Throughout 2025, regulatory and enforcement agencies emphasized the importance of anti-money laundering (AML) compliance and sanctions measures as a means of combatting illicit financing and protecting U.S. foreign policy and national security interests.

Join us for this year’s annual Gibson Dunn webcast on the latest developments and trends across U.S. AML and sanctions and export controls regimes. We discuss developments regarding BSA/AML, sanctions, and export controls rulemaking, legislation, and enforcement actions that have defined the past year. We further delve into key areas of regulatory and enforcement focus such as digital assets and decentralized finance, Russian and Global Terror sanctions programs, and control of critical emerging technologies. Finally, we share our insights into compliance best practices and what to expect for BSA/AML, sanctions, and export controls in 2026 and beyond.

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MCLE CREDIT INFORMATION:

This program has been approved for credit in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 2.0 credit hours, of which 2.0 credit hours may be applied toward the areas of professional practice requirement. This course is approved for transitional/non-transitional credit.

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

Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 2.0 hours in the General category.

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

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PANELISTS:

F. Joseph Warin is chair of the 250-person Litigation Department of Gibson Dunn’s Washington, D.C. office and is Co-Chair of the firm’s White Collar Defense and Investigations Practice Group. He represents corporations in high-stakes internal investigations, enforcement defense, and regulatory litigation spanning FCPA, False Claims Act, securities, compliance counseling, audit and special committee investigations, and complex cross-border matters. His clients include corporations, officers, directors and professionals in regulatory, investigative and trials involving federal regulatory inquiries, criminal investigations and cross-border inquiries by dozens of international enforcers. Early in his career, he served as Assistant United States Attorney in Washington, D.C.

Matthew (Matt) S. Axelrod is a partner in Gibson Dunn’s Washington, D.C. and Co-Chair of the firm’s Sanctions & Export Enforcement practice. Matt is the only person to have previously served as both Principal Associate Deputy Attorney General at the U.S. Department of Justice and Assistant Secretary for Export Enforcement at the U.S. Department of Commerce’s BIS. He also served as an Assistant United States Attorney in the Southern District of Florida, where he conducted nineteen felony jury trials and prosecuted some of the office’s most high-profile cases. His over 25 years of government enforcement, white-collar defense, and crisis management experience are why clients consistently rely on Matt to help them navigate their most sensitive and complex matters.

Stephanie Brooker is a partner in Gibson Dunn’s Washington, D.C. office and Co-Chair of the firm’s White Collar Defense and Investigations, Anti-Money Laundering, and Financial Institutions Practice Groups. She advises financial institutions, global companies, boards, and individuals on internal investigations, regulatory enforcement, white collar defense, and complex cross-border compliance matters. Before joining Gibson Dunn, Stephanie served as a prosecutor at the U.S. Department of Justice.

David P. Burns is a partner in Gibson Dunn’s Washington, D.C. office and Co-Chair of the firm’s National Security Practice Group. His practice focuses on white-collar criminal defense, internal investigations, national security, and regulatory enforcement matters. Prior to re-joining the firm, David served in senior positions in both the Criminal Division and National Security Division of the U.S. Department of Justice.

M. Kendall Day is a partner in Gibson Dunn’s Washington, D.C. office, where he co-leads the firm’s Anti-Money Laundering practice and serves as Co-Chair of the Financial Institutions Practice Group. He advises financial institutions, fintech companies, and global corporations on BSA/AML, sanctions, and financial-crime compliance and enforcement matters. Before joining Gibson Dunn, Kendall spent 15 years at the Department of Justice, culminating in his service as Acting Deputy Assistant Attorney General in the Criminal Division.

Ella Alves Capone is of counsel in Gibson Dunn’s Washington, D.C. office and a member of the firm’s White Collar Defense and Investigations, Financial Regulatory, FinTech and Digital Assets, and Anti Money Laundering Practice Groups. She advises multinational companies and financial institutions on BSA/AML, sanctions, anti corruption, payments, and consumer financial regulatory matters, with particular experience counseling banks, casinos, social media and gaming platforms, fintechs, and digital asset providers.

Sam Raymond is of counsel in Gibson Dunn’s New York office and a member of the firm’s White Collar Defense and Investigations, Litigation, Anti-Money Laundering, FinTech and Digital Assets, and National Security Practice Groups. A former federal prosecutor in the Southern District of New York, Sam has extensive experience conducting complex investigations and advising on BSA/AML and sanctions matters. He previously tried multiple federal cases to verdict and prosecuted a broad range of criminal violations.

Samantha Sewall is of counsel in Gibson Dunn’s Washington, D.C. office and a member of the firm’s International Trade Advisory and Enforcement and Sanctions & Export Enforcement Practice Groups. She advises clients on U.S. economic sanctions, export controls, CFIUS, and anti-boycott laws, and regularly handles compliance assessments, internal investigations, voluntary disclosures, and regulatory engagements with OFAC, BIS, and CFIUS. Samantha has experience across sectors including financial services, technology, aerospace/defense, energy, life sciences, and transportation.

© 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 new members of the Innovation Advisory Committee.

New Developments

CFTC Announces Innovation Advisory Committee Members. On February 12, the CFTC announced the members of the Innovation Advisory Committee (IAC). The committee will help the Commission keep pace with how breakthrough innovations, such as artificial intelligence and blockchain technologies, are transforming markets, enabling the agency to develop adaptive regulations and maintain robust financial oversight in a world where change is constant. Chairman Selig is the sponsor of this committee and nominated Michael Passalacqua as the committee’s designated federal officer. The full list of IAC members can be found here. [NEW]

CFTC Targets Relationship Investment Scams with National and International Initiatives this Valentine’s Week. On February 9, the CFTC’s Office of Customer Education and Outreach announced that it is leading national and international awareness efforts to warn the public about relationship investment scams, a form of fraud that costs Americans an estimated $10 billion each year. The national interagency DatingOrDefrauding? social media awareness campaign warns Americans to be skeptical of any requests from new online friends or romantic interests. The campaign highlights a common warning sign: requests to send crypto assets, or other forms of payment, to invest in scams through fake crypto websites. [NEW]

CFTC Staff Reissues Letter 25-40 Updating Payment Stablecoin Definition. On February 6, the CFTC’s Market Participants Division announced it has reissued CFTC Staff Letter 25-40 with a limited revision to the definition of “payment stablecoin.” This No-Action Position is with respect respect to futures commission merchants that accept certain non-securities digital assets as margin collateral and (a) take into account the value of such digital assets for purposes of certain regulatory requirements, subject to conditions or (b) deposit payment stablecoins as residual interest, subject to conditions. The CFTC’s revision specifies that a national trust bank may be a permitted issuer of a payment stablecoin for purposes of the no-action position.

SEC Publishes Data on Exchange Traded Funds and Fund Mergers; Updated Statistics on Municipal Advisors, Transfer Agents, and Security-Based Swap Dealers. On February 5, the SEC’s Division of Economic and Risk Analysis (DERA) published two new reports on exchange traded funds and fund mergers, and updated statistics and data visualizations on municipal advisors, transfer agents, and security-based swap dealers. The reports provide the public with information about the growth in active ETFs and the changes in fees paid by investors when mutual funds and ETFs acquire other funds.

CFTC Withdraws Event Contracts Rule Proposal and Staff Sports Event Contracts Advisory. On February 4, the CFTC announced it has withdrawn the notice of proposed rulemaking titled “Event Contracts” that it published on June 10, 2024 (see CFTC Press Release No. 8907-24). The CFTC does not intend to issue final rules with respect to the proposal. Additionally, Commission staff has withdrawn CFTC Staff Letter 25-36, a Staff Advisory on Certain Contract Markets (see CFTC Press Release No. 9137-25).

CFTC Staff Issues Interpretation on Legacy Swap Status. On February 2, the CFTC’s Market Participants Division and Division of Clearing and Risk issued an interpretive letter addressing the effect of a merger conducted as part of an internal reorganization at Morgan Stanley, a CFTC-registered swap dealer, on the status of legacy swaps. Based on the facts and circumstances of the merger as described in the letter, the divisions concluded the swaps at issue retain their legacy swap status under the Commission’s uncleared swap margin and swap clearing requirements.

CFTC Designates Xchange Alpha LLC as a Contract Market. On February 2, the CFTC announced it has issued an order designating Xchange Alpha LLC as a designated contract market (DCM) under Section 5 of the Commodity Exchange Act (CEA). The CFTC determined Xchange Alpha demonstrated its ability to comply with the CEA and CFTC regulations applicable to DCMs. The terms and conditions of the designation order require, among other things, Xchange Alpha to comply with all applicable provisions of the CEA and the CFTC regulations applicable to DCMs.

New Developments Outside the U.S.

ESMA Publishes Latest Edition of Spotlight on Markets Newsletter. On February 13, ESMA published its latest edition of the Spotlight on Markets Newsletter. This edition opens with ESMA’s Digital and Data Strategies, outlining ESMA’s position that enhanced data use and improved digital tools will strengthen effective and risk-based supervision. Other highlights include the launch of the selection process for the Consolidated Tape Provider for OTC derivatives, which ESMA stated is an important step toward greater post-trade transparency. [NEW]

ESMA to Hold Conference “A New Era for EU Capital Markets” on May 21, 2026. On February 5, ESMA announced that it is organizing a high‑level conference “A New Era for EU Capital Markets” on May 21, 2026 in Paris, France. The conference will bring together senior policymakers, regulators, leaders of major market infrastructures and financial institutions, as well as investor representatives. Discussions will focus on how to deepen market integration, strengthen supervision and improve the investor journey in support of the Savings and Investments Union.

ESMA Launches Selection Process for its Next Chair. On February 3, ESMA launched the selection procedure for the position of ESMA Chair. This key leadership role offers the opportunity to shape the future of Europe’s financial markets and steer the organization through an evolving regulatory and supervisory landscape.

New Industry-Led Developments

IOSCO Announces Pre-Valentine’s Day Campaign Focused on Combatting Relationship Investments Scams. On February 11, IOSCO announced the start of a worldwide initiative to raise awareness about relationship investment scams and the devastating effect they can have on an investor’s financial future. These scams are called various names, including romance scams, crypto investment scams, financial grooming scams, and “pig butchering” scams. [NEW]

ISDA Publishes Paper on IRRBB Management in Emerging Market and Developing Economies. On February 9, ISDA published a paper on interest rate risk in the banking book (IRRBB) in which it argues that building more effective IRRBB management frameworks supported by well-functioning interest rate derivatives markets is both a financial stability priority and a foundation for sustainable economic progress in emerging market and developing economies. [NEW]

ISDA and FIA Respond to CPMI-IOSCO Consultation on General Business Losses. On February 5, ISDA and the Futures Industry Association (FIA) responded to the Committee on Payments and Market Infrastructures (CPMI) and International Organization of Securities Commissions (IOSCO) consultation on the management of general business risks and general business losses by financial market infrastructures (FMIs). ISDA and FIA stated that they welcome the consultation’s emphasis that FMIs should maintain sufficient resources to bear general business losses for which they are solely responsible, given these losses stem from risks under FMI control and are not appropriately allocated to participants. [NEW]

ISDA Chief Executive Scott O’Malia Gives Remarks at Trading Book Capital Event. On February 5, Scott O’Malia gave welcoming remarks at ISDA’s Trading Book Capital event. In his remarks, O’Malia highlighted three priorities: (1) preserving the viability of Fundamental Review of the Trading Book internal models and improving current treatment of non-modellable risk factors, (2) mitigating market‑functioning strains, and (3) ensuring that the supplementary leverage ratio operates as a backstop after recent U.S. modifications.

ISDA Responds to RBI Unique Transaction Identifier Proposals. On February 3, ISDA submitted comments to a Draft Circular from the Reserve Bank of India (RBI) proposing to mandate the global Unique Transaction Identifier for all transactions in OTC markets for Rupee interest rate derivatives, forward contracts in Government securities, foreign currency derivatives, foreign currency interest rate derivatives, and credit derivatives in India.

ISDA Publishes Paper on How and Why Pension Funds Use Derivatives. On February 2, ISDA published a paper that it said reviews how and why pension funds use derivatives. It also reviews the global regulatory landscape that shapes derivatives use and highlights the role ISDA plays in helping pension funds navigate these markets.

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In our experience, after a long transition, changes within the Division of Enforcement are taking shape.

The SEC’s Enforcement Division Director recently delivered her first public remarks and provided helpful insight into the Division’s direction under her leadership. In her Remarks to the Los Angeles County Bar Association, SEC Enforcement Director Judge Margaret Ryan outlined her guiding principles, approach to enforcement process, and substantive priorities. A brief Q&A with insightful commentary from Judge Ryan followed her remarks. In our experience, after a long transition, changes within the Division of Enforcement are taking shape.

Guiding Principles

• Integrity, honor, fidelity to the law, and the judicious use of the federal government’s power. Judge Ryan wants to uphold the law while ensuring fair process for everyone who participates in the capital markets.
• Past criticisms of the Division and course correction. Judge Ryan stated it is a true privilege to lead an extraordinarily talented Staff while acknowledging that some prior criticisms of Enforcement were accurate. She noted that they have been or are addressing those real concerns, but also cautioned against dwelling on issues that have already been addressed.

Enforcement Process

• Transparent and fair enforcement processes, particularly with respect to the Wells framework. Judge Ryan reiterated Chairman Atkins’s statement last Fall that Wells recipients will have four weeks to respond and a meaningful opportunity to meet with senior enforcement leadership. Wells submissions will be reviewed by senior enforcement leadership and the Commission. Notably, Judge Ryan’s official remarks did not touch on file sharing or Chairman Atkins’s statement last Fall that “[t]he staff must be forthcoming about material in the investigative file.” But as discussed below, she did address that issue in a thoughtful way in her Q&A.
• Informed, adversarial engagement though fairness should not be mistaken for leniency. Judge Ryan emphasized that informed, adversarial engagement improves decision‑making and helps ensure that enforcement recommendations are well‑grounded. She cautioned, however, that fairness should not be mistaken for leniency, warning against tactics that delay investigations. Both Staff and parties, she said, are expected to move matters toward conclusion efficiently and in good faith.

Enforcement Priorities

• Enforcement work continues. Judge Ryan stated “reports that enforcement work at the SEC has been tossed to the wayside are not only greatly exaggerated but flat out wrong.”
• Focus of the Division, quality and impact not “chasing numbers.” Judge Ryan emphasized a “back‑to‑basics” enforcement approach aligned with Chairman Atkins’s direction, with a focus on quality and impact rather than enforcement statistics. Key priorities include fraud targeting retail investors, misconduct that undermines market integrity, and a more measured approach to non‑fraud violations.
• Market integrity includes certain enumerated conduct. Judge Ryan highlighted specific types of conduct on market integrity issues including accounting fraud, insider trading, wash trading, and market manipulation schemes.
• Significantly, Judge Ryan also discussed compliance with other provisions of the federal securities laws that are not “necessarily” on par with fraud. Though confident that many violations of other provisions—such as a broker-dealer or investment adviser’s obligation to adhere to its fiduciary duties and financial responsibility rules, issuer reporting requirements, and books and records—should not result in enforcement cases and might be handled by other Divisions, there is a “middle ground.” Specifically, “where fraud is absent, but compliance has failed in a way that poses risks to investors, risks to the integrity of the market, or yields a benefit to the participant,” opportunity exists for thoughtful Enforcement resolutions emphasizing remediation and a path toward compliance. This last statement presents the most interesting possibility for contrast with prior Enforcement programs, which tended not to distinguish compliance failures from fraud, at least in terms of penalty assessments.

In addition to her prepared remarks, during a brief Q&A that followed insightful commentary covered a range of topics including on tips concerning the Wells process.

Q&A

• Her view of the SEC as an outsider. Responding to a question about her outsider role, Judge Ryan stated that her fresh viewpoint allows her to help move things towards a more streamlined and focused approach to investigations.
• In discussing the reorganization of the enforcement division, Judge Ryan said there should be greater uniformity in both process and resolution.
• Evidence sharing. Judge Ryan stated that the Staff’s transparency of the record evidence will depend on the investigation’s status. As it gets closer to the Wells process, the Staff will be more forthcoming. The Staff will provide relevant documents, but still protect work product, privilege, Bank Secrecy Act materials, and documents that could reveal the identity of a whistleblower. She reiterated that the goal is to provide a productive process that allows for an informed conversation about resolution.
• Wells Submissions. Judge Ryan provided some tips for the Wells process. Submissions should focus on the key issues in the case. She advised that defense counsel should be efficient and not rehash the same arguments. Any submission should cite to the record. She also cautioned against using hyperbolic arguments when presenting potential litigation or policy risks. She also advised that when there is a particularly technical issue, an expert submission could be helpful. Regardless, any submission should focus on factual and legal arguments and not merely stating that the case is “regulation by enforcement,” claiming the Staff is just wrong, or touting the political connections of a target. Parties should instead focus on the key issues and provide solid legal analysis.
• Cooperation. When asked about her view on cooperation, Judge Ryan directed the room to the Seaboard factors and the Commission’s 2006 Statement concerning financial penalties. She emphasized coming to the SEC early with timely cooperation and fulsome remediation. And even if the company has not done everything perfectly, the effort to accomplish these goals and honest recognition of where the company could have done better will be appreciated.
• In closing. She closed by emphasizing that enforcement is the final tool and she hopes that many issues or technical violations of securities laws could be solved through the SEC’s other tools.

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The following Gibson Dunn lawyers prepared this update: David Woodcock, Osman Nawaz, and Greg Boden.

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

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Securities Enforcement, Capital Markets, or Securities Regulation & Corporate Governance practice groups:

Securities Enforcement:
Mark K. Schonfeld – New York (+1 212.351.2433, mschonfeld@gibsondunn.com)
David Woodcock – Dallas (+1 214.698.3211, dwoodcock@gibsondunn.com)
Jina L. Choi – San Francisco (+1 415.393.8221, jchoi@gibsondunn.com)
Osman Nawaz – New York (+1 212.351.3940, onawaz@gibsondunn.com)
Tina Samanta – New York (+1 212.351.2469, tsamanta@gibsondunn.com)
Lauren Cook Jackson – Washington, D.C. (+1 202.955.8293, ljackson@gibsondunn.com)

Capital Markets:
Andrew L. Fabens – New York (+1 212.351.4034, afabens@gibsondunn.com)
Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@gibsondunn.com)
Stewart L. McDowell – San Francisco (+1 415.393.8322, smcdowell@gibsondunn.com)
Peter W. Wardle – Los Angeles (+1 213.229.7242, pwardle@gibsondunn.com)

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.

Absent an appeal, the premerger notification requirements will revert to the prior HSR reporting rule on February 20, 2026.

On February 12, 2026, the U.S. District Court for the Eastern District of Texas vacated the Federal Trade Commission’s 2024 rule overhauling the Hart-Scott-Rodino (HSR) premerger notification form (the 2024 Rule), finding that the FTC failed to analyze whether the 2024 Rule’s benefits outweighed its substantial costs. The Court stayed its ruling for seven days, affording the FTC an opportunity to assess an appeal. Absent an appeal, the premerger notification requirements will revert to the prior HSR reporting rule on February 20, 2026.

Vacated HSR Rule Had Substantially Expanded Scope of Pre-Merger Review

The 2024 Rule represented the most significant overhaul of HSR filing requirements since the publication of the original premerger notification form in 1978. The 2024 Rule added disclosures that previously arose only in later-stage investigations. Key additions included: deal documents from supervisory deal team leads (not just directors and officers); ordinary course competitive documents shared with the CEO or Board within one year of filing; narrative descriptions of transaction rationale and competitive overlaps; and supply relationship information.

The final rule went into effect on February 10, 2025. Notably, the rulemaking garnered bipartisan support: the FTC approved the final rule on a 5-0 vote, and the current FTC leadership had embraced the 2024 Rule prior to this decision.

District Court Vacated HSR Rule as Exceeding FTC’s Authority

In Chamber of Commerce v. FTC, a coalition of business groups led by the U.S. Chamber of Commerce challenged the FTC’s 2024 Rule. On February 12, 2026, Judge Jeremy D. Kernodle on the U.S. District Court for the Eastern District of Texas granted summary judgment to the plaintiffs, holding that the 2024 Rule exceeded the FTC’s statutory authority because “the agency has not shown that the Rule’s claimed benefits will ‘reasonably outweigh’ its significant and widespread costs.”

Under the HSR Act, the FTC may request only pre‑merger information “necessary and appropriate” to assess whether a transaction may violate the antitrust laws—a standard the Court interpreted as requiring a reasonable cost‑benefit analysis. The FTC failed to meet that requirement. Although the FTC acknowledged that the 2024 Rule would nearly triple filing time—from 37 to 105 hours—the Court found the FTC could not substantiate the benefits it claimed the changes would produce. For example, the FTC was unable to identify a single illegal merger in the 46‑year history of the prior form that the new form would have prevented. The Court rejected the FTC’s argument that the 2024 Rule would conserve agency resources, noting that any efficiency gains would accrue only in the roughly 8% of transactions the FTC investigates, while all filers would bear the increased compliance burden.

Judge Kernodle also ruled that the 2024 Rule is arbitrary and capricious because the FTC failed to consider whether the 2024 Rule’s benefits “bear a rational relationship” to its costs and the FTC “did not adequately explain its rejection of less costly and burdensome alternatives,” such as targeted voluntary submissions or more focused Second Requests.

The Court vacated and set aside the 2024 Rule but stayed its decision through February 19, 2026. During this period, the FTC may choose to appeal or allow the prior HSR reporting rule to take effect.

Key Takeaways for Dealmakers

The 2024 Rule Will Likely Remain in Effect During Appeal. If the FTC elects to appeal, the Agency will likely secure a further stay of the Court’s vacatur order pending appeal. In this case, deal teams should continue preparing filings under the 2024 Rule’s requirements. If, however, the FTC declines to appeal, the premerger notification requirements will revert to the prior HSR reporting rule on February 20. Regardless of the FTC’s decision, the Court’s decision will not affect the recently-announced jurisdictional thresholds and filing fees for 2026.

The FTC May Again Promulgate Heightened HSR Filing Requirements if the Vacatur is Sustained. The Court’s decision rests on procedural grounds, not a rejection of the FTC’s authority to modernize the HSR form. Given the unanimous, bipartisan FTC support for stronger filing requirements, if the vacatur is sustained, the FTC may promulgate a similar rule with a more developed administrative record. Dealmakers should not expect a permanent return to the pre-2024 filing regime.

Agency Staff Retain Significant Investigative Tools. Even if the 2024 Rule is ultimately vacated, FTC and DOJ Antitrust Division staff retain authority to request similar information from merging parties on a voluntary basis during the initial HSR waiting period, and on a mandatory basis at a later stage for transactions that trigger a Second Request. The practical implication: the information the FTC sought to require upfront through the 2024 Rule, including ordinary course business documents, will likely still be requested in transactions that draw agency interest.

Early Engagement with Antitrust Counsel Remains Critical. Regardless of the fate of the 2024 Rule, parties considering M&A activities should continue engaging antitrust counsel early. Transaction agreements may benefit from additional regulatory flexibility to accommodate potential changes in filing requirements or extended review timelines.

State Mini-HSR Regimes Continue to Expand. Dealmakers should also monitor evolving state premerger notification requirements. California recently enacted SB 25, joining Washington and Colorado in requiring certain HSR filers to submit copies of their federal filings to state authorities, effective January 1, 2027. These requirements underscore the broader trend toward enhanced premerger scrutiny at the federal and state levels.

For further details on these developments, see our previous Client Alerts and related HSR resources on the firm’s Antitrust and Competition page here.

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The following Gibson Dunn lawyers prepared this update: Jamie France, Kristen Limarzi, Michael Perry, Brad Smith, Logan Billman, and Caroline Black.

Gibson Dunn 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, the authors, or any leader or member of the firm’s Antitrust and Competition, Private Equity, or Mergers and Acquisitions practice groups:

Antitrust and Competition:
Rachel S. Brass – San Francisco (+1 415.393.8293, rbrass@gibsondunn.com)
Jamie E. France – Washington, D.C. (+1 202.955.8218, jfrance@gibsondunn.com)
Sophia A. Hansell – Washington, D.C. (+1 202.887.3625, shansell@gibsondunn.com)
Caeli A. Higney – San Francisco (+1 415.393.8248, chigney@gibsondunn.com)
Julian W. Kleinbrodt – San Francisco (+1 415.393.8382, jkleinbrodt@gibsondunn.com)
Kristen C. Limarzi – Washington, D.C. (+1 202.887.3518, klimarzi@gibsondunn.com)
Samuel G. Liversidge – Los Angeles (+1 213.229.7420, sliversidge@gibsondunn.com)
Michael J. Perry – Washinton, D.C. (+1 202.887.3558, mjperry@gibsondunn.com)
Cynthia Richman – Washington, D.C. (+1 202.955.8234, crichman@gibsondunn.com)
Bradley P. Smith – New York (+1 212.351.5376, bpsmith@gibsondunn.com)
Daniel G. Swanson – Los Angeles (+1 213.229.7430, dswanson@gibsondunn.com)
Stephen Weissman – Washington, D.C. (+1 202.955.8678, sweissman@gibsondunn.com)

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

Mergers and 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)

© 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.

For the first time in CFIUS history, DOJ has filed a federal civil complaint seeking to enforce a presidential order requiring a foreign investor to divest its interests in a U.S. business.

On February 9, 2026, the U.S. Department of Justice (DOJ) filed a complaint in federal district court requesting judicial enforcement of a presidential order requiring Suirui Group Co., Ltd. and Suirui International Co., Ltd. (collectively, the Suirui Purchasers) to divest their interests in Jupiter Systems, LLC (Jupiter Systems).

The Suirui Purchasers’ acquisition of Jupiter Systems was completed in 2020, but four years later, the Committee on Foreign Investment in the United States (CFIUS or the Committee) initiated a review of the transaction over national security concerns.  In July 2025, President Trump issued an order directing the Suirui Purchasers and their affiliates to divest their interests in the California-based manufacturer of visualization technology due to significant national security risks posed by the transaction, which could not be sufficiently mitigated.  Based on publicly available information, the perceived risks appear to arise from Jupiter Systems’ relationships with several government agency customers critical to national security, including the Central Intelligence Agency, National Security Agency, and National Aeronautics and Space Administration.  The divestment order originally provided the Suirui Purchasers 120 days to divest all tangible and intangible equity and assets in Jupiter Systems, a deadline that was eventually extended until February 3, 2026, following two extension requests from the Suirui Purchasers.  According to the DOJ complaint and accompanying press release, such interests have not yet been divested, and Jupiter Systems continues to be owned by the Suirui Purchasers.

DOJ’s February 2026 complaint seeks seven counts of relief, asking the district court for the following:

1. A declaration that the Suirui Purchasers failed to comply with the divestment order and CFIUS regulations;

2. An injunction against the Suirui Purchasers from retaining any equity or assets in Jupiter Systems;

3. An injunction prohibiting Jupiter Systems from being owned or controlled by the Suirui Purchasers;

4. An injunction prohibiting Jupiter Systems from holding any interests or rights in the assets or operations of Jupiter Asia Companies (i.e., its pre-transaction businesses in Asia) that Jupiter Systems acquired or created following the July 2025 divestment order;

5. An order directing the Suirui Purchasers to divest their equity holdings and assets in Jupiter Systems;

6. An order transferring the equity and assets of Jupiter Systems held by the Suirui Purchasers to a third-party fiduciary pending completion of the divestment; and

7. An award of costs and other relief the district court finds appropriate to the U.S. government.

This complaint represents the first time the U.S. government has initiated a judicial enforcement action against transaction parties who failed to comply with a divestment order under the CFIUS regulations.  Courts rarely handle cases involving substantive CFIUS issues, and until now, the small handful of such cases have been initiated by the parties to a transaction subject to CFIUS review.[1]

The complaint and underlying transaction offer a few lessons for CFIUS practice:

• The current administration is willing to utilize every tool in its toolkit, even if unprecedented.  CFIUS under the second Trump administration has already demonstrated a readiness to employ novel methods in its practice, such as the inclusion of a so-called “golden share” in mitigation agreements, which we discussed in our recent Year-End Update.  It appears that judicial enforcement of CFIUS action may be yet another new tool the Committee will utilize to address national security concerns.

• CFIUS remains focused on China.  Despite the Committee’s focus on streamlining its review process and increasing efficiencies for lower risk transactions, as discussed in our previous client alert, CFIUS continues to act to prevent perceived U.S. adversaries—notably, China—from acquiring interests in higher risk U.S. businesses.  While this is somewhat unsurprising considering the current administration’s oft-repeated concerns about China, as explicitly outlined in its America First Investment Policy,[2] the use of the court system to bar perceived problematic Chinese involvement further emphasizes the heightened focus on China.

• Non-notified reviews remain a key focus of the Committee, and reviews are not subject to a statute of limitations.  As discussed in our recent Year-End Update, CFIUS has made clear in recent years that its investigative engine remains active.  Parties should remain mindful that the CFIUS regulations do not contain a statute of limitations barring review after a certain number of years and should carefully consider the risks of forgoing CFIUS filings, especially for transactions involving sectors that pose a heightened national security risk or that involve investors from higher risk jurisdictions.  As DOJ’s complaint clearly illustrates, parties may still find themselves in ongoing discussions with CFIUS years after a transaction is finalized if the Committee becomes aware of a historic transaction and identifies national security risks that warrant additional scrutiny.

How the district court responds to the complaint remains to be seen, but one thing is for certain—the U.S. government appears willing to seek judicial enforcement against parties that defy its CFIUS authority.

[1] See Ralls Corp. v. Committee on Foreign Investments, et al., No. 13-5315 (D.C. Cir. 2014); TikTok Inc. v. Garland, No. 24-1113 (D.C. Cir. 2024); United States Steel Corp. et. al. v. Committee on Foreign Investment in the United States et. al., No. 25-1004 (D.C. Cir. 2025).

[2] The White House, America First Investment Policy § 2(f) (Feb. 2025), https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/ (“The United States will use all necessary legal instruments, including the Committee on Foreign Investment in the United States (CFIUS), to restrict [Chinese]-affiliated persons from investing in United States technology, critical infrastructure, healthcare, agriculture, energy, raw materials, or other strategic sectors”).

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The following Gibson Dunn lawyers prepared this update: Layla Reynolds*, Chris Mullen, and Stephenie Gosnell Handler.

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, any leader or member of the firm’s International Trade Advisory & Enforcement practice group, or the authors:

United States:
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
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Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
Justin duRivage – Palo Alto (+1 650.849.5323, jdurivage@gibsondunn.com)
Zach Kosbie – Washington, D.C. (+1 202.777.9425, zkosbie@gibsondunn.com)
Dorkas Laura Medina – Washington, D.C. (+1 202.777.9444, dmedina@gibsondunn.com)
Chris R. Mullen – Washington, D.C. (+1 202.955.8250, cmullen@gibsondunn.com)
Sarah L. Pongrace – New York (+1 212.351.3972, spongrace@gibsondunn.com)
Anna Searcey – Washington, D.C. (+1 202.887.3655, asearcey@gibsondunn.com)
Erika Suh Holmberg – Washington, D.C. (+1 202.777.9539, eholmberg@gibsondunn.com)
Audi K. Syarief – Washington, D.C. (+1 202.955.8266, asyarief@gibsondunn.com)
Scott R. Toussaint – Washington, D.C. (+1 202.887.3588, stoussaint@gibsondunn.com)
Lindsay Bernsen Wardlaw – Washington, D.C. (+1 202.777.9475, lwardlaw@gibsondunn.com)
Shuo (Josh) Zhang – Washington, D.C. (+1 202.955.8270, szhang@gibsondunn.com)

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

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

*A recent law graduate who is not admitted to practice law.

© 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 January 2026 edition of Gibson Dunn’s digital assets regular update.  This update covers recent legal news regarding all types of digital assets, including cryptocurrencies, stablecoins, CBDCs, and NFTs, as well as other blockchain and Web3 technologies.  Thank you for your interest.

REGULATION AND LEGISLATION

UNITED STATES

Senate Market-Structure Bill Delays, Narrow Committee Advancement, and Ongoing Negotiations
After the Jan. 15 announcement that the Senate Banking Committee would delay its markup of the Digital Asset Market CLARITY Act following a digital asset exchange’s withdrawal of support and broader disagreements over provisions such as stablecoin rewards and DeFi treatment, legislative progress on comprehensive crypto market structure legislation has continued to evolve without resolution. Lawmakers have since worked to bridge remaining differences within and between Senate committees: the Senate Agriculture Committee, which has jurisdiction over commodity-related provisions, rescheduled its markup of its version of the bill to January 29, 2026, and subsequently advanced that legislation by a narrow 12–11 party-line vote, marking a procedural step forward even as broader bipartisan consensus remains elusive. Meanwhile, negotiations continue behind the scenes to reconcile the agriculture panel’s text with Senate Banking’s draft and to address internal party rifts over ethics and crypto policy amendments, leaving the overall CLARITY Act process stalled and unlikely to reach a full Senate floor vote absent further compromise. CryptoNews; CoinDesk; EconoTimes.

Senators Lummis and Wyden Introduce Blockchain Regulatory Certainty Act to Exempt Non-Custodial Developers from Money Transmitter Rules
On January 12, Senators Cynthia Lummis (R-WY) and Ron Wyden (D-OR) introduced the Blockchain Regulatory Certainty Act (BRCA), which would clarify that software developers and infrastructure providers who do not control user funds are not “money transmitters” under federal law solely for writing code or maintaining blockchain infrastructure. The bill seeks to address industry concerns that developers of non-custodial tools could face money transmission obligations (and related potential liability) even where they do not custody or control customer assets, and frames the proposed clarification as necessary to reduce conflicting state approaches and limit the chilling effect on U.S.-based development. Sen. Lummis Press Release; Cointelegraph.

Wyoming Issues First State-Backed Stablecoin
On January 7, Wyoming made available for purchase the Solana-based Wyoming Frontier Stable Token (FRNT), the first dollar-pegged, state-issued, blockchain-based asset. Wyoming representatives wrote in a statement: “Designed under the leadership of the Wyoming Stable Token Commission, the [FRNT] represents a milestone in financial innovation — bringing together the security and oversight of state-managed reserves with the efficiency and transparency of blockchain technology.” The objective of FRNT is to offer to retail users instant transaction settlement and reduced fees (<$0.01). Law360; TheBlock. 

Federal Bill Introduced Prohibiting Use of Prediction Markets by Federal Officials
On January 9, U.S. Representative Ritchie Torres (D-N.Y.) introduced a bill that would set limits on how government officials engage with prediction markets. The bill seeks to block federal elected officials, political appointees, and executive branch employees from making trades on prediction markets on “government policy, government action or political outcome” using material nonpublic information. Law360; TheBlock.

American Bankers Association Appeals to U.S. Senate Regarding Perceived Loopholes in Stablecoin Legislation
On January 5, the American Bankers Association shared a letter with the U.S. Senate highlighting its concerns with a perceived circumvention of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act that would induce consumers to adopt stablecoins contrary to the intent of the Act. The letter states, “Among [the GENIUS Act’s] most important provisions, a ban on interest payments was put in place to ensure this new payments market can develop and mature without becoming a competitor to bank deposits and disintermediating the community-based lending that fuels our economy.” However, the letter notes, “But some companies have exploited a perceived loophole allowing stablecoin issuers to indirectly fund payments to stablecoin holders through digital asset exchanges and other partners. With this activity, the exception swallows the rule. If billions are displaced from community bank lending, small businesses, farmers, students, and home buyers in towns like ours will suffer.” The letter alleges that this could leave at risk $6.6 trillion in community bank deposits. Coindesk; Letter to U.S. Senate.

House Financial Services Democrats Send Letter Criticizing SEC “Retrenchment” from Crypto Enforcement
On January 15, three Democratic members of the House Financial Services Committee sent a letter to SEC Chair Paul Atkins expressing concern over what they described as a “dramatic retrenchment” in crypto-related enforcement, including the dismissal or closure of multiple cases involving crypto firms. The letter argues that the pullback risks leaving investors unprotected and questions whether the SEC’s enforcement posture is consistent with the agency’s statutory mandate. House Financial Services Committee Democrats Letter; Gizmodo.

Senate Agriculture Committee Releases Draft “Digital Commodity Exchange Act” to Clarify CFTC Authority Over Spot Crypto Markets
On January 21, the Senate Agriculture Committee released a discussion draft of the Digital Commodity Exchange Act aimed at granting the Commodity Futures Trading Commission (CFTC) exclusive oversight authority over U.S. spot cryptocurrency markets and clarifying regulatory responsibilities for exchanges and brokers. The draft would reshape how widely traded digital commodities such as Bitcoin and Ethereum are supervised and creates a hearing date of January 27, 2026 for further committee consideration. BingX.

South Dakota State Lawmaker Introduces a Bill to Authorize the State to Invest in Bitcoin
On January 27, South Dakota Representative Logan Manhart (R) released the text of House Bill 1155, which aims to change the state’s public investment statutes to allow its State Investment Council to place up to 10% of certain public funds in Bitcoin. The bill also specifies allowable methods of Bitcoin investment as well as custody and security requirements for the state’s holdings. The bill was read in the state’s House of Representatives and has been referred to its Commerce and Energy committee for consideration. SD Legislative Research Council; The Block.

SEC Divisions Provide Their Views on Tokenized Securities
On January 28, the SEC’s Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets issued a statement providing their views on the taxonomy of tokenized securities. The statement provides a definition of tokenized securities, explaining that they would fall within the scope of the term “security” under federal securities laws. It also notes two broad types of tokenized securities and recognizes that they can be created under a variety of models with different features. SEC Statement.

SEC and CFTC Hold Joint “Harmonization” Event on Crypto Oversight and U.S. Financial Leadership
On January 29, 2026, Securities and Exchange Commission Chairman Paul S. Atkins and Commodity Futures Trading Commission Chairman Michael S. Selig hosted a joint public event titled “SEC – CFTC Harmonization: U.S. Financial Leadership in the Crypto Era” at the CFTC’s headquarters in Washington, D.C. The session, open to attendees and livestreamed online, featured opening remarks by both chairs followed by a moderated fireside chat intended to articulate a more coordinated approach to digital-asset regulation and to signal ongoing efforts to reduce legacy jurisdictional silos between the two agencies. Chairmen Atkins and Selig framed the discussion within the broader goal of delivering on the administration’s vision of making the United States the global “crypto capital,” emphasizing clearer regulatory expectations and closer interagency cooperation as critical to investor protection and U.S. market competitiveness. Finance Feeds.

INTERNATIONAL

Numerous Jurisdictions Begin Collecting Data from Cryptocurrency Platforms Under CARF
On January 1, data collection under the Organization for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF) began in 48 jurisdictions, including the United Kingdom and in the European Union. CARF seeks to address the information gaps faced by tax authorities in effectively assessing crypto asset transactions by requiring that certain crypto service providers collect and report information related to both transactions and users. The United States has not yet implemented CARF. Yahoo Finance; Cointelegraph.

UK FCA Confirms September 2026 Deadline for New Crypto Licensing Regime
On January 9, the UK Financial Conduct Authority (FCA) set September 2026 as the application deadline for a new crypto licensing regime set to take effect in October 2027, ending the current registration-only system. Digital-asset businesses will now have to undergo a full regulatory review and approval to operate or continue to operate in the UK. The application window will open in September 2026, and applicants must submit licensing requests before the before the close of the application window, which will occur 28 days prior to the launch of the new licensing system. CryptoNews.

India’s FIU Issued New Guidelines for User Onboarding to Crypto Platforms
On January 9, India’s Financial Intelligence Unit (FIU), which establishes India’s anti-money-laundering and know-your-customer regulations, issued new rules requiring regulated crypto exchanges to verify users through live selfie pictures and geographic location verification. Exchanges will also be required to collect geolocation and IP addresses at the time of account creation. Cointelegraph.

South Korea to Permit Corporate Crypto Investment
As of January 11, South Korea’s Financial Services Commission (FSC) preliminarily issued updated guidelines allowing corporations to invest in digital assets, ending a nine-year ban. Listed companies and professional investors may invest up to 5% of their equity capital in digital assets. However, investable digital assets will be limited to the top 20 by semi-annual market capitalization based on the disclosure of the five major virtual currency exchanges in South Korea. A senior financial official familiar with the matter said, “The authorities will release the final guidelines in January ~ February and allow virtual currency transactions for investment and financial purposes by corporations.” Cointelegraph; Seoul Economic Daily.

Turkmenistan Law Legalizing Cryptocurrency Mining and Exchanges Goes into Force
On January 1, a law providing for the legalization and regulation of digital assets in Turkmenistan officially took effect. The legislation, which was signed by President Serdar Berdimuhamedov in November 2025, defines the legal and economic status of cryptocurrencies and creates a licensing system for cryptocurrency mining companies and digital-asset exchanges supervised by the country’s central bank. Reuters; The Block; CoinDesk.

Kazakhstan Adopts Legislation Creating a Regulatory Framework for Digital Assets
On January 16, Kazakhstan’s Head of State, Kassym-Jomart Tokayev, signed legislation on “Banks and Banking Activities in the Republic of Kazakhstan” that, among other things, established a framework for the regulation of digital assets in the country. It gives the Kazakh central bank authority to decide which digital assets can be traded via regulated exchanges, while placing digital assets into three categories with different types of oversight. Yahoo Finance.

Vietnam Begins Accepting License Applications for Digital Asset Trading Platforms
On January 20, the State Securities Commission of Vietnam (SSC) announced that it would start accepting applications for the issuance, amendment, and revocation of licenses for the provision of crypto asset trading services. This announcement came in conjunction with the country’s Ministry of Finance issuing a decision establishing the underlying administrative procedures for the applications, which it linked to its efforts to advance a September 2025 government resolution to implement a crypto asset market in Vietnam. SSC Announcement; Cointelegraph.

UK FCA Launches Stablecoin Sprint to Shape Future Stablecoin Payments Standards
On January 28, the UK Financial Conduct Authority published details for its upcoming Stablecoin Sprint, a multi-stakeholder innovation event scheduled for March 4–5, 2026 in London designed to bring together fintech firms, banks, payment institutions, stablecoin issuers, technology providers, consumer and merchant groups, and regulators to co-design practical standards and inform future policy for stablecoin-based payments. According to the FCA’s updated information, the sprint will focus on use cases including retail payments, cross-border transfers, e-commerce, B2B transactions, and remittances, and will be followed by a trade payments roundtable in May 2026. The initiative is intended to feed insights into the FCA’s broader effort to finalise a bespoke regulatory framework for stablecoins, complementing last year’s consultations on stablecoin issuance, prudential requirements, disclosure rules, and the application of the FCA Handbook to crypto activities; applications to participate were extended through midnight on February 8, 2026, with participants to be notified by February 13. FCA; Finextra.

ENFORCEMENT ACTIONS

UNITED STATES

Federal Prosecutors Will Not Attempt to Retry Case Against Former OpenSea Manager for Fraud Related to NFT Trading
On January 21, prosecutors of the U.S. Attorney’s Office for the Southern District of New York filed a letter in the U.S. District Court for the Southern District of New York stating that they would not seek to retry criminal charges against Nathaniel Chastain for wire fraud and money laundering. Chastain, a former manager at OpenSea, had been accused of buying nonfungible tokens (NFTs) that he allegedly knew would be promoted on the platform’s homepage and then selling them for a profit once their appearance generated a price increase. His May 2023 conviction had been vacated by the Second Circuit based on erroneous jury instructions. Letter, Law 360.

SEC to Dismiss Gemini Trust Company Lawsuit
In a January 23 press release, the Securities and Exchange Commission confirmed that it filed a joint stipulation with Gemini Trust Company to dismiss with prejudice the SEC’s ongoing civil enforcement action against it. The SEC acknowledged a “100 percent in-kind return of Gemini Earn investors’ crypto assets” through the Genesis Global Capital bankruptcy process and state, the primary factor for its decision, and regulatory settlements related to the Gemini Earn program. The SEC had previously charged Genesis and Gemini in January 2023 alleging that Gemini Earn program constituted an unregistered securities offering. Genesis and Gemini entered into an arrangement whereby Gemini customers can loan their cryptocurrency to Genesis for an APY of up to 7.4%. However, Genesis locked up approximately $940 million of customer cryptocurrency in November 2022 amid the post-FTX credit crisis. SEC News Release; The Block.

FBI Arrests Former Olympian Ryan Wedding on Crypto-Enabled Drug Trafficking Activities
Former Olympic snowboarder Ryan Wedding was arrested by FBI agents on Friday, January 23 in Mexico City and extradited to the United States to face charges related to cocaine trafficking and murder. Though the focus was on the trafficking and murder charges, U.S. Treasury officials have identified cryptocurrency as instrumental in the financing of the trafficking operations led by Wedding and his associates. The operations were linked to multiple blockchains including Bitcoin, Ethereum, Tron, and Solana. The Block.

OFAC Sanctions Two Digital Asset Exchanges Operating in Iran’s Financial Sector
On January 30, the Office of Foreign Assets Control (OFAC), as part of a press release sanctioning senior Iranian officials and one businessman accused of being a money launderer and sanctions evader, designated two digital asset exchanges connected to the businessman that allegedly processed significant funds associated with counterparties linked to the Islamic Revolutionary Guard Corps (IRGC). The exchanges, Zedcex Exchange, Ltd. and Zedxion Exchange, Ltd., are both registered in the United Kingdom. Per the release, “[t]his marks OFAC’s first designation of a digital asset exchange for operating in the financial sector of the Iranian economy,” while Secretary of the Treasury Scott Bessent noted in it that the Treasury Department will target the “regime’s attempts to exploit digital assets to evade sanctions and finance cybercriminal operations.” OFAC Press Release.

INTERNATIONAL

South Korean Regulator Imposed a $1.9 Millon Penalty on Korbit for Alleged Compliance Failures
On December 31, South Korea’s Financial Intelligence Unit (FIU) imposed a fine of 2.73 billion won, or about $1.9 million dollars, on the cryptocurrency exchange Korbit for alleged violations of the country’s Special Financial Transactions Act. The alleged misconduct involved breaches of anti-money laundering and customer verification obligations by the company that were uncovered as part of an October 2024 on-site inspection by the FIU. In addition to the fine, the FIU issued an institutional warning to Korbit, a warning to its CEO, and a reprimand to the employee responsible for reporting. FIU Press Release; CoinDesk.

South Korea’s Customs Authority Uncovers International Criminal Scheme That Laundering Millions of Dollars of Cryptocurrency
On January 19, South Korea’s Korea Customs Service (KCS) announced that it had identified an international criminal enterprise that it accused of laundering approximately 150 billion won ($102 million dollars) of cryptocurrency in violation of the country’s Foreign Exchange Transactions Act. The scheme allegedly consisted of suspects purchasing cryptocurrency in other countries, transferring it to South Korean digital wallets, and then converting it into Korean won that was moved through domestic bank accounts. Three Chinese nationals have been referred to prosecutors in connection with the alleged scheme. Yonhap News Agency; The Block.

UK Advertising Regulator Restricts Certain Coinbase Ads
On January 28, the UK’s Advertising Standards Authority (ASA) released a ruling after multiple complaints were lodged against several Coinbase advertisements that were alleged to have been “irresponsible because they trivialised the risks of cryptocurrency and implied it was a solution to prevalent financial concerns.” Coinbase disputed this characterization, however the ASA assessment largely concurred with it and found a violation of a provision of the UK Code of Non-broadcast Advertising and Direct & Promotional Marketing (CAP Code). The regulator issued an action banning the ads and directing Coinbase to ensure its ads don’t raise similar issues. ASA Ruling; The Block.

LITIGATION

UNITED STATES

U.S. District Court for the Southern District of Florida Dismisses a Class Action Suit Related to the Marketing of Trading Platform Operated by Voyager Digital, LLC
On December 30, Judge Roy K. Altman of the U.S. District Court for the Southern District of Florida entered an order in Dominik Karnas v. Mark Cuban, 1:22-cv-22538, (S.D. Fla.), dismissing without prejudice the class-action lawsuit filed against defendants Mark Cuban and the Dallas Mavericks. The complaint alleged violations of state securities and consumer fraud statutes related to the defendants’ alleged promotion of a crypto platform operated by Voyager Digital, LLC, which declared bankruptcy in 2022. The district court held that the plaintiffs failed to plausibly allege personal jurisdiction over the defendants. The court did not reach the defendants’ remaining arguments for dismissal. Order.

New York Court Rules that Mango Labs Cannot Cancel Terms of SEC Settlement
On January 21, Judge Jennifer L. Rochon of the U.S. District Court for the Southern District of New York issued an opinion and order denying a motion by crypto company Mango Labs, LLC to vacate a judgment that reflected a settlement the entity finalized with the Securities and Exchange Commission (SEC) in October 2024. Mango Labs had argued that it was entitled to vacatur of its judgment under Rule 60(b) because it entered a settlement with the SEC months before the agency altered its enforcement approach with respect to the crypto industry. Judge Rochon rejected that argument, finding instead that “[e]ven though the enforcement landscape in the cryptocurrency space has allegedly changed, Mango Labs cannot now unwind that finality based on buyer’s remorse.” Order; Law 360.

OTHER NOTABLE NEWS

Iran’s Ministry of Defense Export Center Indicates It Will Accept Cryptocurrency Payments for Weapons
On January 1, it was reported that Iran’s Ministry of Defense Export Center, known as MindEx, is offering to accept cryptocurrency payments as part of contracts for the sale of weapons systems, including drones, ballistic missiles, and warships. This has been linked to efforts by the country to bypass extensive U.S. and European sanctions against it. Financial Times; The Block; CoinDesk.

Crypto Crime Exceeded $150 billion in 2025
According to a new Chainalysis report shared with the Block on January 8, illicit cryptocurrency addresses received a total of at least $154 billion in 2025, a 162% increase from the 2024 estimate of $57.2 billion. Chainalysis suggested that this increase was primarily caused by an increase in activity tied to sanctioned entities, including state actors seeking to evade sanctions. Chainalysis also noted that these transactions still constitute less than 1% of cryptocurrency transaction volume, though the share of illicit transactions is slightly greater in 2025 than in 2024. The Block; Chainalysis Report.

SEC Commissioner Caroline Crenshaw Leaves the Agency
On January 2, Securities and Exchange Commission (SEC) Commissioner Caroline Crenshaw officially exited the agency after more than a decade of work there in various capacities. Crenshaw was the SEC’s last Democratic commissioner, and the agency now has three of five commissioner positions filled by Republican-appointed members. SEC Statement; The Block.

Senate Agriculture Committee Holds Hearing on Digital Commodity Exchange Act Draft
On January 27, following the release of the Digital Commodity Exchange Act draft, the Senate Agriculture Committee convened a hearing to consider the proposal and discuss potential amendments, including how exclusive CFTC authority could apply to spot cryptocurrency markets and what protections would be needed for market participants. BingX.

Political Action in Crypto Sector Surges Ahead of 2026 Midterms
On January 30, reporting indicated that crypto-focused political action committees were actively raising and deploying significant funds in advance of the 2026 midterm elections, with one PAC reportedly assembling a war chest exceeding $100 million from major industry contributors to advocate for pro-crypto candidates and policy priorities. The Block.

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The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Kendall Day, Jeff Steiner, Sara Weed, Sam Raymond, Nick Harper, Apratim Vidyarthi, Nicholas Tok, Advait V. Ramanan, Mason W. Pazhwak, and Gerald Kimani.

FinTech and Digital Assets Group Leaders / Members:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© 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 decision clarifies ambiguity around pre-existing documents and the scope of Rule 6(e), providing strong protection for companies responding to federal grand jury subpoenas.

In a significant ruling for companies responding to federal grand jury subpoenas, the Ninth Circuit has issued what may be its most definitive decision to date on the scope of Federal Rule of Criminal Procedure 6(e) and its interaction with the Freedom of Information Act (FOIA). In Kalbers v. U.S. Department of Justice and Volkswagen AG,[1] the court held that FOIA Exemption 3, incorporating Rule 6(e) bars disclosure of documents that the government possesses solely because they were produced in response to a grand jury subpoena. This includes pre-existing documents such as emails, corporate records and other documents created before and independent of the grand jury investigation.

Takeaways

• The Ninth Circuit held that documents in the government’s possession solely because of a grand jury subpoena are categorically protected from disclosure by the government under Rule 6(e), even if the documents pre-dated the grand jury investigation.
• The decision should give greater assurance to companies producing documents in response to a grand jury subpoena that the documents will not subsequently be obtained from the DOJ by plaintiff’s counsel, state regulators or other interested parties.
• While Kalbers was decided in the context of a FOIA request addressed to DOJ, companies may still face discovery requests in civil litigation for documents they produced pursuant to a grand jury subpoena. Companies should attempt to use the language and reasoning in Kalbers to reject demands for wholesale reproduction or cloned discovery requests by other regulators or civil litigants who try to get these documents.
• Documents being produced pursuant to Rule 6(e) should be clearly labeled as such to strengthen confidentiality protections.

Background

Rule 6(e) of the Federal Rules of Criminal Procedure strictly prohibits the government from disclosing any “matter occurring before the grand jury.”[2] This has been widely understood to prevent the disclosure of grand jury transcripts, witness testimony, subpoenas, and other documents relating to the grand jury proceedings themselves. However, the degree to which the rule prevents the disclosure of pre-existing documents that are simply received by a grand jury pursuant to subpoena has been less clear.[3] That uncertainty has posed risks for companies responding to grand jury subpoenas, particularly because plaintiffs’ counsel, state regulators, and other parties frequently seek access to the evidence considered by the federal grand jury to advance their own subsequent civil or regulatory claims.

The Kalbers case arose when Lawrence Kalbers, a professor at Loyola Marymount University, took an interest in a settlement agreement between the DOJ and the Defendant in a matter involving emissions testing.  Kalbers filed a FOIA request with the Department of Justice seeking all documents that the Defendant produced to the DOJ during a criminal grand jury investigation that ultimately resulted in a plea agreement. The DOJ had obtained approximately six million documents through a grand jury subpoena, nearly all of which were labeled “FOIA Confidential – Produced Pursuant to Rule 6(e)”.

The district court ordered production of the documents, adopting the Special Master’s recommendation that—unlike witness lists, subpoenas, or testimony summaries—the documents themselves did not reveal grand jury deliberations. DOJ and the Defendant appealed.[4]

The Ninth Circuit’s Decision

The Ninth Circuit reversed in substantial part, holding that Rule 6(e) bars disclosure of documents that the government possesses only because of a grand jury subpoena. The court explained that disclosure of such materials—particularly in the aggregate—would allow requesters to “reverse engineer” the grand jury’s investigation by revealing what topics, time periods, and individuals were of interest to prosecutors.[5]

Critically, the court rejected the argument that pre-existing documents lose Rule 6(e) protection simply because they were created outside the grand jury process. Instead, the relevant inquiry is how the government obtained the documents, not when or why the documents were originally created.[6]

The court further clarified that prior Ninth Circuit cases like U.S. v. Dynavac, Inc. and In re Optical Disk Drive Antitrust Litig., allowed the disclosure of documents that were in the possession of an independent source (a private corporation, in the case of Dynavac) or were in the possession of the government independent of a grand jury proceeding (FBI recordings made independent of the grand jury proceeding, in the case of Optical Disk).[7]  If the documents are in the government’s possession only through the grand jury subpoena, Rule 6(e) protection applies.[8]

Significance and Practice Considerations

This decision clarifies ambiguity around pre-existing documents and the scope of Rule 6(e), providing strong protection for companies responding to federal grand jury subpoenas. It confirms that Rule 6(e) shields not only grand jury transcripts and deliberations, but also the document productions themselves, as disclosure would reveal the nature or scope of the investigation.

The language in Kalbers supports broad protections over documents produced pursuant to grand jury subpoenas. The circuits are varied on the level of protection that Rule 6(e) provides. While few cases have held that the subpoena file itself is protected,[9] the Sixth Circuit has established a strong presumption that any documents provided for a grand jury investigation constitute “matters occurring before the grand jury,” and are therefore protected.[10] By contrast, the Second Circuit has taken a narrower view of Rule 6(e), emphasizing that “documents are not cloaked with secrecy merely because they are presented to a grand jury,”[11] and that the government must show that disclosing the documents would reveal protected aspects of the grand jury’s investigation in order to justify withholding them.[12] The D.C. Circuit has held that there is “no per se rule against disclosure of any and all information which has reached the grand jury chambers” and it required a case-specific inquiry into whether disclosure would reveal a secret aspect of the grand jury’s investigation.[13]

Overall, Kalbers is a favorable decision for targets of grand jury investigations and third parties alike, reinforcing the confidentiality of grand jury processes and providing meaningful assurance that the DOJ will not be compelled under FOIA to produce documents to third parties.  While companies may still face discovery requests and demands in civil litigation for documents produced pursuant to grand jury subpoena, the language and reasoning in Kalbers provide compelling arguments to reject wholesale reproduction and cloned discovery requests.

The Kalbers decision also underscores the practical importance of labeling documents produced in response to a grand jury subpoena as grand jury material. The Ninth Circuit relied heavily on the fact that the vast majority of documents at issue were expressly marked as produced pursuant to Rule 6(e), treating those labels as strong evidence that disclosure would reveal matters occurring before the grand jury.[14] At the same time, Kalbers makes clear that production to the grand jury limits disclosure only by the government—principally by barring third parties from obtaining the documents through FOIA. It does not transform the documents themselves into privileged material or otherwise shield them from disclosure by the producing company if sought from an independent source, including through civil discovery.[15]

The decision may also affect how companies weigh voluntary production versus responding to a grand jury subpoena at least within the Ninth Circuit. While voluntary production can signal cooperation, only documents produced in response to a grand jury subpoena are eligible to receive stronger protection from FOIA disclosure because of Rule 6(e) under Kalbers, which in some cases may favor compelled production where disclosure risk is a key concern.

[1] Kalbers v. Volkswagen AG, Nos. 24-1048 & 24-1477, (9th Cir. Jan. 30, 2026).

[2] See Federal Rules of Criminal Procedure (Dec. 1, 2024), https://www.uscourts.gov/sites/default/files/2025-02/federal-rules-of-criminal-procedure-dec-1-2024_0.pdf.

[3] See Article, Toward a Safety Valve for Sharing Documents Obtained by Grand Jury Subpoena in Parallel Investigations, in Department of Justice Journal of Federal Law and Practice Volume 70, Issue 3, 105, 113, (Aug., 2022), https://www.justice.gov/usao/page/file/1532986/dl?inline.

[4] Kalbers v. Volkswagen AG, Nos. 24-1048 & 24-1477, slip op. at 9–10 (9th Cir. Jan. 30, 2026).

[5] Kalbers v. Volkswagen AG, Nos. 24-1048 & 24-1477, slip op. at 14–16 (9th Cir. Jan. 30, 2026).

[6] Kalbers v. Volkswagen AG, Nos. 24-1048 & 24-1477, slip op. at 17–18, 21–22 (9th Cir. Jan. 30, 2026).

[7] Kalbers v. Volkswagen AG, Nos. 24-1048 & 24-1477, slip op. at 17–18, 21–22 (9th Cir. Jan. 30, 2026); United States v. Dynavac, Inc., 6 F.3d 1407, 1411–14 (9th Cir. 1993); In re Optical Disk Drive Antitrust Litig., 801 F.3d 1072, 1077–78 (9th Cir. 2015).

[8] Kalbers v. Volkswagen AG, Nos. 24-1048 & 24-1477, slip op. at 21 (9th Cir. Jan. 30, 2026).

[9] Kalbers v. Volkswagen AG, Nos. 24-1048 & 24-1477, slip op. at 16 (9th Cir. Jan. 30, 2026).

[10] In re Grand Jury Proc., 851 F.2d 860, 863 (6th Cir. 1988).

[11] United States v. Lartey, 716 F.2d 955, 964 (2d Cir. 1983).

[12] Grynberg v. U.S. Dep’t of Justice, 758 F. App’x 162, 164 (2d Cir. 2019).

[13] Lopez v. Dep’t of Justice, 393 F.3d 1345, 1349 (D.C. Cir. 2005).

[14] Kalbers v. Volkswagen AG, Nos. 24-1048 & 24-1477, slip op. at 22–23 (9th Cir. Jan. 30, 2026).

[15] Kalbers v. Volkswagen AG, Nos. 24-1048 & 24-1477, slip op. at 17–18, 21–22 (9th Cir. Jan. 30, 2026); cf. United States v. Dynavac, Inc., 6 F.3d 1407, 1411–12 (9th Cir. 1993).

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The following Gibson Dunn lawyers prepared this update: Jina Choi, Winston Chan, Diana Feinstein, Ben Wagner, and Erin Williams.

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, any leader or member of the firm’s White Collar Defense & Investigations practice group, or the authors:

Jina L. Choi – San Francisco (+1 415.393.8221, jchoi@gibsondunn.com)

Winston Y. Chan – San Francisco (+1 415.393.8362, wchan@gibsondunn.com)

Diana M. Feinstein – Los Angeles (+1 213.229.7351, dfeinstein@gibsondunn.com)

Benjamin Wagner – Palo Alto (+1 650.849.5395, bwagner@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 Dubai International Financial Centre Authority has now issued the Variable Capital Company Regulations 2026, which were enacted on 9 February 2026.

Further to our previous update, the Dubai International Financial Centre Authority has now issued the Variable Capital Company Regulations 2026 (Regulations), which were enacted on 9 February 2026. Some of the key updates to the draft regulations in 2025 include:

Removal of the Qualifying Applicant Concept

One of the most significant changes in the final Regulations is the removal of the previous “Qualifying Purpose” requirements that restricted VCC formation to specific structures such as Aviation Structures, Crowdfunding Structures, Intellectual Property Structures, Maritime Structures, Structured Financing, and Secondaries Structures. Under the final Regulations, these flexible corporate forms are now available more broadly to applicants without the need to demonstrate a specific qualifying purpose.

Introduction of the “Exempt VCC” Category

The Regulations introduce an “Exempt VCC” category, which applies where the Controller of a Variable Capital Company is: (a) a Registered Person; (b) an Authorised Firm; (c) a Government Entity; or (d) a Publicly Listed Entity. Incorporated Cells of an Exempt VCC are automatically deemed exempt. Exempt VCCs benefit from certain operational flexibilities, including the ability to use the Registered Office of an Affiliate rather than being required to appoint a Corporate Service Provider.

Mandatory Corporate Service Provider Requirement

Unless a VCC qualifies as an Exempt VCC, it must appoint a Corporate Service Provider to act on its behalf, and the same requirement applies to its Incorporated Cells. A VCC that fails to comply with this requirement is liable to a fine of up to USD 20,000 and up to USD 100,000 for failure to make documents and information available to its Corporate Service Provider.

The Regulations introduce a comprehensive framework governing the duties and obligations of Corporate Service Providers, including requirements to lodge documents and fees with the Registrar, make filings on behalf of the VCC, and maintain copies of required records. Corporate Service Providers are required to provide a Cessation Notice to the Registrar within ten days if they cease to act for a VCC, with failure to do so attracting a fine of up to USD 2,000.

Continuation of a VCC Outside the DIFC

The Regulations introduce notice requirements where a VCC seeks to be continued as a Foreign Company in a foreign jurisdiction. The VCC must provide thirty days’ notice to creditors and persons with outstanding contracts, and publish a notice in an Appointed Publication at least thirty to forty-five days prior to applying for such continuation.

Removal of Incorporated Cell Transfer Provisions

Article 10.3 of the draft regulations, which provided a detailed framework for the transfer of an Incorporated Cell from one VCC to another (including the Transfer Agreement process, director declarations, and Registrar approval procedures), has been removed entirely from the final Regulations.

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The following Gibson Dunn lawyers prepared this update: Andrew Steele and Omar Morsy.

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, any leader or member of the firm’s Mergers & Acquisitions or Private Equity practice groups, or the authors:

Andrew Steele – Abu Dhabi (+971 2 234 2621, asteele@gibsondunn.com)

Omar Morsy – Dubai (+971 4 318 4608, omorsy@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 insightful webcast explores the complexities of blocking statutes and their impact on government investigations. As regulatory scrutiny intensifies across jurisdictions, understanding how these statutes operate — and how they can affect cross-border data access — is essential for legal and compliance professionals. Our panel of experts breaks down key legal frameworks, recent enforcement trends, and practical strategies for navigating conflicts between domestic obligations and foreign legal restrictions.

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MCLE CREDIT INFORMATION:

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

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

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

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

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PANELIST: 

Patrick F. Stokes is a partner in Gibson Dunn’s Washington, D.C. office and Co-Chair of the Anti-Corruption & FCPA Practice Group. He handles internal corporate investigations, government enforcement matters, and compliance reviews and routinely advises clients on anti-corruption compliance, monitorships, and risk assessments. Prior to joining Gibson Dunn, Patrick headed the FCPA Unit of the U.S. Department of Justice, where he managed the FCPA enforcement program and all criminal FCPA matters throughout the United States.

Courtney M. Brown is a partner in Gibson Dunn’s Washington, D.C. office, where she practices in white collar defense and corporate compliance. She handles cross‑border internal and government investigations and compliance reviews, and routinely advises multinational clients on economic sanctions, anti‑money laundering, and anti‑corruption matters. Her work frequently involves navigating conflicts between U.S. regulatory obligations and foreign legal restrictions including blocking statutes—that affect data access and information sharing. 

Pierre‑Emmanuel Fender is a partner in Gibson Dunn’s Paris office whose practice focuses on complex cross‑border disputes and multinational litigation. He advises clients on navigating conflicting legal obligations across jurisdictions, including issues that arise in cross‑border investigations, enforcement matters, and matters involving foreign legal restrictions. Pierre‑Emmanuel has extensive experience litigating international commercial and corporate disputes and is recognized by Chambers Europe, The Legal 500, Benchmark Litigation, and Best Lawyers for his work in high‑stakes, multijurisdictional matters. 

Christopher Harris KC is a partner in Gibson Dunn’s Zurich and London offices and Global Co‑Chair of the firm’s International Arbitration and Judgment & Award Enforcement practice groups. A leading advocate in complex cross‑border disputes, Christopher has extensive experience navigating conflicts between legal regimes, enforcement challenges, and multinational proceedings involving states and foreign legal restrictions. He is recognized as a Band 1 practitioner by Chambers UK for international arbitration and has appeared in many of the seminal cases on enforcement before UK courts.

Ning Ning is a partner in Gibson Dunn’s Hong Kong office and a member of the White Collar Defense and Investigations practice. She advises clients across the Asia‑Pacific region on cross‑border government and internal investigations, including matters before the DOJ and SEC, and regularly handles issues involving corruption, fraud, and multinational compliance risks. Ning also counsels clients on designing and enhancing global compliance programs and brings extensive experience with China‑related investigative and regulatory matters.

© 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.

Grounded in principles of voidability and laches, the opinion avoided reaching the merits of a controversial trial-court decision already addressed by the Delaware General Assembly.

On January 20, 2026, the Delaware Supreme Court, sitting en banc, issued an opinion bringing an end to one chapter of the “DExit” saga.[1]  The unanimous opinion, authored by Justice Gary F. Traynor, effectively reversed a controversial ruling by the Delaware Court of Chancery, discussed in our February 28, 2024 Client Alert, that certain provisions in a stockholder agreement between a public company and its stockholder founder were unenforceable under Section 141(a) of the Delaware General Corporation Law (DGCL).  Rather than addressing the validity of the disputed provisions, however, the Delaware Supreme Court held that (a) the provisions were at most voidable (as opposed to void ab initio), and thus claims challenging them were subject to equitable defenses (such as laches), and (b) the plaintiff’s claim was time-barred under the laches doctrine because it fully accrued upon adoption of the provisions nine years before the complaint was filed, and not within the three-year limitations period under the “continuing-wrong doctrine.”

The public’s negative reaction to the trial court’s decision was so fierce that the Delaware General Assembly promptly adopted Section 122(18) of the DGCL, authorizing the inclusion in stockholder agreements of corporate-governance provisions like those that had been challenged in this case as facially invalid.  Although Section 122(18) retroactively authorized the relevant governance provisions in stockholder agreements entered into before the statute’s August 1, 2024 effective date, the statute had no effect on litigation completed or pending before such date.  Thus, although the Delaware legislature did not reverse the trial court’s decision entirely, it limited its prospective application.  Now, the Delaware Supreme Court’s opinion has eliminated its application altogether.

The Trial Court’s Decision

Nine years after a public company and its founder entered into a stockholder agreement, a minority stockholder challenged the facial validity of certain provisions granting governance rights to the founder as inconsistent with Section 141(a) of the DGCL.  The company moved for summary judgment, arguing among other things that the stockholder’s challenge was time-barred by the doctrine of laches and the challenged provisions were valid under Section 141(a).

The trial court rejected the company’s laches defense on two bases.  First, the trial court determined that the equitable defense of laches was not available because, assuming the challenged provisions conflicted with Section 141(a), they were void ab initio—rather than merely voidable—and equitable defenses like laches are not applicable to void acts as a matter of law.  The trial court reasoned that any contract provision adopted in a manner exceeding a board’s or management’s authority—as the challenged provisions allegedly were—is void ab initio.

Second, the trial court held in the alternative that, even if laches were an available defense, the stockholder’s challenge was timely under the “continuing wrong” doctrine.  In doing so, the trial court rejected the company’s argument that the plaintiff’s claim accrued when the challenged provisions were adopted nine years earlier, and accepted the plaintiff’s argument that the company’s continuing operation under the constraints of the challenged provisions constituted ongoing violations of Section 141(a).

Then, as discussed in our February 28, 2024 Client Alert, the trial court proceeded to hold that the challenged provisions were unenforceable because they deprived the board of a significant portion of its authority under Section 141(a) and did not appear in the company’s charter.  The parties appealed both decisions to the Delaware Supreme Court, which reversed the trial court’s ruling on laches and declined to reach the validity of the provisions.

Voidability

In reversing the laches ruling, the Delaware Supreme Court held that the trial court misapplied the law for determining voidability.  Under Delaware law, contract provisions in the corporate-governance context are void as ultra vires or against public policy if the corporation cannot, in any case, lawfully adopt them; whereas such provisions are only voidable if the corporation could lawfully adopt them in an appropriate manner.  To apply this rule, the Court explained, courts should focus on the subject matter of the provisions, not the manner in which they were adopted.  Ultimately, the Court held that the plaintiff had failed to carry its burden of establishing that the challenged provisions were void because it had identified no mandatory provision of the DGCL or other Delaware law that would prohibit the company from adopting the challenged provisions by charter amendment or other method.  In other words, the plaintiff had failed to establish that the challenged provisions’ subject matter—and not merely their presence outside of the charter—conflicted with Delaware law.  Thus, the Court concluded that the challenged provisions were, at most, voidable, not void ab initio, and therefore the plaintiff’s claim was subject to a laches defense.

Laches

Next, the Court held that the trial court erred in determining that laches would not bar the claim.  First, the Court rejected the trial court’s application of the “continuing wrong” method of determining when the plaintiff’s claim accrued, reasoning that, under Delaware law, a corporation’s performance under a contract—and associated effects or implications—are not continuing wrongs even if the manner in which the contract was adopted might have been unlawful.  Instead, the Court explained, the plaintiff’s claim “fit neatly” within the “discrete act method,” which applies when a claim arises at a distinct point in time and is effectively complete as of that date, because the challenged provisions were allegedly adopted improperly at a distinct point in time, and complete and adequate relief was available to the plaintiff during the following three years.  Having held that the plaintiff’s claim accrued when the challenged provisions were adopted nine years earlier, the Court concluded that the plaintiff had presumptively delayed unreasonably in bringing its claims outside the three-year limitations period and the company presumptively would be prejudiced if forced to defend the lawsuit.

The Court therefore reversed the trial court’s decision on timeliness and vacated the trial court’s order implementing its rulings on the parties’ cross-motions for summary judgment.

Takeaways

• The opinion reinforces the maxim that “[e]quity aids the vigilant, not those who slumber on their rights,” by restricting the maintenance of lawsuits where, like here, the plaintiff has no excuse for a nine-year delay.
• Together with the Delaware General Assembly’s prompt adoption of Section 122(18), the Delaware Supreme Court’s decision continues the State of Delaware’s long commitment to not only maintaining the quality and balance of the Delaware General Corporation Law, but also preserving the correct and predictable application of common law principles of law and equity. In that regard, the decision is an important reminder for practitioners that appealing an adverse decision at the trial court level is a viable path to success in Delaware.
• The opinion clarified the “knotty” and “vex[ing]” distinction between corporate acts that are voidable or void ab initio. Under Delaware law, voidable acts are those that a corporation has authority to take in a prescribed manner but that were taken in some legally defective manner.  Void acts, on the other hand, are those that a corporation lacks authority to take in any manner.  Voidable acts are curable through various means, including as prescribed by Sections 204 and 205 of the DGCL, and subject to equitable defenses like laches; void acts, on the other hand, and incurable and not subject to equitable defenses.
• In the opinion, the Delaware Supreme Court cabined its holding by indicating that, even where facial challenges were time-barred, as-applied challenges arising from specific circumstances “may be advanced after the period for bringing facial challenges has expired.”
• The opinion was careful to emphasize that the Court was not addressing whether the provisions were consistent with Section 141(a) of the DGCL. As-applied challenges filed after August 1, 2024 will have to contend with the Delaware General Assembly’s authorization of such provisions in Section 122(18).  It remains to be seen how Delaware courts will handle timely facial challenges pending as of that date.

All parties to stockholder or investors’ rights agreements containing corporate-governance provisions should consider reviewing or revisiting those agreements in light of not only the Delaware General Assembly’s authorization of such provisions in Section 122(18) of the DGCL, but also the Delaware Supreme Court’s decision in this case, to determine whether any modification may be warranted.  As always, Gibson Dunn is here to help.

[1] See Moelis & Co. v. West Palm Beach Firefighters’ Pension Fund, — A.3d –, No. 340, 2024 (Del. 2025) (the “Opinion”).

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The following Gibson Dunn lawyers participated in preparing this update: Colin B. Davis, Jonathan D. Fortney, Julia Lapitskaya, Jason J. Mendro, Mark H. Mixon, Jr., and Russell Shapiro.

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 Capital Markets, Mergers & Acquisitions, Private Equity, Securities Litigation, and 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)

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

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

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)

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.

We are pleased to provide you with the December 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 Federal Deposit Insurance Corporation (FDIC) issued a proposed rule under the GENIUS Act to establish procedures for FDIC-supervised insured depository institutions to obtain approval to issue permitted payment stablecoins through a subsidiary. Comments on the proposed rule are due by February 17, 2026.
• The Board of Governors of the Federal Reserve System (Federal Reserve) rescinded its 2023 policy statement interpreting Section 9(13) of the Federal Reserve Act and issued a new policy statement governing the activities of state member banks (both insured and uninsured) and withdrew from the regulatory record the 2023 supplementary information that reflected a presumption against “novel and unprecedented” activities, including crypto-related activities.
• The Federal Reserve published a request for information (RFI) on a limited purpose “payment account” for eligible institutions focused on clearing and settlement. As originally previewed by Governor Waller, the new proposed payment account would be subject to balance caps, would not pay interest or grant access to Federal Reserve services like the discount window, and could be subject to additional restrictions and risk controls on a case-by-case basis. Responses to the RFI are due by February 6, 2026.
• The Office of the Comptroller of the Currency (OCC) issued a notice of proposed rulemaking that would increase the average total consolidated assets threshold at which heightened standards apply to certain insured national banks, insured federal savings associations, and insured federal branches from $50 billion to $700 billion. If adopted, the rule would reduce the number of institutions subject to the heightened standards from 38 institutions to eight.
• The OCC and FDIC withdrew their 2013 and 2014 interagency leveraged lending guidance and FAQs, stating that the guidance and FAQs had become overly restrictive and clarified that banks and examiners should apply general principles of prudent risk management and safe and sound lending to leveraged lending activities. The OCC also issued updated guidance on venture lending, emphasizing that lending to early-stage and growth companies may be conducted in a safe and sound manner when supported by appropriate underwriting, risk management, and governance.
• The OCC published an interpretive letter authorizing national banks to engage in “riskless principal” crypto-asset transactions. The approval preceded the OCC’s conditionally granting five national trust company charters to institutions in the digital assets space.
• The OCC released preliminary findings on debanking activities.
• Travis Hill was confirmed as Chairman of the FDIC’s Board of Directors, and Michael Selig was confirmed as Chairman of the Commodity Futures Trading Commission.
• As part of Chairman Hill’s broader emphasis on improving failed-bank resolution practices, the FDIC announced that the agency had updated its online resources to include enhanced information on the marketing and sale of distressed institutions and had made available sample agreements to help prospective acquirers assess transaction terms in advance.
• On December 30, 2025, the D.C. federal district court in National Treasury Employees Union v. Vought granted a clarification that the Consumer Financial Protection Bureau (CFPB) cannot justify a violation of the preliminary injunction “designed to ensure that the CFPB would continue to exist as Congress mandated and perform its statutorily required duties while the merits of plaintiffs’ claims were litigated” by refusing to request funding from the Federal Reserve. The court held that the CFPB’s unilateral decision to decline to request funding is not supported by the CFPB’s interpretation of the Dodd-Frank Act and contravenes the preliminary injunction.

DEEPER DIVES

FDIC Proposes GENIUS Act Application Procedures. On December 16, 2025, the FDIC issued a proposed rule to implement the application provisions of the GENIUS Act for FDIC-supervised insured depository institutions seeking to issue payment stablecoins through a subsidiary. Under the proposed rule, an FDIC-supervised state nonmember bank or state savings association must submit an application demonstrating how it and its subsidiary would satisfy statutory factors for approval as a permitted payment stablecoin issuer (PPSI), including reserve arrangements, corporate governance, and compliance controls. The rule would establish content requirements, processing timelines, and an appeal process for denied applications under a new section of the FDIC’s regulations. Comments on the proposed rule are due by February 17, 2026.

• Insights. Although the proposal marks the FDIC’s first concrete implementation step under the GENIUS Act to create a formal path for FDIC-supervised institutions to enter the regulated payment stablecoin market, the broader competitive landscape will hinge on forthcoming GENIUS Act rulemakings—particularly those addressing capital, liquidity, and risk management standards for PPSIs, which are expected next. The requirement that state stablecoin regulatory regimes be “substantially similar” to the federal framework effectively means that states can leverage a ready-made model off which to build their own stablecoin regulatory regimes.

Federal Reserve Policy Statement on Section 9(13) of the Federal Reserve Act. On December 22, 2025, the Federal Reserve rescinded its 2023 policy statement interpreting Section 9(13) of the Federal Reserve Act and issued a new policy statement on the scope of activities state member banks—both insured and uninsured—may engage in as principal. The new policy statement (i) replaces the rebuttable presumption that state member banks could generally engage only in activities permissible for national banks (unless permissible for state-chartered banks by federal statute or FDIC regulation), and (ii) articulates two guiding principles—“same activity, same risks, same regulation” and “different activity, different risks, different regulation”—to facilitate innovation while preserving safety and soundness. The new policy statement withdraws from the regulatory record the 2023 supplementary information addressing specific crypto-asset activities, thereby removing crypto-specific interpretive guidance and signaling that such activities will be evaluated under the Federal Reserve’s general, risk-based supervisory principles rather than a categorical presumption of impermissibility. The new policy statement also provides guidance on how uninsured state member banks and uninsured state-chartered bank applicants for membership may seek to engage in activities as principal that are not permissible for insured state member banks. The policy is effective upon publication in the Federal Register.

• Insights. The principal beneficiaries of the new policy statement are uninsured state member banks and state-chartered institutions pursuing innovative or non-traditional activities, as the new policy replaces the 2023 rebuttable presumption with a principles-based, risk-focused framework and provides a clearer pathway for engaging in activities authorized under state law. Insured state member banks also benefit indirectly from the Federal Reserve’s withdrawal of crypto-specific supplementary information and the elimination of a categorical presumption against “novel and unprecedented” activities, though such institutions remain subject to applicable statutory and FDIC regulatory constraints.

Request for Information on Reserve Bank Payment Account Prototype. On December 23, 2025, the Federal Reserve published an RFI on a Reserve Bank payment account prototype, seeking input on a special purpose Federal Reserve Bank account tailored to the risks and needs of institutions focused on payments innovation. The RFI describes a proposed “Payment Account” that would be distinct from a traditional Reserve Bank master account, intended solely for clearing and settling an institution’s payment activity, and designed to pose limited risk to Reserve Banks and the payments system. The prototype includes features such as balance caps, no interest on overnight balances, no discount window or intraday credit access, and streamlined Reserve Bank review, and would not alter existing legal eligibility for Federal Reserve accounts and services. Comments on the RFI are due February 6, 2026.

• Insights. The Payment Account RFI builds on Federal Reserve Board Governor Waller’s earlier concept of a “payment account” as a “lower-risk” gateway to the Federal Reserve’s payments infrastructure for eligible institutions, including those with innovative business models that may not require—or have faced barriers to—traditional master accounts. The Federal Reserve is soliciting detailed feedback on the Payment Account’s structure, usage cases, risk mitigants (e.g., overnight balance limits and exclusion of certain services), and potential impacts on payment system safety and innovation. Although the RFI does not change eligibility criteria under the Federal Reserve Act (which includes national trust banks), it reflects a broader effort to adapt core Federal Reserve services to evolving payment system dynamics and support timely access to key rails for institutions focused on payment activities.

OCC Proposal to Raise Asset Threshold for Heightened Standards. On December 23, 2025, the OCC issued a notice of proposed rulemaking that would increase the average total consolidated assets threshold for application of the OCC’s heightened standards to certain insured national banks, insured federal savings associations, and insured federal branches from $50 billion to $700 billion. If adopted, the proposal would significantly narrow the scope of institutions subject to heightened standards, reducing the number of covered institutions from 38 to eight.

• Insights. The proposal would most directly benefit mid-sized national banks and federal savings associations currently subject to heightened standards. By substantially raising the threshold, the OCC signals a renewed emphasis on regulatory tailoring and proportionality, aligning heightened standards more closely with systemic risk. The proposal would also reduce ongoing compliance and governance burdens for affected institutions, while leaving the most complex and systemically important banks subject to enhanced risk management, liquidity, and capital planning expectations.

OCC and FDIC Withdrawal of Interagency Leveraged Lending Guidance. On December 5, 2025, the OCC and FDIC withdrew their 2013 and 2014 interagency guidance and FAQs on leveraged lending and issued a joint interagency statement explaining the withdrawal. The agencies stated that the guidance and FAQs had become overly restrictive and clarified that banks should manage leveraged lending activities in accordance with general principles of prudent risk management applicable to commercial lending and other credit activities. The statement further notes that examiners will evaluate leveraged lending based on general safety and soundness standards, rather than the withdrawn guidance.

• Insights. The withdrawal of the decade-old leveraged lending guidance primarily benefits banks with leveraged lending portfolios by eliminating prescriptive thresholds and constraints that had been widely viewed as limiting banks’ participation in leveraged loan markets, including loans to leveraged corporate borrowers and private-equity sponsored deals. Without the 2013 guidance and 2014 FAQs, banks should have greater discretion to apply enterprise-wide risk management principles to leveraged loan underwriting and portfolio management, potentially restoring some competitive footing against nonbank private credit providers. At the same time, the shift places greater onus on banks to demonstrate sound credit risk practices under broader safety and soundness expectations, and underscores that supervisory scrutiny remains grounded in general risk-based standards rather than prescriptive leverage metrics. While the Federal Reserve did not join the FDIC and OCC in the withdrawal of the leveraged lending guidance, it is unlikely to limit the effect of the relief granted to national banks and state nonmember banks that operate under a holding company structure. As stated in the Federal Reserve’s Statement of Supervisory Operating Principles, “Federal Reserve supervisory staff should not conduct their own examination of [depository institution subsidiaries other than state member banks] unless it is impossible for the Federal Reserve to rely on their examinations or other supervisory work.”

OCC Updates Guidance on Venture Lending. On December 5, 2025, the OCC also issued Bulletin 2025-45, updating its supervisory guidance on “venture loans”—commercial loans to companies in early, expansion, or late stages of corporate development. The bulletin provides insights into the OCC’s supervisory approach, rescinds OCC Bulletin 2023-34, and articulates expectations that banks engaging in venture lending do so in a safe and sound manner consistent with the bank’s risk appetite. The guidance emphasizes that banks should ensure venture lending activities are appropriately documented, underwritten, risk-rated, sufficiently reserved, and monitored, with strong board and management oversight reflecting the inherently higher credit risk profile.

• Insights. The revised guidance reflects the OCC’s policy of not discouraging prudent venture lending when supported by robust risk management, signaling a shift from earlier caution toward broader commercial credit risk engagement. By rescinding the earlier bulletin, the OCC clarifies that venture loans can be part of a bank’s portfolio provided they are governed by enterprise-wide risk principles commensurate with credit, liquidity, and concentration risk. National banks and federal savings associations that pursue venture lending should benefit from principles-based expectations that align with general safety and soundness frameworks, though they must demonstrate strong underwriting discipline and oversight. Community banks and less complex institutions should carefully assess whether venture lending fits within their risk appetite and capacity to manage potential higher default probabilities.

Oversight of Prudential Regulators. On December 2, 2025, the House Financial Services Committee held a hearing titled “Oversight of Prudential Regulators,” at which senior officials from the Federal Reserve, OCC, FDIC, and National Credit Union Administration testified regarding supervisory and regulatory priorities, including regulatory tailoring, capital requirements, supervisory transparency and emerging risks. Members also focused on concerns regarding the use of reputational risk in supervision and potential regulatory drivers of debanking.

• Insights. The hearing underscored continued focus on reputational risk and debanking. The focus on reputational risk and the OCC’s debanking report suggests growing alignment between congressional oversight and regulatory efforts to address perceived supervisory overreach, and indicates that debanking and access to financial services issues are likely to remain prominent in both regulatory reform initiatives and potential legislative action. The hearing was followed closely by the release of the OCC’s preliminary findings on debanking activities. The House Financial Services Committee also released a Staff Report focused on debanking in the digital assets industry and called for passage of the FIRM Act to codify that prohibition on considering reputational risk. With the comment period for the FDIC and OCC’s proposed rule prohibiting consideration of reputational risk now closed, the agencies will likely continue to press forward by issuing a final rule.

OTHER NOTABLE ITEMS

Federal Reserve Releases Supervision and Regulation Report. On December 1, 2025, the Federal Reserve released its Supervision and Regulation Report, highlighting, among other things, the Federal Reserve’s supervisory focus on core and material financial risks and its efforts to tailor supervisory approaches based on institution size, complexity, business model, and risk profile. As part of this strategic shift, the report explains updates to the supervisory ratings frameworks and examination priorities to enhance transparency and effectiveness. The report also discusses recent regulatory developments and rulemakings affecting institutions.

Vice Chair Bowman Identifies Priorities for Supervision and Regulation. Vice Chair Bowman’s December 2, 2025 testimony before the House Financial Services Committee highlighted the Federal Reserve’s priority of tailoring supervisory and regulatory frameworks, particularly to reduce disproportionate burden on community banks, and modernizing the regulatory capital and supervisory framework for large banks. Key areas include continued reforms to stress testing transparency, the supplementary leverage ratio, the Basel III framework, and the G-SIB surcharge. She also discussed prospective regulation to clarify supervisory and enforcement standards, ongoing review of the CAMELS framework (including reducing subjectivity in the “M” component), and steps to ensure supervisors do not improperly influence banks’ decisions on customer relationships.

Federal Reserve Publishes Staff Manuals for Supervision of Largest, Most Complex Banks. On December 18, 2025, the Federal Reserve published the first of several staff manuals for the supervision of the largest and most complex banks. According to the release, the staff manual has not been updated to reflect the recent name change of the Federal Reserve’s program for the largest and most complex banks from LISCC to GSIB nor has it been amended to reflect the Statement of Supervisory Operating Principles. Vice Chair for Supervision Bowman lauded the release as “another step in [the Federal Reserve’s] efforts to improve transparency and public accountability for bank supervision.” Additional manuals expected to be released by the Federal Reserve next year include the manuals for the large bank operating committee, capital and liquidity planning, recovery and resolution planning, the large bank rating program, enforcement actions, and the large bank risk identification system.

Federal Reserve Request for Information on Future of Check Services. On December 4, 2025, the Federal Reserve issued a Request for Information and Comment on the Future of the Federal Reserve Banks’ Check Services, seeking public input on potential strategic changes to Reserve Bank check collection and processing services amid declining check usage and rising costs. Vice Chair for Supervision Bowman issued a statement dissenting from the RFI, expressing concern that it appears to favor discontinuation of check services to address the growing problem of payments fraud, even though checks remain a significant payment mechanism. Responses to the RFI are due by March 9, 2026.

FSOC Convenes Quarterly Meeting. On December 11, 2025, the Financial Stability Oversight Council (FSOC) convened its quarterly meeting. According to the readout, the FSOC received a briefing from Treasury staff on potential revisions to FSOC’s interpretive guidance regarding nonbank financial company determinations and FSOC’s analytic framework for financial stability risk identification, assessment, and response.

FDIC Provides Update on IDI Resolution Planning for Large Banks. On December 31, 2025, the FDIC issued an update on its insured depository institution (IDI) resolution planning framework, noting that it plans to propose amendments to the IDI Rule in 2026 to codify content requirement exemptions and incorporate lessons learned from 2025 submissions. For 2026, the FDIC outlined submission expectations for covered IDIs (CIDIs), including adjustments to filing schedules and continued application of existing FAQs and waivers for certain content requirements. The FDIC also plans to conduct capabilities testing early next year to assess CIDIs’ abilities to populate virtual data rooms with key information to support resolution efforts. The guidance and proposed rule changes aim to align IDI resolution planning with operational priorities and reduce duplicative overlap with Title I planning where appropriate.

OCC, FDIC Issue Statement Regarding the Status of Certain Investment Funds and Their Portfolio Investments for Purposes of Insider Lending Restrictions and Related Reporting Requirements. On December 18, 2025, the OCC and the FDIC issued a joint statement clarifying supervisory expectations for OCC- and FDIC-supervised institutions regarding the regulatory status of certain investment interests for purposes of insider lending and related regulatory requirements. The statement rescinds the agencies’ prior interagency statements issued annually since 2019 and provides that the current statement will remain in effect unless amended, superseded, or rescinded in writing. The agencies explained that the statement is intended to provide continued regulatory clarity pending the Federal Reserve’s adoption of a final rule revising Regulation O to address the treatment of certain investment structures involving complex-controlled portfolio companies.

OCC Proposals on Preemption. On December 23, 2025, the OCC issued two notices of proposed rulemaking applicable to national banks and federal savings associations that offer escrow accounts in connection with real estate lending. The proposals would clarify the OCC’s position that federal law preempts state laws and regulations that purport to dictate whether, and at what rate, interest must be paid on escrowed funds or that restrict the assessment of fees in connection with escrow accounts. The OCC stated that such state requirements interfere with the exercise of national bank and federal savings association powers under the National Bank Act and the Home Owners’ Loan Act. The proposals would codify this preemption determination through amendments to the OCC’s regulations and are intended to promote uniformity and reduce compliance burden for federally chartered institutions operating in multiple states. Comments on both proposed rules are due 30 days after publication in the Federal Register.

OCC Continues Regulatory and Supervisory Tailoring Efforts for Community Banks. On December 17, 2025, the OCC issued proposed supplemental guidance for a simplified strategic plan process for community banks’ compliance with the Community Reinvestment Act (CRA). Comments on the proposed supplemental guidance are due by February 20, 2026. The OCC also announced revisions to the asset-size threshold amounts used to define “small bank or savings association” and “intermediate small bank or savings association” under the CRA’s regulations.

Remarks by Comptroller Gould at the Blockchain Association Policy Summit. On December 8, 2025, Comptroller Jonathan Gould delivered remarks at the Blockchain Association Policy Summit, where he focused on the importance of reinvigorating the chartering of new banks as a core OCC function and a driver of competition, innovation, and financial system dynamism. Gould observed that de novo chartering had stagnated in the post-financial crisis period but noted that the OCC has received a significant uptick in applications in 2025, including from entities engaged in digital asset and novel technology activities. He emphasized that national trust banks have long been authorized to engage in nonfiduciary custody and safekeeping activities, and argued that permitting charter applicants to engage in such activities is consistent with longstanding OCC practice and statutory authority. He also reaffirmed the OCC’s commitment to merit- and statutory-based review of charter applications to strengthen the federal banking system’s capacity to evolve with financial innovation.

OCC Releases Semiannual Risk Perspective. On December 18, 2025, the OCC released its Semiannual Risk Perspective for Winter 2025, identifying credit, market, operational, and compliance risks as the primary risk themes facing national banks and federal savings associations. The report highlights rising operational and compliance risks, including an increase in threats from foreign state-sponsored actors and sophisticated cybercriminal groups targeting financial institutions, as well as continued challenges stemming from elevated levels and increasing sophistication of fraud and scams. The report emphasizes the importance of strong governance, risk management, and operational resilience as banks navigate these evolving risk dynamics.

OCC Issuances: Rescissions. On December 30, 2025, the OCC announced it identified for rescission 55 outdated or replaced OCC issuances published between 1983 and 2023 and 21 transmittal (or cover) bulletins issued between 2003 and 2023.

OCC, FDIC, and State Attorneys General Seek Rehearing in DIDA Preemption Case. The OCC, the FDIC, and attorneys general from 20 states filed amicus briefs urging the U.S. Court of Appeals for the Tenth Circuit to rehear its decision in National Association of Industrial Bankers v. Weiser, which addresses the scope of state opt-out authority under the Depository Institutions Deregulatory and Monetary Control Act of 1980 (DIDA). The case arises from Colorado’s decision to opt out of DIDA and enforce its state interest-rate caps on loans made to Colorado borrowers. After the district court enjoined Colorado from enforcing its rate caps against state-chartered banks located outside Colorado, the Colorado Attorney General appealed. The Tenth Circuit reversed, holding that DIDA’s opt-out provision applies to loans in which either the lender or the borrower is located in the opt-out state. In their amicus briefs, the OCC, the FDIC, and the states argue that DIDA’s opt-out provision applies only when the lender is located in the opt-out state, and not based on borrower location. The FDIC asserted that the Tenth Circuit’s interpretation imposes “significant financial and operational burdens on state-chartered institutions,” while the OCC warned that the decision would advantage national banks over state-chartered banks and “diminish the vibrancy of the dual banking system.” The participating states similarly contended that the decision improperly interferes with other states’ ability to regulate and support their own financial institutions.

Call Reports: RFI on Regulatory Reporting Burden. On December 1, 2025, the Federal Reserve, OCC, and FDIC issued an RFI on sources of regulatory reporting burden for institutions that file Call Reports. Responses to the RFI are due by January 30, 2026.

FDIC Updates PPE List. On December 22, 2025, the FDIC released an updated list (as of December 15, 2025) of companies that have submitted notices for a Primary Purpose Exception (PPE) under the 25% or Enabling Transactions test.

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

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

Jason J. Cabral, New York (+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)

Hayden McGovern, Dallas (+1 214.698.3142, hmcgovern@gibsondunn.com)

© 2025 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.

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

Key Developments

On December 28, the Wall Street Journal published an article reporting that the Trump Administration has launched investigations into multiple major U.S. companies’ use of diversity initiatives in hiring and promotion. The Wall Street Journal reports that the Justice Department has sent companies in different industries demands for documents and information about workplace DEI programs. According to the article, the government’s investigations are proceeding under the False Claims Act. The article explains that “the Justice Department is embracing the theory that holding a federal contract while still considering diversity when hiring is, in effect, fraud against the government that entitles it to recoup potentially millions of dollars.” The article also cites to a May 19, 2025 enforcement memorandum issued by Deputy Attorney General Todd Blanche, directing the Justice Department to “investigate and, as appropriate, pursue claims against any recipient of federal funds that knowingly violates federal civil rights law,” including those that “knowingly engag[e] in racist preferences, mandates, policies, programs, and activities, including through diversity, equity, and inclusion (DEI) programs that assign benefits or burdens on race, ethnicity, or national origin.”

On December 19, Reuters published an article summarizing an interview with Chair of the U.S. Equal Employment Opportunity Commission (“EEOC”) Andrea Lucas, in which she described her “goal” to shift EEOC enforcement towards “a conservative view of civil rights.” Lucas stated that she is focused on “attacking” all forms of race discrimination, asserting that this includes diversity, equity, and inclusion initiatives. She told Reuters that the EEOC wants to have “strategic impact” on “race-restricted programs or sex-restricted programs or other actions that involve over distinctions between people based on race.” Reuters reports that the EEOC will “intensify” its inquiries into corporate DEI programs, including by using “web-archive searches to target companies that have only changed how they’ve talked about DEI.” White House spokesperson Liz Huston said in a statement to Reuters that “Chair Lucas and the Trump Administration are ensuring all Americans are treated fairly by rigorously enforcing civil rights laws, ending illegal DEI-motivated race and sex discrimination, and upholding the Constitution.” The article follows a December 18 LinkedIn post from Lucas, which contains a video in which Lucas encourages “white male[s] who ha[ve] experienced discrimination at work based on [their] race or sex” to contact the EEOC “as soon as possible,” informing them that they may have a “claim to recover money under federal civil rights laws.” As in the Reuters interview, Lucas emphasized in her LinkedIn video that the “EEOC is committed to identifying, attacking, and eliminating all forms of race and sex discrimination including against white male applicants and employees.”

On December 18, the U.S. Department of Health and Human Services announced upcoming proposed regulatory actions to limit access to gender-affirming care for minors. According to the press release, the Centers for Medicare & Medicaid Services “will release a notice of proposed rulemaking to bar hospitals from performing sex-rejecting procedures on children under age 18 as a condition of participation in Medicare and Medicaid programs.” The Centers for Medicare & Medicaid Services will also release “an additional notice of proposed rulemaking to prohibit the use of federal Medicaid funding for sex-rejecting procedures on children under age 18.”

On December 15, the U.S. Food and Drug Administration (“FDA”) issued a revised version of a January 2025 draft guidance, Study of Sex Differences in the Clinical Evaluation of Medical Products. The December 2025 draft guidance states that, “[h]istorically, the terms gender and sex were used interchangeably to refer to biological sex,” and therefore FDA “considers the term gender in this regulation to mean biological sex.” These revisions replace language in the January 2025 draft guidance stating that “FDA recognizes that sex and gender are not always concordant,” and that, while “gender is currently not a required data variable” for regulatory submissions, FDA “encourages inclusion of gender data particularly if gender may influence the outcome of interest.” The December 2025 guidance continues to note the importance of assessing the impact of sex in medical product development to determine if there may be differences, e.g., in effectiveness and/or safety, associated with the use of the medical product. It also continues to provide recommendations for increasing enrollment of female participants in clinical trials and non-interventional studies to help ensure the generalizability of results, analyzing and interpreting sex-specific data, and including sex-specific information in regulatory submissions of medical products.

Also on December 15, FDA issued a final guidance, Enhancing Participation in Clinical Trials— Eligibility Criteria, Enrollment Practices, and Trial Designs, that revised a November 2020 final guidance on Enhancing the Diversity of Clinical Trials. The revised version of the final guidance removes express references to “diversity” and “inclusive” practices, and no longer expressly encourages “enhancing the diversity of clinical trial populations.” The guidance otherwise remains similar in substance and continues to recommend trial design and methodological approaches that facilitate “enrollment of a broader population,” emphasizing that enrolling study participants “with a wide range of baseline characteristics may create a study population that more accurately reflects the patients likely to use the drug if it is approved and allow assessment of the impact of those characteristics on the safety and effectiveness of the study drug.” The guidance also continues to encourage inclusion of women and “underrepresented racial and ethnic groups in clinical trials,” noting that “[i]nadequate participation and/or data analyses from a representative population can lead to insufficient information pertaining to medical product safety and effectiveness for product labeling.”

On December 12, the National Institutes of Health (“NIH”) issued internal staff guidance titled “Reviewing Grants for Priority Alignment,” which instructs grant reviewers to “review grants for alignment with the priorities set forth in the August 15, 2025, NIH Director’s Priorities Statement.” The internal guidance notes that “NIH-funded research can focus on or include specific populations,” including racial minorities, “if it is scientifically justified.” This justification might include that “the disease/condition could be more prevalent in a certain group, or that group is not currently sufficiently represented in studies of a potential therapeutic to make conclusions about its efficacy or side effects in the group.” NIH also stated that, on the other hand, “[g]rants intended to increase workforce diversity by granting preferential treatment to individuals based on protected characteristics such as race or ethnicity are not consistent with the NIH’s priorities.”

On December 10, the Florida Attorney General, James Uthmeier, filed a complaint against Starbucks in relation to its DEI policies and practices, alleging that the company implemented and maintained illegal race-based policies for hiring and employee advancement in violation of the Florida Civil Rights Act of 1992. The complaint specifically alleges that Starbucks: “1) hires applicants because of their race, including by establishing hiring quotas and goals based on race; 2) pays employees different wages because of their race or ethnicity; 3) ties executive compensation to those executives’ participation in mentorship programs open only to persons of certain favored races and those executives’ retention rates of employees who belong to certain favored races; and 4) excludes people of certain races from networking and mentorship opportunities.” To support these allegations, the complaint points to various DEI policies and programs, including Starbucks’ alleged maintenance of “a racial quota for its board of directors” and its supposed tying of “executive compensation to [a] numerical target based on race” in which “executives must increase the number of ‘people of color’ working in management positions by at least 1.5 percentage points by fiscal year 2026.” The State seeks declaratory and injunctive relief as well as “civil penalties of $10,000 for each instance of racial discrimination that Starbucks is committing or has committed against a Florida resident.” Starbucks has not yet responded to the complaint.

On December 9, the U.S. Department of Justice issued a final rule, applicable to recipients of federal funding, intended to eliminate liability for disparate impact discrimination under Title VI of the Civil Rights Act of 1964. The new rule clarifies that Title VI will continue to prohibit intentional discrimination. In an announcement, Assistant Attorney General Harmeet K. Dhillon of the Justice Department’s Civil Rights Division stated that “[t]he prior ‘disparate impact’ regulations encouraged people to file lawsuits challenging racially neutral policies, without evidence of intention discrimination,” and that the new rule “will restore true equality under the law by requiring proof of actual discrimination, rather than enforcing race- or sex-based quotas or assumptions.” The rule preamble notes that “eliminating disparate-impact liability does not preclude the use of data on disparate outcomes to help prove intentional discrimination” and that “[t]his use of statistical disparity to help establish, as an evidentiary matter, liability for intentional discrimination materially differs from using it to impose liability for an unintentional disparate impact.”

On December 8, the National Science Foundation (“NSF”) issued supplemental changes to its Proposal and Award Policies and Procedures Guide (“PAPPG”). The changes included striking “inclusivity” as a “hallmark of scientific integrity” and striking language that an “inclusive environment” is “conducive to excellence in research and education.” The background section for the supplement states that Executive Order 14332 (“Improving Oversight of Federal Grantmaking”), which had specifically called out as problematic NSF grants to “educators that promoted Marxism, class warfare propaganda, and other anti-American ideologies in the classroom,” requires the Office of Management and Budget (“OMB”) to streamline and transform the OMB Uniform Guidance, and therefore NSF will defer release of a full revised PAPPG until Fiscal Year 2026 to “ensure alignment with the Uniform Guidance.” NSF stated it will continue to issue policy changes via NSF supplemental Policy Notices in the interim.

On November 19, the Guardian reported on an internal memorandum obtained from the U.S. Department of State that proposes to suspend 38 universities from the Diplomacy Lab, a federal research partnership program that pairs university researchers with State Department policy offices to conduct semester-long projects on foreign policy challenges. According to the Guardian, the proposed suspension is because the 38 identified universities allegedly “openly engage” in DEI hiring practices or set DEI objectives for candidate pools. The suspension would be effective January 1, 2026. The memorandum was accompanied by a spreadsheet evaluating 75 universities on a four-point scale ranging from institutions showing “clear DEI hiring policy” to institutions with “merit-based hiring with no evidence of DEI.” Along with the 38 universities recommended for suspension, ten schools were approved to join the Diplomacy Lab.

On November 21, Reuters and BBC reported the State Department issued new instructions related to the drafting of its congressionally mandated annual Human Rights Report. According to reporting, the State Department is instructing all US embassies and consulates involved in compiling the report to note when other countries enforce DEI or affirmative action policies that “‘provide preferential treatment’ to workers on the basis of race, sex, or caste.” The new instructions also mandate that potential human rights infringements include facilitating mass migration, subsidizing abortions or abortion drugs, allowing gender-transition surgery for children, and arresting or investigating individuals for speech. State Department deputy spokesperson, Tommy Pigott, said that “In recent years, new destructive ideologies have given safe harbor to human rights violations. The Trump Administration will not allow these human rights violations, such as the mutilation of children, laws that infringe on free speech, and racially discriminatory employment practices, to go unchecked.”

Media Coverage and Commentary:

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

• Inside Higher Ed, “Is DEI Dead—Or Just Changing?” (December 15): Sara Weissman of Inside Higher Ed reports on a nation-wide pattern of universities “slash[ing] positions, services and programs [students] celebrated and relied on amid a deluge of federal and state challenges to anything perceived as DEI.” According to Weissman, across the country universities are rebranding or shutting down programs, offices, and resource centers. Some have cancelled identity-related traditions like affinity graduations and residential communities geared toward students of certain backgrounds. Weissman reports that universities have been feeling pressure from state-level anti-DEI laws over the past several years, but the pressure increased when President Trump took office in January 2025, citing the Department of Education’s February 14 Dear Colleague letter, the DOJ’s guidance memo of July 30, and the billions of dollars in research grants the federal government has “slashed, frozen and stalled” often due to “perceived ties to DEI concepts.” Following these developments, Weissman reports that some universities have removed hundreds of courses from their catalogues, while others have taken steps to scrub their websites of mention of the diversity offices they previously touted. According to Weissman, “Whether DEI will continue in some form is an open question currently under debate by current and former DEI officers and researchers. Some retain their optimism; others argue it’s going to take years, even decades, for campus infrastructure to recover from the full extent of this year’s losses—if a comeback is even possible.”
• Law.com, “Finally With Quorum, EEOC Likely to Unleash Reverse-Discrimination, Bathroom-Policy Cases” (December 4): Law.com’s Brendan Pierson reports that the EEOC is expected to become more active following the restoration of its quorum and new leadership aligned with President Trump’s priorities. This activity could include heightened scrutiny of corporate DEI initiatives, pursuit of religious accommodation disputes, and scrutiny of workplace policies affecting transgender employees. Pierson also reports that EEOC Chair Andrea Lucas has focused on pursuing “reverse discrimination” claims (discrimination claims brought by those considered to be in “majority” groups) and has indicated a commitment to “dismantling identity politics.” According to Pierson, employment lawyers also anticipate increased enforcement activity, particularly related to DEI programs, with Jason Schwartz, co-chair of Gibson, Dunn & Crutcher’s labor and employment group, stating, “I think they really are going to kick it into high gear.” Schwartz is also quoted as saying that programs explicitly reserving positions based on protected characteristics may become EEOC targets, while broader recruiting efforts are likely permissible absent evidence of preference. Further, Schwartz cautioned that seemingly neutral criteria could draw scrutiny if internal communications suggest discriminatory intent. According to Pierson, Schwartz emphasized that employers must carefully navigate overlapping and sometimes conflicting federal, state, and local requirements, describing the environment as “basically a no-win situation” for many employers.
• Boston Globe, “Companies Rethink DEI Amid Legal Risks and Backlash” (December 2): Yogev Toby of the Boston Globe reports that employers are recalibrating DEI efforts in response to President Trump’s challenges to DEI initiatives. Toby reports, for example, that submissions to the Boston Globe’s DEI Champions list have declined (19 this year versus 36 last year), that recent polls have reflected waning public support for formal DEI initiatives, and that, according to the Conference Board, 53% of S&P 100 companies modified DEI messaging in major filings in 2025. Toby describes various experts’ creative responses to these trends. For example, he quotes Harvard sociologist Frank Dobbin, who suggests that employers focus on performance management tools in lieu of formal DEI programs, and advises that employers implement programs “without forcing the DEI label on them.” Similarly, Toby cites the strategist Lily Zheng, who advocates a Fairness, Accessibility, Inclusion, and Representation framework focused on systemic fixes that reduce bias without inviting claims of discrimination. Toby also reports that companies are increasingly emphasizing governance, merit-based practices, and employee development, as they seek to balance compliance obligations with efforts to support diverse and inclusive workplaces.
• New York Times, “How Universities Are Responding to Trump” (December 1): Alan Blinder of the New York Times reports that, in response to the Trump Administration’s legal action against U.S. colleges and universities, including threats to freeze their federal funds in response to alleged antisemitism and “ideological indoctrination” relating to DEI, institutions are choosing between reaching resolution agreements with the Administration or fighting back. Blinder reports that five universities have made deals with the Administration, with the University of Virginia agreeing to follow the Administration’s interpretation of the SFFA decision; Columbia and Brown agreeing to policy changes around antisemitism; and Cornell and Northwestern paying $60 million and $75 million, respectively, to the Administration. The University of Pennsylvania also agreed to implement certain policies around transgender people in athletics and to apologize for a trans athlete’s participation on its women’s swimming team several years ago. Other schools are fighting back. As Blinder reports, when Harvard rejected Trump Administration proposals to audit allegedly antisemitic programs and departments, the Administration started cutting off billions in federal funds, and Harvard responded by suing the Administration. In September, a federal judge in Boston largely ruled in Harvard’s favor, and in another case, the same judge ruled that the Administration cannot block Harvard from enrolling international students. Blinder reports that Harvard and the Administration may yet settle. Finally, Blinder reports that the White House has leveraged federal research funding and new initiatives, such as the “Compact for Academic Excellence in Higher Education,” which proposes limits on international students, tuition freezes, an embrace of standardized testing and definitions of gender “according to reproductive function and biological processes.” Blinder reports that most schools have rejected the Compact proposal.
• Financial Times, “DEI-linked pay awards drop sharply” (November 26): Alexandra White of the Financial Times reports that executive pay linked to diversity, equity, and inclusion metrics has dropped sharply. Based on an analysis by ISS-Corporate, White reports that the number of S&P 500 companies that disclosed use of DEI metrics in executive pay packages dropped 30%, from 126 in 2024 to 88 in 2025. Further, the analysis showed that companies that disclosed that they used DEI metrics but refrained from revealing details fell by 46%. According to White, the analysis showed that 23.3% of S&P 500 companies tied executive pay to DEI metrics in 2025. According to White, Jun Frank of ISS-Corporate opined that these trends were based on anti-DEI pushback by the Trump Administration, which has changed how companies talk about DEI. White also reported that Kyle Eastman, a partner at Compensation Advisory Partners, cited the political environment as the reason for the drop, but stated the drop does not necessarily reflect a change in companies’ values.
• Law.com, “ABA Considers Repeal of Diversity Standard” (November 14): Christine Charnosky of Law.com reports that the American Bar Association’s Council of the Section of Legal Education and Admissions has voted to defer consideration of whether to repeal Standard 206, which addresses diversity and inclusion in law school admissions, and referred the issue back to the Standards Committee for further review. Standard 206 has been suspended since February, with enforcement currently stayed through August 31, 2026, due to concerns that enforcement would impose significant hardship on law schools. On November 13, the Standards Committee recommended Standard 206 be repealed, citing compliance challenges for law schools due to shifting state and federal law. According to Charnosky, the Standards Committee has indicated that it is hard to maintain a uniform accreditation standard in a shifting legal environment and noted that similar standards have been withdrawn by other accrediting bodies. The council also referred proposed revisions to Standard 205, governing nondiscrimination policies, for further consideration.

Case Updates:

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

1. Contracting claims under Section 1981, the U.S. Constitution, and other statutes:

• American Alliance for Equal Rights and Do No Harm v. Buckfire & Buckfire PC, No. 2:25-cv-13617 (E.D. Mich. 2025): On November 13, 2025, the American Alliance for Equal Rights and Do No Harm sued Buckfire & Buckfire, P.C., a Michigan law firm, alleging that the firm discriminates against white scholarship applicants in violation of Section 1981. The plaintiff organizations allege that the firm offers two scholarships—one for law students and one for medical students—that are “automatically open to member[s] of an ethnic, racial, or other minority group” but only open to white applicants who “demonstrate a defined commitment to issues of diversity.” The plaintiff organizations assert claims on behalf of their “members who are victims of Buckfire’s discrimination.” The plaintiff organizations seek a declaratory judgment that the scholarships violate Section 1981, a permanent injunction prohibiting defendants from “knowing applicants’ race” and from “considering race as a factor when administering its scholarship programs,” nominal damages, and attorneys’ fees.
• Desai v. PayPal, No. 1:25-cv-00033-AT (S.D.N.Y. 2025): On January 2, 2025, Andav Capital and its founder Nisha Desai sued PayPal, alleging that PayPal unlawfully discriminates by administering its investment program for minority-owned businesses in a way that favors Black and Latino applicants. Desai, an Asian-American woman, alleges PayPal violated Section 1981, Title VI, the New York State Human Rights Law (“NYSHRL”) and the New York City Human Rights Law (“NYCHRL”). On April 16, 2025, PayPal moved to dismiss the complaint, asserting that the plaintiffs lack standing because they never applied for funding under the challenged program. PayPal also argued that the plaintiffs’ claims are untimely, and that the plaintiffs failed to state a claim on the merits. On May 7, 2025, the plaintiff filed an amended complaint, adding a claim under the Equal Credit Opportunity Act (“ECOA”), alleging that PayPal violates the ECOA by racially discriminating against businesses who are excluded from PayPal’s investment program for minority-owned businesses. On May 28, 2025, PayPal moved to dismiss the amended complaint. PayPal argued that the plaintiffs’ Section 1981 and state law claims are untimely, their credit discrimination claims fail on the merits because the plaintiffs do not allege they applied for or were qualified to receive credit under the challenged program, and their local law claim should be dismissed because the relevant fund investments were not public accommodations. PayPal is represented by Gibson Dunn in this matter.
  • Latest update: On December 19, 2025 the court granted in part PayPal’s motion to dismiss, concluding that the plaintiffs failed to plead a claim under the ECOA or NYSHRL because they failed to plead that they were applicants for credit. The court rejected PayPal’s arguments with respect to the statute of limitations and on the merits of the NYCHRL claim. The court sua sponte denied leave to amend and scheduled an initial pre-trial conference for January 27, 2026.
• State of California, et al. v. U.S. Department of Education, et al., No. 1:25-cv-10548 (D. Mass. 2025): On March 6, 2025, the states of California, Massachusetts, New Jersey, Colorado, Illinois, Maryland, New York, and Wisconsin (collectively, “the Plaintiff States”) sued the Department of Education, alleging that it arbitrarily terminated previously awarded grants under the Teacher Quality Partnership and Supporting Effective Educator Development programs in violation of the Administrative Procedure Act (“APA”). On June 2, 2025, the Plaintiff States filed an amended complaint. On June 30, the Department of Education moved to dismiss for lack of jurisdiction or, in the alternative, to transfer the case to the Court of Federal Claims. In its motion, the Department argued that the APA’s waiver of sovereign immunity does not extend to claims sounding in contract, like the Plaintiff States’ claims. In the alternative, the Department argued that “the Tucker Act grants the Court of Federal Claims jurisdiction over suits based on any express or implied contract with the United States.” On July 21, 2025, the Plaintiff States filed an opposition to the Department’s motion to dismiss, arguing that their claims do not belong in the Court of Federal Claims because they are not contractual but instead, are based on alleged violations of the APA and the U.S. Constitution, and further, that they seek equitable, prospective relief rather than contract-based remedies.
  • Latest update:: On November 13, 2025, the court granted in part and denied in part the Department’s motion to dismiss, holding that it lacked jurisdiction over the Plaintiff States’ claims seeking disbursement of funds under the terminated grants and that such jurisdiction lies solely with the Court of Federal Claims. The court retained jurisdiction over the Plaintiff States’ constitutional and statutory claims seeking to vacate and set aside the agency directives. The court also retained jurisdiction over the constitutional and ultra vires claims, and stated that although the court “lacks any power to bring” the grants back, if it “finds Defendants’ actions were unlawful under the APA and the Constitution, the grantees in Plaintiff States can file suit in the Court of Federal Claims to request their money damages under the contract.” The court also stated that the issue of whether the Plaintiff States will be successful on the merits will be taken up later in the litigation.

2. Employment discrimination and related claims:

• Bobowicz v. Powell et al., No. 5:24-cv-00246 (W.D.N.C. 2024): On November 18, 2024, a former employee of the Federal Reserve Board, sued the Board and several of its officials, including Jerome Powell, alleging he was discriminated against in violation of Title VII and the Age Discrimination in Employment Act when he became “a target for termination” because he was “a heterosexual, white, male who was the oldest employee in both his local and national [teams]” and retaliated against after refusing a COVID-19 vaccine for religious reasons. On January 6, 2025, the plaintiff filed an amended complaint, adding allegations that “the Federal Reserve Board’s DEI policies were part of a more comprehensive federal effort to incorporate” protected characteristics into hiring and employment practices. Defendants moved to dismiss the complaint for failure to state a claim and for improper venue, arguing that venue lies in Washington, D.C. because all relevant employment decisions were made by officials in Washington, D.C.. On October 31, 2025, the parties stipulated to dismiss all claims against most of the defendants—leaving only Powell and the Board of Governors of the Federal Reserve System as defendants in the case.
  • Latest update: On November 3, 2025, the plaintiff filed an opposition to the motion to dismiss and to transfer venue. He argues that venue is proper in the Western District of North Carolina because nearly all of the alleged discriminatory acts and their effects occurred while he was teleworking from his North Carolina residence. He defended his discrimination and retaliation claims on the merits. On November 26, 2025, the Board filed a reply, noting that the plaintiff has abandoned several claims by failing to oppose their dismissal, including his Section 1981 claim and any argument against striking his claim for punitive damages.

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

• Fell et al. v. Trump et al., 1:25-cv-04206 (D.D.C. 2025): On December 3, 2025, four former federal employees who had separated from the federal government pursuant to Executive Orders 14151 and 14173 sued President Donald Trump and numerous federal agencies and officials, challenging the Executive Orders and their implementing directives as violating the First Amendment, Title VII, and the Civil Service Reform Act based on alleged failures to follow required separation and Reductions in Force procedures. The plaintiffs allege that white, male employees were largely protected from separation due to the Executive Orders. The plaintiffs bring this suit on behalf of a putative class of purportedly similarly situated federal employees. They seek declaratory and injunctive relief, including a declaration that the orders and implementing directives are unlawful, expungement of termination from their records, and reinstatement with back pay, lost benefits, and other necessary compensatory relief.
  • Latest update: On December 4, 2025, the case was assigned to Judge Tanya Chutkan in the U.S. District Court for the District of Columbia.
• President and Fellows of Harvard College, et al. v. U.S. Department of Health and Human Services, et al., No. 1:25-cv-11048 (D. Mass. 2025): On April 21, 2025, the President and Fellows of Harvard College sued a number of federal agencies and their administrators in relation to 15 letters and orders freezing or terminating over $2.2 billion in federal research grants. On September 3, 2025, the district court permanently enjoined the defendants from “[i]mplementing, instituting, maintaining, or giving any force or effect” to the letters and orders, concluding that the Administration’s decision to freeze or terminate this federal funding amounted to an attempt “to pressure Harvard to accede to the government’s demands in a way that squarely violates Plaintiffs’ First Amendment rights and ignores the procedural requirements of Title VI and, to a certain extent, the [Administrative Procedure Act].” The court also permanently enjoined the defendants from “[i]ssuing any other termination, fund freezes, stop work orders, or otherwise withholding payment on existing grants or other federal funding, or refusing to award future grants, contracts, or other federal funding to Harvard in retaliation for the exercise of its First Amendment rights, or on purported grounds of discrimination without compliance with the requirements of Title VI.” As it has done in other challenges to the Administration’s recission of federal funding grants, the government argued that the case belonged in the Court of Federal Claims because it related to government contracts. The district court rejected this argument, holding that while “[t]he resolution of these claims might result in money changing hands, . . . what is fundamentally at issue is a bedrock constitutional principle rather than the interpretation of contract terms.”
  • Latest update: On December 18, 2025, the defendants filed a notice of appeal.

4. Actions against educational institutions:

• Grande v. Hartford Board of Education et al., 3:24-cv-00010-SFR (D. Conn. 2024): On January 3, 2024, John Grande, a white male physical education teacher in the Hartford school district, filed suit against the Hartford School Board after allegedly being required to attend mandatory DEI trainings and thereafter subjected to a retaliatory investigation and wrongful threat of termination. He claimed the school’s actions constitute retaliation and compelled speech in violation of the First Amendment. On February 5, 2025, the defendants moved for summary judgment, arguing that the plaintiff’s objections to the trainings were made in the course of his official duties as a District employee and therefore were not protected by the First Amendment. They further argued that the District’s interest in effectively administering its professional development sessions outweighed the plaintiff’s speech interests. On September 9, 2025, the court denied in part the summary judgment motion, allowing the plaintiff’s First Amendment claim to go forward against two of the three defendants: school board officials sued in their official capacities. The court found that two of the officials did not have qualified immunity because there existed issues of fact as to whether their motivations were retaliatory. As to the merits of the First Amendment claim, the court held that there remained a dispute of material fact about whether the plaintiff’s statements about DEI trainings were made in the scope of his duties as a school district employee and whether those statements pertained to matters of public concern. However, the court granted summary judgment as to the plaintiff’s compelled speech claim, concluding that it was undisputed that the plaintiff was not required to speak during the relevant breakout session at which he made the statement. On September 16, 2025, the defendants filed a motion for reconsideration, arguing that the court erred in not granting qualified immunity to the two individual defendants.
  • Latest update: On November 24, 2025, the plaintiff opposed the defendants’ motion for reconsideration. He asserted that the defendants failed “to satisfy the strict standard for granting a motion for reconsideration” because they had not cited any overlooked, controlling decisions. He also argued that the court’s decision to deny qualified immunity for the two school administrators did not result in “manifest injustice.”

Legislative Updates

• New York Assembly Bill 5471: On November 19, 2025, the New York State Assembly amended proposed Assembly Bill 5471, which was first introduced in February 2025. The bill aims to promote diversity, equity, and inclusion within the state and New York City pension systems by mandating minimum asset allocations to BIPOC (Black, Indigenous, and People of Color) asset managers, financial institutions, and professional service firms. It also requires all public pension funds to adopt an investment manager diversity policy and provide opportunities for emerging BIPOC-owned firms. As revised, the bill dictates that 20% of a fund’s total assets and 25% of its active assets would have to be invested with BIPOC managers. Funds will have six months from the bill’s effective date to establish compliance mechanisms and develop a comprehensive implementation plan. The comptroller will compile and publish annual reports on progress, and funds will need to implement public outreach and educational programs to engage stakeholders. The bill also includes an “Investment Transparency Act,” which requires firms to report aggregated demographic information about founding teams of businesses funded in the previous calendar year. Assembly Bill 5471 is currently in the Assembly Governmental Employees Committee.

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

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

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

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

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

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

Molly T. Senger – Partner, Labor & Employment Group
Washington, D.C. (+1 202-955-8571, msenger@gibsondunn.com)

© 2025 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 Gibson Dunn’s Accounting Firm Quarterly Update for Q3 2025. The Update is available in .pdf format at the below link, and addresses news on the following topics that we hope are of interest to you:

• SEC Returns to Simultaneous Consideration of Settlement and Waiver Requests
• Ninth Circuit Rejects Challenge to SEC No-Admit/No-Deny Rule
• Accounting Firm Settles Lawsuit Challenging Constitutionality of PCAOB
• Ninth Circuit Holds Companies May Be Required to Disclose Interim Financial Results
• SEC Allows Companies to IPO with Mandatory Arbitration Provisions
• SEC Allows Retail Voters to Give Standing Proxy Instructions
• SEC Announces Cross-Border Fraud Task Force
• UK Entities Update Guidance on Failure to Prevent Fraud
• DOJ Reaches Settlement in Two FCA Cybersecurity Cases
• FTC Changes Strategy on Non-Compete Agreements

Please let us know if there are topics that you would be interested in seeing covered in future editions of the Update.

Download Full Newsletter

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Warmest regards,
Jim Farrell
Michael Scanlon

Chairs, Accounting Firm Advisory and Defense Practice Group, Gibson, Dunn & Crutcher LLP

In addition to the practice group chairs, this update was prepared by David Ware, Monica Limeng Woolley, Bryan Clegg, Hayden McGovern, Ty Shockley, Garrick R. Donnelly, and Jimmy Scoville.

Accounting Firm Advisory and Defense Group Chairs:

Jim Farrell – Co-Chair, New York (+1 212-351-5326, jfarrell@gibsondunn.com)

Michael Scanlon – Co-Chair, Washington, D.C.(+1 202-887-3668, mscanlon@gibsondunn.com)

© 2025 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 potentially expands disclosure obligations for companies and may increase securities litigation risk.

In Sodha v. Golubowski, No. 24-1036, a divided Ninth Circuit panel held that a company may violate the securities laws if it discloses historical financial results in securities offering materials without also disclosing current, intra-period financial results that materially differ from the historical results.  The Court also held that companies’ disclosure obligations under Item 303 of Regulation S-K in certain circumstances are not limited to long-standing trends, and short-lived, material shifts may also require disclosure in securities offering materials.

Background

Robinhood Markets, Inc. conducted an initial public offering (IPO) in July 2021—while its second quarter was still in progress.  As part of its IPO, the company filed a registration statement, which included disclosures about its financial performance and key performance indicators (KPIs) through the first quarter of 2021 and its expectations for the second and third quarters of 2021.  After the IPO, when the company reported full financial results and KPIs for the second quarter, its stock price dropped.

Plaintiffs sued under Sections 11, 12, and 15 of the Securities Act.  They alleged that the registration statement omitted material information about a downturn in the company’s performance in the second quarter—the quarter in progress at the time of the IPO—which purportedly contradicted the impression given by the company’s accurate disclosures regarding historical performance.

The district court dismissed the case with prejudice in January 2024.  It held that a company has no obligation to disclose intra‑quarter declines unless they reflected an “extreme departure” from the company’s historical results.  The district court also found that the allegedly deteriorating financial results and KPIs were “not so persistent” as to require disclosure as “known trends” under Item 303.  Plaintiffs appealed to the Ninth Circuit shortly thereafter.

Issue

Do Sections 11 and 12 of the Securities Act create a duty to disclose material intra-period results in securities offering materials?

Court’s Holding

The court held that under Sections 11 and 12, a company has a duty to disclose material information in securities offering materials where a subsequent event renders a previous statement on the same topic misleading.

What It Means

The Ninth Circuit’s decision in Golubowski represents a potential expansion in companies’ disclosure obligations under the securities laws in the context of public offerings, at least with respect to private securities litigation in the Ninth Circuit.  Many courts have held that companies are not required to disclose in their offering materials intra-period results for a quarter that is still in progress unless those results reflect a “known trend” that must be disclosed under Item 303 or are an “extreme departure” from historical results.  See, e.g., Shaw v. Digital Equipment Corp., 82 F.3d 1194, 1210 (1st Cir. 1996) (registration statement should disclose if the “quarter in progress at the time of the public offering will be an extreme departure” from historical results).  Assuming Golubowski stands, the Ninth Circuit now requires disclosure in offering materials where intra-period results are “material,” and has expressly rejected the “extreme departure” test adopted by the First Circuit.  The Ninth Circuit held that “the disclosure duty arises from the combination of a prior statement and a subsequent event, which, if not disclosed, renders the prior statement false or misleading.”  In other words, if this decision stands, companies undertaking a public offering would need to consider implications of this case in formulating decisions on whether to disclose material information concerning interim events—including intra-quarter declines in financials and metrics—that contrast with disclosures of historical information about the same topic.

The panel also clarified the scope of disclosure obligations under Item 303 in the context of public offerings.  The panel expressly rejected the bright-line rule adopted by some courts that a business pattern must persist for at least two months to trigger disclosure as a known trend under Item 303.  It explained that companies’ disclosure obligations under Item 303 may be triggered by short-lived but material shifts, and pointed to the fallouts from the COVID pandemic and 2008 financial crisis as examples.  

The Court’s opinion is available here.

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The following Gibson Dunn lawyers prepared this update: Michael J. Kahn and Kelsey Matevish.

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 or Securities Regulation & Corporate Governance practice groups:

Securities Litigation:

Michael D. Celio – Palo Alto (+1 650.849.5326, mcelio@gibsondunn.com)
Colin B. Davis – Orange County (+1 949.451.3993, cdavis@gibsondunn.com)
Jonathan D. Fortney – New York (+1 212.351.2386, jfortney@gibsondunn.com)
Michael J. Kahn – San Francisco (+1 415.393.8316, mjkahn@gibsondunn.com)
Allison K. Kostecka – Denver (+1 303.298.5718, akostecka@gibsondunn.com)
Monica K. Loseman – Co-Chair, Denver (+1 303.298.5784, mloseman@gibsondunn.com)
Brian M. Lutz – Co-Chair, San Francisco (+1 415.393.8379, blutz@gibsondunn.com)
Mary Beth Maloney – New York (+1 212.351.2315, mmaloney@gibsondunn.com)
Jason J. Mendro – Co-Chair, Washington, D.C. (+1 202.887.3726, jmendro@gibsondunn.com)
Alex Mircheff – Los Angeles (+1 213.229.7307, amircheff@gibsondunn.com)
Lissa M. Percopo – Washington, D.C. (+1 202.887.3770, lpercopo@gibsondunn.com)
Jessica Valenzuela – Palo Alto (+1 650.849.5282, jvalenzuela@gibsondunn.com)
Craig Varnen – Co-Chair, Los Angeles (+1 213.229.7922, cvarnen@gibsondunn.com)

Securities Regulation & Corporate Governance:

Aaron Briggs – San Francisco (+1 415.393.8297, abriggs@gibsondunn.com)
Mellissa Campbell Duru – Washington, D.C. (+1 202.955.8204, mduru@gibsondunn.com)
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
Brian J. Lane – Washington, D.C. (+1 202.887.3646, blane@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
James J. Moloney – Orange County (+1 949.451.4343, jmoloney@gibsondunn.com)
Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)
Michael A. Titera – Orange County (+1 949.451.4365, mtitera@gibsondunn.com)
Geoffrey E. Walter – Washington, D.C. (+1 202-887-3749, gwalter@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

© 2025 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.

Gibson Dunn lawyers are closely monitoring these developments and are available to discuss these issues as applied to a particular business or assist in preparing a public comment for submission in response to the FTC’s public inquiry.

On September 5, the U.S. Federal Trade Commission (FTC) announced a shift in its strategy for reining in anticompetitive non-compete agreements.  The FTC voted 3-1 to dismiss its appeals in Ryan, LLC v. FTC, No. 24-10951 (5th Cir.), and Properties of the Villages v. FTC, No. 24-13102 (11th Cir.), and to accede to the vacatur of the Non-Compete Clause Rule by the Northern District of Texas.[1]  Had it gone into effect, the Non-Compete Clause Rule would have banned the use of non-compete agreements nationwide, impacting 30 million workers by the FTC’s own estimates.  We previously reported the details of the Final Rule here.  On September 8, the Fifth Circuit issued an order formally dismissing the Ryan appeal.[2]  The Non-Compete Rule was promulgated in April 2024, but rendered unenforceable nationwide after a team led by Gibson Dunn attorneys persuaded the court to set it aside.  You can read more about Gibson Dunn’s work obtaining that result here and here.

In his statement accompanying the dismissals, Chairman Andrew N. Ferguson, joined by Commissioner Melissa Holyoak, emphasized that the FTC remains concerned with the anticompetitive effects of non-compete agreements, but will shift its focus from defending the Non-Compete Rule to investigating and litigating specific cases.[3]  Commissioner Mark Meador agreed, stating that he “fully support[s] rigorous enforcement against noncompete agreements.”[4]  Chairman Ferguson warned that companies “in industries plagued by thickets of noncompete agreements” will receive warning letters from his office in the near term, “urging them to consider abandoning those agreements.”[5]

In his concurring statement, Commissioner Meador listed several factors that are important when evaluating non-competes, which may indicate enforcement priorities for the FTC going forward.[6]  These factors include:

• “[W]age and skill level” of workers required to sign non-compete agreements;
• “Deployment in a distribution network,” where such agreements may discourage horizontal competition;
• “Independent contractors,” with whom non-compete agreements “may more closely resemble exclusive dealing”;
• “Likelihood of Free Riding” absent non-compete agreements;
• “Availability of Less Restrictive Alternative[s],” such as non-disclosure agreements, customer non-solicitation agreements, and intellectual-property protections;
• “Scope and Duration” of the non-compete agreements, with particular concern for agreements lasting longer than one to two years, applying more broadly than the geographic boundaries of the employer’s current operations or the locations where the employee performed regular duties, and restricting an employee’s ability to pursue work in industries or professions unrelated to the company’s core business or the employee’s specific role;
• “Market Power” of the employer; and
• “Evidence of Economic Effects,” such as reduced labor mobility or increased barriers to entry.[7]

Focus on Enforcement Actions

The FTC has taken immediate steps to implement this shift in priorities.  On September 4, 2025, the FTC filed a complaint against Gateway Services and its subsidiary Gateway US Holdings, Inc. (collectively, Gateway)—the largest pet cremation services company in the United States, with almost 2,000 U.S.-based employees.[8]  The FTC alleges that, beginning in 2019, Gateway adopted a policy of requiring all new employees to sign a non-compete agreement regardless of the given employee’s position or responsibilities.[9]  These agreements typically prohibited employees from working in the pet cremation service industry anywhere in the United States for one year following their employment with Gateway.[10]  The FTC also alleges that, in at least one instance, Gateway responded to the entry of a competing pet cremation business by requiring all its employees in that market to sign non-compete agreements, including hourly employees who operated the crematories and transported the deceased pets from veterinary clinics to Gateway’s facilities.[11]  According to the FTC, these non-compete agreements enabled Gateway to suppress competition in the labor market and to impede the entry and expansion of Gateway’s competitors in the pet cremation services industry.[12]

Alongside the complaint, the FTC voted 3-1 to approve a proposed consent order against Gateway that prevents Gateway from using non-compete clauses in its employment agreements, with limited exceptions.[13]  The FTC is taking public comments on the proposed order, which permits Gateway to enter into non-compete agreements as part of “the sale of a business, provided that individuals subject to such an agreement have a pre-existing equity interest in the business being sold.”[14]  The proposed order also exempts certain specific employees, including equity holders, those with outside business relationships with Gateway, very senior managers, and those with unique access to confidential information.[15]

The same day, the FTC’s Joint Labor Task Force, which was launched earlier this year,[16] initiated a public inquiry, calling for comments from current and former employees and rival employers affected by non-compete agreements.[17]  The request for information specifically identified “healthcare markets” as an area of concern, stating that putative “harms” from non-competes with doctors and nurses “may be particularly acute in rural areas where medical services are already stretched thin.”[18]  Comments are requested by November 3, 2025.

Meanwhile, non-competes continue to be the subject of intense focus at the state level.  Dozens of States have enacted legislation restricting non-competes based on factors such as profession or income level, and four States—California, North Dakota, Minnesota, and Oklahoma—ban nearly all non-competes.  In other States, such as Florida, non-competes are widely enforceable.

Takeaways

Although the FTC has abandoned the Non-Compete Rule, it has clearly signaled an interest in challenging employment contracts and agreements between employers that increase labor market frictions.  Applicable state laws, moreover, have seen significant revision in recent years.  It is therefore imperative that companies ensure that their hiring and employment policies and practices conform with employment and antitrust laws.  That includes:

• Take an inventory of restrictive covenants. Contract terms that could be viewed as limiting employee mobility could be included in employment and other agreements, such as equity plans and awards, severance agreements, and deal-based documents.
• Consider the duration, scope, and purpose of those provisions—including the groups of employees asked to enter into the provisions—and whether the provisions are tailored to achieve the company’s objectives.
• Monitor changes in federal and state law, with particular focus on States in which the company has a significant headcount.
• Understand that regulators may be interested in a wide range of workers, from low-wage to highly trained workers and both employees and independent contractors.

Gibson Dunn lawyers are closely monitoring these developments and are available to discuss these issues as applied to your particular business or assist in preparing a public comment for submission in response to the FTC’s public inquiry.

[1] Press Release, Fed. Trade Comm’n, FTC Files to Accede to Vacatur of Non-Compete Clause Rule (Sept. 5, 2025), https://www.ftc.gov/news-events/news/press-releases/2025/09/federal-trade-commission-files-accede-vacatur-non-compete-clause-rule.

[2] Order at 1, Ryan, LLC v. FTC, No. 24-10951 (5th Cir. Sept. 8, 2025).

[3] Statement of Chairman Andrew N. Ferguson, Joined by Comm’r Melissa Holyoak, Ryan, LLC v. FTC (Sept. 5, 2025), at 3, https://www.ftc.gov/system/files/ftc_gov/pdf/ferguson-holyoak-statement-re-noncompete-acceding-vacatur.pdf (Ferguson Ryan Statement).

[4] Concurring Statement of Comm’r Mark R. Meador, In the Matter of Non-Compete Clauses, Matter No. P201200 (Sept. 5, 2025), at 1, https://www.ftc.gov/system/files/ftc_gov/pdf/meador-statement-noncompete-agreements-9.5.25.pdf (Meador Statement).

[5] Ferguson Ryan Statement, at 3.

[6] Meador Statement, at 3–5.

[7] Id.

[8] Complaint, In re Gateway Pet Memorial Servs., Matter No. 2210170 (Sept. 4, 2025), ¶¶ 1, 6–7, https://www.ftc.gov/system/files/ftc_gov/pdf/Gateway-Complaint.pdf.

[9] Id. ¶ 8.

[10] Id. ¶¶ 1, 10.

[11] Id. ¶¶ 10, 14.

[12] Id. ¶¶ 15–18.

[13] See Decision and Order, In re Gateway Pet Memorial Servs., Matter No. 2210170 (Sept. 4, 2025), § II., https://www.ftc.gov/system/files/ftc_gov/pdf/Gateway-DecisionOrder.pdf.

[14] Id. § I.G.

[15] Id.; see also Statement of Chairman Andrew N. Ferguson, Joined by Comm’r Melissa Holyoak, In the Matter of Gateway Pet Memorial Services, Matter No. 2210170 (Sept. 4, 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/gateway-ferguson-holyoak-statement-2025.09.04.pdf.

[16] Press Release, Fed. Trade Comm’n, FTC Launches Joint Labor Task Force to Protect American Workers (Feb. 26, 2025), https://www.ftc.gov/news-events/news/press-releases/2025/02/ftc-launches-joint-labor-task-force-protect-american-workers.

[17] Press Release, Fed. Trade Comm’n, FTC Issues Request for Information on Employee Noncompete Agreements (Sept. 4, 2025), https://www.ftc.gov/news-events/news/press-releases/2025/09/federal-trade-commission-issues-request-information-employee-noncompete-agreements.

[18] Request for Information, Fed. Trade Comm’n, Request for Information Regarding Employer Noncompete Agreements (Sept. 4, 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/2025-Noncompete-RFI.pdf.

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The following Gibson Dunn lawyers prepared this update: Rachel Brass, Svetlana Gans, Michael Holecek, Andrew G.I. Kilberg, Kristen Limarzi, Harris Mufson, Jason Schwartz, John Matthew Butler, and Bridget Amoako.

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, the authors, or any of the following leaders and members of the firm’s Antitrust & Competition, Administrative Law & Regulatory, or Labor & Employment practice groups:

Antitrust and Competition:
Rachel S. Brass – San Francisco (+1 415.393.8293, rbrass@gibsondunn.com)
Svetlana S. Gans – Washington, D.C. (+1 202.955.8657, sgans@gibsondunn.com)
Kristen C. Limarzi – Washington, D.C. (+1 202.887.3518, klimarzi@gibsondunn.com)
Cindy Richman – Washington, D.C. (+1 202.955.8234, crichman@gibsondunn.com)
Ali Nikpay – London (+44 20 7071 4273, anikpay@gibsondunn.com)
Christian Riis-Madsen – Brussels (+32 2 554 72 05, criis@gibsondunn.com)

Administrative Law and Regulatory:
Stuart F. Delery – Washington, D.C. (+1 202.955.8515, sdelery@gibsondunn.com)
Eugene Scalia – Washington, D.C. (+1 202.955.8673, escalia@gibsondunn.com)
Helgi C. Walker – Washington, D.C. (+1 202.887.3599, hwalker@gibsondunn.com)

Labor and Employment:
Michael Holecek – Los Angeles (+1 213.229.7018, mholecek@gibsondunn.com)
Andrew G.I. Kilberg – Washington, D.C. (+1 202.887.3759, akilberg@gibsondunn.com)
Harris Mufson – New York (+1 212.351.3805, hmufson@gibsondunn.com)
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)

© 2025 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 Trade Fraud Task Force seeks to enhance information sharing between DOJ civil and criminal prosecutors, Customs and Border Protection, and Homeland Security Investigations to identify instances of customs fraud for DOJ to pursue as civil and criminal enforcement actions.

On August 29, 2025, the Department of Justice (DOJ) launched the Trade Fraud Task Force that will coordinate efforts between DOJ’s Civil and Criminal Divisions and the Department of Homeland Security (DHS) to bring enforcement actions against importers who unlawfully evade tariffs and other customs duties, as well as against parties who unlawfully import prohibited goods.[1] This is the latest sign that, amid legal battles over the legality of President Trump’s tariffs, DOJ remains deeply committed to using all available legal tools to police customs and tariff compliance.  It is also the latest example of this Administration’s top-down approach to generating investigative targets.

The Trade Fraud Task Force seeks to enhance information sharing between DOJ civil and criminal prosecutors, Customs and Border Protection (CBP), and Homeland Security Investigations (HSI) to identify instances of customs fraud for DOJ to pursue as civil and criminal enforcement actions. On the civil side, DOJ will continue its recent trend of enforcement of customs fraud and tariff evasion under the False Claims Act (FCA) and Tariff Act of 1930. According to DOJ, criminal prosecutions will be focused on violations of trade fraud and conspiracy provisions of Title 18 of the U.S. Code.

In announcing the Trade Fraud Task Force, DOJ explained that enforcement in this area is a necessary component of implementing President Trump’s “America First Trade Policy.”  In particular, DOJ emphasized that its enforcement efforts are focused on protecting “law abiding businesses in the United States” who are “at a competitive disadvantage” as compared to “nefarious importers and their co-conspirators.”  The announcement follows prior announcements by DOJ political leadership of enhanced enforcement efforts tied to White House priorities, suggesting that the Administration will be proactive in identifying and investigating companies with significant import activities, regardless of having particularized suspicions or allegations of wrongdoing.

In an effort to spur civil and criminal cases, DOJ is actively encouraging whistleblowers to report alleged customs violations to the Criminal Division’s Corporate Whistleblower Program and to file lawsuits under the qui tam provisions of the FCA.  In particular, DOJ welcomed “referrals and cooperation from the domestic industries that are most harmed by unfair trade practices and trade fraud.”

Implications

DOJ’s Trade Fraud Task Force is the latest in a string of announcements from DOJ emphasizing customs enforcement.  For example, in May of this year, the head of the DOJ’s Criminal Division announced that the  pursuit of cases involving trade and customs fraud is one of the Division’s top priorities.  Additionally, as we have previously reported here and here, DOJ has long employed the FCA to combat customs fraud but with increasing frequency in recent months. 

Deliberate and consistent information sharing between DHS and DOJ will make it easier for DOJ to pursue these types of cases. CBP maintains a wealth of information regarding import items and associated transaction values and applicable duties. In combination with the resources dedicated by HSI to conduct internal reviews of this data, this Trade Fraud Task Force makes clear that it is the federal government’s intention to analyze this data for the purpose of detecting patterns of tariff evasion that the Administration believes would undermine its trade policy. DOJ already has significant experience partnering with other agencies to mine complex data in support of potential civil and criminal actions, particularly in the FCA space—a trend which the Trade Fraud Task Force could bolster.

We expect the Administration to be proactive and aggressive in utilizing this data to open new criminal and civil investigations of companies reliant on imports, regardless of whether there are other indicia of wrongdoing.  Indeed, this has already been the approach taken by the new Trump Administration in 2025.  Since the spring, DOJ has issued announcements of a number of other enforcement priorities—for example, in taking on “discriminatory practices” under corporate DEI policies, “ending sanctuary jurisdictions,” and investigating the provision of gender-affirming care for minors—that have been immediately followed by the issuance of dozens of subpoenas across broad swaths of industry, in addition to other aggressive investigative actions.  We expect a similar approach to be taken in the wake of the Trade Fraud Task Force announcement. 

Moreover, DOJ’s appeal to would-be whistleblowers—who, based on historical activity, we expect to be predominantly U.S.-based competitors to importers of goods subject to high tariffs—will add even more leads for new DOJ investigations in this area.  That is particularly because, under the FCA, whistleblowers can be awarded as much as 30% of any recovery, plus attorney’s fees, on top of whatever incidental competitive advantages might be gained. In the first Trump Administration, a significant percentage of new customs-related FCA investigations originated from such complaints by competitors; with the current Administration announcing its eagerness to take such cases, we expect a resurgence of this phenomenon in the coming months and years. 

The Trade Fraud Task Force, therefore, is an alarm bell to import-reliant industries insofar as it further reinforces and operationalizes the current Administration’s goal of imposing and enforcing high tariffs, and it signals that the Task Force will be aggressive in searching for and pursuing all manner of potential non-compliance with customs laws. In particular, we expect the Task Force will focus on violations most strongly tied to supporting President Trump’s trade policy such as misrepresenting the (i) country of origin, (ii) classification, or (ii) value of imported goods, as well as the misuse of various cost mitigation strategies such as bonded warehouses and free trade zones.

The Task Force will also help the Criminal Division deliver on its desire to prioritize criminal investigations and enforcement actions related to customs and tariff fraud. As with previous actions, the announcement of the Trade Fraud Task Force underscores the importance for importers–particularly those touching tariff sensitive commodifies such as textiles, steel, solar, aluminum, and automobile parts–to develop and maintain robust mechanisms to comply with customs requirements and duties.

Parties dealing with complex supply chains such as those underpinning electronics and pharmaceuticals should also take steps to mitigate risk via contractual measures with counterparties. Most important, in the case of possible violation, conducting timely internal investigations and carefully weighing the decisions to submit self-disclosure will be critical to navigating the current trade enforcement regime. 

[1] Departments of Justice and Homeland Security Partnering on Cross-Agency Trade Fraud Task Force, Press Release, Department of Justice, available at: https://www.justice.gov/opa/pr/departments-justice-and-homeland-security-partnering-cross-agency-trade-fraud-task-force.

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The following Gibson Dunn lawyers prepared this update: Jake M. Shields, Michael Dziuban, Winston Chan, Adam M. Smith, Matthew Axelrod, Jonathan Phillips, and Nicole Martinez*.

Gibson Dunn lawyers regularly counsel clients on the False Claims Act issues and are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s False Claims Act/Qui Tam Defense or International Trade Advisory & Enforcement practice groups:

False Claims Act/Qui Tam Defense:

Washington, D.C.
Jonathan M. Phillips – Co-Chair (+1 202.887.3546, jphillips@gibsondunn.com)
Stuart F. Delery (+1 202.955.8515,sdelery@gibsondunn.com)
F. Joseph Warin (+1 202.887.3609, fwarin@gibsondunn.com)
Jake M. Shields (+1 202.955.8201, jmshields@gibsondunn.com)
Gustav W. Eyler (+1 202.955.8610, geyler@gibsondunn.com)
Lindsay M. Paulin (+1 202.887.3701, lpaulin@gibsondunn.com)
Geoffrey M. Sigler (+1 202.887.3752, gsigler@gibsondunn.com)
Joseph D. West (+1 202.955.8658, jwest@gibsondunn.com)
Michael R. Dziuban (+1 202.955.8252; mdziuban@gibsondunn.com)

San Francisco
Winston Y. Chan – Co-Chair (+1 415.393.8362, wchan@gibsondunn.com)

New York
Reed Brodsky (+1 212.351.5334, rbrodsky@gibsondunn.com)
Mylan Denerstein (+1 212.351.3850, mdenerstein@gibsondunn.com)

Denver
John D.W. Partridge (+1 303.298.5931, jpartridge@gibsondunn.com)
Ryan T. Bergsieker (+1 303.298.5774, rbergsieker@gibsondunn.com)
Monica K. Loseman (+1 303.298.5784, mloseman@gibsondunn.com)

Dallas
Andrew LeGrand (+1 214.698.3405, alegrand@gibsondunn.com)

Los Angeles
James L. Zelenay Jr. (+1 213.229.7449, jzelenay@gibsondunn.com)
Nicola T. Hanna (+1 213.229.7269, nhanna@gibsondunn.com)
Jeremy S. Smith (+1 213.229.7973, jssmith@gibsondunn.com)
Deborah L. Stein (+1 213.229.7164, dstein@gibsondunn.com)
Dhananjay S. Manthripragada (+1 213.229.7366, dmanthripragada@gibsondunn.com)


International Trade Advisory & Enforcement:

United States:
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
David P. Burns – Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
Courtney M. Brown – Washington, D.C. (+1 202.955.8685, cmbrown@gibsondunn.com)
Amanda H. Neely – Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)
Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Michelle A. Weinbaum – Washington, D.C. (+1 202.955.8274, mweinbaum@gibsondunn.com)

Asia:
Kelly Austin – Denver/Hong Kong (+1 303.298.5980, kaustin@gibsondunn.com)
David A. Wolber – Hong Kong (+852 2214 3764, dwolber@gibsondunn.com)
Fang Xue – Beijing (+86 10 6502 8687, fxue@gibsondunn.com)
Qi Yue – Beijing (+86 10 6502 8534, qyue@gibsondunn.com)

Europe:
Attila Borsos – Brussels (+32 2 554 72 10, aborsos@gibsondunn.com)
Patrick Doris – London (+44 207 071 4276, pdoris@gibsondunn.com)
Michelle M. Kirschner – London (+44 20 7071 4212, mkirschner@gibsondunn.com)
Penny Madden KC – London (+44 20 7071 4226, pmadden@gibsondunn.com)
Benno Schwarz – Munich (+49 89 189 33 110, bschwarz@gibsondunn.com)

*Nicole Martinez, an associate in the New York office, is not admitted to practice law.

© 2025 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, ISDA and the Futures Industry Association submitted a joint response to the Reserve Bank of Australia on its consultation on guidance for Australia’s clearing and settlement facility resolution regime.

New Developments

CFTC Staff Issues No-Action Letter Regarding Event Contracts. On August 7, the CFTC’s Division of Market Oversight and the Division of Clearing and Risk announced they have taken a no-action position regarding swap data reporting and recordkeeping regulations for event contracts in response to a request from the Railbird Exchange, LLC, a designated contract market, and QC Clearing LLC, a derivatives clearing organization.

SEC Division of Corporation Finance Issues Staff Statement on Certain Liquid Staking Activities. On August 5, the SEC issued a statement regarding certain liquid staking activities. The statement aims to provide greater clarity on the application of federal securities laws to crypto assets, specifically addressing a type of protocol staking known as “liquid staking.” Liquid staking refers to the process of staking crypto assets through a software protocol or service provider and receiving a “liquid staking receipt token” to evidence the staker’s ownership of the staked crypto assets and any rewards that accrue to them. The statement clarifies the division’s view that, depending on the facts and circumstances, the liquid staking activities covered in the statement do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act of 1933 or Section 3(a)(10) of the Securities Exchange Act of 1934. [NEW]

Acting Chairman Pham Launches Listed Spot Crypto Trading Initiative. On August 4, CFTC Acting Chairman Caroline D. Pham announced that the CFTC will launch an initiative for trading spot crypto asset contracts that are listed on a CFTC-registered futures exchange (a designated contract market). This is the first initiative in the CFTC’s crypto sprint to start implementation of the recommendations in the President’s Working Group on Digital Asset Markets report.

Acting Chairman Pham Announces CFTC Crypto Sprint. On August 1, CFTC Acting Chairman Caroline D. Pham announced that the CFTC will kick off a crypto sprint to start implementation of the recommendations in the President’s Working Group on Digital Asset Markets report.

New Developments Outside the U.S.

ESMA Publishes Data for Quarterly Bond Liquidity Assessment. On August 1, ESMA published its new quarterly liquidity assessment of bonds. For this period, there are currently 1,346 liquid bonds subject to Markets in Financial Instruments Directive (“MIFID II”) transparency requirements. As indicated in the public statement released on March 27, 2024, the quarterly liquidity assessment of bonds will continue to be published by ESMA.

New Industry-Led Developments

ISDA and FIA Respond on Australian Clearing and Settlement Facility Resolution Regime. On August 11, ISDA and the Futures Industry Association (“FIA”) submitted a joint response to the Reserve Bank of Australia (“RBA”) on its consultation on guidance for Australia’s clearing and settlement facility resolution regime. The associations welcome publication of the draft guidance, which provides greater clarity and transparency on the RBA’s approach to the resolution of clearing and settlement facilities in Australia. However, the associations encourage the RBA to provide greater detail on certain aspects of its approach to resolution, including explicit assurance that the power to direct a central counterparty to amend its rules would not be used to amend any rights that any clearing participant has to terminate contracts with or take other action against a clearing house and, more broadly, under what circumstances the RBA would use this direction power. [NEW]

ISDA Releases SwapsInfo First Half of 2025 and the Second Quarter of 2025. On August 7, ISDA released a research note that concludes interest rate derivatives trading activity increased in the first half of 2025, driven by continued interest rate volatility, evolving central bank policy expectations, and persistent macroeconomic uncertainty. Trading in index credit derivatives also rose, as market participants responded to a changing macroeconomic environment and sought to manage credit exposure.

ISDA Responds to IFSCA on Derivatives Reporting and Clearing. On August 5, ISDA responded to the International Financial Services Centres Authority’s (“IFSCA”) consultation on reporting and clearing of over-the-counter (“OTC”) derivatives contracts booked in International Financial Services Centres. In the response, ISDA provided several recommendations including removing one-to-one hedging requirements for OTC derivatives, especially those referencing foreign or IFSC-listed securities, to align with global practice and support flexible risk management.

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The following Gibson Dunn attorneys assisted in preparing this update: Jeffrey Steiner, Adam Lapidus, Marc Aaron Takagaki, Hayden McGovern, 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 )

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

*Alice Wang, a law clerk in the firm’s Washington, D.C. office, is not admitted to practice law.

© 2025 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 July summarizes the current status of petitions pending before the Supreme Court and recent Federal Circuit decisions concerning obviousness, prosecution history estoppel, interference estoppel, and Federal Circuit jurisdiction.

Federal Circuit News

Noteworthy Petitions for a Writ of Certiorari:

There was one potentially impactful petition filed before the Supreme Court in July 2025:

• D R Burton Healthcare, LLC v. Trudell Medical International Inc. (US No. 25-17): The question presented is:  “Whether a district court’s order changing the time to trial in its case management order from at least 326 days to 146 days, and its time for completion of all discovery (including expert discovery) from 231 days to 108 days, constitutes a fair legal procedure under the due process clause of the Fifth Amendment?”  The respondent waived its right to file a response.  The Court will consider the petition at its September 29, 2025 conference.

We provide an update below of the petitions pending before the Supreme Court, which were summarized in our June 2025 update:

• In Gesture Technology Partners, LLC v. Unified Patents, LLC (US No. 24-1281), after one of the respondents waived its right to respond, the Court requested a response. The response is due September 4, 2025.

• In Purdue Pharma L.P. v. Accord Healthcare, Inc. (US No. 24-1132), the respondent filed its response brief on June 2, 2025, and the petitioners filed a reply brief on June 17, 2025. The Court will consider the petition at its September 29, 2025 conference.

Other Federal Circuit News:

• Release of Materials in Ongoing Judicial Investigation. In the ongoing proceeding by the Judicial Council of the Federal Circuit under the Judicial Conduct and Disability Act and the implementing Rules involving Judge Pauline Newman, Judge Newman requested additional materials be released.  These additional materials are available here.

• Boston Session in October 2025. The Federal Circuit announced that it intends to sit in and around Boston, Massachusetts as part of its October 2025 session here.

Upcoming Oral Argument Calendar

The list of upcoming arguments at the Federal Circuit is available on the court’s website. 

Key Case Summaries (July 2025)

Shockwave Medical, Inc. v. Cardiovascular Systems, Inc., No. 23-1864, 23-1940 (Fed. Cir. July 14, 2025):  Cardiovascular Systems, Inc. (CSI) filed an inter partes review (IPR) petition against Shockwave’s patent directed to the treatment of plaque buildup in blood vessels with shockwave pulses.  The Patent Trial and Appeal Board (Board) determined that all the challenged claims except one were unpatentable as obvious, relying in part on applicant admitted prior art (AAPA) as evidence of background knowledge in the art.  Shockwave appealed the Board’s final written decision on the claims that were unpatentable, and CSI cross-appealed on the one claim that was not. 

The Federal Circuit (Dyk, J., joined by Lourie and Cunningham, JJ.) affirmed Shockwave’s appeal and reversed CSI’s cross-appeal.  The Court held that the Board did not improperly rely on AAPA in concluding that the claims would have been obvious, because AAPA was properly used as evidence of general background knowledge to show that missing claim limitations were known in the art and not as a basis for any of the obviousness grounds.

Colibri Heart Valve LLC v. Medtronic CoreValve, LLC, No. 23-2153 (Fed. Cir. July 18, 2025): Colibri filed suit against Medtronic, alleging induced infringement of Colibri’s patent directed to a method for use in implanting a replacement heart valve.  The asserted independent claim recites “partially deploying a distal portion of the replacement heart valve device within the patient by pushing out the pusher member from the moveable sheath to expose the distal portion of the replacement heart valve device.”  During prosecution, Colibri had pursued a second independent claim (claim 39) that included “partially deploying the replacement heart valve device within the patient by retracting the moveable sheath to expose a portion of the replacement heart valve device.”  However, Colibri cancelled claim 39 in response to the examiner’s rejection of the claim for lack of written description.  At trial, Colibri dropped its literal infringement claim and instead pursued a doctrine of equivalents theory that Medtronic’s partial-deployment method, which retracts a moveable sheath to deploy the heart valve, was substantially the same as pushing out the replacement heart valve as required by the asserted claim.  The jury rendered a verdict of infringement.  Medtronic sought judgment as a matter of law, arguing that prosecution history estoppel barred Colibri’s doctrine of equivalents argument because Colibri had cancelled the claim including the “retracting” step during prosecution.  The district court denied Medtronic’s motion. 

The Federal Circuit (Taranto, J., joined by Hughes and Stoll, JJ.) reversed.  The Federal Circuit held that Colibri’s cancelling of claim 39 was a narrowing amendment giving rise to prosecution history estoppel and rejected the district court’s holding that estoppel did not apply because Colibri had not amended any claims to exclude the accused equivalent.  The Court explained that narrowing for purposes of estoppel can exist not only when a single claim’s terms are amended but also when a closely related claim involving intertwined terminology is cancelled such that its cancellation necessarily communicates that the scope of the other claim has narrowed.  The Court determined such narrowing existed here, and thus a skilled artisan would have understood that the subject matter of claim 39 was being surrendered in order to obtain allowance of the closely related remaining claims that included the pushing step.

IGT v. Zynga Inc., No. 23-2262 (Fed. Cir. July 22, 2025):  IGT owns a patent directed to game playing services such as slot machines and video poker machines that securely communicates with devices over the Internet.  IGT’s patent issued from an application it filed in 2002.  In 2003, Zynga filed a patent application of its own, which included claims copied from IGT’s application.  In 2010, the Board declared an interference between the IGT application and the Zynga application.  In 2014, the Board granted judgment in IGT’s favor finding that Zynga’s application lacked adequate written description support, and therefore, did not reach the additional issue raised by Zynga of whether the claims were unpatentable as obvious.  In 2021, IGT sued Zynga for infringement of its patent, and Zynga filed an IPR challenging certain claims as obvious.  In response, IGT argued that the Board should deny institution of Zynga’s petition because Zynga was barred from raising its obviousness challenge based on interference estoppel under 37 C.F.R. § 41.127(a)(1).  The Board rejected IGT’s interference estoppel argument because the interference proceedings were terminated based on a threshold issue of lack of adequate written description, and thus, the Board never reached the obviousness issue.  IGT petitioned for Director review, and the Director affirmed the Board’s conclusion.

The Federal Circuit (Taranto, J. joined by Clevenger and Hughes, JJ.) affirmed.  The Court held that the Board’s determination regarding whether interference estoppel bars institution of Zynga’s IPR petition is within the general unreviewability principle under 35 U.S.C. § 314, which states that institution decisions are final and nonappealable.  While there might be exceptions to the general rule of unreviewability “where the agency engaged in blatant violations of legal constraints,” the Court found that did not apply in this case.  Indeed, the Board and Director provided sufficient grounds for not applying interference estoppel, including that the interference was terminated on a threshold issue of written description.

Acorda Therapeutics, Inc. v. Alkermes PLC, No. 23-2374 (Fed. Cir. July 25, 2025):  Acorda develops Ampyra®, a drug used to treat multiple sclerosis.  Alkermes owns the now-expired patent that claimed the active ingredient in Ampyra.  Acorda and Alkermes entered into an agreement under which Alkermes licensed its patent to Acorda, who supplied the active ingredient, in exchange for royalty payments.  The patent expired in July 2018, but Acorda continued to make royalty payments without protest until July 2020, at which point it made payments but under formal protest.  Acorda filed a demand in arbitration seeking recoupment of the royalty payments made after the patent expired in 2018, but the Tribunal only awarded Acorda the payments that it made under protest starting from July 2020.  Acorda then filed suit in district court requesting modification of the arbitral award.  The district court declined to modify the award.

The Federal Circuit (Taranto, J., joined by Hughes and Stark, JJ.) transferred the appeal to the Second Circuit.  The Court determined that it lacked jurisdiction over the appeal because there was no patent-law cause of action.  Acorda’s case sought modification of the arbitral award under 9 U.S.C. § 207.  Acorda had presented two arguments regarding manifest error by the Tribunal, but only one, based on Brulotte, rested on federal patent law.  Acorda’s second argument was based on Kaiser Steel, which did not rely on patent law, and therefore provided a way for the district court to decide the case without applying patent law.  Thus, because an issue of patent law was not necessarily raised, the Court concluded that it lacked jurisdiction.

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The following Gibson Dunn lawyers assisted in preparing this update: Blaine Evanson, Jaysen Chung, Audrey Yang, Hannah Bedard, and Michelle Zhu.

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)

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)

© 2025 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.

Quintara Biosciences confirms that California state law’s requirement that a plaintiff disclose its trade secrets with “reasonable particularity” at the outset of discovery does not apply to trade-secret claims brought solely under the DTSA.

On August 12, 2025, the Ninth Circuit held that a district court abused its discretion in striking a plaintiff’s alleged trade secrets during discovery for failing to identify them with sufficient specificity in connection with a trade-secret misappropriation claim under the federal Defend Trade Secrets Act (DTSA).  Quintara Biosciences, Inc. v. Ruifeng Biztech, Inc., — F.4th —-, 2025 WL 2315671, at *3 (9th Cir. Aug. 12, 2025).

The DTSA requires a plaintiff to identify a trade secret with “sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons . . . skilled in the trade.”  Id. at *4 (citation omitted).  In Quintara, the Ninth Circuit made clear that (i) the DTSA does not mandate “the specific timing or scope for identifying trade secrets”—in contrast to California state law’s requirement that a plaintiff asserting trade-secret claims under the California Uniform Trade Secrets Act (CUTSA) identify its trade secrets with “reasonable particularity” before the plaintiff commences discovery; and (ii) the question of whether “a plaintiff has sufficiently particularized a trade secret under [the] DTSA” is a question of fact for summary judgment or trial.  Quintara Biosciences, Inc., 2025 WL 2315671, at *2, *5 (9th Cir. Aug. 12, 2025).   

The district court struck (and thus “functionally dismiss[ed]”) under Federal Rule of Civil Procedure 12(f) nine of the plaintiff’s alleged trade secrets after finding that they had not been described with enough specificity in a trade-secrets disclosure the court ordered at the outset of discovery.  Id. at *5.  The Ninth Circuit held that Rule 12(f) does not authorize striking alleged trade secrets for lack of specificity—and that doing so as a sanction under Rules 16 or 37 was inappropriate in this case.  Id. at *6-7.  The Ninth Circuit confirmed that district courts nonetheless retain broad discretion to manage the timing and scope of trade-secret disclosures under the DTSA.

Background

Quintara sued Ruifeng in federal court alleging misappropriation of trade secrets.  The operative complaint asserted a claim under the federal DTSA for misappropriation of eleven trade secrets.  Ruifeng did not assert any claims under CUTSA. 

Early in the case, the parties disputed whether Quintara was required to disclose its trade secrets with “reasonable particularity” before proceeding with discovery.  Section 2019.210 of the California Code of Civil Procedure requires plaintiffs asserting trade-secret claims under CUTSA to identify their alleged trade secrets with “reasonable particularity” before commencing discovery relating to the trade secrets.  The practical effect of this statute is that California state courts presiding over CUTSA claims typically require a plaintiff to serve a 2019.210 disclosure or a discovery response identifying their alleged trade secrets with reasonable particularity before commencing discovery related to the trade-secret claim.  Many California federal courts faced with a CUTSA claim have required a similar type of 2019.210 disclosure as well.  The DTSA, however, does not contain a provision comparable to Section 2019.210 of the CCP.  California federal courts faced with the question of whether to require a 2019.210 disclosure in a DTSA case without an accompanying CUTSA claim generally have declined to specifically order such a disclosure under Section 2019.210.  The district court in Quintara departed from this practice and ordered Quintara to provide a detailed, pre-discovery disclosure of its alleged trade secrets, citing section 2019.210.  Ruifeng found Quintara’s disclosure lacking and moved to strike Quintara’s alleged trade secrets in the disclosure under Rule 12(f), which the district court granted.  Id. at *5.  As the Ninth Circuit put it, “[t]he district court dismissed Quintara’s claim to nine of its trade secrets because Quintara failed to prove just one element of its DTSA claim—that it owned sufficiently particularized trade secrets.”  Id. at *7.

The Ninth Circuit’s Decision

The Ninth Circuit held that the district court erred by “rel[ying] on a California rule that does not control a federal trade-secret claim.”  Id. at *5.  “[U]nlike CUTSA, DTSA does not set out requirements for the specific timing or scope for identifying trade secrets,” and “[i]nstead, the conventional procedures under the Federal Rules of Civil Procedure apply.” Id.

The Ninth Circuit further held that Rule 12(f) did not “authorize[] the district court to strike—and functionally dismiss—Quintara’s claim to nine of its trade secrets.”  Id.  Rule 12(f) allows courts to “strike from a pleading an insufficient” defense or any redundant, immaterial, impertinent, or scandalous matter.”  Id.  Even if a trade-secrets disclosure could be considered a “pleading” under Rule 12(f), the plaintiff’s alleged trade secrets were not an “insufficient defense” or a “redundant, immaterial, impertinent, or scandalous matter”—and thus, Rule 12(f) could not provide the “authority to strike the trade secrets at issue.” Id.

The Ninth Circuit further held that the district court’s decision dismissing Quintara’s claim of misappropriation of nine trade secrets as a discovery sanction under Rule 16 or 37 was an abuse of discretion.  Weighing the five-factor test for sanctions (the public’s interest in expeditious resolution of litigation, the risk of prejudice to the defendant, the court’s need to manage its docket, the public interest in resolving cases on their merits, and availability of less drastic alternatives), the Ninth Circuit held that the district court abused its discretion in dismissing Quintara’s trade-secrets for failure to sufficiently describe them at the outset of discovery in compliance with the court’s order.  Id. at *6-7.  The Ninth Circuit explained that “[a]lthough our five-factor test for dismissal sanctions invites case-specific analysis, a DTSA trade-secret claim will rarely be dismissible as a discovery sanction in a situation like this.”  Id. at *8.  The Ninth Circuit emphasized that even though Section 2019.210’s disclosure requirement does not govern a DTSA claim, the “district court could have granted a protective order limiting discovery to whether Quintara had identified its trade secrets with ‘sufficient particularity’ before permitting additional discovery,” or “could have invited a motion for summary judgment” on the issue—rather than striking the alleged trade secrets as the district court did.  Id. at *7-8.

What It Means

Quintara Biosciences confirms that California state law’s requirement that a plaintiff disclose its trade secrets with “reasonable particularity” at the outset of discovery does not apply to trade-secret claims brought solely under the DTSA—and cautions district courts from striking (and thus dismissing) alleged trade secrets for lack of specificity prior to summary judgment.  The decision nonetheless highlights that district courts retain “broad discretion and ample alternatives under the Federal Rules of Civil Procedure to manage the disclosure of trade secrets in discovery,” and reiterates that the question of whether a trade secret is described with sufficient specificity under the DTSA is usually a question of fact for resolution at summary judgment or trial.  Id. at *8. 

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The following Gibson Dunn lawyers prepared this update: Ilissa Samplin, Angelique Kaounis, Grace Hart, Doran Satanove, and Peter Jacobs.

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

Trade Secrets:
Ilissa Samplin – Los Angeles (+1 213.229.7354, isamplin@gibsondunn.com)
Angelique Kaounis – Los Angeles (+1 310.552.8546, akaounis@gibsondunn.com)
Grace E. Hart – New York (+1 212.351.6372, ghart@gibsondunn.com)
Doran J. Satanove – New York (+1 212.351.4098, dsatanove@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)

© 2025 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 Executive Order describes seabed mineral resources as “a core national security and economic interest” for the US and aims to establish the US as a global leader in seabed mineral exploration and development.

On 24 April 2025, President Trump issued an Executive Order—“Unleashing America’s Offshore Critical Minerals and Resources” (Executive Order)—intending to significantly advance the United States’s (US) deep-sea mining capabilities in the Pacific Ocean.[1]  The Executive Order—which describes seabed mineral resources as “a core national security and economic interest” for the US—aims to establish the US as a global leader in seabed mineral exploration and development.  On 25 June 2025, the US Department of the Interior announced new policy steps “to speed up the search and development of critical minerals offshore”, advancing the Executive Order.  Several companies have already applied (or are reported to be in negotiations) for commercial licenses to mine in international waters.  These moves have been met with criticism, including from the European Union (EU) and China as violating the framework for exploitation under international agreements—and many States have called for a moratorium or precautionary pause raising concerns regarding the potential harm to the marine environment.

The Executive Order has changed—and will continue to shape—the course of the international debate on deep-sea mining. Whilst the US is forging ahead with its plans to issue licenses by setting its own standards, this move could prompt other countries to do the same. Investors should therefore carefully assess the risks involved—whether that is uncertainty around licensing and regulatory environment, increased costs, litigation risk and/or concerns with respect to environmental impacts of deep-sea mining.  In circumstances where deep-sea mining in international waters is considered to be a violation of international law, investors also need to carefully assess how their investments may be impacted, and consider available options to protect them.

We explore the international legal framework applicable to deep-sea mining, and further consider implications of the Executive Order, States’ responses and issues that need to be considered by investors and companies interested in exploring the opportunities in further detail below.

The International Framework

Deep-sea mining may take place in waters within a country’s jurisdiction, known as exclusive economic zones (EEZs).  EEZs are areas extending 200 nautical miles from a State’s coast and, subject to their domestic laws, States have jurisdiction to undertake deep-sea mining (and otherwise control, explore and conserve natural resources) within these zones.  States such as Norway, the Cook Islands, and Sweden have actively explored deep-sea mining operations in their respective EEZs.  Several other States—including Brazil and China—are supportive of deep-sea mining in the EEZ too.

For deep-sea mining in international waters beyond the EEZs, known as the “Area”, the UN Convention on the Law of the Sea (UNCLOS) has established the applicable legal and regulatory framework.[2]  UNCLOS is designed to ensure equitable access to resources, protect the environment, and facilitate responsible exploitation of the seabed.[3]

Under UNCLOS, the Area and its resources are described as the “common heritage of mankind” and the Area’s minerals are only to be “alienated” in accordance with Part XI of UNCLOS and the “rules, regulations and procedures of the [International Seabed Authority]”.[4]  The International Seabed Authority (ISA) is an intergovernmental agency and comprises 168 member States and the EU.  Whilst the US is not a full member of the ISA (as it has not ratified UNCLOS), it has historically participated as an observer at the ISA.  Further, much of UNCLOS is recognized by the US as reflecting customary international law.

The ISA is mandated under UNCLOS to issue rules, regulations and procedures with respect to the exploration and exploitation of minerals in the Area.[5]  At present, pursuant to regulations issued by the ISA, 31 exploration contracts have been approved, which largely concern the “Clarion-Clipperton Zone”—a 6 million km² area in the Pacific, between Hawaii and Mexico.  With respect to exploitation, however, no regulations have yet been issued (and, accordingly, no contracts approved)—therefore deep-sea mining in international waters remains forbidden under UNCLOS.  

In recent years, however, the ISA has faced increasing pressure to finalise regulation on deep-sea mining.  On 25 June 2021, the island nation of Nauru notified the ISA of its plans to begin deep-sea mining in international waters and triggered an UNCLOS treaty provision known as the “two-year rule”.  This rule requires the ISA to “nonetheless consider and provisionally approve” a plan for exploitation of deep-sea minerals in circumstances where ISA exploitation regulations have not yet been issued.  On 21 July 2023 (i.e., the end of the two-year period), ISA delegates agreed to extend the deadline for the finalisation of the plan for exploitation to July 2025 (a further two-year extension).  The ISA’s 30th session is currently in progress—though it is unlikely that regulations will be finalized during that meeting.

The Executive Order

As the Executive Order recognizes, critical minerals (such as nickel, cobalt, copper, manganese and titanium) and rare earth elements are crucial to a range of sectors—including energy, infrastructure and defence.  China dominates both the production and processing of minerals—accounting for 61% of global mined rare earth production and controlling over 90% of the processing.[6]  For the US, therefore, deep-sea mining presents an opportunity to reduce dependence on foreign suppliers such as China, creating its own supply chain. 

The Executive Order requires, within 60 days of its issuance, the Secretary of Commerce to: (i) expedite the process for reviewing and issuing seabed mineral exploration licenses and commercial recovery permits in areas beyond national jurisdiction under the Deep Seabed Hard Mineral Resources Act 1980; and (ii) in coordination with the Secretary of the Interior and the Secretary of Energy and others, provide a report identifying private sector interest and opportunities.  The National Oceanic and Atmospheric Administration under the Department of Commerce (which is responsible for issuing licenses for exploration and permits for commercial recovery under the Deep Seabed Hard Mineral Resources Act) has recently proposed rules that outline the licensing process.  It has also started a consultation process, set to end by September 2025.[7]

Additionally, the Secretary of the Interior is required to establish an expedited process for reviewing and approving permits for prospecting and granting leases for the exploration, development, and production of seabed mineral resources within the United States Outer Continental Shelf.  The Secretary of the Interior is also required to identify which critical minerals may be derived from seabed resources, so that it can indicate the critical minerals that are essential for applications, such as defense infrastructure, manufacturing and energy.

Responses to the Executive Order and Deep-Sea Mining

Both China and the EU have questioned the legality of the Executive Order, arguing that it circumvents cross-nation negotiations and the approval processes under international law, for deep-sea mining in international waters, which must involve the ISA under UNCLOS.  Following the Executive Order, at the UN Ocean Conference in June 2025 (previously reported on here), a number of States—including France, Spain and the United Kingdom—joined a group of (now) 37 States calling for an outright ban, moratorium or precautionary pause on deep-sea mining.  Concerns expressed by those States include environmental impacts (such as the release of toxins into the ocean, noise pollution and the loss of biodiversity), risks to global food security and the acceleration of rising temperatures. 

Notably, commercial appetite for deep-sea mining remains relatively low—with some major financial institutions having announced that they would not fund deep-sea mining projects, including due to uncertainties around costs and the concerns around environmental impacts, with others committing to avoid ocean-minded minerals in their products.    

What the Future Holds for Deep-Sea Mining

The Executive Order has changed—and will continue to shape—the course of the international debate on deep-sea mining.  Although serious concerns remain about its environmental effects, for those States that consider deep-sea mining as an opportunity to unlock critical resources as a matter of national security, and to reduce dependence on foreign suppliers, the Executive Order may set a precedent for other States to follow suit.  By setting its own standards, the US could prompt other countries to do the same, undermining long-standing international cooperation and desire to build a global regulatory regime that will protect the fishing industry, the ocean ecosystem and responsible mining standards.   

Investors should therefore carefully assess the risks involved—whether that is uncertainty around licensing and the regulatory environment, increased costs and/or concerns with respect to environmental impacts of deep-sea mining.  In circumstances where deep-sea mining in the Area is considered to be a violation of international law, investors need to carefully assess how their investments may be impacted.

Alongside domestic and contract-based remedies, it is possible that investor-State arbitration may offer a mechanism for deep-sea mining investors to protect their investments, to the extent  their operations and exploration licenses are impacted by UNCLOS-based challenges emanating from international law or environmental considerations.  Investors will need to think carefully about claims that involve investments and operations in the Area potentially outside a sovereign State’s national jurisdiction. 

Moreover, there are also, potentially, ESG and environmental litigation related risks for investors, where they are subject to due diligence obligations under domestic laws and there arises—as a result of mining operations—harm to the marine environment.  ESG litigation with an environmental nexus has rapidly increased over recent years across the globe. 

Finally, State-to-State disputes may ensue under the UNCLOS regime in relation to inter alia maritime boundaries, resource ownership, subsea cables and fishing rights which could have a direct and / or an indirect impact on the viability of a mining project and should be considered carefully.  

Gibson Dunn’s Geopolitical Strategy and International Law team—together with our International Arbitration, and ESG Risk Advisory teams—can help investors understand and navigate these multi-dimensional risks.

Should you wish to discuss the contents of this alert, do not hesitate to reach out to Patrick Pearsall, Lindsey Schmidt, Ceyda Knoebel and Stephanie Collins.

[1] See ‘Unleashing America’s Offshore Critical Minerals and Resources’, The White House, 24 April 2025, <https://www.whitehouse.gov/presidential-actions/2025/04/unleashing-americas-offshore-critical-minerals-and-resources/>, last accessed 18 July 2025.

[2] See UNCLOS, Art. 1.

[3] See UNCLOS, Preamble.

[4] UNCLOS, Arts. 136-37.

[5] See UNCLOS, Arts. 162, 164-65.

[6] See ‘Global Critical Minerals Outlook 2024’, International Energy Agency, May 2024, <https://www.iea.org/reports/global-critical-minerals-outlook-2024>, last accessed 18 July 2025.

[7] https://www.federalregister.gov/documents/2025/07/07/2025-12513/deep-seabed-mining-revisions-to-regulations-for-exploration-license-and-commercial-recovery-permit.

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The following Gibson Dunn lawyers prepared this update: Patrick Pearsall, Lindsey Schmidt, Ceyda Knoebel, and Stephanie Collins.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Geopolitical Strategy & International Law or International Arbitration practice groups:

Patrick W. Pearsall – Co-Chair, Geopolitical Strategy & International Law Group,
Washington, D.C. (+1 202.955.8516, ppearsall@gibsondunn.com)

Robert Spano – Co-Chair, Geopolitical Strategy & International Law Group,
London/Paris (+33 1 56 43 13 00, rspano@gibsondunn.com)

Lindsey D. Schmidt – New York (+1 212.351.5395, lschmidt@gibsondunn.com)

Ceyda Knoebel – London (+44 20 7071 4243, cknoebel@gibsondunn.com)

Stephanie Collins – London (+44 20 7071 4216, scollins@gibsondunn.com)

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