Client Alert Archives

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

New Developments

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

New Developments Outside the U.S.

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

New Industry-Led Developments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

If the SEC were to change the FPI definition substantially, it could have significant consequences for a potentially large number of foreign issuers.

Overview

On June 4, 2025, the U.S. Securities and Exchange Commission (SEC) issued a concept release[1] requesting public comment on the definition of “foreign private issuer” (FPI).[2] This move comes in response to significant shifts in the FPI landscape, including changes in the jurisdictions of incorporation and headquarters of many FPIs, and a marked increase in the number of FPIs whose securities are traded almost exclusively in U.S. markets. The SEC is considering whether the current FPI definition and related regulatory accommodations remain fit for purpose, or whether updates are needed to better align with today’s global capital markets and to ensure appropriate investor protections. If the SEC were to change the FPI definition substantially, it could have significant consequences for a potentially large number of foreign issuers.[3]

As a concept release, this is the first step in a SEC rulemaking process that potentially could lead to the publication of proposed rules and possibly the adoption of final rules. Foreign issuers accessing or seeking to access the U.S. capital markets should monitor the SEC’s process and consider whether changes to the FPI definition will affect their ability to qualify for FPI status or affect the disclosure and reporting accommodations currently available to FPIs.

Background: The FPI Framework and Its Evolution

The SEC established the initial regulatory framework for foreign issuers in 1935[4] and conducted its latest review in 2008,[5] when there were approximately 900 FPIs.[6] As of 2023, there were approximately 1,100 FPIs.[7]

The FPI regulatory framework was established to recognize the unique challenges foreign issuers face when accessing U.S. capital markets and becoming subject to different and sometimes competing legal and accounting reporting requirements in their home country and the United States.[8] To mitigate this effect, the SEC allowed foreign companies with a sufficient nexus to a foreign home country jurisdiction to qualify as an FPI and granted such FPIs a range of accommodations from U.S. securities laws. These accommodations for FPI registrants include the use of specialized registration and reporting forms, less frequent reporting (with interim reporting on Form 6-K consisting of disclosure required by the issuer’s home country or any stock exchange on which the issuer is listed, or any other disclosure distributed to the issuer’s securityholders),[9] more flexible accounting standards, and exemptions from certain other rules such as the U.S. proxy rules, Regulation FD and Section 16 reporting, and short-swing profit liability.[10]

The current FPI definition was first adopted in 1983 and last amended in 1999,[11] and is based on a combination of U.S. ownership thresholds, and percentages of U.S. management control, U.S. business assets and business contacts with the United States.[12]

In the case of an existing registrant, FPI eligibility is determined annually as of the end of a foreign issuer’s second fiscal quarter.[13] A foreign issuer filing an initial registration statement under the Securities Act of 1933 or the Securities Exchange Act of 1934 determines its FPI status as of a date within 30 days prior to filing.[14]

Historically, the SEC’s FPI framework was based on the expectation that FPIs would be subject to meaningful disclosure and regulatory oversight in their home countries, and that their securities would primarily trade in foreign markets. However, the data derived from the SEC’s recent review of the composition of the current FPI population indicates that these assumptions may no longer hold true for a significant portion of the FPI population.[15]

Key Developments in the FPI Population

Jurisdictional Shifts: There has been a dramatic change in the jurisdictions of incorporation and headquarters among FPIs. The Cayman Islands is now the most common place of incorporation, while mainland China is the most common headquarters location. Many FPIs are now incorporated in jurisdictions with limited disclosure requirements, while their operations are based elsewhere.
Divergence Between Incorporation and Headquarters: The proportion of FPIs with different jurisdictions for incorporation and headquarters has risen sharply, from 7% in 2003 to 48% in 2023. This trend is particularly pronounced among China-based issuers, many of which are incorporated in the Cayman Islands or British Virgin Islands but are headquartered and operate primarily in China.
Increased Reliance on U.S. Markets: A majority of FPIs now have their equity securities traded almost exclusively in U.S. capital markets. In 2023, 55% of the FPIs that filed Forms 20-F had at least 99% of their global trading volume in the United States, up from 44% in 2014. These FPIs tend to be smaller in market capitalization but represent a growing share of the FPI population by number.
Regulatory Arbitrage Concerns: The SEC notes that some FPIs may be seeking to minimize regulatory costs by incorporating in jurisdictions with minimal disclosure requirements while listing primarily in the United States, potentially reducing the information available to U.S. investors and raising questions about the adequacy of investor protections.

Members of Congress and other stakeholders beyond the SEC have questioned whether the present regime creates an uneven playing field for certain foreign companies relative to U.S. reporting companies who are not able to benefit from the same accommodations, and have proposed legislation aimed at curbing perceived abuses.[16]

Potential Regulatory Responses Under Consideration

The SEC is seeking feedback on a range of possible approaches to updating the FPI definition and related accommodations, including:

Updating Existing Eligibility Criteria
- Lowering the U.S. ownership threshold or revising the business contacts test to better capture issuers with significant ties to the United States.

Introducing a Foreign Trading Volume Requirement
- Requiring FPIs to maintain a minimum percentage of trading volume outside the United States to retain FPI status.
- The SEC is considering various thresholds (e.g., 1%, 3%, 5%, 10%, 15%, 50%) and has provided data on how many current FPIs would be affected at each level.

Requiring Listing on a Major Foreign Exchange
- Mandating that FPIs be listed on a “major” foreign exchange, with the SEC defining which exchanges qualify based on criteria such as market size, governance standards, and disclosure requirements.

SEC Assessment of Foreign Regulation
- Limiting FPI status to issuers incorporated or headquartered in jurisdictions with robust regulatory and oversight frameworks, as determined by the SEC.

Mutual Recognition Systems
- Expanding mutual recognition arrangements (similar to the U.S.-Canada MJDS[17]) to other jurisdictions with comparable investor protection standards.

International Cooperation Arrangement Requirement
- Conditioning FPI status on the issuer’s home country securities authority being a signatory to international information-sharing agreements, such as the International Organization of Securities Commissions Enhanced Multilateral Memorandum of Understanding Concerning Consultation, Cooperation, and the Exchange of Information.[18]

Business Implications

Regulatory Uncertainty: Companies currently relying on FPI status—especially those incorporated in jurisdictions with limited disclosure requirements or trading primarily in the United States—face potential changes to their reporting obligations and compliance costs.
Competitive Dynamics: The SEC is considering whether the current framework creates an uneven playing field between domestic issuers and FPIs, particularly those with limited home country oversight.
Market Access: Changes to the FPI definition could prompt some issuers to reconsider their U.S.listings or seek alternative markets, potentially impacting U.S. investor access to foreign securities.
Transition and Compliance: The SEC is seeking input on transition periods, potential accommodations for affected issuers, and the costs and complexities of moving from IFRS or home country GAAP to U.S.GAAP.

Commissioners Comments

Below are links to the full statements of several SEC Commissioners regarding the concept release and potential changes to the FPI definition:

Next Steps

Businesses with cross-border operations, FPI registrants in the United States (including those with classes of securities listed on a U.S. stock exchange), and investors in FPI securities should closely monitor this process and consider participating in the comment period to help shape the future regulatory landscape for FPIs.

The SEC is inviting comments on all aspects of the FPI definition and potential regulatory responses, including the costs, benefits, and competitive impacts of any changes. Comments are due within 90 days of publication in the Federal Register. Comments may be submitted: (1) using the SEC’s comment form at https://www.sec.gov/rules/submitcomments.htm; (2) via e-mail to rule-comments@sec.gov (with “File Number S7-2025-01” on the subject line); or (3) via mail to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number S7-2025-01.

[1]  Concept Release on Foreign Private Issuer Eligibility, Release Nos. 33-11376; 34-103176 (June 4, 2025), available at https://www.sec.gov/files/rules/concept/2025/33-11376.pdf.

[2]  A “foreign private issuer” is currently defined as a foreign issuer (i.e., an issuer which is a foreign country, a national of any foreign country or a corporation or other organization incorporated or organized under the laws of any foreign country) other than a foreign government (i.e., the government of any foreign country or of any political subdivision of a foreign country) except an issuer that as of the last business day of its most recently completed second fiscal quarter has more than 50% of its outstanding voting securities directly or indirectly held of record by U.S. residents and for which any of the following is true: (i) a majority of its executive officers or directors are citizens or residents of the United States, (ii) more than 50% of its assets are located in the United States, or (iii) its business is administered principally in the United States. See 17 CFR § 230.405; 17 CFR § 240.3b-4.

[3]  As used herein, any reference to a “foreign issuer” means an entity, other than a foreign government, organized under the laws of any non-U.S. jurisdiction.

[4]  See supra note 1, n.13.

[5]  See Foreign Issuer Reporting Enhancements, Release No. 33-8959 (Sept. 23, 2008) [73 FR 58300 (Oct. 6, 2008)], available at https://www.sec.gov/files/rules/final/2008/33-8959fr.pdf.

[6]  See Evan Avila and Mattias Nilsson, Trends in the Foreign Private Issuer Population 2003-2023: A Descriptive Analysis of Issuers Filing Annual Reports on Form 20-F (Dec. 2024 (Revised May 2025)), available at https://www.sec.gov/files/dera_wp_fpi-trends-2412.pdf.

[7]  Id.

[8]  See supra note 1, n.13.

[9]  The reporting obligations of an FPI registrant are in contrast to the interim, quarterly and annual reporting requirements for non-FPI registrants, which are based on specific items of disclosure mandated in the relevant Form 8-K, Form 10-Q and Form 10-K. While both Nasdaq and the New York Stock Exchange require listed companies (including FPIs) to timely disclose any material information likely to affect the market price for their listed securities, those rules do not mandate the specific financial and other disclosure that would also apply to a non-FPI registrant that is required to file interim and quarterly reports on Form 8-K and Form 10-Q. For more details on the FPI reporting obligations, see Form 6-K, General Instructions, U.S. Securities and Exchange Commission (Revised February 2025), available at https://www.sec.gov/files/form6-k.pdf.

[10]  See supra note 1 at § II.B for an outline of the accommodations afforded to FPIs.

[11]  See supra note 1, n.101.

[12]  See supra note 2.

[13]  Id.

[14]  See supra note 1, n.101.

[15]  See supra note 1, at §§ II.A, and III.C.1.

[16]  See Holding Foreign Insiders Accountable Act, S. 2542, 118th Cong. (2024), available here; Press Release, Sen. Chris Van Hollen, Van Hollen, Kennedy Introduce Bipartisan Bill to Deter Executives of Foreign Companies from Insider Trading at the Expense of American Investors (June 13, 2024), available here.

[17] Notably, the concept release does not seek comments on the MJDS. Rather, the SEC appears to generally be positing the MJDS as a mutual recognition model to consider as an alternative.  See supra note 1, n.100.

[18]  See International Organization of Securities Commissions, Enhanced Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (2016), available at https://www.iosco.org/about/pdf/Text-of-the-EMMoU.pdf.

The following Gibson Dunn lawyers prepared this update: J. Alan Bannister, Mellissa Campbell Duru, James J. Moloney, Eric Scarazzo, Rodrigo Surcan, and Chad Kang.

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

Alan Bannister – New York (+1 212.351.2310, abannister@gibsondunn.com)

Mellissa Campbell Duru – Washington, D.C. (+1 202.955.8204, mduru@gibsondunn.com)

James J. Moloney – Orange County (+1 949.451.4343, jmoloney@gibsondunn.com)

Eric Scarazzo – New York (+1 212.351.2389, escarazzo@gibsondunn.com)

Rodrigo Surcan – New York (+1 212.351.5329, rsurcan@gibsondunn.com)

Chad Kang – Orange County (+1 949.451.3891, ckang@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)

James J. Moloney – Orange County (+1 949.451.4343, jmoloney@gibsondunn.com)

Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

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

ENFORCEMENT ACTIONS

UNITED STATES

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

INTERNATIONAL

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

REGULATION AND LEGISLATION

UNITED STATES

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

INTERNATIONAL

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

SPEAKER’S CORNER

UNITED STATES

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

INTERNATIONAL

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

OTHER NOTABLE NEWS

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

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

FinTech and Digital Assets Group Leaders / Members:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Justice Alito, writing for the Court

Background:

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

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

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

Issue:

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

Court’s Holding:

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

What It Means:

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

Gibson Dunn represented Devas’s owners as Petitioners.

The Court’s opinion is available here.

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

Appellate and Constitutional Law

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

Related Practice: Judgment and Arbitral Award Enforcement

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

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

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

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

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

Justice Jackson, writing for the Court

Background:

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

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

Issue:

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

Court’s Holding:

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

What It Means:

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

The Court’s opinion is available here.

Appellate and Constitutional Law

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

Related Practice: Labor and Employment

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

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

The Judgment is only the third occasion on which the Competition Appeal Tribunal has been required to approve a collective settlement, and it offers valuable insight to the CAT’s developing approach to a settlement procedure still in its infancy.

A. Introduction

In the long-running Merricks v Mastercard litigation, the Competition Appeal Tribunal (the CAT) approved the Class Representative and the Defendants’ (together, the “Settling Parties”) joint application for a collective settlement approval order (CSAO) (the Settlement Application). On 20 May 2025, the CAT issued its judgment setting out its reasons for that approval, together with its decision as to how the settlement sum should be distributed (the Judgment).

The Judgment is important because it is only the third occasion on which the CAT has been required to approve a collective settlement. As such, the Judgment offers valuable insight to the CAT’s developing approach to a settlement procedure still in its infancy. It is also the first time the CAT has had to consider whether it is required to consider the interests of other stakeholders (in particular, the litigation funder, who opposed the Settlement Application) when considering a settlement application.

This client alert briefly examines the Judgment and identifies some key takeaways.

B. Collective Settlement Procedure

The CAT is required to approve proposed settlements in opt-out collective proceedings.[1] Accordingly, once parties have reached a settlement, they must apply jointly to the CAT for a CSAO (which application will usually be determined at a hearing). The application must among other things: set out the terms of the proposed settlement; contain a statement that the applicants believe the terms of the proposed settlement are just and reasonable, supported by evidence; and specify how any sums are to be paid and distributed. The test for approval is whether the terms of the proposed settlement are “just and reasonable”.

The process is new, with little authority on how it should operate in practice. Prior to the Judgment, there had only been two previous decisions under the collective settlement regime, each involving far smaller sums. In McLaren,[2] the Class Representative settled with one of 12 Defendants for £1.5 million (comprising both damages and costs). In Gutmann,[3] the Class Representative settled with one of two Defendants for up to £25 million (comprising both damages and costs).

C. Judgment Summary

Approval of the settlement

The Settling Parties signed a settlement agreement on 3 December 2024 (the Settlement Agreement), which provided that, subject to the CAT’s approval, the Defendants would pay £200 million in full and final settlement of the proceedings (inclusive of interest and all costs and expenses) (the Settlement Sum).[4] The Settlement Agreement did not contain any provisions regarding distribution of the Settlement Sum, which was expressed to be a matter for the CAT.[5] The litigation funder was not a party to the Settlement Agreement, strongly opposed the Settlement Application on the basis that the Settlement Sum was “significantly too low”,[6] and was granted permission to intervene. As a result of the litigation funder’s opposition, the Settlement Agreement provided for an indemnity from the Defendants to the Class Representative of up to £10 million against any contractual exposure he might have to the litigation funder as a result of accepting the settlement (the Indemnity).[7]

Notwithstanding the litigation funder’s intervention and objections, the Judgment makes clear that the test to be applied by the CAT in determining whether to approve a collective settlement application is whether the terms of the settlement are “just and reasonable” from the exclusive perspective of the class members (as opposed to all stakeholders involved, i.e. including the litigation funder).[8] That is because, in opt-out proceedings, class members are not involved in the proceedings and the CAT’s role is to scrutinize the proposed settlement on their behalf.

Rule 94(9) of the Competition Appeal Tribunal Rules 2015 (the CAT Rules) provides that, in determining whether a collective settlement is “just and reasonable”, the CAT shall take into account all relevant circumstances, including a non-exhaustive list of factors. In this regard, the Judgment emphasises that the CAT will not require a settlement to be “perfect” and that “there is likely to be a range of settlements which could be approved”.[9]

The CAT considered various factors listed in CAT Rule 94(9). In doing so, it noted, amongst other things, that:

the number of class members entitled to participate in the settlement was “vast”;[10]
the £200 million Settlement Sum was “well within the reasonable range”, despite the litigation funder’s objections;[11]
there was “real benefit to class members in securing a payment of damages now, rather than waiting potentially a further two years for the uncertain prospect of potentially a higher amount”;[12]
the fact that any further costs would have been paid by the litigation funder was not an irrelevant consideration from the perspective of the class members since the litigation funder would have sought reimbursement for such costs;[13], and
there was “no requirement for there to be an independent opinion” in the circumstances – it would have been very difficult to obtain a meaningful opinion in the short period of time available and, in any event, the CAT was not short on legal analysis of the relevant strengths and weaknesses of the case, nor past judgments in the case (however, note the CAT’s postscript guidance below).[14]

More generally, the CAT observed that it is not concerned with deciding “the best negotiating strategy”.[15] In this regard, it made clear that there may be a difference in perspective and interests between a class representative and a litigation funder. For the former, a 15% chance that the case may fail might be an unacceptable risk in terms of rejecting a settlement sum of £200 million; whereas for the latter, which has a portfolio of cases and seeks to make a high return on that portfolio, continuing a case which only has a 30% chance of achieving £500 million as opposed to settling it for £200 million may be a more commercially sensible approach.[16]

In relation to the Indemnity, the CAT noted this may have given rise to a conflict of interest when the Settlement Agreement was entered into. However, it explained that it had subjected the terms of the settlement to “careful scrutiny to satisfy [itself] that they are just and reasonable”.[17] Further, the Class Representative had reached the view that the Settlement Sum was in the best interests of the class members before the Defendants offered the Indemnity.[18]

Distribution

As a preliminary point, the CAT rejected the litigation funder’s “fundamentally misconceived” argument that it could not: (i) approve the Settlement Application; but, (ii) then direct a different basis of distribution to that proposed in the draft order accompanying the Settlement Application. Rather, the CAT held that it must first determine the Settlement Application and then must itself decide the appropriate order as to how the Settlement Sum is distributed.[19] This distinction is made clear in CAT Rule 94(4)(b) and (d).[20]

The CAT highlighted as “fundamental” that “the collective proceedings regime should operate for the benefit of [class members] and not primarily for the benefit of lawyers and funders” while recognising the need for “commercial litigation funding to pay for it”.[21] The Tribunal further noted that there is “no one right answer […] regarding the amount to be offered to each [class member]”; “the only requirement is that the distribution should be fair and reasonable”.[22]

On that basis, the CAT divided the Settlement Sum into the following pots for distribution:

Pot 1 – Class Members. The CAT agreed with the Settling Parties that a payment of £45 per class member, which was expected to lead to a take-up of 5% (i.e., 2.2 million class members), was reasonable and fair, subject to a cap of £70 per class member in the event of lower take-up to ensure payments were not excessive.[23] Equally, given the possibility of higher take-up, which could exhaust the Settlement Sum, the CAT determined that it was necessary to reserve a portion of the Settlement Sum for the litigation funder.[24] Accordingly, the CAT limited Pot 1 to £100 million.
Pot 2 – Costs. The CAT decided that this pot should cover: (i) costs paid on behalf of the Class Representative; (ii) the litigation funder’s payment of its own direct costs; and (iii) further anticipated costs, with certain of those costs to be assessed for reasonableness by an independent expert. The CAT noted that the total Pot 2 sum may exceed the estimated figure of £45.6 million in the Settlement Application.
Pot 3 – Litigation Funder’s Profit Return and Other. Pot 3 would amount to £100 million less the sum of Pot 2. The CAT determined it should be used to:
1. Pay the Class Representative’s costs which do not fall within Pot 2.[25]
2. Pay the litigation funder’s profit return. The Settlement Application expressly left the determination of the profit return to the CAT, in line with the statutory scheme and the LFA.[26] As an initial matter, the CAT was satisfied that the litigation funder should be paid a profit return given the importance of litigation funding to collective proceedings. However, to determine the appropriate level in the circumstances,[27] it was guided by jurisprudence from Australia and Canada. The CAT took into account the significant value of the funding commitment (a notional £54.85 million),[28] the significant funding period (over 5 years),[29] the fact that the case was “very far from a success”,[30] the litigation funder’s strategy of running a portfolio of cases,[31] and an Australian judgment which found that the return on investment for a substantial litigation funder is 1.2x for all completed cases, 1.9x for cases which did not provide a negative return, and above 4x for 15% of cases.[32] On that basis, although the litigation funder argued it was entitled to an “agreed minimum floor” of a return of £179 million, the CAT determined that a return on investment of 1.5x (amounting to only £68 million) would be appropriate, “recognising the significant risk but reflecting also the poor outcome”.[33]
3. Supplement Pot 1 in the event that more than 5% of class members submit claims.

Any remaining money in Pot 3 after these three stages would go to a charity, The Access to Justice Foundation (as proposed by the Class Representative), which the CAT determined to be more appropriate than The Good Things Foundation (proposed by the Defendants).[34]

D. Takeaways for Future Collective Settlements

The CAT emphasised that its approach to settlement in this case had been “determined by the exceptional circumstances of this case” and “should not be regarded as a guide for more positive settlements”.[35] Nonetheless, given the limited jurisprudence in this area, we anticipate the Judgment, together with the Canadian and Australian jurisprudence, will at the very least provide a starting point for future collective settlements.

Practitioners should also note the CAT’s postscript guidance that: (i) settlement applications should have a section specifically addressing full and frank disclosure;[36] (ii) they will ordinarily expect a comprehensive opinion from a KC;[37] and (iii) if a settlement application is made shortly before trial, the likely outcome is that the trial will be adjourned and refixed if the settlement is not approved.[38]

Finally, in the days since the Judgment, the litigation funding industry has sounded the alarm in relation to the CAT’s approach to the litigation funder’s level of return on investment which they say is far too low and likely to produce a chilling effect in terms of the availability of funding for future collective proceedings. Indeed, the litigation funder in this case has called the Judgment “unfair” and is exploring potential options to appeal. Claimant law firms and other litigation funders will therefore be watching closely to see what steps the litigation funder takes next.

[1] Section 49A Competition Act 1998.

[2] Case 1339/7/7/20 Mark McLaren Class Representative Limited v MOL (Europe Africa) Ltd and Others.

[3] Case 1304/7/7/19 Justin Gutmann v First MTR South Western Trains Limited and Another.

[4] Judgment, para. 61.

[5] Judgment, para. 68.

[6] Judgment, para. 75.

[7] Judgment, para. 67.

[8] Judgment, para. 81.

[9] Judgment, para. 83.

[10] Judgment, para. 84.

[11] Judgment, para. 89.

[12] Judgment, para. 100.

[13] Judgment, para. 100.

[14] Judgment, para. 106.

[15] Judgment, para. 107.

[16] Judgment, para. 107.

[17] Judgment, para. 102.

[18] Judgment, para. 103(1).

[19] Judgment, para. 112.

[20] Judgment, para. 118.

[21] Judgment, para. 121.

[22] Judgment, para. 129.

[23] Judgment, paras 129 and 131.

[24] Judgment, para. 130.

[25] Judgment, para. 196.

[26] Judgment, para. 167.

[27] Judgment, para. 168.

[28] Judgment, para. 179.

[29] Judgment, para. 180.

[30] Judgment, para. 182.

[31] Judgment, para. 183.

[32] Judgment, para. 187.

[33] Judgment, para. 188.

[34] Judgment, para. 202.

[35] Judgment, para. 208.

[36] Judgment, para. 211.

[37] Judgment, para. 212.

[38] Judgment, para. 213.

The following Gibson Dunn lawyers prepared this update: Doug Watson, Dan Warner, and Jack Crichton.

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 in the firm’s Class Actions, Antitrust & Competition, or Litigation practice groups, or the following in London:

Philip Rocher (+44 20 7071 4202, procher@gibsondunn.com)

Patrick Doris (+44 20 7071 4276, pdoris@gibsondunn.com)

Doug Watson (+44 20 7071 4217, dwatson@gibsondunn.com)

Susy Bullock (+44 20 7071 4283, sbullock@gibsondunn.com)

Dan Warner (+44 20 7071 4213, dwarner@gibsondunn.com)

Jack Crichton (+44 20 7071 4008, jcrichton@gibsondunn.com)

This update examines key changes made to the Ordinance during the Hong Kong Legislative Council’s consideration of the Bill, flags a number of key observations made by the Hong Kong Government during the LegCo process, and outlines key aspects of the Consultation Papers.

On May 21, 2025, the Hong Kong Legislative Council (LegCo) passed the long-awaited Stablecoins Bill (Bill) to introduce a robust regulatory framework for fiat-referenced stablecoin issuers in Hong Kong, focusing on stablecoins that maintain their value by referencing official currencies (specified stablecoins).[1] While the Stablecoins Bill was gazetted as the Stablecoins Ordinance (Cap. 656) (Ordinance) on May 30, 2025,[2] the Ordinance has not yet come into effect and its commencement date is currently unknown. However, the Hong Kong Monetary Authority (HKMA) has indicated that it expects the regime to come into effect this year.

As part of the HKMA’s preparation for the commencement of the Ordinance, the HKMA published two consultation papers (Consultation Papers) on May 26, 2025.[3][4] In one of the consultation papers, titled “Consultation Draft Guideline on Supervision of Licensed Stablecoin Issuers”, the HKMA is seeking feedback on the proposed guidelines that set out its expectations regarding the minimum ongoing criteria that licensed stablecoin issuers must meet (Supervision Guideline). In a separate consultation paper, titled “Consultation Paper on the Proposed AML/CFT Requirements for Regulated Stablecoin Activities”, the HKMA is seeking views on its proposed anti-money laundering and counter-financing of terrorism (AML/CFT) requirements for stablecoin issuers seeking HKMA licensing to conduct regulated stablecoin activities (AML/CFT Consultation). The consultation period for both Consultation Papers is until June 30, 2025.

I. LegCo’s consideration of the Bill

In December 2024, the Government introduced the Bill to LegCo with the aim of establishing a regulatory regime for the supervision of activities involving stablecoins and providing the HKMA with relevant supervisory powers.[5] This followed the HKMA and Financial Services and Treasury Bureau’s consultation which concluded in July 2024 (see our previous client alert here).[6] LegCo’s dedicated Stablecoins Committee (Bills Committee) then debated the Bill at a number of meetings and sought clarifications from the Hong Kong Government on a range of topics related to the Bill prior to the Bill’s passage on May 21, 2025. As part of this process, the Bills Committee released two reports on May 9, 2025[7] and May 21, 2025[8] reporting on their deliberations (LegCo Reports).

The LegCo Reports provide valuable insight into the Hong Kong Government’s approach to the regulation of stablecoins, the guidance which can be expected from the HKMA in coming months and the amendments made to the Bill between its introduction in December 2024 and its passage in May 2025.

The key takeaways from the LegCo Reports are as follows:

The HKMA will issue guidelines regarding whether a specified stablecoin is issued ‘in Hong Kong’: The Ordinance will, once enacted, require persons which carry on ‘regulated stablecoin activity’ in Hong Kong to be licensed. This concept of ‘regulated stablecoin activity’ will capture the issuance of a specified stablecoin in Hong Kong or a HKD-referenced stablecoin outside of Hong Kong in the course of business. The LegCo Reports note that the HKMA will issue guidelines on the factors it will consider in determining whether a specified stablecoin is issued ‘in Hong Kong’, but that the Hong Kong Government intends for the HKMA to take a holistic approach which considers all relevant factors, including but not limited to:
1. the location of the issuer’s day-to-day management and operations;
2. place of incorporation;
3. where minting and burning occur;
4. where management of reserve assets takes place; and
5. the location of bank accounts used for processing cash flows related to minting and redemption.
The HKMA will take a holistic approach in deciding whether an activity constitutes “active marketing”: Under the Ordinance, a person would be regarded as holding out as carrying on a regulated stablecoin activity or offering a specified stablecoin if the person actively markets, whether in Hong Kong or elsewhere, to the public (i.e. the public of Hong Kong, including a class of that public) that the person carries on, or purports to carry on, a regulated stablecoin activity or the offering of a specified stablecoin. The LegCo Reports again signal that the HKMA will issue guidelines on the factors it will consider in determining whether a person is actively marketing to the public, but note that the Hong Kong Government intends for the HKMA to take a holistic approach which considers all relevant factors, including but not limited to:
1. the language used in marketing materials;
2. whether the materials are targeted at a group of people that resides in Hong Kong;
3. whether a Hong Kong domain name is used for a marketing website; and
4. whether there is a detailed marketing plan to promote the activity.
SVF licensees will be permitted to offer specified stablecoins to the Hong Kong public: The Bill had initially proposed only allowing four categories of firm to offer specified stablecoins to the Hong Kong public, namely licensed stablecoin issuers, firms licensed by the Securities and Futures Commission (SFC) to conduct Type 1 regulated activity, SFC-licensed Virtual Asset Trading Platforms and HKMA-regulated authorised institutions. However, one of the most significant amendments made to the Bill during the LegCo review process was to expand the definition of ‘permitted offeror’ to also include firms regulated by the HKMA as stored value facility (SVF) licensees under the Payment Systems and Stored Value Facilities Ordinance (Cap. 584) (PSSVFO). The LegCo Reports note that this amendment was made on the basis of LegCo feedback and the Government’s consideration of stablecoin use cases and market trends, and that SVF licensees will be required to obtain prior and express approval from the HKMA before they commence offering specified stablecoins.
Restrictions on offering specified stablecoins issued by an entity that is not licensed by the HKMA to professional investors only: Importantly, the LegCo Reports also make it clear that the legislative intent of the Ordinance is to limit the offering of specified stablecoins issued by an entity that is not licensed by the HKMA to professional investors only, and flag that this restriction will be implemented through the publication of a notice in the Gazette by the Financial Secretary pursuant to section 9(3) of the Ordinance. Further, the HKMA and the SFC will also issue a circular directing permitted offerors (as set out above) to clearly indicate where specified stablecoins may only be offered to professional investors.

II. The Supervision Guideline

In order to obtain and maintain a licence under the Ordinance, stablecoin issuers will be required to meet a range of minimum criteria (as set out in Schedule 2 of the Ordinance) in relation to key areas of their business operations and risk and compliance functions. The Supervision Guideline being consulted on by the HKMA provides guidance on the HKMA’s expectations with regard to these minimum criteria and is summarised in the below table. The HKMA has indicated that it welcomes feedback from the industry on the Supervision Guideline, but has not identified specific questions or areas where it considers industry feedback would be most helpful.

Area	Key Requirements / Expectations	Details
Reserve Asset Management	Full Reserve Backing and Over-Collateralisation	Licensees must ensure that reserve assets are maintained at a level at least equal to the par value of all outstanding specified stablecoins in circulation.An additional layer of over-collateralisation is required to mitigate potential market risks and provide enhanced protection for holders.Licensees are required to conduct regular reconciliation of reserve assets to ensure ongoing compliance with the minimum reserve and over-collateralisation requirements. The valuation of reserve assets must be performed using transparent and robust methodologies, ensuring that the adequacy of the backing is consistently verified.
	Quality and Composition of Reserve Assets	Licensees must hold reserve assets that are high quality, highly liquid, and carry minimal investment risk to ensure stablecoin reliability.Acceptable reserves include short-term bank deposits (up to three months), high-grade debt securities, overnight reverse repos, and investment funds holding only eligible assets. Reserves should generally match the stablecoin’s currency (unless otherwise approved by the HKMA), but for Hong Kong dollar-referenced stablecoins, U.S. dollar reserves are allowed due to the linked exchange rate system between the HKD and USD.
	Segregation and Safeguarding of Reserve Assets	Licensees must maintain reserve assets for each specified stablecoin in separate pools, distinct from other reserve assets and all other assets or funds held by the licensee. This segregation ensures that reserve assets are protected and not subject to claims from the licensee’s other creditors.Effective trust arrangements are required to ensure that reserve assets are held exclusively for the benefit of stablecoin holders and are always available to meet valid redemption requests at par value. Any income or loss from the management of reserve assets accrues to the licensee.
	Prohibition on Interest	Licensees are prohibited from paying interest or providing interest-like incentives to stablecoin holders.
	Transparency Requirements	To ensure transparency and maintain public confidence, licensees must publicly disclose their reserve asset management policy, the composition and value of their reserve assets, and the results of regular independent attestations and audits. Daily statements must be prepared and ready for submission to the HKMA if required, although licensees will generally only be required to report to the HKMA on a weekly basis.Licensees must report to the HKMA immediately on identification of a breach of statutory or regulatory requirements in relation to reserve assets management, material non-compliance with reserve assets management policy, and unresolved discrepancies identified in any reconciliation exercise.
Issuance, Redemption and Distribution	Prudent Issuance and Full Reserve Matching	Licensees are required to issue stablecoins in a prudent manner, ensuring that new coins are only minted upon receipt of matching funds in the referenced currency.The value of reserve assets must fully correspond to the value of outstanding stablecoins at all times.
	Redemption Rights	Stablecoin holders must have the right to redeem their stablecoins at par value, with a direct claim against the licensee for any shortfall, including in the event of insolvency.Redemption requests should be processed promptly, typically within one business day, and any associated fees must be reasonable and transparent. A licensee should establish and maintain an effective redemption mechanism for the stablecoins it issues.
	Distribution Requirements	A licensee should consider the licensing status of any third party entities involved in distributing its specified stablecoins. Where third party entities offer specified stablecoins in Hong Kong, the licensee should ensure that the third party entities are permitted offerors.Where engaging third party entities to provide liquidity on the secondary market for specified stablecoins issued by a licensee, the licensee should consider the need to engage such parties, and if so, the extent and scope of the arrangements, taking into account its business model and operational arrangement. The licensee should ensure that any such arrangements have the goal of maintaining relatively stable value for the specified stablecoins in the secondary markets, and that any potential and/or actual conflicts of interest have been identified as well as properly addressed and mitigated.
	Customer Due Diligence and Jurisdictional Controls	A licensee should establish adequate and effective policies and procedures for customer on-boarding in respect of issuance and redemption of specified stablecoins.A licensee should comply with the relevant laws and regulations in the jurisdictions where it offers specified stablecoins. Importantly, effective controls should be in place to detect and block attempts at location spoofing.
	Disclosure, Audit, and Reporting Requirements	Licensees must provide clear and comprehensive disclosures to the public regarding redemption processes, rights, and applicable fees.Regular audits of stablecoin operations are required to ensure compliance with its issuance, redemption and distribution policies, as well as the applicable regulatory requirements.
Other Business Activities	Prudent Conduct of Stablecoin Activities	Licensees are required to issue specified stablecoins in a prudent and sound manner, taking into account their business model and operational arrangements.
	Approval for Other Business Activities	Prior to engaging in any business activities outside of their licensed stablecoin operations, licensees must obtain prior consent from the HKMA. In seeking such approval, licensees should establish appropriate governance structures, conduct thorough risk assessments, and implement effective risk management measures.It is essential that these additional activities do not compromise the safety and soundness of the licensee’s stablecoin business or give rise to potential or actual conflicts of interest. Licensees must also ensure that sufficient resources remain dedicated to their stablecoin activities at all times. Licensees are responsible for determining whether their other business activities are subject to regulation and must ensure full compliance with all applicable regulatory regimes.
	Issuing Multiple Stablecoins	Licensees may issue more than one type of specified stablecoin, but must first consult with the HKMA before doing so. Licensees are expected to demonstrate that they possess adequate resources and operational capabilities to manage multiple stablecoin issuances without adversely affecting their existing operations.
Financial Resources	Minimum paid-up share capital	Licensees must have a minimum paid-up share capital of HK$25,000,000, or an equivalent amount in another currency that is freely convertible into Hong Kong dollars, unless the HKMA grants an exemption or alternative arrangement.The HKMA retains the discretion to impose additional financial resource requirements or set higher capital thresholds as a condition of granting or maintaining a licence. The financial resources allocated to meet these requirements should only be used for the purposes of the licensee’s business activities and should not be used for any dealing with its related companies or parties.
Risk Management	Governance and Oversight	A licensee engaged in stablecoin activities should implement robust risk management policies and procedures tailored to their size and complexity.This includes a clear governance structure with defined roles for the Board and senior management, documented risk management frameworks, regular reviews, independent audits, and timely risk reporting to both management and the HKMA.
	Financial, Technology, and Security Controls	Licensees should prudently manage reserve assets to meet all redemption requests, even under stress. This involves setting internal limits, conducting stress tests, and managing credit, liquidity, and market risks.Technology and security risks must be addressed through comprehensive IT controls, smart contract management, wallet and account security, cybersecurity, oversight of third-party providers, ongoing monitoring, and independent audits.
	Token Management	For each specified stablecoin it issues, the licensee should clearly document (i) the token standards used, (ii) the distributed ledgers on which such specified stablecoins are issued, and (iii) the architecture of all smart contracts (including token contract, proxy contract, multi-signature contracts, etc.) in respect of such specified stablecoins.A licensee should identify all operations in relation to the management of the full lifecycle of each specified stablecoin it issues, which should cover deploy, configure, mint, burn, upgrade, pause, resume, blacklist, remove blacklist, freeze, remove freeze, whitelist, usage of any operational wallets, etc. The licensee should also engage a qualified third party entity to audit the smart contracts in respect of such specified stablecoins on at least an annual basis in order to ensure the smart contracts, to ensure that the smart contracts (i) are implemented correctly, (ii) consistent with the intended functionalities, and (iii) are, to a high level of confidence, not subject to any vulnerabilities or security flaws.
	Wallet and Private Key Management	A licensee should put in place effective wallet and private key management policies and procedures to ensure the security and integrity of the operations in relation to the specified stablecoins it issues.A licensee should put in place robust controls and procedures for private key management covering its full lifecycle, including but not limited to key generation, distribution, storage, usage, back-up, recovery, destruction, etc. The licensee should identify all seeds and/or private keys relevant to the management of the specified stablecoins it issues, and adopt measures which comply with detailed requirements set out in the Supervision Guideline but on a ‘scale proportionate’ to the significance of the seeds and private keys. In particular, the HKMA has noted that it expects seeds and private keys should be safeguarded in secure storage media, such as HSM with appropriate certification, in a secure facility with stringent access control and monitoring systems located in Hong Kong, or at a location acceptable to the HKMA.
	Account Management	During the customer on-boarding process, a licensee should adopt an effective authentication method to establish and verify the identity of a potential customer having regard to the nature of the customer (i.e. natural or non-natural person).When fulfilling a customer’s request for issuance or redemption, a licensee should transfer funds only to and accept fund transfers from the customer’s pre-registered accounts, as well as transfer specified stablecoins only to and accept transfers of specified stablecoins from the customer’s pre-registered wallet addresses or accounts. A licensee should also establish effective monitoring mechanisms to prevent, detect and block unauthorised access to customers’ accounts and fraudulent transactions in relation to customers’ accounts.
	Operational Risks / Incident Management	Comprehensive incident management, business continuity, and exit plans must be established, regularly tested, and approved by the board of the licensee. The HKMA must be promptly notified of any significant incidents or changes that could affect stablecoin redemption.
Corporate Governance		Licensees must establish effective governance structures which correspond to the scale and complexity of their stablecoin operations.Controllers of licensees, chief executives, directors, and stablecoin managers (where the licensee is an authorized institution) should be fit and proper to hold their roles and must be approved by the HKMA. Officers who are responsible for the day-to-day management and operation of the licensee’s licensed stablecoin activities must also possess appropriate knowledge and experience to discharge their responsibilities. Any changes in managerial appointments or responsibilities must be promptly reported to the HKMA. All managers must be assessed for suitability, with clear processes for selection, training, and addressing breaches.
Business Practices and Conduct		Licensees shall maintain robust information and accounting systems that accurately record business activities, ensure compliance with Hong Kong’s regulatory and accounting standards, and remain accessible for regulatory review. They should also keep accurate records and submit annual audited financial statements to the HKMA.Licensees must publish a white paper in respect of each type of specified stablecoin it uses. This white paper should be published on the licensee’s website and material changes to the paper should be notified to the HKMA before being made.

III. The AML/CFT Consultation

As noted above, the HKMA is also seeking industry feedback on its AML/CFT Consultation, which sets out a range of AML/CFT requirements which the HKMA proposes imposing on stablecoin issuers. The HKMA has signalled that it has taken a range of factors into consideration in formulating the proposed AML/CFT requirements, including the following:

Potential risks associated with stablecoin activities: The AML/CFT Consultation observes that stablecoins, like other virtual assets, present significant ML/TF risks due to the inherent anonymity, global accessibility, and the potential for complex fund layering associated with stablecoin transactions. The HKMA considers that these risks are further heightened when stablecoins are used in conjunction with unhosted wallets, which facilitate peer-to-peer transfers without the involvement of regulated intermediaries or the creation of blockchain records. However, the HKMA also recognises the traceability advantages offered by blockchain technology, which provides transparent and immutable records of all on-chain transactions, and considers that this transparency can assist in the identification of suspicious activities, even when obfuscation tools are employed.

Alignment with international standards: International AML/CFT standards generally place obligations on intermediaries between individuals and the financial system. While the minting and burning of stablecoins by an issuer is not considered to be intermediating activity, stablecoin issuers will be considered intermediaries when they offer, redeem, or facilitate stablecoin transactions. Consequently, the HKMA proposes to treat stablecoin issuers as financial institutions under the Anti-Money Laundering and Counter-Terrorism Financing Ordinance (Cap. 615) (AMLO).

In light of these considerations, the HKMA intends to require licensed issuers to adopt a range of AML/CFT policies and controls to manage ML/TF risks associated with their stablecoin operations. At a minimum, these should include institutional risk assessments, governance and oversight, controls against terrorist financing and sanctions, suspicious transaction reporting, and record-keeping. Each of these requirements should be proportionate to the nature and scope of the licensee’s activities.

The table below summarises the specific AML/CFT requirements proposed for licensed stablecoin issuers, as well as the specific questions the HKMA is seeking feedback on:

Regulatory Area	Key Requirements / Expectations	Details
Stablecoin Issuance and Redemption	The HKMA is seeking industry feedback on the following aspects of its proposals with regards to issuance and redemption: Whether due diligence measures should be required for institutions (e.g. financial institutions or virtual asset service providers (VASPs)) providing custodial wallets for stablecoin holders at both the issuance and redemption stages; Whether additional controls should be introduced to mitigate the risks associated with unhosted wallets in the context of stablecoin issuance and redemption; and Any other suggestions to strengthen the regulatory approach to stablecoin issuance and redemption from a risk mitigation perspective.
	Customer Due Diligence and Rights	For both the issuance and redemption of stablecoins, licensees must conduct due diligence on all customers. This includes individuals and legal entities with ongoing business relationships, as well as those conducting occasional transactions of HK$8,000 or more.In the case of redemption, licensees are also required to honor valid redemption requests from stablecoin holders.
	Wallet Identification and Ownership Verification	Before issuance or redemption of stablecoins, licensees must identify the relevant wallet address and verify the customer’s ownership or control of that wallet.If the wallet is custodial (e.g., provided by a VASP), the licensee must identify the institution providing the custodial wallet and perform due diligence on it.
	Additional Controls for Unhosted Wallets	The HKMA considers that unhosted wallets (i.e. those controlled directly by users rather than institutions) present heightened risks in both issuance and redemption situations.To mitigate these risks, licensees must implement additional controls before transferring stablecoins to, or accepting stablecoins from, unhosted wallets. These controls shall include: Enhanced monitoring of transactions involving unhosted wallets; Only transferring to or accepting from unhosted wallets that have been assessed as reliable, based on transaction and wallet screening; and Imposing transaction limits where appropriate
Ongoing Monitoring	The HKMA is seeking industry feedback on the following aspects of its proposals with regards to ongoing monitoring: Whether licensees should conduct ongoing monitoring for its customers to detect potential illicit activities for their specified stablecoins.
	Risk-based transaction monitoring systems	Given the ML/TF risks associated with stablecoins, and the fact that they have an identifiable legal issuer, licensees are required to implement effective, risk-based transaction monitoring systemsThese systems should: Monitor the destination of stablecoin transactions at the point of issuance. Monitor the source of stablecoin transactions at the point of redemption. Leverage available technologies to track stablecoin movements on the blockchain. Identify, report and take follow-up actions regarding suspicious transactions.
	Screen stablecoin transactions and wallet addresses	Licensees shall establish systems and controls to screen stablecoin transactions and associated wallet addresses. This includes the use of blockchain analytics tools to: Trace transaction histories to accurately determine the source and destination of stablecoins. Detect transactions involving wallet addresses that are directly or indirectly linked to illicit activities or designated parties.
Stablecoin Transfers	The HKMA is seeking industry feedback on the following aspects of its proposals with regards to stablecoin transfers: To what extent should licensees comply the special requirements for virtual asset (VA) transfers set out in section 13A of Schedule 2 of the AMLO?
	Section 13A of Schedule 2 of the AMLO applies the Travel Rule to VA transfers. The HKMA has proposed extending these requirements to stablecoin transfers on the basis that stablecoins are a type of VA as defined under the AMLO.
Additional measures for ongoing monitoring of stablecoins circulated in secondary markets	The HKMA is seeking industry feedback on the following aspects of its proposals with regards to additional monitoring in the secondary markets: Whether the industry agrees that licensees should be required to implement adequate and appropriate systems and controls to effectively prevent or combat the abuse of stablecoins transacted to or from unhosted or unregulated wallets for ML/TF purposes; If yes, suggestions regarding possible risk mitigation measures for stablecoin transactions involving unhosted wallet addresses, taking into account the different roles of ecosystem participants such as issuers, intermediaries, and banks; and The extent to which licensees should be held accountable for monitoring stablecoin transactions in the secondary market, and views on how such additional measures should be implemented (e.g. scope, analytics frequency, and control mechanisms).
	Licensees should adopt proportionate and ongoing monitoring practices to mitigate the risk of stablecoins being used for illicit purposes. These may include: Limiting the primary distribution and redemption of stablecoins to financial institutions and VASPs with strong AML/CFT controls. Using appropriate solutions (e.g. blockchain analytics tools) to continuously screen transactions and wallet addresses beyond the primary distribution venues. Blacklisting wallet addresses linked to sanctions or illicit activities. Implementing other effective measures such as whitelisting wallet addresses or adopting a closed-loop system that restricts circulation to trusted entities. The HKMA expects license applicants to consider international standards and available technological solutions when designing safeguards in this space. The HKMA has indicated that it is open to industry proposals, provided they align with the overarching principle of preventing misuse of stablecoins in secondary markets.

The HKMA has also noted that it is also developing supplementary AML/CFT guidance for digital asset activities, such as stablecoin issuance and custodial services. This aims to align with SFC guidelines to ensure consistent regulation across institutions performing similar activities. Industry consultation is planned for later in 2025.

IV. Conclusion

The passage of the Ordinance and release of the Consultation Papers are key milestones in the development of Hong Kong’s regulatory landscape for stablecoin issuers and offerors. Stakeholders are encouraged to review the Consultation Papers and submit feedback by June 30, 2025. In the meantime, we recommend stablecoin issuers to evaluate their current operations to ensure readiness for the forthcoming regulatory changes.

[1] “Government welcomes passage of Stablecoins Bill”, published by the Hong Kong Government on May 21, 2025, available here.

[2] Stablecoins Ordinance (Cap. 656) in gazette, available here.

[3] “Consultation Draft Guideline on Supervision of Licensed Stablecoin Issuers”, published by the HKMA on May 26, 2025, available here.

[4] “Consultation Paper on the Proposed AML/CFT Requirements for Regulated Stablecoin Activities”, published by the HKMA on May 26, 2025, available here.

[5] Stablecoins Bill, available at https://www.legco.gov.hk/yr2024/english/bills/b202412064.pdf

[6] “Hong Kong’s Regulators Publish Consultation Conclusions on Legal Framework for Stablecoin Issuers”, published by Gibson, Dunn & Crutcher on September 10, 2024, available at: https://www.gibsondunn.com/hong-kongs-regulators-publish-consultation-conclusions-on-legal-framework-for-stablecoin-issuers/

[7] “Paper for the House Committee – Report of the Bills Committee on Stablecoins Bill”,published by the Hong Kong Legislative Council on May 9, 2025, available here.

[8] “Report of the Bills Committee on Stablecoins Bill”, published by the Hong Kong Legislative Council on May 15, 2025, available here.

The following Gibson Dunn lawyers prepared this update: William Hallatt, Emily Rumble, Arnold Pun, and Macy Chung*.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. If you wish to discuss any of the matters set out above, please contact any member of Gibson Dunn’s Financial Regulatory team, including the following members in Hong Kong:

William R. Hallatt (+852 2214 3836, whallatt@gibsondunn.com)
Emily Rumble (+852 2214 3839, erumble@gibsondunn.com)
Arnold Pun (+852 2214 3838, apun@gibsondunn.com)
Becky Chung (+852 2214 3837, bchung@gibsondunn.com)
Jane Lu (+852 2214 3735, jlu@gibsondunn.com)

*Macy Chung is a trainee solicitor in the firm’s Hong Kong office who is not yet admitted to practice law.

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

KEY TAKEAWAYS

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

DEEPER DIVES

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

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

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

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

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

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

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

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

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

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

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OTHER NOTABLE ITEMS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Challenges to Removal of Venezuelan Nationals Under the Alien Enemies Act

Underlying Executive Order

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

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

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

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

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

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

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

Contempt of Court – J.G.G. v. Trump:

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

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

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

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

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

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

Challenge to Removal of Kilmar Armando Abrego Garcia

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

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

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

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

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

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

Challenge to Termination of Temporary Protected Status for Venezuelans

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

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

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

Challenges to Termination of Birthright Citizenship

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

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

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

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

Challenge to Terminations of the Certain Humanitarian Parole Program

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

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

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

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

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

Challenge to Registration Requirements for Certain Noncitizens

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

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

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

Challenges to Revocation of Certain Student Visas

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

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

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

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

Doe v. Trump[111]

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

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

Challenges to Executive Actions Withholding Funding for Immigration-Related Services

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

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

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

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

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

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

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

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

[2] Id.

[3] 50 U.S.C. § 21.

[4] Id. §§ 21, 22.

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

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

[7] Elsea, supra note 5.

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

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

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

[11] Id. at 15.

[12] Id.

[13] Id. at 41–43.

[14] Id. at 43.

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

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

[17] Id.

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

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

[20] Id.

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

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

[23] Id. at 1006.

[24] Id.

[25] Id.

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

[27] Id.

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

[29] Id. at *7.

[30] Id.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[46] Id. at *3.

[47] Id. at *2.

[48] Id. at *4.

[49] Id.

[50] Id. at *2.

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

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

[53] See id.

[54] Id. at *3.

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

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

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

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

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

[60] Id.

[61] Id.

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

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

[64] Id. at *1-2.

[65] Id.

[66] Id. at 2.

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

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

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

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

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

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

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

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

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

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

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

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

[79] Id.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[94] Id.

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

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

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

[98] Id.

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

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

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

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

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

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

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

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

[107] 8 U.S.C. § 1127 (2025).

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

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

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

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

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

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

[114] Id. at 19.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

New Developments

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

New Developments Outside the U.S.

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

New Industry-Led Developments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Justice Kavanaugh, writing for the Court

Background:

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

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

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

Issue:

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

Court’s Holding:

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

What It Means:

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

The Court’s opinion is available here.

Appellate and Constitutional Law

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

Related Practice: Environmental Litigation and Mass Tort

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

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

Related Practice: Land Use and Development

Mary G. Murphy
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mgmurphy@gibsondunn.com

Benjamin Saltsman
+1 213.229.7480
bsaltsman@gibsondunn.com

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

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

Overview

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

SB 1057’s Key Changes to the TBOC

Limitations on Shareholder Proposals

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

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

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

A corporation does not have to be incorporated in the State of Texas to take advantage of this new TBOC provision. Under Texas case law, the principal place of business of a corporation is the location where the corporation’s officers direct, control and coordinate the corporation’s activities.

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

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

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

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

Effective Date

These amendments will be effective on September 1, 2025.

SB 2411’s Key Changes to the TBOC

Expanded Exculpation of Officers

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

Streamlined Approval of Mergers, Major Transactions and Related Actions

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

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

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

Other

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

Effective Date

These amendments will be effective on September 1, 2025.

Conclusion

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

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

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

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

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

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

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

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

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

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

Background

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

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

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

The Board Reduction

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

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

The Advance Notice Bylaw

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

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

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

Takeaways

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

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

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

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

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

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

From the Derivatives Practice Group: This week, both the CFTC and SEC were very active in issuing guidance and advisories and Commissioner Kristin N. Johnson announced that she intends to step down from the CFTC.

New Developments

CFTC Staff Issues Advisory on Market Volatility Controls. On May 22, the CFTC issued a staff advisory reminding designated contract markets and derivatives clearing organizations of certain core principles and regulatory obligations under the Commodity Exchange Act and CFTC regulations related to controls designed to address market volatility. [NEW]
Commissioner Kristin N. Johnson Makes Statement on Departure from CFTC. On May 21, Commissioner Kristin N. Johnson announced that she intends to step down from the Commission later this year. [NEW]
CFTC Staff Issues Interpretation Regarding Certain Cross-Border Definitions. On May 21, the CFTC issued an interpretative letter confirming the application of certain cross-border definitions. The letter pertains to SCB Limited, an offshore crypto proprietary trading entity affiliated with Susquehanna, and confirms that SCB is not and will not qualify as a US person for the purposes of CFTC regulations concerning FCMs, FBOTs, and SEFs even if it were to (1) rely on US-located persons for trading/algorithm development, (2) license technology from a US-based affiliate, and (3) use US servers for its trading. Specifically, the interpretative letter confirms that SCB Limited is not a “person located in the United States” for purposes of the “foreign futures or foreign options customer” definition in Commission regulation 30.1(c); is not a “participant located in the United States” for purposes of Commission regulation 48.2(c); is a “foreign located person” for purposes of Commission regulation 3.10(c)(1)(ii); and is not a “U.S. person” as defined by Commission regulation 23.23(a) and the Commission’s 2013 Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations. [NEW]
CFTC Releases Procedures on Registered Non-U.S. Swap Entities Using Substituted Compliance. On May 20, the CFTC released procedures regarding CFTC-registered non-U.S. swap dealers or major swap participants relying on substituted compliance. The procedures establish how CFTC Divisions will address potential non-compliance with foreign law that has been found by the CFTC to be comparable in outcome to the Commodity Exchange Act or CFTC regulations pursuant to a substituted compliance order. [NEW]
SEC Names Katherine Reilly as Acting Inspector General. On May 19, the SEC announced the appointment of Katherine Reilly as the agency’s Acting Inspector General. Ms. Reilly is currently serving as a Deputy Inspector General at the SEC. She replaces Deborah Jeffrey, who has served as the SEC’s Inspector General since 2023 and is retiring. [NEW]
SEC’s Division of Trading and Markets Releases FAQ Relating to Crypto Asset Activities and Distributed Ledger Technology. On May 15, the SEC prepared responses to frequently asked questions relating to crypto asset activities and distributed ledger technology. The responses cover topics relating to broker-dealer financial responsibility and transfer agents. These responses represent the views of the staff of the Division of Trading and Markets. They are not a rule, regulation, or statement of the SEC. [NEW]
Commissioner Christy Goldsmith Romero Makes Statement on Departure from CFTC. On May 16, Commissioner Christy Goldsmith Romero announced that she intends to step down from the Commission and retire from federal service. Her final day at the Commission will be May 31.
Commissioner Summer K. Mersinger Makes Statement on Departure from CFTC. On May 14, Commissioner Mersinger announced that she intends to step down from her position as Commissioner at the CFTC at the end of the month, to pursue new opportunities.
CFTC Warns Public of Imposter Scam Targeting Fraud Victims. On May 14, the CFTC warned the public about a growing imposter scam involving individuals falsely claiming to represent the agency. According to the CFTC, scammers are contacting members of the public and claiming to represent the CFTC Office of Inspector General and promise to help financial fraud victims recover lost funds from foreign bank accounts. The CFTC Office of Inspector General stated that it will never contact individuals with offers to recover money lost to investment scams.
Acting Chairman Pham Makes Statement on Court Sanctions Against CFTC. On May 13, CFTC Acting Chairman Caroline D. Pham made a statement regarding the Federal District Court report and recommendations for sanctions against the CFTC for misconduct in CFTC v. Traders Global Group Inc, highlighting proactive efforts to overhaul the CFTC’s Division of Enforcement and reform culture and conduct, develop staff, and leverage expertise and reduce siloing.
CFTC Staff on Leave Pending Investigation. On May 5, pursuant to the President’s executive orders on lawful governance and accountability, the CFTC placed certain staff on administrative leave for potential violations of laws, government ethics requirements and professional rules of conduct. The CFTC stated it is committed to holding employees to the highest standards, as expected by American taxpayers. Investigations are currently ongoing into these matters and the CFTC has committed to provide updates as appropriate.

New Developments Outside the U.S.

ESMA Asks for Input on the Retail Investor Journey as Part of Simplification and Burden Reduction Efforts. On May 21, ESMA launched a Call for Evidence (“CfE”) on the retail investor journey under the Markets in Financial Instruments Directive 2014. The purpose of this CfE is to gather feedback from stakeholders to better understand how retail investors engage with investment services, and whether regulatory or non-regulatory barriers may be discouraging participation in capital markets. [NEW]
ESMA Delivers Technical Advice on Market Abuse and SME Growth Markets as Part of the Listing Act. On May 7, ESMA published its advice to the European Commission to support the Listing Act’s goals to simplify listing requirements, enhance access to public capital markets for EU companies, and improve market integrity. In relation to Market Abuse Regulation (“MAR”), the advice covers: protracted processes, identifying key moments for public disclosure; delayed public disclosure, listing situations where delays are not allowed; and Cross-Market Order Book Mechanism, indicating the methodology for the identification of trading venues with significant cross-border activity.
ESMA Consults on Rules for ESG Rating Providers. On May 2, ESMA published a Consultation Paper on draft Regulatory Technical Standards (“RTS”) under the Environmental, Social, and Governance (“ESG”) Rating Regulation. The draft RTS cover the following aspects that apply to ESG rating providers: the information that should be provided in the applications for authorization and recognition; the measures and safeguards that should be put in place to mitigate risks of conflicts of interest within ESG rating providers who carry out activities other than the provision of ESG ratings; the information that they should disclose to the public, rated items and issuers of rated items, as well as users of ESG ratings.

New Industry-Led Developments

ISDA Publishes ISDA SIMM® Methodology, Version 2.7+2412. On May 22, ISDA published updates to its Standard Initial Margin Model (“SIMM”) methodology that are based on the full recalibration of the model and marked the first SIMM version publication of the new semiannual calibration cycle in 2025. The effective date of July 12, 2025 means that ISDA SIMM users should use SIMM version 2.7+2412 to calculate the initial margin for close of business on Friday July 11, 2025 onwards. This means that the first day for exchange of initial margin calculated using SIMM version 2.7+2412 would be on Monday July 14, 2025. [NEW]
ISDA/SIFMA/SIFMA AMG Publish Joint Response to CFTC Request for Comment on 24-7 Trading. On May 21, ISDA, the Securities Industry and Financial Markets Association (“SIFMA”), and the SIFMA Asset Management Group (“SIFMA AMG”) jointly filed a comment letter in response to the CFTC’s request for comment on 24/7 trading and clearing. ISDA, SIFMA, and SIFMA AMG believe that the feasibility of both 24/7 trading and clearing needs to be evaluated holistically with an understanding of the interdependencies between market participants, trading venues, middleware and software providers, clearing systems, margining frameworks, payments systems, default mechanisms and adjacent markets. [NEW]
IOSCO Makes Statement on Combatting Online Harm and the Role of Platform Providers. On May 21, IOSCO reiterated its concern about risks associated with investment fraud orchestrated through online paid-for advertisements and user-generated content. IOSCO stated that regulators and platforms providers are strategically positioned to mitigate the potential investor harm arising from these risks and asks platform providers to enhance efforts, consistent with local law, aimed at reducing risk of pecuniary harm to investors, which also threatens public trust in the services provided by platform providers. [NEW]
IOSCO Releases Sustainable Bonds Report. On May 21, IOSCO published its Sustainable Bonds Report which identifies the key characteristics and trends tied to the sustainable bond market. IOSCO’s Report includes five key considerations which are designed to address market challenges, including enhancing investor protection, ensuring sustainable bond markets are operating in a fair and efficient way, and improving accessibility. [NEW]
IOSCO Publishes Final Reports on Finfluencers, Online Imitative Trading Practices and Digital Engagement Practices. On May 19, IOSCO published the Final Reports on Finfluencers, Online Imitative Trading Practices and Digital Engagement Practices, as part of the third wave of its Roadmap for Retail Investor Online Safety. The Finfluencers Final Report explores the evolving landscape of finfluencers, the associated potential benefits and risks, and the current regulatory responses across jurisdictions. [NEW]
IOSCO Concludes its 50th Annual Meeting. On May 15, IOSCO concluded its 50th Annual Meeting, which was hosted by the Qatar Financial Markets Authority (“QFMA”) in Doha. IOSCO welcomed near 500 participants over the course of three days, followed by the QFMA public conference. The IOSCO Annual Meeting brings all 130 member jurisdictions together to discuss the most relevant issues and risks with regard to global financial markets, and how to assist regulators in implementing standards through capacity building.
ISDA Publishes Paper Exploring Use of Generative AI to Extract and Digitize CSA Clauses. On May 15, ISDA published a whitepaper that shows generative artificial intelligence can be used to accurately and reliably extract, interpret and digitize key legal clauses from ISDA’s credit support annexes, showing how this technology could increase efficiency, cut costs and reduce risks in derivatives processes that have traditionally been highly manual and resource intensive.
ISDA Margin Survey Shows Leading Derivatives Firms Collected $1.5 Trillion of Margin at Year-end 2024. On May 14, ISDA published its latest annual margin survey, which shows that initial margin (“IM”) and variation margin collected by leading derivatives market participants for their non-cleared derivatives exposures increased by 6.4% to $1.5 trillion at the end of 2024. The 32 responding firms included all 20 phase-one entities (the largest derivatives dealers subject to regulatory IM requirements in the first implementation phase), five of the six phase-two firms and seven of the eight phase-three entities.
ISDA Extends Digital Regulatory Reporting to Support Revised Canadian Reporting Rules. On May 13, ISDA extended its Digital Regulatory Reporting solution to cover new reporting rules in Canada and has made it compatible with a trade reporting messaging format used for North America reporting to maximize the benefit of adoption by those firms subject to the rules. The revisions are being implemented by the Canadian Securities Administrators and are scheduled for implementation on July 25, 2025.
ISDA Publishes Governance Committee Proposal for CDS Determinations Committees. On May 8, ISDA published a proposal for a new governance committee for the CDS Determinations Committees (“DCs”), the first in a series of amendments to improve the structure of the DCs and maintain their integrity in changing economic and market conditions. The governance committee would be responsible for taking market feedback and adopting rule changes affecting the structure and operations of the DCs to ensure their long-term viability and meet market expectations for efficiency and transparency in credit event determinations.
ISDA Presents Proposed Charter for the Credit Derivatives Governance Committee. On May 8, ISDA presented the proposed Charter for the Credit Derivatives Governance Committee and accompanying DC Rule changes to implement. Pursuant to the announcement made in 2024, an ISDA working group formed from ISDA’s Credit Steering Committee has worked on producing the Governance Committee solution. ISDA views the Governance Committee as the first step in implementing the other recommended changes from the Linklaters’ report as part of an independent review on the composition, functioning, governance and membership of the DCs.

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

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

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

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

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

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

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

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

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

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

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

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

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

This edition of Gibson Dunn’s Federal Circuit Update for April summarizes the current status of petitions pending before the Supreme Court and recent Federal Circuit decisions concerning provisional rights under 35 U.S.C. § 154(d), the Board’s findings regarding knowledge of a person of ordinary skill in the art, patent ineligibility under 35 U.S.C. § 101, and means-plus-function terms under 35 U.S.C. § 112 ¶ 6.

Federal Circuit News

Noteworthy Petitions for a Writ of Certiorari:

There were a few potentially impactful petitions filed before the Supreme Court in April 2025:

NexStep, Inc. v. Comcast Cable Communications, LLC (US No. 24-1137): The question presented is “Whether a patentee must in every case present ‘particularized testimony and linking argument’ to establish infringement under the doctrine of equivalents.” The response is due June 5, 2025.
Purdue Pharma L.P. v. Accord Healthcare, Inc. (US No. 24-1132): The question presented is “Whether, as this Court has held, the objective indicia of non-obviousness should be analyzed flexibly to combat hindsight bias or instead subject to the Federal Circuit’s rigid rules restricting the inquiry.” The response is due June 2, 2025.

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

The Court will consider the petition in Converter Manufacturing, LLC v. Tekni-Plex, Inc. (US No. 24-866) at its May 22, 2025 conference.
The Court denied the petitions in Brumfield v. IBG LLC, et al. (US No. 24-764) and Celanese International Corp. v. International Trade Commission (US No. 24-635).

Upcoming Oral Argument Calendar

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

Key Case Summaries (April 2025)

In re Forest, No. 23-1178 (Fed. Cir. April 3, 2025): Mr. Forest submitted a patent application titled “Apparatus for Selecting from a Touch Screen” on December 27, 2016. The application was rejected by the examiner in part under obviousness and nonstatutory double patenting grounds and affirmed by the Patent Trial and Appeal Board (Board), which Mr. Forest now appeals. The application claims priority to another application filed on March 27, 1995, meaning that if the 2016 application were to issue as a patent, it would have an expiration date in 2015. The United States Patent and Trademark Office (PTO) therefore contends that Mr. Forest has no personal stake in the appeal because he cannot be granted any enforceable rights by a patent grant with zero term. Mr. Forest argues that he would acquire “provisional rights” under 35 U.S.C. § 154(d) if the PTO issues him an expired patent.

The Federal Circuit (Chen, J., joined by Taranto and Schall, JJ.) dismissed the appeal. The Federal Circuit held that provisional rights, which are “provisional,” means they are “temporary” and must be replaced by the statutory exclusionary rights, which runs from the date of issuance to 20 years after the priority date. Thus, a patent is only granted exclusionary rights if it issues before its expiration date. Based on this, the Court reasoned that provisional rights must therefore precede exclusionary rights, which means that provisional rights can only be granted to a patent that issues with exclusionary rights. As a result, even if Mr. Forest were granted a patent on the 2016 application, it would not lead to a conferral of provisional rights, because the patent would have expired before it issued, meaning Mr. Forest would receive no exclusionary rights.

Sage Products, LLC v. Stewart, No. 23-1603, 23-1604 (Fed. Cir. Apr. 15, 2025): Sage owns two patents directed to a sterilized chlorhexidine product in a package, such as an applicator filled with an antiseptic composition for disinfecting skin. Becton, Dickinson and Co. (BD) petitioned for inter partes review (IPR) of certain claims of Sage’s patents and the Board concluded that the challenged claims were unpatentable in part because a person of skilled in the art would have found the prior art’s disclosure of “sterile applicators” taught the “sterilized chlorhexidine product” claimed.

The Federal Circuit (Stark, J., joined by Reyna, J. and Cunningham, J.) affirmed. The Court held that the Board’s finding that a person of skill in the art would have understood the term “sterile” as used in the prior art (a publication from the United Kingdom’s (UK) health agency) to meet the claim term “sterilized” under the Board’s construction was supported by substantial evidence. The Court found no reversible error in the Board’s finding that a skilled artisan would know about the differing regulatory requirements in the United States and the UK, including recognizing that satisfying the UK regulatory standards for “sterile” would satisfy the challenged claims’ requirements for “sterilized” items.

Recentive Analytics, Inc. v. Fox Corp., No. 23-2437 (Fed. Cir. April 18, 2025): Recentive owns several patents directed to methods for generating optimized television broadcast schedules and network maps using machine learning. Specifically, the patents aimed to improve television scheduling for live events and to allocate network content across different geographic areas. The claims described the use of machine learning to dynamically predict optimal scheduling and map allocation, allegedly proposing an innovative use of artificial intelligence (AI) in the broadcasting industry. Fox moved to dismiss on the grounds that the patent claims were ineligible under 35 U.S.C. §101, and the district court granted the motion. The court held that the claims were directed to abstract ideas of producing network maps and event schedules using generic mathematical techniques, and the claims lacked an inventive concept because they involved only routine applications of machine learning technology using generic and conventional computing devices.

The Federal Circuit (Dyk, J., joined by Prost and Goldberg (district judge sitting by designation), JJ.) affirmed. At Alice Step One, the Court held that the claims were directed to abstract ideas—specifically, the use of machine learning to television broadcast scheduling and network map allocation. At Alice Step Two, the Court held that the claims merely applied generic machine learning techniques to a new field, and that the use of conventional technology did not somehow transform the claimed abstract idea into a patent-eligible invention. The Court also noted that although machine learning is a rapidly advancing field, simply applying machine learning to specific tasks, without further innovation, does not satisfy the statutory requirements for patent eligibility.

Fintiv, Inc. v. PayPal Holdings, Inc., No. 23-2312 (Fed. Cir. Apr. 30, 2025): Fintiv sued PayPal for infringement of patents related to a cloud-based transaction system. During claim construction proceedings before the district court, PayPal argued that the term “payment handler” is a means-plus-function term subject to 35 U.S.C. § 112 ¶ 6 and was indefinite for failing to disclose adequate corresponding structure.

The Federal Circuit (Prost, J., joined by Taranto and Stark, JJ.) affirmed. The Court first determined that while the payment-handler terms did not use the word “means,” PayPal overcame the presumption that § 112 ¶ 6 does not apply because the payment-handler terms recite function without reciting sufficient structure for performing that function. The Court also agreed with the district court that “handler” alone did not provide sufficient structure. The Court then looked to whether there was corresponding structure disclosed in the specification or an algorithm to achieve the functionalities performed and concluded that there was not. The Court thus concluded the term was indefinite.

The following Gibson Dunn lawyers assisted in preparing this update: Blaine Evanson, Jaysen Chung, Audrey Yang, Al Suarez, 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)

Gibson Dunn announces release of the International Comparative Legal Guide – Anti- Money Laundering 2025

Gibson Dunn is pleased to announce with Global Legal Group the release of the International Comparative Legal Guide – Anti-Money Laundering 2025. Gibson Dunn partners Stephanie L. Brooker and M. Kendall Day are the Contributing Editors of the publication, which covers issues including criminal enforcement, regulatory and administrative enforcement, and requirements for financial institutions and other designated businesses. The Guide, comprised of 4 expert analysis chapters and 15 jurisdictions, is live and FREE to access HERE.

Ms. Brooker, Mr. Day, and of counsel Ella Capone and Sam Raymond jointly authored “Anti-Money Laundering Laws and Regulations Top Developments in Anti-Money Laundering Enforcement in 2024.”

In addition, Ms. Brooker, Mr. Day, Ms. Capone, and Mr. Raymond co-authored the jurisdiction chapter on “USA: Anti-Money Laundering 2025.”

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

CLICK HERE to view Anti-Money Laundering Laws and Regulations Top Developments in Anti-Money Laundering Enforcement in 2024

CLICK HERE to view Anti-Money Laundering Laws and Regulations USA 2025

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

Gibson Dunn has deep experience with enforcement defense and compliance issues regarding the Bank Secrecy Act, AML laws, and sanctions laws and regulations.

About the Authors:

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

Kendall Day is a nationally recognized white-collar partner in the Washington, D.C. office of Gibson Dunn, where he is Co-Chair of Gibson Dunn’s Global Fintech and Digital Assets Practice Group, Co-Chair of the firm’s Financial Institutions Practice Group, co-leads the firm’s Anti-Money Laundering practice, and is a member of the White Collar Defense and Investigations and Crisis Management Practice Groups. Kendall is recognized as a leading White Collar Attorney in the District of Columbia by Chambers USA – America’s Leading Business Lawyers. Most recently, Kendall was recognized in Best Lawyers 2024 for white-collar criminal defense. Prior to joining Gibson Dunn, Kendall had a distinguished 15-year career as a white-collar prosecutor with DOJ, rising to the highest career position in DOJ’s Criminal Division as an Acting Deputy Assistant Attorney General (“DAAG”). As a DAAG, Kendall had responsibility for approximately 200 prosecutors and other professionals. Kendall also previously served as Chief and Principal Deputy Chief of the Money Laundering and Asset Recovery Section. In these various leadership positions, from 2013 until 2018, Kendall supervised investigations and prosecutions of many of the country’s most significant and high-profile cases involving allegations of corporate and financial misconduct. He also exercised nationwide supervisory authority over DOJ’s money laundering program, particularly any BSA and money-laundering charges, DPAs and non-prosecution agreements involving financial institutions.

Ella Alves Capone is Of Counsel in the Washington, D.C. office of Gibson Dunn, where she is a member of the White Collar Defense and Investigations, Fintech and Digital Assets, Financial Regulatory, International Trade Advisory and Enforcement, and Anti-Money Laundering practice groups. Her practice focuses on representing and advising multinational corporations and financial institutions in government and internal investigations and regulatory compliance matters involving Bank Secrecy Act, money laundering, sanctions, consumer protection, anti-corruption, fraud, and payments issues. She also regularly advises clients on the development and implementation of compliance programs and internal controls. Ella has been featured as a fintech “Rising Star” by Law360 and recognized for her White Collar Litigation and Investigations work in Lawdragon’s 500 X – The Next Generation publications. She has also been recognized by Super Lawyers as a White Collar Defense “Rising Star.”

Sam Raymond is Of Counsel in the New York office of Gibson Dunn and a member of the White Collar Defense and Investigations, Litigation, Anti-Money Laundering, Fintech and Digital Assets, and National Security Groups. As a former federal prosecutor, Sam has a broad-based government enforcement and investigations practice, with a specific focus on investigations and counseling related to anti-money laundering, the Bank Secrecy Act, and sanctions. Sam is an experienced investigator and trial lawyer. He served as an Assistant United States Attorney in the U.S. Attorney’s Office for the Southern District of New York from 2017 to 2024. In that role, he tried multiple cases to verdict and prosecuted a broad range of federal criminal violations, including as a lead prosecutor in one of the first cases ever charging individuals with violations of the Bank Secrecy Act.

Contact Information:

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

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

Frame-Wilson v. Amazon.com, Inc., No. 2:20-cv-00424 (W.D. Wa.) – Decided April 29, 2025

A court in the Western District of Washington has held that human error in coding a privileged document as non-privileged does not qualify as inadvertent production of privileged documents under Federal Rule of Evidence 502(b).

Background

Amazon.com, Inc. is the defendant in three putative antitrust class actions. Amazon has produced almost 14 million documents, with the help of some 160 document reviewers. After a dispute arose over Amazon’s privilege log, Amazon conducted a privilege re-review of over 100,000 documents. During the course of that review, a reviewer designated three documents as not privileged or neglected to redact privileged information.

The plaintiffs then moved for class certification. In their motion, they cited the three documents that had been marked not privileged or had been inadequately redacted. Amazon quickly sought to claw back the documents, asking the plaintiffs to destroy them and to refile the class-certification motion without citing them. The plaintiffs refused, arguing that Amazon had waived any claim of privilege by virtue of producing the documents.

Issue Presented

Is a waiver of privilege “intentional” under Federal Rule of Evidence 502 when a reviewer mistakenly codes a privileged document as not privileged?

Court’s Holding

Yes. Absent extenuating circumstances, such as a technical glitch, the production of a privileged document is necessarily deliberate, and privilege is therefore waived, whenever a document was reviewed and designated “not privileged,” even if the document was initially designated privileged and was downgraded by mistake. The Court reached this conclusion after determining that the parties’ standard discovery agreements were inadequate to trigger the benefits of Federal Rule of Evidence 502(d), which permit no-fault clawbacks and limit the scope of any waivers to one particular lawsuit.

What It Means

In complex cases, litigants often accidentally produce a handful of privileged documents and seek to claw them back. Because cases routinely involve millions of documents, mistakes are inevitable, and litigants generally rely on the protections afforded by discovery agreements based on Rule 502. But the court here rejected the possibility of human error, holding that the production of a document marked as non-privileged must mean that the party producing it intentionally waived any claim of privilege.
The district court’s rule would leave very little that would satisfy the “inadvertence” standard for avoiding a privilege waiver under Federal Rule of Evidence 502(b). The court limited the standard to cover little more than technical glitches and freak accidents, rather than simple human error.
Other courts might conclude that a litigant’s reaction to the use of privileged information has some bearing on whether the disclosure of that information was inadvertent. Here, Amazon immediately took steps to claw back its documents and has continued to pursue the issue even after the district court’s decision. On May 14, Amazon challenged that decision by filing a petition for a writ of mandamus from the Ninth Circuit, and on May 19, the U.S. Chamber of Commerce filed an amicus brief in support of Amazon’s position.
If the Ninth Circuit declines to review the district court’s decision, litigants would be well advised to devote even more resources to ensuring that no privileged documents are produced. It may not be enough, as it was not in this case, to rely on standard language invoking the protections of Federal Rule of Evidence 502(d), or on Federal Rule of Evidence 502(b)’s default protections against inadvertent disclosure.

The following Gibson Dunn lawyers prepared this update: Samuel Liversidge, Julian W. Poon, Daniel R. Adler, Matthew C. Parrott, and Brian W. Anderson.

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 member of the firm’s Litigation practice group, or the following authors:

Samuel Liversidge – Los Angeles (+1 213.229.7420, sliversidge@gibsondunn.com)

Julian W. Poon – Los Angeles (+1 213.229.7758, jpoon@gibsondunn.com)

The Bureau of Industry and Security has initiated the rescission of the AI Diffusion Framework and announced additional guidance, policies, and plans to introduce a replacement set of rules regulating AI models and advanced computing technologies, with a continued focus on China.

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) ofﬁcially announced last week that it is rescinding the AI Diffusion Framework (the Framework) issued in the closing days of the Biden administration,[1] and will be replacing the rule with a “stronger but simpler” framework in the future.[2]

At the same time, BIS released a trio of guidance and policy statements which significantly expand the risks for companies using products made with advanced chips made by companies physically present in, headquartered in, or that are a subsidiary of a parent located in, China (including Hong Kong and Macau), with a specific notice regarding certain advanced chips produced by Huawei. The releases also heighten diligence expectations for any company exporting, reexporting or transferring U.S. controlled advanced integrated circuits (ICs), including to or by Infrastructure as a Service (IaaS) providers, particularly to parties headquartered in countries subject to U.S. arms embargoes such as China (including Hong Kong and Macau).

Rescission of the Framework

As discussed in a prior client alert, the Framework, through a multi-part control structure, would have created additional rules to restrict “countries of concern” (i.e., countries listed in BIS Country Group D:5 as subject to a U.S. arms embargo, which include, among many others, Russian, Iran, Venezuela, and China (including Hong Kong and Macau)) from obtaining advanced U.S. and allied closed-weight AI models by broadly:

Expanding licensing requirements for the export of advanced ICs;
Imposing controls on frontier AI models; and
Closing a loophole that previously allowed persons in countries of concern rent access to computing power outside their countries.

A key aspect of the Framework was to create a three-tiered licensing policy with a more permissive structure allowing exports to and among countries whose export controls are aligned with the U.S., imposing an effective embargo against countries the U.S. perceives as threats, and detailing a conditional policy for all other countries yet to adopt certain safeguards against exports supporting the unchecked development of frontier AI models.

The rescission of the Framework now means that, until a new regulation is issued, there are no express controls on general purpose AI models, whether proprietary, published, or otherwise. Questions remain, however, as to whether AI models that are specially trained to provide users with design, development, or other kinds of controlled technology are subject to export controls (and if so, how export controls apply to their development, deployment, and use).

AI Diffusion Replacement Rule

In its press release announcing the rescission of the Framework, BIS stated that it “will issue a replacement rule in the future.” Among other potential changes, the Trump administration has signaled an interest in reworking the tiered system of access to U.S. AI chips. Potential options include replacing the tiered system with bilateral agreements reached with counterparts on a country-by-country basis.[3]

While the Trump administration has explained that it is going back to the drawing board to replace the Framework, the national security drivers for the Framework controls remain, and we assess that any new regulations would retain some version of the following Framework elements:

License exceptions to support use and production by countries who adopt parallel export controls on AI chips and AI models to certain end uses and end users;
A validated end user (VEU) authorization system for data centers to facilitate the supply of advanced ICs to end users in destinations that do not raise national security or foreign policy concerns. (While the Universal VEU / National VEU categories no longer apply, the data-center focused VEU regulation from October 2024 remains intact);[4]
Enhanced customer diligence and reporting requirements for recipients of large quantities of AI chips; and
Controls on at least some proprietary AI models.

As such, we advise companies to prepare for such features when designing compliance systems and entering into new contract arrangements for counterparties that will entail the use of AI chips and AI-optimized data centers for the support of AI model training and inference.

Guidance and Policy Statements

BIS’s publication of three advisories on the same day it rescinded the Framework indicate that the Trump administration will continue an aggressive approach towards China-related export controls.

Heightened Risk of Export Control Violations from use of Advanced-Computing Integrated Circuits Designed or Made by Chinese Companies

In its Guidance on Application of General Prohibition 10 to People’s Republic of China Advanced-Computing Integrated Circuits (the IC Guidance), BIS substantially increases its compliance expectations for industry actors that use China-linked advanced-computing ICs meeting the parameters for control under Export Control Classification Number (ECCN) 3A090 by creating a presumption that such dealings violate U.S. export controls. While the warning extends to cover chips that have been developed or produced by companies located in, headquartered in, or whose ultimate parent company is headquartered in any country included in BIS Country Group D:5, BIS focuses its guidance primarily on China and specifically calls out specific Huawei-made chips, namely the Huawei Ascend 910B, Huawei Ascend 910C, and Huawei Ascend 910D.

BIS explains that its reference to Huawei chips is only illustrative, however, and states that there is a high probability that all chips meeting the parameters of 3A090 were likely designed or produced with U.S. software, technology, or equipment, and that a license therefore would have been required for various activities connected to companies in China or specifically restricted on the Entity List. Because BIS has not granted such licenses, BIS notes that there is a high probability that any such chips designed or produced by companies located in, headquartered in, or with an ultimate parent company headquartered in China were manufactured in violation of the EAR, and puts companies on notice that it will presume that General Prohibition 10 liability will extend to any further activity involving these chips.

General Prohibition 10 is a broad and temporally and geographically unbounded regulation that prohibits dealings on an item subject to the EAR “with knowledge [including a reason to know] that a violation of the EAR has occurred, is about to occur, or is intended to occur in connection with the item.” For example, in 2022, BIS listed 73 aircraft that had flown into Russia in violation of the EAR and noted that “any subsequent actions taken with regard to any of the listed aircraft, including, but not limited to, refueling, maintenance, repair, or the provision of spare parts or services,” are subject to General Prohibition 10.[5] In its press release, BIS then emphasized that any form of service to the listed aircraft likely constitutes a violation of U.S. export controls, and the potential for General Prohibition 10 liability created waves that hit not only direct service providers of aircraft – including aftermarket part manufacturers and distributors, maintenance organizations, airport operators, and refuelers – but also aircraft finance sector players such as insurers, lenders, and underwriters.

BIS’s IC Guidance goes a step beyond this precedent by creating a presumption that General Prohibition 10 restrictions apply to all China-linked ICs, and stating that the mere use of these chips could make one subject to enforcement actions. BIS stops short, at least for now, of stating that the use of AI models that were trained by China-linked companies using such ICs could be a General Prohibition 10 issue.

Heightened Risk of Export Control Violations from AI Chips and AI Models

BIS also used the occasion of its recission of the AI Framework recission to remind data center operators and IaaS service providers, among others that there are certain “catch-all” prohibitions on the use of AI chips for certain end uses and by certain end users. In its Policy Statement on Controls that May Apply to Advanced Computing Integrated Circuits and Other Commodities Used to Train AI Models (the Policy Statement), BIS warns of the heightened risk of prohibited transactions arising from dealings that involve WMD or military-intelligence end users and advanced ICs and related commodities (e.g., those classified under ECCNs 3A090.a, 4A090.a, as well as .z items in Categories 3, 4, and 5).

Specifically, (i) exports, re-exports, or transfers (in-country) of advanced computing ICs and commodities or (ii) providing “support” (as defined in 15 C.F.R. § 744.6(b)(6)) or performing any contract, service, or employment to assist the training of AI models may trigger a license requirement if the exporter, re-exporter, transferer, or service provider:

Has “knowledge” or a “reason to know” that the advanced computing ICs and commodities, support, or services will be used to conduct or assist the training of AI models for or on behalf of parties headquartered in D:5 countries (including China) or Macau, and
Has “knowledge” or a “reason to know” that the AI model will be used for WMD or military-intelligence use/user.

When read together with its Red Flag Guidance, discussed below, the BIS Policy Statement notifies exporters of its heightened end use and end user diligence expectations, both for companies supplying the IaaS providers with controlled ICs and for the IaaS providers themselves.

Red Flags and Diligence Actions

Finally, in its Industry Guidance to Prevent Diversion of Advanced Computing Integrated Circuits (the Red Flag Guidance), BIS provides exporters with transactional and behavioral red flags and suggested due diligence actions that are specific to exporters of advanced computing ICs.[6] The IC-related red flags focus on various suspicious behaviors concerning the customer’s address or business activities that are not consistent with the need for advanced computing ICs.

Notable, however, is BIS’s focus on IaaS providers and the diligence required to both supply IaaS providers with controlled ICs and for IaaS providers to use controlled ICs. To that end, the Red Flags Guidance provided:

Data Center /IaaS Red Flags:
- The data center to which the advanced ICs and/or commodities containing such ICs are being exported does not or cannot affirm it has the infrastructure (e.g., power/energy, cooling capacity, or physical space needed to run servers containing advanced ICs) to operate the advanced computing ICs and/or commodities that contain such ICs.
- The customer providing IaaS does not or cannot affirm that users of its services are not headquartered in the PRC, whether or not such customer is located inside or outside of China and Macau.
Data Center / IaaS Diligence Actions:
- The data center to which the advanced ICs and/or commodities containing such ICs are being exported does not or cannot affirm it has the infrastructure (e.g., power/energy, cooling capacity, or physical space needed to run servers containing advanced ICs) to operate the advanced computing ICs and/or commodities that contain such ICs.
- The customer providing IaaS does not or cannot affirm that users of its services are not headquartered in the PRC, whether or not such customer is located inside or outside of China and Macau.

Key Takeaways

Together with BIS’s intent to replace the AI Diffusion Framework with a “stronger but simpler” version, the three advisories make clear that despite the shift in political winds in D.C., the U.S. Government continues to remain concerned about the diversion of advanced ICs to Chinese end users and to certain kinds of end users and end uses. While BIS’s rescission of the Framework may appear at first to provide temporary relief for AI chip suppliers, distributors, and customers, BIS’s precedent-setting guidance on the use of Chinese AI Chips, and its heightened and elaborated due diligence expectations, especially for IaaS and associated service providers, are regulatory in effect and lay the groundwork for aggressive BIS enforcement premised on General Prohibition 10 theories of liability.

Our team works daily with clients to develop the kinds of due diligence frameworks, contractual protections, and other compliance system tools to reflect BIS’s rapidly evolving guidance on AI chip exports, AI model development, and AI model use, and to advise on the kinds of safeguards investors, data center developers, and others should be looking to put place while the Trump administration works to replace the Framework with its own.

[1] U.S. Dep’t of Commerce, Press Release, Department of Commerce Announces Recission of Biden-Era Artificial Intelligence Diffusion Rule, Strengthens Chip-Related Export Controls (May 13, 2025), https://media.bis.gov/press-release/department-commerce-rescinds-biden-era-artificial-intelligence-diffusion-rule-strengthens-chip-related.

[2] Karen Freifeld, Trump Officials Eye Changes to Biden’s AI Chip Export Rule, Sources Say, Reuters (Apr. 29, 2025), https://www.reuters.com/world/china/trump-officials-eye-changes-bidens-ai-chip-export-rule-sources-say-2025-04-29.

[3] For example, the recent announcement of a “US-UAE AI Acceleration Partnership” framework and agreements to expand the UAE’s access to U.S. AI chips may reflect President Trump’s preference for bilateral agreements in the AI sector. See Gram Slattery, et. al., Trump Announces $200 Billion in Deals During UAE Visit, AI Agreement Signed, Reuters (May 15, 2025), https://www.reuters.com/world/middle-east/trump-heads-uae-it-hopes-advance-ai-ambitions-2025-05-15.

[4] BIS, Expansion of Validated End User Authorization: Data Center Validated End User Authorization, 89 Fed. Reg. 80080 (Oct. 2, 2024) (to be codified at 15 C.F.R. pt. 748), https://www.govinfo.gov/content/pkg/FR-2024-10-02/pdf/2024-22587.pdf.

[5] BIS, Commerce Department Updates List of Aircraft Exported to Russia in Apparent Violation of U.S. Export Controls (Mar. 30, 2022), https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/2942-2022-03-30-bis-list-of-aircraft-violating-the-ear-press-release-final/file.

[6] See also Supplement No. 3 to Part 732, Title 15 (providing sector non-specific red flags).

The following Gibson Dunn lawyers prepared this update: David Wolber, Christopher T. Timura, Matthew S. Axelrod, Dharak Bhavsar, Mason Gauch, and Zach Kosbie.

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

United States:
Matthew S. Axelrod – Co-Chair, Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Ronald Kirk – 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)
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)
Roxana Akbari – Orange County (+1 949.451.3850, rakbari@gibsondunn.com)
Karsten Ball – Washington, D.C. (+1 202.777.9341, kball@gibsondunn.com)
Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
Mason Gauch – Houston (+1 346.718.6723, mgauch@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)
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 – Beijing (+86 10 6502 8687, fxue@gibsondunn.com)
Qi Yue – Beijing (+86 10 6502 8534, qyue@gibsondunn.com)
Dharak Bhavsar – Hong Kong (+852 2214 3755, dbhavsar@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@gibsondunn.com)

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

We are pleased to provide you with Gibson Dunn’s ESG update covering the following key developments during April 2025. Please click on the links below for further details.

I. GLOBAL

International Maritime Organization (IMO) announces deal to decarbonize global shipping

On April 11, 2025, the IMO, the United Nations agency responsible for developing global shipping standards, announced its approval of draft regulations setting a global fuel standard to reduce annual greenhouse gas (GHG) emissions and establishing a pricing system for above-threshold emitters. Sixty-three nations approved the framework, including EU member states, China, and the United Kingdom, while 16 nations opposed, 25 nations abstained, and the United States leaving negotiations prior to the vote. The United States subsequently warned of “reciprocal measures” to compensate for fees charged to U.S. ships and “other economic harm” resulting from the new regulations. The regulations are expected to be formally adopted in October 2025 and effective in 2027 and will apply to large ocean-going ships over 5,000 gross tonnage.

Institutional Shareholders Services (ISS) launches new sustainability bond rating

On April 3, 2025, ISS ESG launched a new sustainability bond rating to provide investors with a sustainability impact and risk assessment for bonds issued labeled as green, social, sustainability, or sustainability-linked. These new ratings will assess bonds in three categories: how they align with international standards and guidelines, an environmental and social impact assessment, and the issuer’s sustainable strategy.

Other highlights:

On April 28, 2025, the International Sustainability Standards Board (ISSB) published draft amendments to the IFRS S2 Climate-related Disclosures standard that would ease certain requirements related to the reporting of GHG emissions.
The Net Zero Banking Alliance provided new guidance to align all sector financing with a goal to limit global warming to well below 2°C above pre-industrial levels, up from the prior target of 1.5°C.
T. Rowe Price and T. Rowe Price Investment Management have both issued updated proxy voting guidelines for 2025 that soften their approach to director votes, disclosure of GHG emissions, dual-class stock, and shareholder proposals on political spending and lobbying.

II. UNITED KINGDOM

Prudential Regulatory Authority (PRA) publishes consultation on managing climate-related risk

On April 30, 2025, the PRA issued Consultation Paper CP10/25, proposing to replace Supervisory Statement 3/19 with an updated and more granular statement on managing climate-related financial risk. The draft statement would apply to UK banks, building societies, PRA-designated investment firms and insurers (but not branches). The draft statement sets outcome-focused expectations structured around five themes: (i) governance – boards will be expected to set firm-wide risk appetite for each material climate exposure, translating it into quantitative limits for every business line, and periodically reassessing it in light of evolving regulatory, technological, or scientific standards; (ii) risk management – firms should conduct periodic materiality assessments, develop quantitative metrics and integrate climate considerations into operational resilience frameworks; (iii) climate scenario analysis – models must cover all material risks, inform capital planning and be refreshed; (iv) data – firms should have strategic plans to close data gaps, deploy conservative proxies where needed and oversee external providers while building in-house capability; and (v) disclosure – alignment will shift from Taskforce for Climate-related Financial Disclosures to forthcoming UK Sustainability Reporting Standards. The expectations remain guidance, not rules, but supervisors will test implementation six months after finalisation. The consultation closes on July 30, 2025.

UK Government launches consultation into voluntary carbon and nature markets (VCNMs)

On April 17, 2025, the Department for Energy Security and Net Zero published a consultation paper seeking views on the implementation of its principles to ensure integrity within VCNMs, launched at COP 29 in November 2024. VCNMs allow entities and/or individuals to acquire credits that represent avoided or removed greenhouse gas emissions or measurable environmental improvement. The acquiring entity/individual can then utilize the credits to offset unavoidable emissions and/or reach its environmental targets. The six principles announced at COP 29 include: (i) the use of credits in addition to ambitious actions within value chains; (ii) the use of high integrity credits; (iii) the disclosure of credits in ESG-related reporting; (iv) the role of credits in the transition plan; (v) the accuracy of green claims; and (vi) domestic and international co-operation. The consultation closes on July 10, 2025.

UK Advertising Standards Authority (ASA) publishes guidance on biodegradable and compostable products

On April 30, 2025, the ASA issued guidance on products that claim to be biodegradable and/or compostable to reflect relevant changes introduced by the Digital Markets, Competition and Consumers Act 2024 and included the following: (i) ensure claims are genuine; (ii) do not exaggerate the biodegradable content of the product; (iii) do not omit information material to a product’s ability to biodegrade or compost; and (iv) ensure absolute environmental claims apply to the product’s full lifecycle. In the event of an investigation, marketers should ensure that they hold sufficient evidence to substantiate claims about the extent to which their products are biodegradable and/or compostable.

Other highlights:

On April 24, 2025, His Majesty’s Revenue and Customs published the draft primary legislation for the carbon border adjustment mechanism for technical consultation.
On April 2, 2025, the Financial Conduct Authority shared feedback it received on its discussion paper on sustainability-related governance, incentives, and competence for regulated firms (DP23/1), confirming that it is not currently considering introducing new rules on the themes discussed in the discussion paper.
On April 11, 2025, the Lending Standards Board (LSB) announced its forthcoming Access to Financial Services for Ethnic Minority-led Businesses Code, committing participating firms to reduce barriers, enhance cultural understanding, apply evidence-based improvements, and share best practice, while the LSB monitors and reports progress.
On April 16, 2025, the International Association of Insurance Supervisors issued its final application paper on the supervision of climate-related risk, explaining how existing Insurance Core Principles should be applied to ensure insurers and supervisors adequately address the mounting consumer and commercial impacts of climate-driven events.

III. EUROPE

Discussions about Omnibus Simplifications in substance ongoing

On April 25, 2025, the rapporteur for the EU’s Omnibus Simplification Package in the European Parliament, Swedish MEP Jörgen Warborn, outlined his initial suggestions for amendments to the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) during discussions in the European Parliament. Among other things, Warborn proposes to further raise the employee threshold for CSRD reporting requirements uniformly above the currently proposed 1,000 employees and backed the Commission’s proposal to remove the CSDDD’s civil liability (we have previously reported on the Commission’s proposal here). The proposal has sparked strong political divisions in the European Parliament, with some factions pushing to eliminate or delay reporting and due diligence obligations, while others seek to preserve the core objectives of the regulations. The rapporteur is expected to present his final proposal in early June of 2025.

In parallel, the EU’s Sustainability Reporting Board (SRB) has approved a work plan to simplify the European Sustainability Reporting Standards (ESRS). Among the currently envisaged revisions are the removal of less relevant data points for general purpose sustainability reporting (such as detailed biodiversity transition plans and certain non-employee-related disclosures), the downgrading of currently mandatory data points to voluntary reporting and of voluntary data points to guidance, prioritizing quantitative over narrative disclosures, and further alignment with global standards like ISSB. According to the work plan, the process will be continued with a shortened public consultation period this summer and is set to be finalized by October 31, 2025.

Updates and proposed amendments on European Deforestation Regulation (EUDR) published

On April 15, 2025, the European Commission published updates regarding the EUDR, including proposed amendments to Annex I of the EUDR as well as updated guidance and FAQs. The proposed amendments to Annex I include clarifications on in-scope commodities, such as cattle, cocoa, coffee, oil palm, rubber, soya, and wood. According to the proposal, the following products shall be excluded: products made from bamboo, rattan and waste materials. The updated guidelines and FAQs clarify certain topics, including regarding re-imported products, local law requirements in Art. 2 (40), trading and packaging of pallets, and qualifications as trader or operator.

CSRD / Omnibus “Stop-the-clock” directive transposition update

The focus currently is on postponing entry into force of the CSRD reporting requirements by transposing the EU’s Stop-the-clock Directive in member states that already completed the transposition process. While France already published its national “Stop-the-clock” law in the Journal officiel on May 2, 2025, Lithuania has published a proposal for a respective bill to delay reporting by two years. Bulgaria passed a law to delay implementation by one year, which came into effect two days after the Omnibus Simplification Package was officially disclosed.

An overview of the current transposition status of CSRD into national laws and the “Stop-the-clock” process under the Omnibus Simplification Package can be found here.

Other highlights:

The European Securities and Market Authority published a consultation paper on its new Regulatory Technical Standards under the EU’S ESG Rating Regulation.

IV. NORTH AMERICA

Business Roundtable (BRT) and U.S. Congress address proxy process reforms

On April 23, 2025, BRT published a report recommending reforms to the proxy process. The report argues that the lack of proxy process regulation has “allowed a small but vocal group of activist investors to exploit the proxy system for political purposes,” and includes recommendations aimed at depoliticizing the proxy process and refocusing it “on supporting shareholder interests and long-term value creation.” The report includes recommendations to (i) reform the Rule 14a-8 shareholder proposal process and (ii) create accountability for proxy advisory firms.

With regard to the Rule 14a-8 shareholder proposal process, BRT recommends Congress enact legislation that would preclude the inclusion of environmental, social and political shareholder proposals in companies’ proxy statements. If legislation is not enacted, BRT recommends the Securities and Exchange Commission (SEC) amend Rule 14a-8 to exclude environmental, social and political shareholder proposals, (ii) raise submission and resubmission thresholds, (iii) prevent Rule 14a-8 workarounds, including the use of voluntary exempt solicitation filings and universal proxy rules, (iv) restrict co-filers and representatives from being directly or indirectly involved in more than one proposal per company, and (v) amend the SEC review process to include an appeals process for no-action letter decisions and changing the timeline for no-action request responses.

Regarding proxy advisory firms, BRT recommends that Congress and the SEC (i) confirm the SEC’s authority to regulate proxy advisory firms and deem the activities of proxy advisory firms “solicitations” subject to SEC oversight, (ii) prohibit robovoting, (iii) require an economic analysis for proxy advisor recommendations that are contrary to a majority-independent board’s decision, (iv) prohibit conflicts of interests, and (v) limit the ability of proxy advisory firms to impose subjective preferences, including related to executive compensation decisions and prior shareholder support levels.

On May 6, 2025, the Interfaith Center on Corporate Responsibility (ICCR) and the Shareholder Rights Group (SRG) sent a letter to BRT, copying the Chairman of the SEC. The letter offered ICCR’s and SRG’s view that BRT’s recommendations would “insulate corporate management and boards, exposing companies and investors to increased risk during a highly volatile economic moment” and requested a dialogue with BRT to discuss the proxy process.

On April 29, 2025, the House Subcommittee on Capital Markets held a hearing to “examine the role and influence of proxy advisory firms . . . in shaping corporate governance and shareholder voting outcomes.” The memorandum related to the hearing included draft legislation proposing, among other things, required proxy advisory firm registration, prohibitions on robovoting for certain votes, and a requirement that the SEC study certain issues related to the shareholder proposal and proxy process.

Canadian regulator halts mandatory climate reporting requirements

On April 23, 2025, the Canadian Securities Administrators (CSA) announced a pause of its work developing new mandatory climate-related disclosure requirements and diversity-related disclosure rule amendments. The CSA explained the pauses were driven by the desire to support Canadian markets as they adapt to recent U.S. and global developments and resulting uncertainty and competitiveness concerns. The CSA emphasized, though, that Canadian securities laws already require disclosure of any material climate-related risks under existing regulations and that companies are encouraged to voluntarily report under the Canadian Sustainability Standards Board standards that were issued in December 2024.

Eighth Circuit issues abeyance in SEC climate litigation

After the SEC withdrew from its defense of the climate disclosure rules, 18 states filed a motion to hold the case in abeyance until the SEC takes action to amend or rescind the rules, as discussed in our March 2025 alert. On April 24, 2025, the Eighth Circuit granted the states’ motion and directed the SEC to file a report within 90 days advising whether the SEC intends to review or reconsider the rules.

President Trump issues executive order focused on state laws and regulations addressing climate and ESG

On April 8, 2025, President Donald Trump issued an executive order, “Protecting American Energy from State Overreach,” directing the U.S. Attorney General (AG) to investigate and identify all state and local laws and regulations that burden the “identification, development, siting, production, or use of domestic energy resources” that may be unconstitutional or preempted by federal law and to take “all appropriate action” to stop the enforcement of such laws. Under the order, the AG is required to prioritize laws that address climate change, environmental justice, carbon or GHG emissions, carbon penalties or taxes, and ESG initiatives. Within 60 days of the order, the AG is required to submit a report to the President detailing the actions taken and recommending additional presidential or legislative actions as necessary. The executive order highlights laws in New York and Vermont seeking retroactive payments for GHG emissions and California’s cap and trade framework as examples of laws that may be beyond states’ constitutional or statutory authorities.

Class-action plaintiffs attack sustainability claims by paper-goods companies

Two class-action lawsuits were filed recently in federal court against Amazon and Proctor & Gamble, alleging “greenwashing” claims based on each company’s statements about their paper products such as toilet paper. See Ramos et al. v. Amazon.com, Inc. (W.D. Wash. Case No. 2:25-cv-00465); Melissa Lowry, et al. v. Proctor & Gamble Company (W.D. Wash. 2:25-cv-00108). The complaints allege that, notwithstanding these companies’ advertised partnerships with groups like Forest Stewardship Council, production of their products leads to deforestation, and thus violates the FTC’s Green Guides and various state consumer-protection laws.

Both cases remain in their early stages. But they represent a new front in the ongoing trend of false-advertising litigation based on sustainability advertising claims, in which class action plaintiffs have already targeted multiple companies based on sustainability claims relating to plastics, emissions reductions, and supply-chain initiatives.

Other highlights:

On April 21, 2025, the Chamber of Commerce sent a letter asking the Trump Administration to urge the EU to exempt U.S. companies from the Corporate Sustainability Due Diligence Directive, which the letter asserts is overly prescriptive and in conflict with U.S. federal and state law.
As discussed in our recent client alert, on April 21, 2025, Paul Atkins was sworn into office as the 34th Chairman of the SEC.
On April 11, 2025, the SEC approved the launch of the Green Impact Exchange (GIX), a sustainability-focused stock market in the United States.
On April 4, 2025, the U.S. Department of Justice (DOJ) announced that it had terminated a settlement between the DOJ, the U.S. Department of Health and Human Services, and the Alabama Department of Public Health regarding sanitation risks in an Alabama county arising from inadequate water infrastructure, citing the termination as “another step . . . to eradicate illegal DEI preferences and environmental justice across the government and in the private sector.”

In case you missed it…

The Gibson Dunn DEI Task Force has published its updates for April summarizing the latest key developments, media coverage, case updates, and legislation related to diversity, equity, and inclusion.

A collection of our analyses of the legal and industry impacts from the presidential transition is available here.

V. APAC

South Korea Financial Services Commission (FSC) delays ESG mandatory reporting

On April 23, 2025, the FSC announced after the fifth meeting of the ESG Finance Promotion Task Force that its original plan to begin disclosures in 2025 for large companies listed on the Korea Composite Stock Price Index will be postponed to post-2026, with possible further delays. The FSC explained that the delay to the ESG disclosure roadmap is in response to the evolving global regulatory landscape and increasing pressure for harmonization and highlighted recent moves by global regulators to ease ESG requirements. The Task Force also reviewed other key aspects of the reporting framework, including disclosures on consolidated financial statements, excluding non-material subsidiaries and a proposal to defer Scope 3 emissions reporting due to its complexity and costs involved in tracking the emissions.

Securities and Exchange Board of India (SEBI) issues new guidelines for ESG ratings

On April 22, 2025, the SEBI issued new guidelines that provided flexibility in ESG rating withdrawals, streamlined disclosure requirements, and offered relief to newer ESG ratings providers. Under these new guidelines, ESG ratings providers may withdraw a rating on a company if their business responsibility or sustainability reports are not available. Additionally, a ratings provider may also withdraw the rating if there are no subscribers for the rating. These new guidelines follow a statement made earlier this month by SEBI’s new chief, Tuhin Kanta Pandey, arguing that the ESG disclosures were too onerous.

China issues its first sovereign green bond

On April 2, 2025, China’s Ministry of Finance (MOF) issued a sovereign green bond on the London Stock Exchange, making this China’s first green bond and the first bond to be listed on an international market. The MOF originally announced its intention to enter the green bond market in January 2025. The bond has raised $824 million USD ($6 billion RMB). Proceeds from the bonds will be used to support projects and initiatives aimed at achieving environmental objectives. These include climate change mitigation, adapting to utilizing natural resources, and biodiversity conservation.

Other highlights:

The Taipei Exchange will launch a green securities certification system in 2026 to encourage enterprises to engage in green and sustainable economic activities.
The Philippine Department of Finance announced its intention to expand the role of the Inter-Agency Technical Working Group on Sustainable Finance.

The following Gibson Dunn lawyers prepared this update: Lauren Assaf-Holmes, Carla Baum, Susy Bullock, Mitasha Chandok, Martin Coombes, Mellissa Duru, Sam Fernandez*, Ferdinand Fromholzer, Saad Khan*, Michelle Kirschner, Julia Lapitskaya, Vanessa Ludwig, Babette Milz, Johannes Reul, Annie Saunders, and Meghan Sherley.

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 leader or member of the firm’s ESG: Risk, Litigation, and Reporting practice group:

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

*Sam Fernandez and Saad Khan are trainee solicitors in London and not admitted to practice law.

Gibson Dunn is monitoring regulatory developments and executive orders closely. Our attorneys are available to assist clients as they navigate the challenges and opportunities posed by the current, evolving legal landscape.

Introduction

On May 12, 2025, the Department of Justice (DOJ) Criminal Division announced it was “turning a new page” in its approach to white collar and corporate enforcement and issued four foundational guidance documents: a memorandum outlining the new White-Collar Enforcement Plan (“Enforcement Plan”), an update to the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy (“Corporate Enforcement Policy”), an update to the Department of Justice Corporate Whistleblower Awards Pilot program, and an updated memorandum describing the process for implementing monitorships and selecting monitors (collectively, the “May 12, 2025 Guidance Documents”).

Although the Criminal Division is but one litigating component in the larger DOJ and its guidance does not bind prosecutors outside it, it is a bellwether for DOJ-wide initiatives, particularly in white collar enforcement, because of its size, role in administering various criminal statutes, and proximity to DOJ leadership. Below we survey the most significant developments outlined in the Criminal Division’s new guidance, beginning with the key takeaways and continuing with developments under each of the three principles of criminal enforcement—”focus, fairness, and efficiency”—declared by the umbrella Enforcement Plan memorandum.[1]

The May 12, 2025 Guidance Documents were released days after President Trump signed an Executive Order aimed at combatting “Overcriminalization in Federal Regulations.” Analysis of that Executive Order can be found here.

Key Takeaways

These policies have immediate implications for the risk profile of certain conduct and the possibility of resolution with the Criminal Division, and potentially other components of the DOJ. Some key takeaways are:

In an unusual but helpful move, the Criminal Division has now set out a comprehensive strategy for criminal enforcement of white collar cases, providing a roadmap of its priorities with an “America First” and business-friendly emphasis. The Enforcement Plan also explains that the Criminal Division will continue to combat a broad range of white collar crimes to advance the Trump Administration’s law enforcement priorities, some of which have traditionally not been emphasized.
Like other guidance documents published by government agencies during the Trump Administration, the Enforcement Plan makes clear that overly aggressive government action can “hinder[] innovation.” The Enforcement Plan explicitly instructs prosecutors to consider the impact of their investigations on businesses, rather than simply deterring violations of law. The Enforcement Plan recognizes that the vast majority of American companies act legitimately, and that “it is critical to American prosperity to promote policies that acknowledge law-abiding companies and companies that are willing to learn from their mistakes.”
The Enforcement Plan begins by emphasizing a focus on the harms to America posed by “dishonest actors [that] exploit government programs” and “[s]chemes that defraud . . . investors and consumers, especially the most vulnerable.”
The Enforcement Plan also indicates that national security offenses will continue to be a priority of the Criminal Division, supplementing the work of the National Security Division.
The Criminal Division will continue to prosecute offenses related to foreign corruption, with an emphasis on bribery and money laundering offenses that harm U.S. national security, impact American businesses, and enrich foreign officials.
The Criminal Division likewise will focus on trade enforcement, including customs fraud and tariff evasion, as well as related money laundering.
In an exercise of new authority, the Criminal Division will prioritize white collar enforcement of the Federal Food, Drug, and Cosmetic Act.
The Department of Justice will be particularly focused on offenses related to China, cartels, transnational criminal organizations, and immigration violations.
The emphasis on the need for expeditious prosecution means that corporations subject to Criminal Division scrutiny can push for efficiency in investigations and faster resolutions, to ensure that investigations do not linger.
Corporations considering whether to self-disclose will have a clearer understanding of the potential benefits of making a disclosure. Those benefits include declination and higher discounts to any penalties. Prosecutors retain some discretion to conclude there are aggravating factors present that will mean a declination is not assured.

I. “Focus”

Enforcement Priorities

The Enforcement Plan states that the Criminal Division is to be “laser-focused on the most urgent criminal threats to the country[.]” Consistent with previous policy announcements by the Trump Administration, the Enforcement Plan lists ten high-impact areas that the Criminal Division will prioritize investigating and prosecuting to combat those harms.[2] Similarly, the Whistleblower Awards Pilot Program, which was first announced in August 2024, has been expanded to cover eligible tips in new subject areas that mirror the Criminal Division’s enforcement priorities, including cartels and transnational criminal organizations, violations of the immigration laws, material support of terrorism, sanctions evasion, and fraud involving trade, tariffs, customs and procurement.

Healthcare, Procurement, Investor, and Consumer Fraud

To address “[r]ampant health care fraud and program and procurement fraud,” the Enforcement Plan states that the “Criminal Division will lead the fight in holding accountable those who exploit these programs and harm the public fisc for personal gain.” The focus on health care and procurement fraud aligns with recent Executive Orders of President Trump on these topics.

Foreign Bribery Enforcement

Notwithstanding President Trump’s February 10, 2025 Executive Order pausing enforcement of the Foreign Corrupt Practices Act,[3] the May 12, 2025 Guidance Documents make clear that the Criminal Division will continue to prosecute cases involving foreign bribery. The Enforcement Plan specifically asserts that in doing so the Criminal Division will take a targeted approach to protect American interests, prioritizing offenses that include “[b]ribery and associated money laundering” that affect U.S. national interests, undermine national security, harm U.S. businesses, and enrich corrupt foreign officials.

National Security Offenses

In a memorandum issued on her first day in office, Attorney General Pam Bondi suspended certain requirements for approval by the National Security Division.[4] The May 12, 2025 Guidance Documents prioritize criminal enforcement of national security offenses, including terrorism and sanctions evasion. These documents suggest these offenses will be charged through the Criminal Division or U.S. Attorney’s Offices more often, supplementing the work of the National Security Division.

Tariffs and Customs Enforcement

The May 12, 2025 Guidance Documents make clear that the Criminal Division will prioritize violations of tariff and customs laws. Investigations of such violations are listed as priorities in the Enforcement Plan, and the updated whistleblower program adds such violations as subject areas for whistleblower tips. This adds to other recent indications by the Trump Administration that tariffs enforcement will, unsurprisingly, be heavily emphasized, as Gibson Dunn previously covered here and here.

Bank Secrecy Act Enforcement

Under the principles of the May 12, 2025 Guidance Documents, the Criminal Division will continue to prosecute cases involving violations of the Bank Secrecy Act, with a particular focus on offenses that implicate U.S. sanctions. The Enforcement Plan decries “exploitation of our financial system” that can “enable underlying criminal conduct,” and warns that “[f]inancial institutions, shadow bankers, and other intermediaries aid U.S. adversaries by processing transactions that evade sanctions.” The updated whistleblower program maintains the Department’s focus on violations by financial institutions or their employees for schemes involving money laundering and violations of the Bank Secrecy Act.

Fraud Cases with Individual Victim Losses

In line with the Criminal Division’s focus on vindicating the rights of victims impacted by white collar and corporate crime, the Enforcement Plan also tasks the Criminal Division with seeking forfeiture to compensate victims. The Criminal Division is also tasked with “prioritize[ing] schemes involving senior-level personnel or other culpable actors, demonstrable loss, and efforts to obstruct justice.” The Enforcement Plan focuses on certain crimes that defraud victims, including Ponzi schemes, investment fraud, elder fraud, market manipulation, and “fraud that threatens the health and safety of consumers.”

Federal Food, Drug, and Cosmetic Act Enforcement

As part of a broader reorganization of the Department—and explained in this Gibson Dunn client alert—it recently was announced that the criminal authorities (and most prosecutors) of Civil Division’s Consumer Protection Branch would move to the Criminal Division to become a new consumer protection unit of the Fraud Section. Through that move, the Criminal Division has gained authority to lead criminal enforcement of the Federal Food, Drug, and Cosmetic Act, and the Enforcement Plan makes clear that it intends to exercise that authority and to pursue corporate violations of the Controlled Substances Act.

Focus on China

The Criminal Division will renew its focus on criminal conduct related to China. The Enforcement Plan makes multiple references to criminal conduct involving Chinese-connected companies and entities, including variable interest entities and sophisticated money laundering operations connected to China.

II. “Fairness”

Additional Paths to Avoid or Mitigate Corporate Criminal Enforcement

The Enforcement Plan creates additional opportunities for white collar defense attorneys to advocate for non-criminal resolutions for their corporate clients. The Enforcement Plan states that, in many cases, prosecution of individuals will suffice to “vindicate U.S. interests,” leaving civil or administrative remedies to address misconduct at the corporate level. The Enforcement Plan reiterates that prosecutors should consider certain factors identified in the Justice Manual when determining whether to charge corporations, including whether the company self-reported, the company’s willingness to cooperate with the government, and the company’s actions to remediate the misconduct.

The Enforcement Plan also directs the Fraud and Money Laundering and Asset Recovery Sections to re-review all existing agreements between the Criminal Division and companies and determine whether to terminate those agreements early. Factors that could lead to early termination include the duration of the post-resolution period, a change in a company’s risk profile, the state of the company’s compliance program, and whether the company self-reported the conduct. According to the Enforcement Plan, the Criminal Division has already terminated some agreements early as a result of the new policy.

For future resolutions, the Enforcement Plan suggests that the duration of resolutions will be shorter than before, directing that prosecutors “must impose a term that is appropriate and necessary in light of, among other things, the severity of the misconduct, the company’s degree of cooperation and remediation, and the effectiveness of the company’s compliance program at the time of resolution.” The Enforcement Plan states that these terms are usually not to exceed three years and should be regularly reviewed for the possibility of early termination.

Recognition of Compliance and Law-Abiding Companies

In his May 12 speech at the annual Anti-Money Laundering and Financial Crimes Conference held by the Securities Industry and Financial Markets Association introducing the new enforcement policies and priorities, Matthew Galeotti, the Head of the Criminal Division, stated that the Criminal Division recognizes “that law-abiding companies are key to a prosperous America [and] [e]conomic security is national security.” In his speech, Galeotti further stated: “[m]ost corporations and financial institutions want to play by the rules and provide value for their shareholders and their customers. And that is what we want them to remain focused on. Excessive enforcement and unfocused corporate investigations stymie innovation, limits prosperity, and reduces efficiency.” The Enforcement Plan similarly recognizes that “it is critical to American prosperity to promote policies that acknowledge law-abiding companies and companies that are willing to learn from their mistakes.”

These messages make clear the importance of corporate compliance and appropriate remediation. In line with this message, the Corporate Enforcement Policy has been revised “[t]o ensure fairness and individualized assessments,” with a focus on benefits for companies that self-disclose and cooperate. Under the new Corporate Enforcement Policy, the Criminal Division is to make a “case-by-case analysis about the appropriate disposition” and consider all forms of corporate criminal resolutions: non-prosecution agreements (NPAs), deferred prosecution agreements, and guilty pleas. In his May 12 remarks, Mr. Galeotti stated that under the new policy, “[s]elf-disclosure is key to receiving the most generous benefits the Criminal Division can offer.” The Corporate Enforcement Policy also preserves prior compliance components in the definition of appropriate remediation, again signaling the importance of compliance.

More Certain Paths to Specific Results

Mr. Galeotti also stated that the new Corporate Enforcement Policy was simplified to allow companies to better anticipate outcomes when self-reporting. Under the updated Corporate Enforcement Policy, the Criminal Division will publicly decline to prosecute a company for criminal conduct when:

The company voluntarily self-disclosed the misconduct to the Criminal Division. These disclosures qualify so long as “the company had no preexisting obligation to disclose the misconduct to the Department of Justice.” This seems to allow for self-disclosures that were undertaken out of obligation to agencies other than DOJ.
The company fully cooperates with the Criminal Division’s investigation.
The company timely and appropriately remediated the conduct.
There are no aggravating circumstances (which are “the nature and seriousness of the offense, egregiousness or pervasiveness of the misconduct within the company, severity of harm caused by the misconduct, or criminal adjudication or resolution within the last five years based on similar misconduct by the entity engaged in the current misconduct.”). This definition suggests that only criminal resolutions by the same corporation for “similar misconduct” will be considered an aggravating factor, rather than any prior misconduct or by an affiliated entity.[5] Where there are aggravating circumstances, prosecutors can still recommend declination after weighing the severity of the circumstances.

In instances of “near miss self-disclosures” or where there are aggravating circumstances, the guidance requires the Criminal Division provide an NPA (absent egregious or multiple aggravating factors) for a term of less than 3 years without a monitorship, and a 75% reduction off of the low end of the U.S. Sentencing Guidelines fine range.

For resolutions in other cases, there is a presumption that any sentencing reduction will be taken from the low end of the Guidelines.

In addition to the updated language of the policy, the Criminal Division has also provided a flowchart illustrating enforcement “paths” in line with the policies summarized above.

III. “Efficiency”

Streamlined Investigations

In his remarks, Mr. Galeotti stated that businesses have been deterred from utilizing benefits of self-reporting misconduct to governmental authorities by the possibility of “lengthy drawn-out investigations that are ultimately detrimental to companies[.]” He argued that this deterrence of self-reporting diverts Department resources away from “tackling the most significant threats facing our country.” The Enforcement Plan instructs the Criminal Division to take all reasonable steps to minimize the length and collateral impact of their investigation and to ensure that “bad actors” are quickly brought to justice. While framed as a novel insight, many prior Administrations have included similar language in guidance documents; any meaningful change will depend on Criminal Division supervisors driving more efficient investigations.

Limited Use of Monitors

In addition to taking reasonable steps to minimize length and impact of investigations, the Enforcement Plan instructs the Criminal Division to utilize independent compliance monitors only when necessary and that use of those monitors should be narrowly tailored.

The Criminal Division also released a memorandum entitled “Memorandum on Selection of Monitors in Criminal Division Matters,” which requires prosecutors to consider four factors when weighing the possibility of imposing a monitorship:

Risk of recurrence of criminal conduct that significantly impact U.S. interests.
Availability and efficacy of other independent government oversight.
Efficacy of the compliance program and culture of compliance at the time of the resolution.
Maturity of the company’s controls and its ability to independently test and update its compliance program.

Even if a monitor is appropriate, the memorandum requires that prosecutors tailor the monitorship to be cost efficient and effective. The company’s counsel must present three to five monitor candidates for consideration, which is an increase from previous guidance. After a monitor is approved, the Criminal Division must ensure the costs are proportionate to the severity of the underlying conduct, the company’s profits, and the company’s size and risk profile. There will be a cap on hourly rates, and the monitor will be required to submit a budget for the entire monitorship at the time is submits its first work plan to the Criminal Division and company for review. The monitor will also attend at least two additional meetings a year with the company and the government to ensure alignment.

Conclusion

The May 12, 2025 Guidance Documents, taken together, indicate that the Criminal Division will continue to aggressively prosecute violations of law while rewarding compliant companies with non-criminal enforcement alternatives to resolve any misconduct. This development underscores the continued importance for companies to maintain effective compliance programs that address risks relating to government procurement, corruption, money laundering, national security and tariff offenses, sanctions evasion, and other priorities, to mitigate the corresponding liability that may arise under the criminal statutes. Companies therefore will be well served by reviewing their compliance programs and calibrating their compliance-related risk assessments to mitigate against changing risk and enforcement realities.

[1] Guidance documents like these are often issued by the Deputy Attorney General and thus are also applicable to other DOJ components like U.S. Attorney’s Offices. It remains to be seen how the May 12, 2025 Guidance Documents will, if at all, also govern those other DOJ components.

[2] The ten high-impact areas are:

“1. Waste, fraud, and abuse, including health care fraud and federal program and procurement fraud that harm the public fisc;

2. Trade and customs fraud, including tariff evasion;

3. Fraud perpetrated through [variable interest entities], including, but not limited to, offering fraud, “ramp and dumps,” elder fraud, securities fraud, and other market manipulation schemes;

4. Fraud that victimizes U.S. investors, individuals, and markets including, but not limited to, Ponzi schemes, investment fraud, elder fraud, servicemember fraud, and fraud that threatens the health and safety of consumers;

5. Conduct that threatens the country’s national security, including threats to the U.S. financial system by gatekeepers, such as financial institutions and their insiders that commit sanctions violations or enable transactions by Cartels, TCOs, hostile nation-states, and/or foreign terrorist organizations;

6. Material support by corporations to foreign terrorist organizations, including recently designated Cartels and TCOs;

7. Complex money laundering, including Chinese Money Laundering Organizations, and other organizations involved in laundering funds used in the manufacturing of illegal drugs;

8. Violations of the Controlled Substances Act and the Federal Food, Drug, and Cosmetic Act (FDCA), including the unlawful manufacture and distribution of chemicals and equipment used to create counterfeit pills laced with fentanyl and unlawful distribution of opioids by medical professionals and companies;

9. Bribery and associated money laundering that impact U.S. national interests, undermine U.S. national security, harm the competitiveness of U.S. businesses, and enrich foreign corrupt officials; and

10. As provided by the Digital Assets DAG Memorandum: crimes (1) involving digital assets that victimize investors and consumers; (2) that use digital assets in furtherance of other criminal conduct; and (3) willful violations that facilitate significant criminal activity. Cases impacting victims, involving cartels, TCOs, or terrorist groups, or facilitating drug money laundering or sanctions evasion shall receive highest priority.”

[3] Gibson Dunn’s analysis of that Executive Order can be found at https://www.gibsondunn.com/president-trump-pauses-new-fcpa-enforcement-initiates-enforcement-review-and-directs-preparation-of-new-guidance/.

[4] Gibson Dunn’s analysis of this and other memoranda issued by Attorney General Bondi can be found at https://www.gibsondunn.com/new-memoranda-from-attorney-general-bondi-topics-to-watch-in-corporate-enforcement/.

[5] DOJ policy under the Biden Administration directed prosecutors considering non-prosecution to give the “greatest significance” to “recent U.S. criminal resolutions, and to prior misconduct involving the same personnel or management.” This policy de-emphasized conduct addressed by criminal resolution more than ten years prior, or civil / regulatory resolutions finalized more than five years prior. However, conduct that fell outside of this timeframe could still be considered if it was part of a pattern of behavior indicative of deficient corporate “compliance culture or institutional safeguards.” See Memorandum from Deputy Attorney General Lisa O. Monaco, Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group (Sept. 15, 2022). See also Deputy Attorney General Lisa O. Monaco Delivers Remarks on Corporate Criminal Enforcement (Sept. 15, 2022), https://www.justice.gov/archives/opa/speech/deputy-attorney-general-lisa-o-monaco-delivers-remarks-corporate-criminal-enforcement.

Chart 1

The following Gibson Dunn lawyers prepared this update: F. Joseph Warin, Stephanie Brooker, Kendall Day, Winston Chan, Gus Eyler, Nick Hanna, Matt Axelrod, Jonathan Phillips, Patrick Stokes, Amy Feagles, John Partridge, Oleh Vretsona, Sam Raymond, Kate Goldberg, and Ashley Wilson*.

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

Washington, D.C.
F. Joseph Warin (+1 202.887.3609, fwarin@gibsondunn.com)
Stephanie Brooker (+1 202.887.3502, sbrooker@gibsondunn.com)
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
Courtney M. Brown (+1 202.955.8685, cmbrown@gibsondunn.com)
David P. Burns (+1 202.887.3786, dburns@gibsondunn.com)
John W.F. Chesley (+1 202.887.3788, jchesley@gibsondunn.com)
Daniel P. Chung (+1 202.887.3729, dchung@gibsondunn.com)
M. Kendall Day (+1 202.955.8220, kday@gibsondunn.com)
Stuart F. Delery (+1 202.955.8515, sdelery@gibsondunn.com)
Michael S. Diamant (+1 202.887.3604, mdiamant@gibsondunn.com)
Gustav W. Eyler (+1 202.955.8610, geyler@gibsondunn.com)
Melissa Farrar (+1 202.887.3579, mfarrar@gibsondunn.com)
Amy Feagles (+1 202.887.3699, afeagles@gibsondunn.com)
Scott D. Hammond (+1 202.887.3684, shammond@gibsondunn.com)
George J. Hazel (+1 202.887.3674, ghazel@gibsondunn.com)
Jake M. Shields (+1 202.955.8201, jmshields@gibsondunn.com)
Adam M. Smith (+1 202.887.3547, asmith@gibsondunn.com)
Patrick F. Stokes (+1 202.955.8504, pstokes@gibsondunn.com)
Oleh Vretsona (+1 202.887.3779, ovretsona@gibsondunn.com)
David C. Ware (+1 202.887.3652, dware@gibsondunn.com)
Ella Alves Capone (+1 202.887.3511, ecapone@gibsondunn.com)
Lora Elizabeth MacDonald (+1 202.887.3738, lmacdonald@gibsondunn.com)
Bryan Parr (+1 202.777.9560, bparr@gibsondunn.com)
Pedro G. Soto (+1 202.955.8661, psoto@gibsondunn.com)

New York
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Osman Nawaz (+1 212.351.3940, onawaz@gibsondunn.com)
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Orin Snyder (+1 212.351.2400, osnyder@gibsondunn.com)
Sam Raymond (+1 212.351.2499, sraymond@gibsondunn.com)

Dallas
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Denver
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Robert C. Blume (+1 303.298.5758, rblume@gibsondunn.com)
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Houston
Gregg J. Costa (+1 346.718.6649, gcosta@gibsondunn.com)

Los Angeles
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Michael M. Farhang (+1 213.229.7005, mfarhang@gibsondunn.com)
Diana M. Feinstein (+1 213.229.7351, dfeinstein@gibsondunn.com)
Douglas Fuchs (+1 213.229.7605, dfuchs@gibsondunn.com)
Nicola T. Hanna (+1 213.229.7269, nhanna@gibsondunn.com)
Poonam G. Kumar (+1 213.229.7554, pkumar@gibsondunn.com)
Marcellus McRae (+1 213.229.7675, mmcrae@gibsondunn.com)
Eric D. Vandevelde (+1 213.229.7186, evandevelde@gibsondunn.com)
Debra Wong Yang (+1 213.229.7472, dwongyang@gibsondunn.com)

San Francisco
Winston Y. Chan (+1 415.393.8362, wchan@gibsondunn.com)
Jina L. Choi (+1 415.393.8221, jchoi@gibsondunn.com)
Charles J. Stevens (+1 415.393.8391, cstevens@gibsondunn.com)

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

London
Patrick Doris (+44 20 7071 4276, pdoris@gibsondunn.com)
Sacha Harber-Kelly (+44 20 7071 4205, sharber-kelly@gibsondunn.com)
Michelle Kirschner (+44 20 7071 4212, mkirschner@gibsondunn.com)
Allan Neil (+44 20 7071 4296, aneil@gibsondunn.com)
Philip Rocher (+44 20 7071 4202, procher@gibsondunn.com)

Paris
Benoît Fleury (+33 1 56 43 13 00, bfleury@gibsondunn.com)
Bernard Grinspan (+33 1 56 43 13 00, bgrinspan@gibsondunn.com)

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

Munich
Kai Gesing (+49 89 189 33 285, kgesing@gibsondunn.com)
Katharina Humphrey (+49 89 189 33 155, khumphrey@gibsondunn.com)
Benno Schwarz (+49 89 189 33 110, bschwarz@gibsondunn.com)

Hong Kong
Oliver D. Welch (+852 2214 3716, owelch@gibsondunn.com)

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

Ashley Wilson, a recent law graduate in New York, is not admitted to practice law.