to maintain a customer identification program (CIP). The proposal would require each PPSI to maintain a written, risk-based CIP; collect specified identifying information before opening an account, verify identity within a reasonable time, maintain records, screen against designated government lists, and provide customer notice. Notably, the proposal distinguishes primary-market activity (direct interaction between the PPSI and a holder) from secondary-market activity, declining to impose issuer-level identity verification on every secondary-market user. Comments on the proposal are due August 21, 2026.

Agencies Remove Reputation Risk References from Interagency Materials. On June 2, 2026, the federal banking agencies announced they updated certain interagency documents to remove references to reputation risk to complement their earlier actions that ended the use of reputation risk in supervision.

Federal Reserve Releases Supervision and Regulation Report. On June 3, 2026, the Federal Reserve released its Supervision and Regulation Report, issued in conjunction with Vice Chair for Supervision Michelle Bowman’s semiannual testimony before Congress. The report highlights, among other things, the Federal Reserve’s supervisory focus on core and material financial risks and its continued efforts to tailor supervisory approaches based on institution size, complexity, business model, and risk profile. As part of this strategic shift, the report describes updates to the supervisory ratings frameworks and examination programs, including changes following the October 2025 Statement of Supervisory Operating Principles and its updated May 2026 version, which clarified standards for MRAs or MRIAs and enforcement actions, intended to enhance transparency and effectiveness. The report also notes that outstanding MRAs and MRIAs at large financial institutions decreased in the second half of 2025 and discusses recent regulatory developments and rulemakings affecting supervised institutions.

Vice Chair for Supervision Bowman Testifies on Supervision and Regulation. On June 4, 2026, Federal Reserve Vice Chair for Supervision Michelle Bowman testified before the House Financial Services Committee on current banking conditions, regulatory and supervisory reforms. Bowman highlighted recent reforms, including the finalized community bank leverage ratio changes, the March 2026 Basel III re-proposal, a comprehensive review of outstanding MRAs to refocus supervision on material financial risks, and proposed revisions to the CAMELS rating framework. Bowman also emphasized ongoing initiatives, including recalibrating regulatory thresholds for inflation and economic growth (citing Regulation O as an example), GENIUS Act stablecoin rulemaking, stress testing transparency, and recognizing discount window collateral in liquidity regulations.

Governor Barr Warns Against Bank Deregulation. On June 6, 2026, Federal Reserve Governor Michael Barr delivered a speech titled “Deregulating in a Financial Boom: What Could Go Wrong?”, offering a dissenting counterpoint to Vice Chair for Supervision Bowman’s June 4 testimony and expressing concern that recent and proposed actions by the Federal Reserve and other banking agencies are weakening bank regulation and supervision in ways that increase risk to financial stability and the broader economy.

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

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

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

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

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

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

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

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

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

Sam Raymond, New York (+1 212.351.2499, sraymond@gibsondunn.com)

Rachel Jackson, New York (+1 212.351.6260, rjackson@gibsondunn.com)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

The decision provides meaningful guidance on the interaction between Section 144’s new “heightened” presumption—that directors deemed independent under applicable national securities exchange rules are also presumed to be disinterested under Section 144—and Court of Chancery Rule 23.1’s well-established demand-futility standard.

On June 15, 2026, Vice Chancellor Lori W. Will issued a decision in Ayers v. Foley, — A.3d —, 2026 WL 1723538 (Del. Ch. June 15, 2026), concerning a director-disinterestedness presumption added to 8 Del. C. § 144 last year by Senate Bill 21 (2025).  The case was filed in June 2025, after the S.B. 21 amendments were adopted by the Delaware legislature.  As we discussed in this Client Alert, Section 144(d)(2) established a presumption of disinterestedness for directors of publicly listed companies not party to an act or transaction if the board determines that such director satisfies applicable stock exchange criteria for independence from the company and, if applicable, the controlling stockholder.  As the Court observed, Delaware courts had “yet to interpret” the provision.  Ayers, 2026 WL 1723538, at *9.  Vice Chancellor Will’s decision provides meaningful guidance on the interaction between Section 144’s new “heightened” presumption—that directors deemed independent under applicable national securities exchange rules are also presumed to be disinterested under Section 144—and Court of Chancery Rule 23.1’s well-established demand-futility standard.

Takeaways:

• Ayers clarifies the scope of Section 144(d)(2): a board’s exchange-based independence determinations now carry statutory weight not only within Section 144’s transactional safe harbors but also at the Rule 23.1 demand-futility stage. This gives boards and advisors clarity regarding director independence and makes it more difficult for a stockholder plaintiff to plead around a disinterested board majority, where those directors have been determined to be independent under stock exchange rules.
• To rebut the heightened presumption, a plaintiff must plead facts of genuine qualitative significance. The Court determined that “substantial” in the statute’s requirement of “substantial and particularized facts” means “significant enough to evidence a disabling conflict.”  This is a higher, more director-friendly standard than the one that preceded S.B. 21.
• A defensible decision-making process and structure offer substantial protections against a legal challenge. The directors in Ayers qualified for the Section 144(a)(1) safe harbor and prevented a challenged grant from being aggregated with the directors’ own compensation by referring the proposed grant to a separate committee of disinterested directors—the Related Person Transaction (RPT) Committee—that met on its own, retained its own compensation and legal advisors, and reached its own decision.  The Court praised the referral as “sound corporate governance” even though it was not strictly required.
• The “interlocking protections” of (i) the Section 144(a)(1) safe harbor and (ii) a Section 102(b)(7) charter provision exculpating directors for breaching the duty of care require a plaintiff to plead “particularized facts supporting a reasonable inference that they acted [in] bad faith” to establish a substantial likelihood of liability for the approving disinterested directors—a “high hurdle” the complaint here did not clear. The committees’ reliance on independent compensation and legal advisors cut strongly against any inference of bad faith.

Background

Nominal Defendant Fidelity National Financial, Inc. (FNF) is a provider of title insurance, mortgage loan servicing, and other real estate services.  Plaintiff, an FNF stockholder, asserted derivative claims for, among other things, breach of fiduciary duty against FNF’s founder and Non-Executive Chairman, William P. Foley, and the company’s nine non-employee directors (NEDs), challenging (i) a special equity grant approved for Foley in 2024 by the Compensation Committee and the separate RPT Committee (the Equity Grant), and (ii) the directors’ 2022–2024 annual compensation, set by the Compensation Committee (the NED Compensation).  The Equity Grant resulted from an arm’s length negotiation: Foley initially requested a $60 million grant of restricted shares, which the committees, after seeking and reviewing market research from a third-party consultant, negotiated down to a $50 million equity grant vesting over three years, subject to Foley’s continued service.  Ayers, 2026 WL 1723538, at *4.

Distinct Transactions

The Court rejected plaintiff’s effort to treat the Equity Grant and the NED Compensation as a single board act.  The record reflected two discrete decisions made through separate processes and on different timelines.  The Compensation Committee approved the NED Compensation on October 14, 2024.  As to the Equity Grant, the Compensation Committee conditioned it on approval by a separate RPT Committee, which met on its own, obtained its own compensation and legal advice, and approved the grant roughly two weeks later.  Because the NED Compensation had already been approved by the time the RPT Committee considered Foley’s award, that review could not “call into question” the committee members’ own pay.  Id. at *7–8.  The plain text of 8 Del. C. § 144(a)(1) reinforced the distinction: treating the two transactions as one “would mean that a conflict in one action could disable the safe harbor for another action” even if the other action was “driven by different motivations and governed by an independent process.”  Id. at *8.  Such a result would be contrary to the General Assembly’s intent that a single “act or transaction” approved under the safe harbor be shielded from equitable relief or damages.  Id.

The Equity Grant: Amended Section 144(d)(2) Defeats Demand Futility

Applying the three-pronged demand-futility test of United Food & Commercial Workers Union & Participating Food Industry Employers Tri-State Pension Fund v. Zuckerberg, 262 A.3d 1034 (Del. 2021), the Court held that plaintiff failed to plead that a majority of FNF’s eleven-member board could not impartially consider a demand to pursue claims regarding the Equity Grant.  Ayers, 2026 WL 1723538, at *6.

Under the first prong of Zuckerberg, the Court found that Foley was disabled.  Plaintiff did not allege, however, that any of the nine NEDs profited from the grant, and therefore failed to show that any NED “received a material personal benefit from the alleged misconduct that is the subject of the litigation demand.”  Id. at *8 (quoting Zuckerberg, 262 A.3d at 1059).  Demand therefore was not excused under the first Zuckerberg prong.

The Court also concluded that demand was not futile under Zuckerberg’s third prong, which asks whether “the director lacks independence from someone who received a material personal benefit from the alleged misconduct . . . or who would face a substantial likelihood of liability on any of the claims that are the subject of the litigation demand.”  Id. at *9 (quoting Zuckerberg, 262 A.3d at 1059).  At the center of the Court’s analysis was amended Section 144(d)(2), which provides that a director of an exchange-listed corporation is “presumed to be a disinterested director” as to a transaction to which the director is not a party if the board has determined that the director satisfies the applicable exchange’s independence criteria—a presumption that is “heightened” and “may only be rebutted by substantial and particularized facts” of a material interest or material relationship.  Id. at *9 (quoting 8 Del. C. § 144(d)(2)).  Having already held that the Equity Grant was a transaction distinct from the NED Compensation, the Court found that the NEDs were not parties to it and could therefore invoke the presumption as to that grant—disposing of plaintiff’s contention that the presumption was unavailable because the NEDs were parties to their own compensation packages.  Because no Delaware court had construed Section 144(d)(2), the Court applied settled principles of statutory interpretation and reached several conclusions of first impression.

First, the Court concluded Section 144’s heightened presumption applies whenever director interest is assessed, including for demand futility under Rule 23.1.  Id. at *10.  The Court reasoned that, unlike other parts of Section 144 that expressly limit their reach—like Section 144(d)(7) and the definitions in Section 144(e)—Section 144(d)(2) contains no such limiting language.  Id.  Reading the presumption to apply only within Section 144 also would illogically result in a lighter burden on plaintiffs to plead director interest under Rule 23.1 than under Rule 12(b)(6).  Id. at *10 n.124.

Second, the Court construed the standard for rebutting the statute’s independence presumption.  Id. at *10–11.  The Court determined that “particularized” carries the meaning Delaware courts have long given that term under Rule 23.1—namely “specific, non-conclusory facts.”  Id.  The Court then interpreted the added requirement that the facts be “substantial” as a qualitative directive: the pleaded facts must be “significant enough to evidence a disabling conflict.”  Id. at *11.  As the Court put it, “a collection of trivial facts will not satisfy” the heightened standard by sheer accumulation.  Id.

Measured against that standard, the Court concluded plaintiff’s allegations fell short.  The directors’ overlapping service with Foley on the boards of Foley-affiliated companies was insufficient, consistent with the settled rule that overlapping board service, standing alone, does not compromise independence.  Plaintiff’s aggregation of the fees those directors had earned from that service likewise failed, absent particularized facts that the fees were personally material to the directors.  The directors’ indirect co-investments alongside Foley in professional sports franchises—which FNF’s proxy statement described as a “small non-voting minority interest”—fared no better.  The Court held that plaintiff pleaded no facts about the investments’ terms, voting rights, or financial exposure, did not allege that the investments gave Foley any authority over the directors or rendered them beholden to him, and overlooked that the board had already weighed those co-investments in making its independence determination.  A director’s employment at a firm that transacted with Foley-affiliated entities, and another director’s limited partnership interest in an entity Foley chairs, foundered on the same lack of materiality, because some financial ties between an interested party and a director, without more, are not disqualifying.  Underlying each conclusion was the absence of any allegation that Foley could deprive the directors of material wealth; allegations of mere friendship or ordinary business relationships do not, without more, raise a reasonable doubt as to independence, particularly under the heightened standard required under 8 Del. C. § 144(d)(2).  Id. at *12–13.

Finally, as to Zuckerberg’s second prong, the Court found that plaintiff failed to plead a “substantial likelihood of liability” theory due to two interlocking protections: (i) the Section 144(a)(1) safe harbor foreclosed relief because the material facts of any conflict were disclosed or known and a majority of disinterested directors approved the grant in good faith and without gross negligence; and (ii) FNF’s Section 102(b)(7) charter provision exculpated the directors for any breach of the duty of care.  Id. at *14.  Together, these provisions meant plaintiff could establish a substantial likelihood of liability for the approving disinterested directors only by pleading “particularized facts supporting a reasonable inference that they acted [in] bad faith”—a “high hurdle” the complaint did not clear.  Id. at *14–15.

Because plaintiff failed to allege a lack of independence as to three of the five challenged directors, plaintiff lacked a conflicted board majority, and demand was not excused for the Equity Grant claims.

Director Self-Compensation: Section 144(a)(3) Fairness Tracks Common-Law Entire Fairness

The Court went on to conclude that, although plaintiff did not adequately plead a claim against the non-Compensation Committee member directors for the NED Compensation decision, the circumstances of this case and plaintiff’s allegations prevented dismissal of the claims against the Compensation Committee members under Section 144(a)(3).  Section 144(a)(3), which insulates an interested-director transaction shown to be “fair as to the corporation and the corporation’s stockholders,” requires a plaintiff to plead facts supporting a reasonable inference of both unfair dealing and unfair price.  Id. at *17.  The Court concluded that plaintiff’s allegations regarding performance metrics that were different than those used by the Compensation Committee when setting compensation “present[ed] a factual dispute inappropriate for resolution on a motion to dismiss.”  Id. at *18.

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The following Gibson Dunn lawyers prepared this update: Colin Davis, Jonathan Fortney, Mark H. Mixon, Jr., and Justine Drohan.

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

Securities Litigation:
Colin B. Davis – Orange County (+1 949.451.3993, cdavis@gibsondunn.com)
Jonathan D. Fortney – New York (+1 212.351.2386, jfortney@gibsondunn.com)
Monica K. Loseman – Denver (+1 303.298.5784, mloseman@gibsondunn.com)
Brian M. Lutz – San Francisco (+1 415.393.8379, blutz@gibsondunn.com)
Jason J. Mendro – Washington, D.C. (+1 202.887.3726, jmendro@gibsondunn.com)
Mark H. Mixon, Jr. – New York (+1 212.351.2394, mmixon@gibsondunn.com)
Craig Varnen – Los Angeles (+1 213.229.7922, cvarnen@gibsondunn.com)

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

Securities Regulation & Corporate Governance:
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

A quarterly update of high-quality education opportunities for Boards of Directors.

Gibson Dunn’s summary of director education opportunities has been updated as of July 2026. A copy is available at this link. Boards of Directors of public and private companies find this a useful resource as they look for high quality education opportunities.

This quarter’s update to the summary of director education opportunities includes a number of new opportunities as well as updates to the programs offered by organizations that have been included in our prior updates.

Read More

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The following Gibson Dunn lawyers prepared this update: Hillary Holmes, Lori Zyskowski, Ronald Mueller, Elizabeth Ising, Ashlyne Polynice, and Jason Ferrari.

Please view this and additional information on Gibson Dunn’s Securities Regulation and Corporate Governance Monitor:

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

Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@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)
Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

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.

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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.

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

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.”

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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.

© 2026 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

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.

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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 )

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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)

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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.

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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:

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Hui Fang – Hong Kong (+852 2214 3805, hfang@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@gibsondunn.com)

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Patrick Doris – London (+44 207 071 4276, pdoris@gibsondunn.com)
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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)
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Vanessa Ludwig – Frankfurt (+49 69 247 411 531, vludwig@gibsondunn.com)

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