Client Alert Archives

Texas Supreme Court Round-Up – August 8, 2025

The Texas Supreme Court has issued all decisions for cases argued during the 2024–2025 term. Below we provide an overview of how many cases the Court heard, along with how each court of appeals fared.

Between September 2024 and March 2025, the Texas Supreme Court heard argument in 63 cases. At the end of June, the Texas Supreme Court finished issuing opinions in all argued cases.

Argument Numbers:

All but three of the fifteen courts of appeals in Texas had cases in front of the Court this year, with the most arising out of the Fifth Court of Appeals (Dallas) and none from the Ninth Court of Appeals (Beaumont), the Eleventh Court of Appeals (Eastland), or the newly constituted Fifteenth Court of Appeals (limited statewide jurisdiction):

First Court of Appeals (Houston): 8[1]
Second Court of Appeals (Fort Worth): 2
Third Court of Appeals (Austin): 6
Fourth Court of Appeals (San Antonio): 3
Fifth Court of Appeals (Dallas): 12
Sixth Court of Appeals (Texarkana): 1
Seventh Court of Appeals (Amarillo): 2
Eighth Court of Appeals (El Paso): 7
Ninth Court of Appeals (Beaumont): 0
Tenth Court of Appeals (Waco): 1
Eleventh Court of Appeals (Eastland): 0
Twelfth Court of Appeals (Tyler): 1
Thirteenth Court of Appeals (Corpus Christi & Edinburg): 4
Fourteenth Court of Appeals (Houston): 7
Fifteenth Court (limited statewide jurisdiction): 0[2]

The Court also heard argument in a direct appeal from the 205th District Court in El Paso County, an appeal from the Board of Disciplinary Appeals, a mandamus proceeding arising from the Multi-District Litigation Panel, and a mandamus proceeding seeking relief from the Comptroller. And the Court accepted and heard argument in five cases certified to it by the U.S. Court of Appeals for the Fifth Circuit.

[1] One was dismissed before decision.

[2] The Fifteenth Court of Appeals only began hearing cases in September 2024. For more information on this new court and its jurisdiction, see Gibson Dunn’s past alerts: here, here, here, and here.

Affirmance & Reversal Rates:

Below, we break down the Court’s term by the numbers—providing the Court’s overall affirmance and reversal rates and its affirmance and reversal rates by court of appeals.

These rates include only argued and decided cases funneling up from Texas state courts or other state entities, so the rates don’t include certified questions from the Fifth Circuit, cases decided on the briefing, or cases that were dismissed before the Court issued an opinion or on mootness grounds. That leaves a total of 56 cases.

For purposes of calculating the rates below, reversals include vacaturs, along with grants of mandamus relief for cases in which a party first sought relief in the court of appeals. And we’ve counted all cases with judgments that only reversed or affirmed in part as a tie, weighted with half a point each. That includes cases in which the Court reversed on all issues presented for review, but the parties didn’t challenge other parts of the court of appeals’ judgment.

Overall, the Court affirmed in 27.7% and reversed in 72.3% of the 56 cases in which it heard argument this term from a state court (or other state entity over which the Texas Supreme Court has jurisdiction) and issued a decision.

Affirmance and reversal rates in the state courts of appeals varied:

First Court of Appeals:
- Affirmed: 35.7% (2.5 out of 7)
- Reversed: 64.3% (4.5 out of 7)
Second Court of Appeals:
- Affirmed: 25% (.5 out of 2)
- Reversed: 75% (1.5 out of 2)
Third Court of Appeals:
- Affirmed: 8.3% (.5 out of 6)
- Reversed: 91.7% (5.5 out of 6)
Fourth Court of Appeals:
- Affirmed: 0% (0 out of 3)
- Reversed: 100% (3 out of 3)
Fifth Court of Appeals:
- Affirmed: 29.2% (3.5 out of 12)
- Reversed: 70.8% (8.5 out of 12)
Sixth Court of Appeals:
- Affirmed: 0% (0 out of 1)
- Reversed: 100% (1 out of 1)
Seventh Court of Appeals:
- Affirmed: 50% (1 out of 2)
- Reversed: 50% (1 out of 2)
Eighth Court of Appeals:
- Affirmed: 35.7% (2.5 out of 7)
- Reversed: 64.3% (4.5 out of 7)
Tenth Court of Appeals:
- Affirmed: 50% (.5 out of 1)
- Reversed: 50% (.5 out of 1)
Twelfth Court of Appeals:
- Affirmed: 0% (0 out of 1)

- Reversed: 100% (1 out of 1)
Thirteenth Court of Appeals:
- Affirmed: 75% (3 out of 4)
- Reversed: 25% (1 out of 4)
Fourteenth Court of Appeals:
- Affirmed: 21.4% (1.5 out of 7)
- Reversed: 78.6% (5.5 out of 7)

What It Means:

The Court’s overall affirmance rate of 27.7% rose slightly from last term’s affirmance rate of 25.4%. But the rate remains in line with the historical pattern that the Court affirms roughly 30% of cases each term. So the odds continue to favor the petitioner once the Court hears argument on a case.
The affirmance rates in the courts of appeals continue to fluctuate from year to year, largely due to relatively small sample sizes. For example, the affirmance rate in the Third Court of Appeals (Austin) dropped from 30.8% out of 13 cases in the 2023–2024 term to 8.3% out of 6 cases in the 2024–2025 term. In contrast, the affirmance rate in the Fifth Court of Appeals (Dallas) rose from 0% out of 8 cases in the 2023–2024 term to 29.2% out of 12 argued cases in the 2024–2025 term.
The Thirteenth Court of Appeals (Corpus Christi & Edinburg) is this term’s clear winner, with a 75% affirmance rate out of 4 cases. That’s a turnaround from its 0% affirmance rate on its only case up for review last year. On the opposite end of the scorecard is the Fourth Court of Appeals (San Antonio)—with a 0% affirmance rate out of 3 cases this year, compared to its top-scoring affirmance rate of 58.3% out of 6 cases last year.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Texas 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
Brad G. Hubbard +1 214.698.3326 bhubbard@gibsondunn.com

Related Practice: Texas General Litigation

Trey Cox
+1 214.698.3256
tcox@gibsondunn.com

Collin Cox
+1 346.718.6604
ccox@gibsondunn.com

Gregg Costa
+1 346.718.6649
gcosta@gibsondunn.com

This alert was prepared by Texas of counsel Ben Wilson, and Texas associates Elizabeth Kiernan, Stephen Hammer, and Catherine Frappier.

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

From the Derivatives Practice Group: This week, Acting Chairman Pham announced the CFTC’s Crypto Sprint initiative aimed at implementing the recommendations from the President’s Working Group on Digital Asset Markets Report. As a first step, Acting Chairman Pham launched an initiative for listing spot crypto assets on designated contract markets (DCMs). For more information on the U.S. digital assets regulatory framework, please see Gibson Dunn’s recent client alert.

New Developments

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

SEC Division of Corporation Finance Issues Staff Statement on Certain Liquid Staking Activities. On August 5, the SEC issued a statement regarding certain liquid staking activities. The statement aims to provide greater clarity on the application of federal securities laws to crypto assets, specifically addressing a type of protocol staking known as “liquid staking.”

Liquid staking refers to the process of staking crypto assets through a software protocol or service provider and receiving a “liquid staking receipt token” to evidence the staker’s ownership of the staked crypto assets and any rewards that accrue to them. The statement clarifies the division’s view that, depending on the facts and circumstances, the liquid staking activities covered in the statement do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act of 1933 or Section 3(a)(10) of the Securities Exchange Act of 1934. [NEW]

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

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

CFTC Staff Issues No-Action Letter Regarding Swap Data Error Correction Notification Requirements. On July 31, the CFTC took a no-action position with respect to reporting counterparties that fail to submit a swap data error correction notification with respect to an error if, at the time the reporting counterparty initially discovers and assesses the impact of an error, the reporting counterparty makes a reasonable determination that the number of reportable trades affected by the error does not exceed five percent of the reporting counterparty’s open swaps for the relevant asset class in swaps for which it was the reporting counterparty.

Acting Chairman Pham Lauds Presidential Working Group Recommendations to Usher in Golden Age of Crypto in the U.S. On July 30, the President’s Working Group on Digital Asset Markets released a multi-agency report on recommendations to strengthen American leadership in digital financial technology. The report included input from multiple federal agencies, including the CFTC. Acting Chairman Pham stated that the “report represents a unified approach under the Trump Administration to usher in a golden age of crypto, and the CFTC stands ready to fulfill our mission to promote responsible innovation, safeguard our markets and ensure they remain the envy of the world.”

CFTC Staff Issues No-Action Letter on SEF Order Book. On July 30, the CFTC issued a no-action letter stating that it will not recommend the Commission commence an enforcement action against a swap execution facility (“SEF”) that does not provide a central limit order book as set forth in CFTC Regulation 37.3(a)(2), in connection with swap transactions executed on the SEF that are not subject to the trade execution requirement in Commodity Exchange Act section 2(h)(8).

SEC Permits In-Kind Creations and Redemptions for Crypto ETPs. On July 29, the SEC voted to approve orders to permit in-kind creations and redemptions by authorized participants for crypto asset exchange-traded product (“ETP”) shares. The orders reflect a departure from recently approved spot bitcoin and ether ETPs, which were limited to creations and redemptions on an in-cash basis. Bitcoin and ether ETPs, consistent with other commodity-based ETPs approved by the SEC, will be permitted to create and redeem shares on an in-kind basis.

CFTC Staff Issues No-Action Letter Regarding Event Contracts. On July 23, the CFTC’s Division of Market Oversight and the Division of Clearing and Risk announced they have taken a no-action position regarding swap data reporting and recordkeeping regulations in response to a request from the Chicago Mercantile Exchange Inc. (“CME”), a designated contract market and derivatives clearing organization. The divisions will not recommend the CFTC initiate an enforcement action against CME or its participants for failure to comply with certain swap-related recordkeeping requirements and for failure to report to swap data repositories data associated with binary option transactions executed on or subject to the rules of CME, subject to the terms of the no-action letter.

New Developments Outside the U.S.

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

ESMA Prepares for Switch Toward Single Volume Cap in October 2025. On July 24, ESMA announced an update of the volume cap system, which will pass from the previous double volume cap mechanism to a “single” volume cap mechanism (“VCM”) in October, according to the changes introduced by the Markets in Financial Instruments Regulation Review. The new VCM limits at 7% the trading volume under the reference price waiver in the EU, compared to the total aggregated trading volume in the EU over the last 12 months for each equity and equity-like financial instrument.

New Industry-Led Developments

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

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

ISDA Board Appoints New Chair. On July 31, ISDA announced that its Board of Directors elected Amy Hong as its new Chair. Ms. Hong is Head of Strategy, Investments and Partnerships in the Global Banking & Markets division at Goldman Sachs, responsible for leading strategic initiatives for the division with a focus on market structure, systemic and operational risks, and industry digitization. Ms. Hong succeeds Jeroen Krens, who has stepped down in accordance with ISDA’s bylaws following his departure from HSBC.

ISDA/IIF Responds to the PRA Consultation (CP10/25) on Enhancing Banks’ and Insurers’ Approaches to Managing Climate-Related Risks. On July 30th, ISDA and the Institute of International Finance (“IIF”) responded to the PRA consultation (CP10/25) on enhancing banks’ and insurers’ approaches to managing climate-related risks, which proposes updates to the Supervisory Statement 3/19 on climate-related risk management for banks and insurers. ISDA and IIF indicated their broad support the PRA’s climate risk approach, but warned against overly prescriptive or bespoke climate-specific requirements.

ISDA Responds to EC on Exemption of Spot FX Benchmarks from BMR. On July 28, ISDA and the Global Foreign Exchange Division of the Global Financial Markets Association responded to the European Commission’s (“EC”) consultation on the need to exempt spot foreign exchange (“FX”) benchmarks under Article 18a of the EU Benchmarks Regulation (“BMR”). The consultation recommends applying the exemption to four currencies on the basis that their use in the EU either exceeds (Indian rupee, South Korean won, Taiwanese new dollar) or is very close to (Philippine peso) the significant benchmark threshold based on traded volume data provided by EU supervised entities.

ISDA CEO Issues Comment on Strengthening DC Governance. On July 23, ISDA CEO Scott O’Malia offered an informal comment on the role of Credit Derivatives Determinations Committees (“DCs”). He announced the formation of a governance committee that will be responsible for overseeing the operation of the DCs and making changes to the DC rules where necessary to ensure long-term viability and meet market expectations for efficiency and transparency in credit event determinations.

ISDA and CSA Issue Notification of Significant Error or Omissions Suggested Operational Practices. On July 22, ISDA and the Canadian Securities Administrators (“CSA”) developed a Suggested Operational Practices that considered current institutional processes and outlined suggested operational practices related to the new requirement under §26.3(2) of the Canadian Trade Repositories and Derivatives Data Reporting rules rewrite. This is intended to notify a Canadian regulator of a significant error or omission with respect to derivatives data.

ISDA Announces Paper on UPI Identifiers for MIFID Transaction Reporting. On July 22, ISDA announced a paper (titled UPI as the Foundation for OTC Derivatives Reporting: The Case for UPI) that it submitted to the UK Financial Conduct Authority on July 16. The paper was developed to complement ISDA’s response to the FCA’s discussion paper DP24/2: Improving the UK Transaction Reporting Regime, which is intended to improve transaction reporting under the UK Markets in Financial Instruments Regulation.

ISDA Releases Report on Interest Rate Derivatives Trading Activity Reported in EU, UK and US Markets: First Quarter of 2025. On July 21, ISDA released a report that analyzed interest rate derivatives trading activity reported in Europe. The analysis is based on transactions publicly reported by 30 European approved publication arrangements and trading venues.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This update provides an overview of shareholder proposals submitted to public companies during the 2025 proxy season, including statistics and notable decisions from the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) on no-action requests.

As discussed below, based on the results of the 2025 proxy season, there are several key takeaways to consider for the coming year:

Shareholder proposal submissions fell for the first time since 2020.
The number of proposals decreased across all categories (social, governance, environmental, civic engagement and executive compensation).
No-action request volumes continued to rise and outcomes continued to revert to pre-2022 norms, with the number of no-action requests increasing significantly and success rates holding steady with 2024.
Anti-ESG proposals continued to proliferate in 2025, but shareholder support remained low.
Data from the 2025 season suggests that the Staff’s responses to arguments challenging politicized proposals (those proposals that express either critical or supportive views on ESG, DEI and other topics) were driven by the specific terms of the proposals and not by political perspectives.
New Staff guidance marked a more traditional application of Rule 14a-8, but the results of the 2025 season indicate that Staff Legal Bulletin 14M (“SLB 14M”) did not provide companies with a blank check to exclude proposals under the economic relevance, ordinary business or micromanagement exceptions.

Shareholder Proposal Developments

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

Aaron Briggs – San Francisco, CA (+1 415.393.8297, abriggs@gibsondunn.com)
Mellissa Campbell Duru – Washington, D.C. (+1 202.955.8204, mduru@gibsondunn.com)
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
Julia Lapitskaya – New York, NY (+1 212-351-2354, jlapitskaya@gibsondunn.com)
Ronald O. Mueller – Washington, D.C. (+1 202-955-8671, rmueller@gibsondunn.com)
Michael Titera – Orange County, CA (+1 949-451-4365, mtitera@gibsondunn.com)
Geoffrey E. Walter – Washington, D.C. (+1 202-887-3749, gwalter@gibsondunn.com)
Lori Zyskowski – New York, NY (+1 212-351-2309, lzyskowski@gibsondunn.com)

Gibson Dunn is experienced in not only banking regulation and compliance and enforcement defense but in challenging agency action if needed and in related advocacy including in any rulemakings resulting from the Executive Order.

On August 7, 2025, President Trump signed an Executive Order directing the federal banking agencies, National Credit Union Administration (NCUA) and Small Business Administration (SBA) to investigate whether financial institutions have engaged in “politicized or unlawful debanking” practices in violation of federal law.[1] The Executive Order alleges that bank regulators have used their “supervisory scrutiny and influence” over banks to “direct” or “encourage” politicized or unlawful debanking activities, including debanking on the basis of political affiliation, religious belief, or engagement in lawful business activities.

The Executive Order mirrors language used by President Trump in recent months. In January, President Trump spoke via videoconference at the World Economic Forum in Davos, Switzerland, noting that “conservatives complain that the banks are not allowing them to do business ….”[2] This week, President Trump told CNBC that “banks discriminated against me very badly,” and that banks, “discriminate against many conservatives.”[3] However, it is important to note that much of the emphasis on reputation risk by financial institutions was in response to federal banking agencies and the imposition of supervisory expectations. These supervisory expectations required institutions to designate certain customer types as “high risk” and subject them to heightened onboarding and monitoring requirements – and failure to do so could result in supervisory findings, including fines and ratings downgrades.

The Executive Order’s stated aim is to protect Americans from being denied access to financial services on the basis of constitutionally or statutorily protected beliefs, affiliations, or political views, and to ensure that politicized or unlawful debanking is not used as a tool to inhibit such beliefs, affiliations, or political views. Instead, the Executive Order states, customer retention decisions must be made on the basis of “individualized, objective, and risk-based analyses.”

What’s next?

The Executive Order directs the “federal banking regulators” (which, in addition to the federal banking agencies, the Executive Order defines to include the Consumer Financial Protection Bureau (CFPB), NCUA, and SBA) to: (i) remove the use of reputation risk or equivalent concepts that could result in politicized or unlawful debanking from all guidance documents, manuals, and other materials; and (ii) consider rescinding or amending existing regulations to eliminate the risk of politicized or unlawful debanking and to ensure that an institution’s or customer’s reputation is “considered for regulatory, supervisory, banking, or enforcement purposes solely to the extent necessary to reach a reasonable and apolitical risk-based assessment.”

The federal banking agencies already have begun modifying their guidance, examination manuals and other policy documents on reputation risk well in advance of this Executive Order. On March 20, 2025, the Office of the Comptroller of the Currency (OCC) announced that it would remove reputation risk considerations from their supervisory and regulatory toolboxes – changes which the OCC has already begun implementing.[4] On March 24, 2025, Federal Deposit Insurance Corporation (FDIC) Acting Chairman Travis Hill indicated that the FDIC planned to “eradicate” reputation risk from its regulations, guidance, examination manuals, and other policy documents. Following suit, on June 23, 2025, the Federal Reserve announced that reputation risk will no longer be a component of examination programs in its supervision of banks – changes which the Federal Reserve, too, has begun implementing.[5] Similarly, the Financial Integrity and Regulation Management (FIRM) Act, which would prohibit the use of reputation risk as a supervisory factor, has advanced out of both the Senate Banking and House Financial Services Committees.

The Executive Order also requires the federal banking regulators to conduct a review of financial institutions subject to their jurisdiction to identify whether any institution has current or historical policies that encourage politicized or unlawful debanking that violates “applicable law.” Federal banking regulators are instructed to take “appropriate remedial action” to correct improper conduct identified pursuant to this review, including levying fines, issuing consent decrees, or imposing other disciplinary measures.

The Executive Order cites Section 5 of the Federal Trade Commission Act[6] (FTC Act), Section 1031 of the Consumer Financial Protection Act[7] (CFPA), and the Equal Credit Opportunity Act[8] (ECOA) as “applicable law” authorizing the federal banking regulators’ enforcement authority. The Executive Order citing to these statutes reveals the Administration’s views on the legality of politicized debanking practices and previews potential areas of focus for enforcement.

The FTC Act and CFPA prohibit “unfair and deceptive acts or practices.” The CFPA expands on the FTC Act by also prohibiting “abusive” acts or practices.[9] By citing to the FTC Act and CFPA, the Executive Order would expand the range of fact patterns that may give rise to enforcement action under those statutes beyond those that traditionally result in enforcement actions for unfair, deceptive, or abusive acts or practices. The CFPB has primary enforcement authority under the CFPA for banks and credit unions with assets exceeding $10 billion.[10]

ECOA prohibits creditors from discriminating against credit applicants on the basis of certain protected characteristics. Reliance on ECOA therefore limits “debanking” enforcement under that act to instances of denying credit on the basis of race, religion, or other protected status. In that connection, the Executive Order also requires the federal banking regulators to review their current supervisory and complaint data to identify potential instances of unlawful debanking on the basis of religion and to refer financial institutions to the Attorney General where the agency has reason to believe that one or more institutions “has engaged in a pattern or practice” of ECOA violations.[11] The CFPB also has enforcement authority under ECOA.[12]

Finally, the Executive Order directs the SBA to require financial institutions subject to SBA’s jurisdiction and supervision to “make reasonable efforts” to identify and reinstate clients denied SBA services due to politicized or unlawful debanking and to identify potential clients denied access to financial or payment processing services due to politicized or unlawful debanking at financial institutions subject to the SBA’s oversight and supervision and notify such clients of the “renewed option” to engage in “such services previously denied.”[13]

What’s relevant now?

“Debanking” and the agencies’ supervision and regulation of reputation risk has been a top-line area of focus since the change in administration and many institutions, as a result, have been grappling with the evolving regulatory and supervisory landscape for several months. Because the Executive Order directs federal banking regulators to conduct a lookback to identify potential instances of unlawful debanking, financial institutions may encounter a variety of challenges.

Financial institutions may receive broad information requests in connection with agency lookbacks. From a practical perspective, these lookbacks could be time-consuming and costly. Institutions may not have all data available in response to broad lookbacks and should aim to scope any lookback to narrowly define the type of client or business for which information is sought or the timeframe of any lookback. In certain scenarios, institutions may be able to demonstrate that then-current regulatory guidance and/or directives, supervisory requests or findings in the examination/supervisory process shaped the institution’s actions with respect to clients engaged in certain industries, and those institutions should be well-positioned to respond to requests from regulators in those instances.
Moreover, although the Executive Order on its face focuses on “unlawful debanking” on the basis of political or religious affiliation, customer “offboarding” for other reputation risks may also be in scope for enforcement. In recent months, President Trump and other Administration officials have identified the debanking of oil and gas companies, firearms manufacturers, and cryptocurrency companies as potentially problematic.[14] All possible enforcement angles should be considered when assessing potentials risks as a result of the Executive Order.

The regulatory and supervisory scheme with respect to reputation risk will continue to evolve. While many institutions have already commenced recalibrating how they assess reputation risk as a facet embedded within measurable, traditional risk domains in light of the Administration’s and agencies’ focus on the issue, there remains ample opportunity for the industry to continue to advocate with (i) policymakers in the implementation of legislation like the FIRM Act and (ii) regulators as the agencies shift away from subjective reputation risk assessments to the implementation of clearer, more objective guidance in the supervisory process. Clearly, the Executive Order suggests there is more guidance and scrutiny to come in this area. Despite the Executive Order’s focus on preventing politicized or unlawful debanking, financial institutions will continue to be expected to adhere to robust initial and ongoing due diligence inquiries of customers to address core banking risk assessments, including credit risk, market risk, operational risk, and legal and compliance risk, among other core banking risks.

Congress may launch investigations into financial institutions’ use of reputation risk in response to this Executive Order. Under President Trump, Congress has been focusing its oversight and investigations less on the executive branch and more on the private sector and causes perceived to be aligned with the political left. For example, for more than two years, the House Judiciary Committee has been investigating alleged efforts by social media companies and the Biden Administration to censor conservative speech. In light of the Executive Order and the fact that both House and Senate committees held hearings earlier this year on other aspects of debanking, it seems likely Congress also will examine the debanking allegations and issues addressed by the Executive Order. Congressional investigations often unfold through public letters and subpoenas, in committee or committee staff reports, and before television cameras in hearing rooms. It is advisable for financial institutions to begin thinking about the possibility of congressional investigations and organizing their responses. Effective responses to congressional investigations often involve thoughtful coordination among legal, government affairs, business, and communications resources. And the best time to marshal and organize such resources is before a crisis occurs. Here, with potential congressional investigations looming on the horizon, beginning to prepare is advisable.

In closing, we recognize that the Executive Order amplifies regulatory uncertainty on these issues given prior contrary guidance and enforcement (both formal and informal) regarding reputation risk. The Executive Order itself seemingly lays the groundwork for future penalties related to actions taken by financial institutions at the behest of their regulators. Gibson Dunn is experienced in not only banking regulation and compliance and enforcement defense but in challenging agency action if needed and in related advocacy including in any rulemakings resulting from the Executive Order. We stand ready to assist clients in thinking through the best strategies for navigating these changing tides.

Gibson Dunn will continue to closely monitor regulatory developments related to the Executive Order and other related agency actions, and our attorneys are available to support financial institutions in responding to requests for information and revising existing policies to ensure compliance with new developments and existing requirements, and to interface with government decisionmakers and strategize on approach in any further regulatory proceedings or examinations.

[1] https://www.whitehouse.gov/presidential-actions/2025/08/guaranteeing-fair-banking-for-all-americans/. The Executive Order defines “politicized or unlawful debanking” as an “act by a bank, savings association, credit union, or other financial services provider to directly or indirectly adversely restrict access to, or adversely modify the conditions of, accounts, loans, or other banking products or financial services to any customer or potential customer on the basis of the customer’s or potential customer’s political or religious beliefs, or on the basis of the customer’s or potential customer’s lawful business activities that the financial service provider disagrees with or disfavors for political reasons.” Executive Order, § 3(a).

[2] https://www.wsj.com/finance/banking/trump-big-bank-conservative-bias-accusations-168abb27?mod=article_inline.

[3] https://www.cnbc.com/video/2025/08/05/president-trump-banks-discriminated-against-me-after-i-was-president.html

[4] Press Release, OCC, OCC Ceases Examinations for Reputation Risk (Mar. 20, 2025), https://www.occ.gov/news-issuances/news-releases/2025/nr-occ-2025-21.html. See also Comptroller’s Handbook, https://www.occ.gov/publications-and-resources/publications/comptrollers-handbook/files/bank-supervision-process/pub-ch-bank-supervision-process.pdf.

[5] Press Release, Board of Governors for the Federal Reserve System, Federal Reserve Board announces that reputational risk will no longer be a component of examination programs in its supervision of banks (June 23, 2025), https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250623a.htm. See also SR 95-51 (SUP): Rating the Adequacy of Risk Management Processes and Internal Controls at State Member Banks and Bank Holding Companies, https://www.federalreserve.gov/supervisionreg/srletters/SR9551.htm.

[6] 15 U.S.C. § 45.

[7] 12 U.S.C. § 5531.

[8] 15 U.S.C. § 1691.

[9] 12 U.S.C. § 5531(a).

[10] 12 U.S.C. § 5515(a).

[11] 15 U.S.C. § 1691e(g).

[12] 15 U.S.C. § 1691c(a)(9).

[13] Executive Order, § 4(b).

[14] See https://www.wsj.com/politics/jpmorgan-targeted-by-republican-states-over-accusations-of-religious-bias-903c8b26?mod=article_inline; https://www.wsj.com/finance/banking/big-banks-worried-about-being-trumps-next-target-race-to-appease-republicans-15b6423a?mod=article_inline.

The following Gibson Dunn lawyers assisted in preparing this update: M. Kendall Day, Stephanie Brooker, Jason Cabral, Michael Bopp, Amy Feagles, Gene Scalia, Ro Spaziani, Helgi Walker, Rachel Jackson, Monica Murphy, and David Reck.

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, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the following leaders and members of the firm’s Financial Institutions, Financial Regulatory, Administrative Law & Regulatory, Congressional Investigations, or White Collar Defense & Investigations practice groups:

Financial Institutions:
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M. Kendall Day – Washington, D.C. (+1 202.955.8220, kday@gibsondunn.com)
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Financial Regulatory:
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Administrative Law & Regulatory:
Stuart F. Delery – Washington, D.C. (+1 202.955.8515, sdelery@gibsondunn.com)
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Congressional Investigations:
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White Collar Defense & Investigations:
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F. Joseph Warin – Washington, D.C. (+1 202.887.3609, fwarin@gibsondunn.com)

Center for Biological Diversity, Inc. v. Public Utilities Com., S283614 – Decided August 7, 2025

The California Supreme Court today unanimously held that when courts review decisions of the Public Utilities Commission, they act as “the final arbiters of statutory meaning” and need not defer to Commission interpretations.

“An agency’s interpretation is one among several tools available to the court, but the court cannot abdicate a quintessential judicial duty—applying its independent judgment de novo to the merits of the legal issue before it.”

Justice Kruger, writing for the Court

Background:

For decades, when courts reviewed decisions of California’s Public Utilities Commission, they applied a “uniquely deferential” standard under which the Commission’s “interpretation of the Public Utilities Code should not be disturbed unless it fails to bear a reasonable relation to statutory purposes and language.” (Greyhound Lines, Inc. v. Public Utilities Com. (1968) 68 Cal.2d 406, 410-411.) But beginning in the mid-1990s, the Legislature enacted a series of laws expanding the scope of scope of judicial review and making clear that courts can review Commission decisions for “abuse of discretion” and can vacate decisions where the Commission did not “proceed[] in the manner required by law.” (Pub. Utilities Code, § 1757.1, subds. (a)(1)-(2).)

Following those amendments, lower courts in California were split over how to review Commission decisions. Some continued to apply the deferential standard of Greyhound Lines. But others applied the typical standard that governs review of an agency’s statutory interpretation, under which courts must “independently judge the text of the statute.” (Yamaha Corp. of America v. State Bd. of Equalization (1989) 19 Cal.4th 1, 7-8.) The California Supreme Court granted review to resolve that conflict.

Issue Presented:

What standard of review applies to judicial review of a Public Utilities Commission decision interpreting provisions of the Public Utilities Code?

Court’s Holding:

Courts reviewing decisions of the Public Utilities Commission must apply the normal standard for review of agency action and must independently interpret the Public Utilities Code rather than substantially deferring to the Commission’s interpretation.

What It Means:

The Court’s decision puts an end to decades of deference to the Commission’s interpretation of the Public Utilities Code, allowing courts to reach independent conclusions about how best to interpret the Code.
The decision will make it easier for litigants to challenge decisions of the Commission. Challengers will no longer have to show that the Commission’s interpretation of the Code is patently unreasonable; they will have to show only that their interpretation is better.
The Court made clear that some degree of deference to the Commission may remain appropriate. An agency’s interpretation, for instance, remains “one among several tools available to the court” in construing the Code, and that interpretation may warrant “great weight” in “appropriate circumstances.” And when a dispute turns on the reasonableness of the agency’s exercise of lawmaking authority rather than on a question of statutory interpretation, it “may be appropriate to defer to an agency’s reasonable exercise of . . . such authority.”

The Court’s opinion is available here.

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

Appellate and Constitutional Law

Thomas H. Dupree Jr. +1 202.955.8547 tdupree@gibsondunn.com	Allyson N. Ho +1 214.698.3233 aho@gibsondunn.com	Julian W. Poon +1 213.229.7758 jpoon@gibsondunn.com
Lucas C. Townsend +1 202.887.3731 ltownsend@gibsondunn.com	Bradley J. Hamburger +1 213.229.7658 bhamburger@gibsondunn.com	Michael J. Holecek +1 213.229.7018 mholecek@gibsondunn.com

This alert was prepared by Daniel R. Adler, Ryan Azad, and Matt Aidan Getz.

This update provides a discussion on the President’s Report and other current developments in digital asset regulation related to market infrastructure, the banking system and broader payment activities, and taxation of digital assets.

Recent developments in the digital asset space aim to establish a clear regulatory framework for digital assets, while encouraging innovation and enabling a pathway of compliance for eligible current market participants. Given the Administration’s agenda to transform the United States into a global leader in digital assets and blockchain technology and Congressional support for this agenda, the digital asset regulatory framework is likely to take shape quickly—with rulemakings and specific guidance to follow over a substantially longer timeframe.

On July 30, 2025, the President’s Working Group on Digital Asset Markets (PWG) published the Strengthening American Leadership in Digital Financial Technology Report (Report) in response to Executive Order 14178. The Report reiterates the Administration’s support for digital assets and provides a roadmap of recommendations for Congress and regulators to modernize the U.S. digital asset regulatory framework, including in connection with digital asset market structure, banking and payments, countering illicit finance, and taxation. The Report emphasizes the need for a clear, fit-for-purpose system to foster innovation, protect investors, and position the United States as a global leader in digital financial technology.

In light of all of the moving pieces, below is a discussion on the Report and other current developments in digital asset regulation related to market infrastructure, the banking system and broader payment activities, and taxation of digital assets. For additional information on the Report’s recommendations for countering illicit finance, please see our accompanying Client Alert. In addition, for a fulsome discussion on the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), see our prior publication.

I. Market Infrastructure

The market structure for digital assets presents a web of potential licensing and registration requirements that have long been unaddressed. The reforms outlined in the Report, the launch of “Project Crypto” by the U.S. Securities and Exchange Commission (SEC), and pending legislation relating to market structure, including the envisioned roles of the SEC and the Commodity Futures Trading Commission (CFTC), aim to address these open questions to provide more certainty for industry participants. Specifically, we highlight components of the House of Representatives’ Digital Asset Market Clarity Act (CLARITY Act) and the Senate’s discussion draft of the Responsible Financial Innovation Act of 2025 (Discussion Draft), as well as the request for information from the industry in connection with the development of the digital assets market oversight framework.

A. The PWG Report

The Trump Administration has unequivocally articulated its ambition for the United States to position itself as an international leader at the forefront of technological advancement in the digital asset space, “usher[ing] in the Golden Age of Crypto” and “lead[ing] the blockchain revolution.”[1] The Report acknowledged risks within the digital assets space, but emphasizes the valuable opportunities for U.S. leadership in international standard-setting, including promoting technology-neutral regulatory approaches, ensuring standards accurately reflect risk profiles rather than political preferences, and maintaining the importance of the dollar in emerging digital payment systems. Throughout, the Report acknowledges a geopolitical dimension, noting that cross-border payment innovation may be crucial to maintaining dollar dominance as existing inefficiencies could create demand for alternatives that “may be filled by U.S. adversaries.”

In focusing on the market infrastructure, the Report addresses the evolving nature of digital asset markets and categorizes digital assets as security tokens, commodity tokens, and tokens for commercial and consumer use—emphasizing the importance of economic functionality in determining the appropriate regulatory fit.

The Report provides several recommendations for the SEC and the CFTC, encouraging both to use their rulemaking and exemptive authorities to foster the trading of digital assets and ensure American businesses remain competitive internationally. The Report also lauds the CLARITY Act, indicating that it provides an “excellent foundation” for the digital asset market in the United States. However, the PWG also provides the following key recommendations to Congress as it works to finalize this legislation:

The CFTC should have authority to regulate spot markets in non-security digital assets.
Registrants should be permitted to engage in multiple business lines under an efficient, clear, and simple licensing and regulatory framework.
Federal law should preempt state law for intermediaries, including for state virtual currency businesses, blue sky laws, and commodity broker laws.
Intermediaries should be permitted to lend, net, and hedge securities against non-securities, accounting for applicable risk characteristics.
Registrants should be required to adopt best practices for cybersecurity standards.
Trading platforms should be allowed to custody customer digital assets with appropriate controls.

B. Potential Legislation: The CLARITY Act and the Discussion Draft

The CLARITY Act currently awaits consideration in the Senate after passing in the House of Representatives on July 17 with strong bipartisan support (216 Republicans and 78 Democrats). However, on July 22, Senate Committee on Banking, Housing, and Urban Affairs (Senate Banking Committee) Chairman Tim Scott, Subcommittee on Digital Assets Chair Cynthia Lummis, Senator Bill Hagerty, and Senator Bernie Moreno released the Discussion Draft as an alternative to the CLARITY Act. Along with the Discussion Draft, Senator Scott and his colleagues issued a Request for Information for stakeholders to submit feedback on the draft, posing a wide array of questions.

Both the CLARITY Act and the Discussion Draft aim to provide a foundation on which to develop a clear framework to classify digital assets and jurisdiction between the SEC and CFTC, depending on whether the digital assets are securities or commodities. It is important to note that unlike the CLARITY Act, which is a complete bill that passed the House with bipartisan support, the Discussion Draft is a preliminary discussion draft of a potential future bill and was issued by the Senate Banking Committee, which has jurisdiction over the SEC, and aims to build on the momentum of the CLARITY Act. The Senate Committee on Agriculture, Nutrition, and Forestry (Senate Agriculture Committee), which has jurisdiction over the CFTC, is also expected to introduce its own draft legislation on digital assets. The two committees will then need to reconcile the jurisdictional divide between the SEC and CFTC and other matters before a full bill can be advanced. The introduction of the Discussion Draft suggests that there may be some issues that will need to be considered more carefully in order to garner the necessary support for the CLARITY Act in the Senate.

A summary of certain components of the CLARITY Act and the Discussion Draft are set forth below.

1. Regulatory Oversight

The CLARITY Act would give the CFTC oversight of “digital commodities,” a defined category of digital assets that (1) are intrinsically linked to, and derive their value from, a “mature” blockchain system, (2) are sufficiently decentralized, and (3) do not confer ownership rights. Digital assets that are securities—such as tokens conferring equity, debt, or other rights similar to those conferred by securities—would fall under the SEC’s jurisdiction.

The CLARITY Act addresses the requirement to register offers and sales of securities under Section 5 of the Securities Act of 1933 (Securities Act) in two ways. First, it amends the definition of “investment contract” in Section 2(a)(1) to exclude a new term of art, the “investment contract asset,” and it also provides an exemption from the registration requirements of the Securities Act for offers and sales of investment contracts involving digital commodities on blockchains that are “mature” (i.e., sufficiently decentralized) or are “intended” to be “mature” within four years from the date of first sale, subject to specified conditions.

The Discussion Draft provides a preliminary structure predicated on preexisting definitions and authorities but provides only limited insight into a potential framework, pending input from the Request for Information, the expected draft legislation from the Senate Agriculture Committee, and reconciliation. In lieu of the CLARITY Act’s definitional exemption and offering exemption, the Discussion Draft employs the concept of an “ancillary asset,” defined as an intangible, fungible asset that is provided to a person in connection with the sale of a security through an investment contract. If certain conditions are satisfied in the offering process, including compliance with periodic disclosure requirements and a self-certification requirement, then, by operation of the Discussion Draft, the ancillary asset “shall not be a security.” The Discussion Draft calls for the SEC to promulgate rules under a proposed “Regulation DA” to define how and when a digital asset qualifies as an ancillary asset that becomes a commodity over time.

2. Licenses and Registration Requirements

The CLARITY Act and the Discussion Draft would impose different registration and licensing schemes on market participants.

The CLARITY Act creates three new categories of CFTC registrants: (i) digital commodity exchanges; (ii) digital commodity brokers; and (iii) digital commodity dealers. Each of these registrants would be required to register with the CFTC, similar to their traditional counterparts, and comply with digital asset-specific regulations. Additionally, U.S. issuers that issue no more than $75 million of digital commodities within a 12-month period would be exempt from registration under the Securities Act, and dual-registration would be available to entities transacting in both securities and digital commodities.

The Discussion Draft does not currently propose a new licensing regime for digital assets and instead calls for the SEC to tailor existing registration, disclosure, and reporting obligations for digital asset activities, and to promulgate rules under the proposed Regulation DA, which may include registration or licensing requirements. However, the Discussion Draft prohibits the SEC from imposing more onerous obligations on digital asset activities than would otherwise be applicable to functionally analogous conduct not in the digital asset space. As previously indicated, the Discussion Draft will likely be supplemented with CFTC-related requirements by the Senate Agriculture Committee.

3. Considerations for Foreign Issuers

The CLARITY Act and the Discussion Draft both aim to make the U.S. a more hospitable jurisdiction for digital assets. However, as one would expect, the CLARITY Act is more explicit than the Discussion Draft in addressing the regulatory treatment of foreign issuers and intermediaries, providing mechanisms for their participation in U.S. markets subject to disclosure and compliance requirements. The Discussion Draft touches on international cooperation and reciprocity but, as a discussion draft, is less detailed than the CLARITY Act on the specific obligations of foreign issuers.

4. Primary v. Secondary Trading

A critical issue is how digital asset sales in the primary market are treated as compared to trading in the secondary market. The CLARITY Act draws a clear line between the two, subjecting primary offerings of digital assets that originate as investment contracts to specific disclosure and reporting requirements and allowing for unrestricted secondary trading of such assets as digital commodities on CFTC-regulated platforms. Similarly, the Discussion Draft proposes to require “ancillary asset originators” to comply with certain disclosure requirements in connection with primary offerings, and gives jurisdiction over secondary transactions to the CFTC, contingent on a certification by the ancillary asset originator and a waiting period.

5. State Preemption

Both the CLARITY Act and the Discussion Draft provide for preemption of state law, although the CLARITY Act is more comprehensive.

The CLARITY Act would amend the Securities Act to classify digital commodities as “covered securities,” thereby restricting the ability of the states to impose separate registration or qualification requirements on offers or sales of the same. It also grants the CFTC exclusive jurisdiction over registered digital commodity exchanges, digital commodity brokers, and digital commodity dealers, preempting any related provision of law dealing with activities subject to the Commodity Exchange Act.

The Discussion Draft is, naturally, more nebulous but provides that any rules adopted under the proposed Regulation DA would preempt state registration requirements.

6. Regulatory Uncertainty Remains

Although the CLARITY Act and the Discussion Draft are a step toward the legislation of digital assets, many questions remain. The Discussion Draft remains just that, a discussion draft, and will need to be reconciled with responses to Senator Scott’s Request for Information and the Senate Committee on Agriculture’s own draft legislation, which remain pending. Notably, the Administration appears to support the CLARITY Act, as evidenced by the Report.

C. The PWG Report v. Proposed Legislation

The Report’s market structure recommendations broadly align with the spirit of the CLARITY Act and the Discussion Draft, but go further in certain respects. For instance, the Report and the proposed bills all acknowledge the importance of preserving decentralized finance (DeFi) innovation. However, the Report contemplates the integration of DeFi into mainstream finance while the CLARITY Act and the Discussion Draft merely propose to protect the ability to develop decentralized protocols by limiting burdensome registration requirements, but stop short of incorporating DeFi into the regulatory framework or into traditional financial infrastructure. Uncertainty remains as to what constitutes sufficient decentralization and how to address evolving governance models. Similarly, the PWG recommends that the SEC and CFTC “immediately enable” crypto trading within the existing regulatory framework, communicating a sense of urgency, whereas the proposed legislation contemplates a time horizon of up to a year for recommended rulemakings.

D. Project Crypto

On July 31, SEC Chairman Atkins announced the launch of “Project Crypto” at the SEC, an initiative led by himself and Commissioner Hester Peirce.[2] Project Crypto is aimed at swiftly implementing the Report’s recommendations within the SEC’s purview under five initiatives:

Clarifying the definitional confusion around what is a security, encouraging innovative offerings of digital assets, including tokenized securities, and bringing back and supporting more capital raising related to digital assets in the United States;
Providing maximum flexibility for market participants with respect to custody of and trading digital assets;[3]
Allowing securities intermediaries to offer a wide range of non-security cryptoassets, cryptoasset securities, traditional securities, and other services under a single license;
Updating archaic rules and regulations to “unleash the potential of on-chain software systems in our securities markets”; and
Fostering innovation and entrepreneurship by providing an “innovation exemption” that allows “innovators and visionaries . . . to immediately enter the market with new technologies and business models,” subject to compliance with “certain principles-based conditions designed to achieve the core policy aims of the federal securities laws.”

Chairman Atkins explicitly directed SEC staff to draft “clear and simple rules of the road,” in line with the PWG’s call for immediate regulatory clarity. Consistent with the recommendations of the PWG, Chairman Atkins also disclosed that while formal rules are in process, the SEC will consider employing interpretive and exemptive authorities to provide paths forward for industry participants.

II. Banking and Payments

The Report notes several key roles of traditional banks in the digital assets ecosystem and the Report’s recommendations for actions of the Board of Governors of the Federal Reserve System (Federal Reserve), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), as well as state banking and insurance regulators.

Banks provide core services including commercial deposit accounts, loans, and capital markets advisory services to digital asset firms. The Report emphasizes that access to traditional banking services is “essential for any company or individual” and enables digital asset firms to “manage cash flows, pay employees and vendors, and conduct their operations efficiently.” Further, banks have focused on services and activities related to digital assets, including providing custody services and facilitating trade execution (primarily through finder authority).

A. Existing Regulatory Framework

While many of the activities referenced above are permissible for national banks and bank holding companies without further action from the OCC and the Federal Reserve, there are key gaps. The Report highlights several OCC Interpretive Letters that were originally issued during the first Trump Administration, including with regard to the ability of national banks to provide digital asset custody and execution services,[4] hold deposits that serve as reserves for stablecoins,[5] and use distributed ledger technology for certain payment activities,[6] which were reaffirmed by the OCC in 2025.[7] Notwithstanding those several OCC Interpretive Letters, the Report highlights that there remains uncertainty regarding the permissibility of digital asset-related activities at the depository institution level beyond those addressed in prior OCC Interpretive Letters or where clear authority already exists, and within the broader bank holding company ownership structure.

B. Key Recommendations for Banking Agencies

1. Clarify Permissible Activities

Of course, many of the highlighted activities are permissible under current regulations—e.g., custody, finder activities, payment facilitation—but additional clarity on expected risk management practices and capital requirements would enable more certainty by banks (and their holding companies) engaging in digital asset-related activities.

Specifically, the Report identifies several areas where additional clarity may be necessary:

Whether and how banks may use public, permissionless blockchains;
Whether banks may acquire and use digital assets to pay transaction fees (g., gas fees) for blockchain operations;
Whether banks may purchase and sell digital assets solely as riskless principals;
Whether banks may, and the potential limits to, create markets in digital assets; and
Guidelines for the tokenization of deposits and other financial products.

While the foregoing may benefit the industry, as noted, there is existing authority for banks to engage in a wide range of digital-asset related activities without additional rulemakings or formal guidance.

2. Adopt a Technology-Neutral Approach to Risk Management Expectations

The Report emphasizes a “technology-neutral” regulatory approach, whereby digital asset activities are evaluated on the basis of their actual risk profiles rather than on their technological characteristics. It highlights the importance of banks and other financial industry participants to innovate and that traditional banking institutions should be allowed to engage in “safe and sound” digital asset activities “without prior regulatory approval or notice.” This technology-neutral principle is especially important for permissionless blockchain usage, where the Report notes that other jurisdictions have allowed banks to interact with public chains for years while “the U.S. banking agencies have effectively prohibited it.” The new framework also identifies the need to implement carefully regulated pathways to facilitate such activities.

The Report also emphasizes that tokenization should not affect prudential treatment when the underlying risk profile remains unchanged. Specifically, the Report notes that Banking Agencies should “clarify the circumstances, using risk-based guidelines, under which tokenized assets and tokenized asset collateral would be subject to the same capital and liquidity treatment as the underlying asset or collateral.”

3. Implement Technology-Neutral Capital Requirements

The Report raises concerns with the existing Basel Committee on Banking Supervision (BCBS) cryptoasset standards, particularly with regard to the defined asset classes and risk weights that do not accurately reflect the risk profiles.

Currently, the BCBS framework divides cryptoassets into categories (which are further subdivided). In short, Group 1 assets are backed by traditional assets meeting specified conditions, and are subject to capital requirements based on underlying exposures. In contrast, Group 2 assets fail to meet at least one Group 1 condition and have a 100% capital charge, provided they meet hedge recognition criteria—otherwise they are subject to a 1250% risk weight.

The Report identifies several flaws in the BCBS approach. First, the current framework discriminates against permissionless blockchain-based assets regardless of their actual risk characteristics. Put differently, the Report notes that “cryptoassets relying on permissionless blockchains pose risks that may prevent them from being included in Group 1,” despite strong evidence to the contrary that technical risk mitigation strategies are being actively developed and implemented. Second, the Report contends that the current system fails to offer “a clear enough distinction between cryptoassets widely used for payment and investment purposes and other cryptoassets, such as memecoins.” And third, it may be the case that BCBS standards are simply outdated; they do not reflect “recent innovations and changes in the cryptoasset market since the BCBS standards were first published” in 2022.

The Report recommends that the U.S. adopt capital requirements that “accurately reflect the risk of the asset or activity” by:

Simplifying the cryptoasset grouping system;
Allowing for certain use of permissionless blockchain for cryptoassets, subject to continued development and implementation of risk mitigation strategies;
Adopting appropriate risk-based guidelines that ensure tokenized assets receive equivalent treatment to underlying assets; and
Implementing comprehensive data analysis that incorporates recent market developments.

However, in making the above recommendations, the Report further recommends that the United States advocate that the BCBS revisit the cryptoasset standards to ensure similar treatment to U.S. capital requirements.

C. Need for Global Coordination and Alignment

Although the U.S. has considerable flexibility in setting its own capital standards, the practical influence of BCBS recommendations on global banking practices means that the U.S. must weigh the implications of deviating from the BCBS standards. U.S. banks with international operations benefit from the U.S. capital regime’s alignment with BCBS standards and, to the extent there are material deviations from such standards, such U.S. banks may face heightened scrutiny from foreign regulators who view the U.S.’s oversight as inadequate. In addition, inducing more regulatory fragmentation may create compliance burdens for international banks operating across multiple jurisdictions.

As the Report notes, “[i]t is important for the United States to lead in such international forums” and it encourages the route of global engagement and coordination to minimize further roadblocks confronting financial institutions engaged in, or seeking to engage in, digital asset activities. Importantly, this represents another opportunity for stakeholders to engage with regulators and other policymakers through advocacy efforts to shape capital standards and mitigate or avoid unintended consequences that disrupt industry innovation efforts or increase capital costs to banks’ participation in such efforts.

III. Stablecoins and Payments

The Report highlights the GENIUS Act as foundational to the Administration’s ongoing digital asset strategy, identifying the following key objectives achieved through the GENIUS Act.

Regulatory Clarity: Establishing clear licensing regime for stablecoin issuers.
Consumer Protection: Requiring full reserve backing and segregated custody.
Market Integrity: Ensuring transparent reporting and auditing requirements.
Dollar Competitiveness: Promoting development of dollar-backed stablecoins globally.

Given the recent adoption of the GENIUS Act, the Report limits its analysis and recommendations on the potential framework for issuances, but rather focuses on a few key recommendations.

A. Support Stablecoins as Payment Infrastructure

The Report positions stablecoins as fundamental infrastructure for addressing inefficiencies in existing payment systems espousing several technological advantages, including (i) instantaneous settlement; (ii) reduced intermediation; (iii) continuous operation; and (iv) programmability of smart contracts to allow for automation of payment conditions. Partially as a function of these advantages, the Report explicitly links stablecoin development to the overall competitiveness of the U.S. dollar—implicitly emphasizing the need for stablecoins to be pegged to the U.S. dollar.

B. CBDC Policy Concerns

Separate from stablecoins, which are addressed in more detail in the GENIUS Act, the PWG reasserts its opposition to Central Bank Digital Currency (CBDC) development.[8] The Report identifies several specific concerns with retail CBDCs, including “compromising individual economic and privacy rights,” loss of control of over monetary policy, and undermining the private banking system.

The Report further emphasizes that at least 90 countries are actively considering or experimenting with CBDCs, including China’s e-CNY pilot project and the European Central Bank’s digital euro development. The Report emphasizes that “[r]etail CBDC efforts, both domestically and abroad, pose severe risks to individual rights, financial systems, and the sovereignty of the United States.”

In short, the PWG strongly favors private sector innovations like stablecoins over CBDCs to better preserve the economic liberty of money movements while capturing technological benefits.

C. Banking Agency Coordination and Guidance

In addition to the traditional banking activities and actions addressed in Part II, above, state and federal banking regulators are also responsible for the oversight of permissible payment stablecoin issuers and development of the regulations under the GENIUS Act. In furtherance of these responsibilities, the Report emphasizes that bank supervisors should apply risk management processes “based on risk, with the intensity and rigor of risk management corresponding to, among other things, the complexity, criticality, and magnitude of the technological change or new activity.” Additionally, banking agencies must ensure evaluation teams are “adequately educated on issues related to digital assets and the consistent application of best practices and standards across institutions.” And, once again referencing its broader technology-neutral approach, the Report states that banking agencies should “examine banks’ activities from a technology-neutral approach, focusing on such activities’ material risks and the banks’ abilities to manage such risks.”

In addition to the principles-based approach to supervision, the Report identifies the specific areas requiring immediate regulatory attention:

Provide “best practices” guidance for custody activities;
Clarify permissible sub-custodian and infrastructure provider arrangements;
Updated reserve guidance reflecting new GENIUS Act requirements;
Clarify on balance sheet and capital treatment for digital asset holdings;
Establish a pilot program framework for bank participation in digital asset initiatives; and
Provide guidance on risk-based standards for deposit tokenization and other activities.

D. Charter Applications

The Report emphasizes the need for transparency and predictability in the bank charter application process for digital asset firms and asserts three recommendations. While concerns on charter reviews and timelines are not specific to the digital asset space, we support the recommendations for clarity and objective standards for applications.

First, the Report recommends that banking agencies should “clarify and define in regulation the expected timelines for decision-making on completed applications for charter licensing (including federal deposit insurance where applicable) and requesting a Reserve Bank master account.” The Report further recommends that if regulatory timelines are not met for a given application, then, absent extraordinary circumstances, the application should be deemed approved.

Establishing a level of certainty around regulatory expectations and review timelines is critical for entities seeking licenses. From a practical perspective, establishing objective criteria to commence the review period is central to the concept of transparency in review timelines. We recognize that the banking agencies receive a wide variety of applications and, therefore, understand that the mere submission of an application is not in all cases the appropriate starting point. We encourage engagement with the industry on how to define the commencement of the timeline (i.e., when an application is deemed “complete” or “substantially complete”) and transparency for new applicants on the expectations for what constitutes a “complete” or “substantially complete” application.

The Report further recommends that banking agencies should confirm that “otherwise eligible entities are not prohibited from obtaining bank charters, obtaining federal deposit insurance, or receiving Reserve Bank master accounts or services solely because they engage in digital asset-related activities.” In practice, the provision of what constitutes permissible activities under the various charters should align with this recommendation.

Lastly, the Report recommends that the banking agencies provide data on the average time to review and complete applications on an individual and aggregate basis, primarily with regard to bank mergers, de novo licensing, acquisition of federal deposit insurance, and Reserve Bank master account applications.

IV. Taxation

The Report indicates that the IRS has issued little guidance that deals directly with the taxation of digital assets. At a high level, current guidance provides that digital assets are treated as property for tax purposes, as opposed to currency, and that general federal income tax principles apply to digital asset transactions.[9]

The PWG highlighted certain recent legislative efforts, such as the joint resolution signed into law by the President in April 2025 to overturn prior efforts to define DeFi developers as “brokers” for tax purposes, as the type of “pro-innovation” approach to tax law that the Administration wants the federal government to embrace.

The Report identifies certain substantive tax issues, with calls for priority guidance recommendations to be implemented by the Treasury and the IRS intended to support the growth of digital assets, especially the future development of DeFi platforms. The Report also highlights several priority legislative recommendations for Congress, including modifying how digital assets are characterized for U.S. federal income tax purposes, and a number of lower priority issues on which stakeholders have requested guidance that could be addressed in future guidance or legislation. The final priority tax issue included in the Report is the reporting requirements for digital assets, with a special emphasis on reporting requirements for digital assets held by U.S. taxpayers on offshore digital exchanges. See Appendix A for the highlighted issues that the Report identifies and the related recommendations for Congress, the Treasury and the IRS.

V. Countering Illicit Finance

The Report provides an overview of the PWG’s view regarding the extent and types of risks in the digital asset space and outlines recommendations for the U.S. government’s strategic responses. It also emphasizes the need for updated regulatory frameworks, stronger but more targeted enforcement, strong cybersecurity practices to prevent attacks, and enhanced cooperation to mitigate systemic vulnerabilities. See our accompanying Client Alert for additional information.

VI. Conclusion

The Administration’s agenda to position the United States as a global leader in digital financial technology is rapidly taking shape. However, a significant amount of work remains to be done. The evolving regulatory landscape presents both significant opportunities and challenges for market participants and the PWG’s Report, the GENIUS Act, the CLARITY Act, the Discussion Draft, and Project Crypto all signal a strong commitment from the Administration, Congress, and federal agencies to work with both traditional financial institutions and the digital assets industry in developing and implementing a regulatory framework. Of course, as the framework continues to develop, proactive engagement will be essential.

APPENDIX A

PWG Report – Taxation Issues and Recommendations

I. Priority Administrative Regulatory Recommendations

A. Corporate Alternative Minimum Tax

The corporate alternative minimum tax (CAMT) requires certain corporations to pay U.S. federal income tax on their adjusted financial statement income (AFSI) at a rate of at least 15 percent. For the CAMT to apply, the corporation must meet certain AFSI thresholds over a three-year testing period. While the CAMT does not directly address digital assets, the PWG states that it “creates a potential punitive effect on the growth of the digital assets sector and contradicts the policy goals of Executive Order No. 14219,” directing agencies to identify and remove certain regulations and guidance that impede private enterprise and entrepreneurship.

The Report acknowledges that stakeholders have requested guidance that would provide that AFSI does not include financial accounting unrealized gains and losses on cryptocurrency, or on investments generally. The priority guidance recommendation falls short of that request, saying that Treasury and the IRS should publish guidance addressing the determination of AFSI with respect to financial accounting unrealized gains and losses on investment assets other than stock and partnership interests.

B. Staking

The Report states that many U.S. investment funds that hold digital assets that qualify as exchange-traded products under securities laws often choose to hold such investments in investment trusts treated as grantor trusts. Such trusts must meet certain requirements regarding their activities, but if those requirements can be met, the investors are treated as if they were the direct owners of trust assets. One of the priority guidance initiatives is publishing guidance addressing whether, assuming all other requirements are met, such a trust holding digital assets can stake those assets and receive staking awards.

C. Wrapping

Wrapping is a process used to convert a digital asset native to one blockchain into a digital asset native to another blockchain. The Report calls for priority guidance to address whether wrapping and unwrapping transactions are taxable transactions.

D. Non-Priority Issues

While not identified as priority items, the Report notes that stakeholders have requested guidance on the following issues that could be addressed in future guidance or legislation:

Clarification on timing of income from staking and mining awards and whether staking constitutes a trade or business for federal income tax purposes;
How to value digital assets that are traded on multiple exchanges or thinly traded;
How non-fungible tokens are generally taxed, including whether they are treated as collectibles for purposes of sections 408(m) and 1(h)(5);
Standards and acceptable proof for claiming worthlessness and abandonment, including with respect to thefts of digital assets;
Removing the requirement for a qualified appraisal for chartable donations of digital assets worth more than $5,000;
Whether tokenization of an asset gives rise to a new asset for federal income tax purposes, and if so under what circumstances;
The application of the investment company rules of sections 351(e) and 721(b) to digital assets;
Distributions of digital assets in partnership liquidations (the “marketable securities” rules) under section 731;
The application of the “hot asset” rules of section 751 to sales of partnerships holding digital assets;
Expanding the classes of assets that may be held by regulated investment companies to include digital assets;
The treatment of digital assets for purposes of the subpart F, global intangible low-taxed income (GILTI),[10] and passive foreign investment company rules;
The tax treatment of blockchain splits and mergers; and
The rules applicable to digital assets with respect to retirement accounts.

II. Priority Legislative Recommendations

A. Characterization of Digital Assets

As noted above, current guidance characterizes digital assets as property for tax purposes but does not specify whether a digital asset is considered a security or a commodity. The classification of an asset as a security or a commodity for U.S. federal income tax purposes impacts the application of multiple provisions of the Code, including the ability to elect to mark commodities to market under section 475(e), eligibility for trading commodities safe harbors under section 864(b)(2)(B), and eligibility for certain passive income exceptions for publicly traded partnerships under section 7704(d)(1)(G).

The Report recommends that Congress enact legislation that would treat digital assets as a new class of assets subject to modified legacy provisions determining the taxation of securities and commodities. Part of the recommendation includes expanding section 475 (mark-to-market election), section 864(b) (trading safe harbors), section 1058 (securities loans) and section 7704 (publicly traded partnership rules) to apply to this new class of asset.

The PWG also recommends that sections 1091 (wash sale rules) and 1259 (constructive sales) be expanded to explicitly apply to digital assets.

B. Stablecoins as Debt

The Report states that a stablecoin is a digital asset that is intended to maintain a stable value relative to a reference asset, usually a currency and most often the U.S. dollar. The GENIUS Act sets forth a framework for the issuance of payment stablecoins in the United States,[11] which are generally used in transactions in a manner similar to a cash-equivalent asset. Under the GENIUS Act, U.S.-licensed issuers of payment stablecoins will be obligated to convert, redeem, or repurchase such stablecoins for a fixed amount of monetary value and must be collateralized with high quality liquid assets.[12] Despite the tendency for stablecoins to be used as a cash-equivalent, the Report takes the position that it is unlikely that the tax law would treat them as currency for several reasons, including that no rules currently exist to deal with the possibility of gains or losses on payment stablecoins treated as currency. The PWG takes the position that characterizing payment stablecoins as debt is the most appropriate approach, provided that certain carveouts are made to ensure that the wash sale rules and the anti-bearer bond rules[13] do not apply to payment stablecoins. There are a few alternative recommendations included with respect to the wash sale rules including that the wash sale rules to not apply to payment stablecoins at all, that the wash sale rules do not apply to de minimis losses from payment stablecoins, or that, more broadly, gains and losses on payment stablecoins are disregarded for U.S. federal income tax purposes.

III. Reporting Recommendations

A. De Minimis Digital Asset Receipts

The Report outlines the many ways in which holders of digital assets receive new digital assets that may have minimal or speculative value, whether through staking or unsolicited airdrops related to marketing promotions. Digital assets acquired in this manner are often illiquid and hard to value. After an airdrop or a hard fork, the value of the digital assets often falls significantly. Under current IRS guidance,[14] taxpayers must recognize the fair market value of digital assets as income from the point at which the taxpayer has dominion and control over the asset. Citing the potential for a high volume of transactions involving low value assets, rapidly changing valuations, and difficulties around determining the precise moment a taxpayer takes dominion and control of an asset, the PWG recommends that the Treasury and IRS prioritize issuing administrative guidance that addresses reporting requirements for receipts of de minimis digital assets.

For similar reasons related to fluctuating valuations and difficulty determining exactly when the taxpayer has dominion and control over the asset, the Report also recommends that Congress, the Treasury, and the IRS consider measures to clarify or modify the guidance around the timing of income from staking and mining. Possible legislative proposals include deferring recognition of income from staking or mining until the year of the sale or other disposition of the rewards.

B. Foreign Digital Asset Reporting

The Report recommends that the Treasury and the IRS consider proposing regulations that would implement the Crypto-Asset Reporting Framework (CARF), an international tax transparency standard requiring digital asset service provides to report certain transactions to the tax authorities in the provider’s jurisdiction. The Report considers that adopting CARF would create several benefits. For taxpayers, the reporting could be coordinated with existing foreign financial reporting requirements such as FATCA and FBAR to ensure that owning digital assets does not create duplicative filing obligations. More importantly, the PWG expects that implementing CARF would discourage U.S. taxpayers from moving their digital assets to offshore digital asset exchanges, which supports the administration’s overall policy of promoting the growth and use of digital assets within the United States and on U.S. exchanges.

IV. Outlook for Market Participants

The Report’s recommendations for increased clarity on the taxation of digital assets and transactions involving digital assets should be beneficial for all marketplace participants as they plan future investments and activities. Key open questions for marketplace participants will include how much of the input from stakeholders that is included in the Report (that is generally favorable to marketplace participants) will make it into any tax guidance or legislation that is ultimately implemented. Another key open question for any marketplace participants with holdings in offshore digital asset exchanges will be timing around any potential adoption of CARF and what the tax implications will be of moving those holdings to U.S. exchanges or leaving them offshore.

[1] Fact Sheet: The President’s Working Group on Digital Asset Markets Releases Recommendations to Strengthen American Leadership in Digital Financial Technology, The White House (July 30, 2025), available at https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-the-presidents-working-group-on-digital-asset-markets-releases-recommendations-to-strengthen-american-leadership-in-digital-financial-technology/.

[2] As of February 2025, Commissioner Peirce has been designated head of the SEC’s Crypto Task Force.

[3] In addition to announcing Project Crypto, Chairman Atkins “asked the staff to evaluate the use of Commission authority to permit non-security crypto assets that are subject to an investment contract to trade on trading venues that are not registered with the Commission,” noting that he is “keen to pursue such a solution . . . .”

[4] See Interpretive Letters No. 1170 (July 2020) and No 1184 (May 2025).

[5] See OCC Interpretive Letter No. 1172 (September 2020).

[6] See OCC Interpretive Letter 1174 (January 2021).

[7] See OCC Interpretive Letters 1183 (March 2025).

[8] The Trump Administration previously addressed its opposition to CBDC in Executive Order No. 14178, which explicitly prohibiting federal agencies from undertaking actions to establish, issue, or promote CBDCs domestically or internationally. On July 17, 2025, the U.S. House of Representatives passed the Anti-CBDC Surveillance State Act (H.R. 1919) with a vote of 219-210. The act would prohibit the Federal Reserve from issuing a CBDC or using a CBDC to implement monetary policy.

[9] See 2014-16 I.R.B. 938 (April 14, 2014); Notice 2014-21. See also Rev. Rul. 2019-24, 2019-44 I.R.B. 1004 (Oct. 28, 2019) (addressing taxation of hard forks, which is when a blockchain changes the way it operates typically splitting the blockchain); Rev. Rul. 2023-214, 2023-33 I.R.B. 484 (Aug. 14, 2023) (addressing taxation of staking, which is the process of using the native asset of a blockchain to secure the network); Notice 2023-27, 2023-15 I.R.B. 634 (Apr. 10, 2023) (addressing taxation of non-fungible tokens, which is a type of token that is a unique digital asset and has no equal token).

[10] References to GILTI presumably included reference to net Controlled Foreign Corporations tested income, or “NCTI,” the successor regime to GILTI under the law commonly known as the One Big Beautiful Bill Act.

[11] S. 1582, 119th Cong. (2025) § 2(22).

[12] S. 1582, 119th Cong. (2025) § 2(22)(A)(ii)(I); See S. 1582, 119th Cong. (2025) § 4(a)(i)(A).

[13] See sections 149(a), 163(f), 165(j), 312(m), 871(h), 881(c), 1287, and 4701.

[14] Notice 2014-21.

The following Gibson Dunn lawyers prepared this update: Ro Spaziani, Jeffrey Steiner, Jason Cabral, Matt Donnelly, Mellissa Campbell Duru, Thomas Kim, Sara Weed, Blake Hoerster, Hayden McGovern, Alexis Levine, and Alice Wang*.

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, any leader or member of the firm’s Fintech & Digital Assets practice group, or the authors:

Ro Spaziani – New York (+1 212.351.6255, rspaziani@gibsondunn.com)
Jeffrey L. Steiner – Washington, D.C. (+1 202.887.3632, jsteiner@gibsondunn.com)
Jason J. Cabral – New York (+1 212.351.6267, jcabral@gibsondunn.com)
Matt Donnelly – New York/Washington, D.C. (+1 212.351.5303, mjdonnelly@gibsondunn.com)
Mellissa Campbell Duru – Washington, D.C. (+1 202.955.8204, mduru@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
Sara K. Weed – Washington, D.C. (+1 202.955.8507, sweed@gibsondunn.com)
Blake Hoerster – Dallas (+1 214.698.3180, bhoerster@gibsondunn.com)
Hayden K. McGovern – Dallas (+ 214.698.3142, hmcgovern@gibsondunn.com)
Alexis Levine – Dallas (+1 214.698.3194, alevine@gibsondunn.com)
Alice Wang* – Washington, D.C. (+1 202.777.9587, awang@gibsondunn.com)

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

This update provides a sequential discussion of the President’s Working Group on Digital Asset Markets’ description of the intersection of digital assets and illicit finance in its Report.

Government officials have stated that they aim to establish a clear regulatory framework for digital assets, while encouraging innovation and enabling a pathway of compliance for eligible current market participants. Given the Administration’s stated agenda is to transform the United States into a global leader in digital assets and blockchain technology, and Congressional support for this agenda, there is a good chance that there will be a set digital asset regulatory framework, with rulemakings and specific guidance to follow.

On July 30, 2025, the President’s Working Group on Digital Asset Markets (PWG) published the Strengthening American Leadership in Digital Financial Technology Report (Report) in response to Executive Order 14178. The Report reiterates the Administration’s support for digital assets and provides a roadmap of recommendations for Congress and regulators to update the U.S. digital asset regulatory framework, including in connection with digital asset market structure, banking and payments, countering illicit finance, and taxation. The Report emphasizes the need for a clear, fit-for-purpose system to foster innovation, protect investors, and position the United States as a global leader in digital financial technology.

Below is a sequential discussion of the PWG’s description of the intersection of digital assets and illicit finance in the Report. The PWG provides an overview of its view of the extent and types of risks in the digital asset space and outlines recommendations for the U.S. government’s strategic responses. The Report emphasizes the need for updated regulatory frameworks, stronger but more targeted enforcement, strong cybersecurity practices to prevent attacks, and enhanced cooperation to mitigate systemic vulnerabilities. For additional information on the Report’s recommendations for market structure, banking, payments, and taxation, please see our accompanying Client Alert. In addition, for a fulsome discussion on the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), see our prior publication.

I. Illicit Finance Risks

The Working Group begins by noting that the technology underlying digital assets enables ways to mitigate the risk of illicit transactions, and noting that the share of illicit finance transactions conducted using digital assets remains quite small, citing estimates placing illicit transactions at between 0.61% and 0.86% of all on-chain digital asset volumes. Still, the Working Group caveats that the harm from such illicit activity may not be commensurate with the comparatively low transactional value and lists funding of DPRK’s miliary efforts and losses from investment schemes as examples of activity that cause more harm than the dollar value might otherwise suggest.

The Report suggests that illicit actors may be attracted to the digital asset ecosystem primarily due to digital asset service providers with weak or nonexistent controls for anti-money laundering (AML) and combatting the financing of terrorism (CFT) risks, as well as the availability of tools and methods such as mixers, anonymity-enhanced cryptocurrencies (AECs), and chain hopping that can hinder law enforcement investigations. Finally, the Report posits that illicit actors also seek to exploit pseudonymity of self-custody and peer-to-peer payments in DeFi networks to conceal or quickly move illicit proceeds.

Key Considerations and Questions

Will the Administration and Congress use the Report’s illicit finance conclusions to guide regulation and legislation moving forward?
What steps should traditional financial institutions that interact with the digital asset ecosystem take in light of the Report’s conclusions?

II. Improving the AML/CFT and Sanctions Frameworks

The PWG next explains that mitigating and combatting the risks posed by illicit use are paramount to protecting the digital asset ecosystem and its users, and ultimately will serve to encourage further innovation and responsible use of digital assets. To carry out that goal, the PWG advocates for clear obligations that are tailored to the risk and structure of the digital asset industry while simultaneously respecting lawful use of digital assets and respecting Americans’ privacy rights. This section of the Report also promotes more supportive infrastructure to help digital asset businesses meet AML/CFT requirements. For example, many actors, particularly in the DeFi space, lack clarity on their obligations or the tools to implement effective compliance programs. The Report recommends targeted guidance for high-risk market segments and better coordination among U.S. regulators to reduce uncertainty.

The PWG makes some regulatory and legislative suggestions that could dramatically reshape how AML and CFT applies to both institutions and individuals within the digital asset ecosystem. First, the PWG suggests that Treasury revisit FinCEN’s 2013 and 2019 guidance documents related to the digital asset sector, which have stood as some of the preeminent guidance as to AML/CFT as applied to digital assets for years. Second, the PWG proposes that Congress amend the Bank Secrecy Act to provide further gradations in terms of how certain AML obligations apply to different financial institutions, with obligations based on the type of financial entity (e.g. “financial institution types or sub-types”) and also potentially by activity (e.g. “utiliz[ing] smart contracts”). The PWG also proposes legislative amendments to clarify the BSA’s extraterritorial reach, which could have important effects on the obligations of foreign-located actors. At the same time, the Working Group also recommends that Congress codify principles reinforcing the ability of individuals to lawfully hold or custody their own digital assets and engage in lawful, direct digital asset transfers without any financial intermediary.

Key Considerations and Questions

Industry specific guidance has led to more cooperation within certain industries, like casinos or banking. Digital asset providers should consider how gradated obligations might affect their relationships within their market category.
Some of the Working Group’s suggestions could mean that far more foreign-located actors are covered by the BSA. Market participants should review any forthcoming guidance carefully.

III. Equipping Digital Asset Actors to Mitigate Risk

Beyond fortifying AML/CFT frameworks, the PWG advocates for ways to increase the partnership between the public and private sectors. This section proposes expanding private sector authority to investigate and share information pertaining to illicit finance through safe harbors, and touts the benefits of prior efforts within Treasury to learn through round tables that convene an array of private sector and law enforcement professionals. While cautioning against the potential to infringe on civil liberties, the PWG nonetheless advocates for greater information sharing among a broader set of institutions to foster a safer digital asset ecosystem.

Key Considerations and Questions

If implemented, these suggestions could have a major impact on private sector tracing and blockchain analytics firms.

IV. Disrupting and Mitigating Systemic Illicit Finance Risks

The final section calls for proactive measures to dismantle networks that enable systemic illicit finance. The PWG advocates that Treasury should have expanded authority to restrict fund transmission and for continued use of OFAC sanctions in instances in which digital assets are used for specific illicit risks, like crimes targeting Americans, laundering proceeds or illicit drug and narcotics sales, and financing terrorist organizations. The section also proposes amendments that could expand law enforcement authority related to digital assets, from forfeiture laws to bank fraud statutes. In addition to highlighting some of the ways that Treasury is already working to reduce the risk of malicious cyber actors and advocating for greater public-private partnerships and information sharing, the PWG also recommends that relevant agencies develop principles-based requirements and standards for digital asset firms to address the risks of various industry participants and activities, such as those involving custody and smart contracts.

Key Considerations and Questions

Some of the PWG’s suggestions may have less impact, given how law enforcement already uses available authorities.
Other proposed changes could potentially lead to far more law enforcement action. For example, the Working Group proposes amending 18 U.S.C. § 1014 to cover all false statements in connection with obtaining or maintaining access to financial institution services, rather than solely false statements in loan and credit applications, and to include digital asset service companies within the definition of “financial institution.” Such a change could lead to further investigations and enforcement actions, even when the exchange or bank is not itself at risk of losing its funds.
If implemented, the PWG’s recommendation to develop principles-based requirements and standards could mean that digital asset market participants—custodians, wallet providers, etc.—are required to have security tools in place to prevent bad actors from engaging in attacks that lead to illicit finance on the blockchain.

V. PWG Recommendations

To implement the Trump Administration’s policy of encouraging innovation and responsible use of digital assets, the PWG states that the United States must protect the digital asset ecosystem and its users by implementing tools and measures to prevent attacks that lead to illicit finance activities and mitigating and combating the risks posed by illicit use. In light of the PWG’s emphasis on protecting market participants, proactively preventing the initial attack may be considered priority, given that blockchain transactions are immutable and thus cannot be reversed (as in some traditional financial sectors) after illicit finance activity is identified. The PWG proposes several measures towards this goal of deterring and combating illicit finance. These recommendations take a “whole of government” approach to disrupting and exposing illicit activity in the digital asset ecosystem, while also building confidence among U.S. users and firms seeking to grow domestically. Overall, the recommendations also build on themes that the Administration has articulated in other regulatory contexts as well:

Specificity: clear frameworks that expressly identify or define which types of actors or entities are subject to various laws and regulations (e.g., defining financial institutions and DeFi networks).
Tailoring: regulations are no more restrictive than necessary to curtail identified risks (e.g., AML/CFT regulations by entity type).
Balancing: appropriately consider individual privacy rights and burden to industry when regulating to mitigate risk (e.g., CVC mixing rule, SARs).

The recommendations are largely bifurcated between Treasury and Congress, representing a dual-tracked and whole-of-government approach to fortifying the digital asset ecosystem.

Digital Assets Policy Recommendations
Topic	Congress	Treasury
Financial Institutions	Statutory changes to define which entities are subject to the BSA, particularly as Congress considers changes to market structure and the creation of new types of financial institutions. Expand BSA applicability to foreign-located actors based on conduct and effects.	Tailor AML/CFT obligations by entity type. Adopt rules required under the GENIUS Act to treat permitted payment stablecoin issuers as financial institutions. Tailor AML/CFT obligations for payment stablecoin issuers. FinCEN should reconsider its 2013 and 2019 guidance given legislative and regulatory change.
DeFi	Define various actors in DeFi ecosystem and clarify which obligations apply to entities with some, but not all, DeFi characteristics. Codify principles affirming the right to self-custody. Codify that software provides that do not maintain total independent control over value are not engaged in money transmitters.	Tailor obligations to DeFi actors based on their role and associated risks. Reconsider proposed rule on CVC mixing in light of illicit finance risk, privacy and burden to financial sector.
Supervision	—	Provide needed guidance (alongside Federal banking agencies) clarifying AML/CFT obligations and expectations for financial institutions offering digital asset services.
BSA Reporting	Ensure BSA-required reporting to FinCEN under 31 U.S.C. 5331 aligns with IRS reporting rules to coordinate treatment of fiat and digital asset transactions.	Evaluate modernizing Suspicious Activity Report (SAR) reporting, including SAR form updates for digital asset-specific data.
Sanctions	—	Solicit sanctions compliance feedback from DeFi developers and technologists. Update OFAC’s Sanctions Compliance Guidance for the Virtual Currency Industry.
Privacy	—	Coordinate with the National Institute for Standards and Technology and other agencies to identify new approaches to customer identification in digital asset use cases. Gather information on tools for detecting illicit activity, including digital identity verification. Issuing guidance to financial institutions on using digital identity solutions in customer identification programs.
Investigations	Enact a digital asset-specific “hold law” to provide safe harbor for voluntary asset holds while institutions investigate risk of illicit activity.	Encourage greater information sharing between the public and private sectors via FinCEN’s 314(a) and 314(b) programs.
Treasury Authorities	Add a sixth special measure to Section 311 allowing FinCEN to restrict certain digital asset transfers.	Continue using OFAC’s sanctions authorities to combat illicit digital asset use.
Law Enforcement	Streamline victim compensation regulations and improve asset-forfeiture efforts in the digital assets space. Amend bank fraud statutes and associated sentencing guidelines to apply to institutions offering digital assets. Amend the National Stolen Property Act, anti-tip-off provisions and forfeiture laws to apply equally to digital assets.	—
Cybersecurity	—	Office of Cybersecurity and Critical Infrastructure Protection (OCCIP) should identify opportunities to increase information sharing, including by providing U.S. regulated digital asset firms access to the Automated Threat Information Feed. OCCIP should harness existing public-private partnerships to identify gaps in addressing operational resiliency. Develop principles-based requirements and standards, as appropriate, for digital asset firms (along with other relevant agencies).

The following Gibson Dunn lawyers prepared this update: M. Kendall Day, Stephanie Brooker, Ro Spaziani, Jeffrey Steiner, Ella Alves Capone, Sam Raymond, Rachel Jackson, and Karin Thrasher.

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

Stephanie Brooker – Washington, D.C. (+1 202.887.3502, sbrooker@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)

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

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

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

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

Toward the end of July, President Trump made a flurry of announcements that further complicate the tariff landscape. Country-specific reciprocal tariff rates are set to go into effect by August 7. Legal challenges to the tariffs face a long road ahead.

Over the last two days of July, President Trump made a flurry of announcements that further roil the tariff landscape, already in flux since the announcement of the Liberation Day tariffs on April 2, 2025. Operating under the International Emergency Economic Powers Act (IEEPA), President Trump sent letters to trading partners threatening imminent steep tariff increases, announced tariff-reducing deals with several countries, and issued tariff-related executive orders providing direction on the implementation of some (but not all) of the announced tariffs. This burst of activity further demonstrates President Trump’s strategy of leveraging trade tools for non-trade ends—many of the announced tariffs were not promulgated to address unfair trade practices or even trade deficits. Rather, some explicitly serve other ends: the newly imposed tariffs on Brazil, for instance, are based in part on President Trump’s concerns about the prosecution of former Brazilian President Jair Bolsonaro (these trade measures were pared with sanctions imposed on a Brazilian judge leading this prosecution). Higher tariffs on India seek to stem India’s growing trading relationship with Russia.

While the Trump Administration has continued to implement and enforce an unprecedented interpretation and use of IEEPA as an emergency-based tariff program, which Gibson Dunn has previously discussed here and here, the legality of these measures remains under review in several U.S. federal courts. Moreover, as of this writing, many of the announced trade deals remain handshake arrangements with few publicly disclosed terms, and some trading partners have offered different views of the terms (such as levels or types of planned investment in the United States) than those expressed by the White House. Taken together, these developments introduce the potential for both clearer rules (for example, new proposed tariff rates for 69 trading partners) and ongoing uncertainties (such as the potential for additional trade deals, or the tariff treatment of “transshipped” goods) into President Trump’s evolving trade policy.

Tariff Actions of July 31, 2025

On July 31, 2025, President Trump issued a suite of executive orders modifying U.S. tariff rates under the Administration’s evolving reciprocal trade and border security framework. In addition to reinstating and revising country-specific reciprocal tariffs, the White House announced increased duties on imports from Canada, claimed to be based on a continued flow of illicit drugs across the northern border.

A day prior to these tariff measures, the White House announced 40 percent IEEPA-based tariffs on Brazil, consisting of newly imposed “free speech” tariffs targeting Brazilian political and judicial actions that are alleged to undermine U.S. free speech rights and “the rule of law in Brazil.” These are imposed in addition to the 10 percent reciprocal tariffs on goods from Brazil.

Although the White House has emphasized progress in negotiations with certain U.S. trading partners, none of these negotiations have led to the complete elimination of tariffs against any country, and President Trump’s latest orders suggest that the President will continue to leverage tariffs to accomplish a range of different foreign policy objectives during the remainder of his administration, unless restricted by court or other action. Notably, many of the deals announced include agreements to on topics beyond the scope of the tariffs, such as agreements by trading partners to make substantial new investments in U.S. industries, purchase U.S. goods, or align on supply chain and economic security measures. Further, President Trump’s announcement of a new category of “free speech” tariffs targeting the Brazilian government may also signal his intent to use IEEPA-based tariffs to address foreign policy issues more traditionally addressed through other means, including sanctions programs.

I. Country-specific Reciprocal Tariffs Reinstated and Revised Reflecting Trade Negotiations

On July 31, 2025, President Trump issued an Executive Order titled “Further Modifying the Reciprocal Tariff Rates” (referred to hereafter as the “July 31 Reciprocal Order” or “Order”). The Order reinstates the reciprocal tariff framework announced on Liberation Day by Executive Order 14257—comprised of a 10 percent baseline (virtually worldwide) tariff and a schedule of higher country-specific rates set forth in an annex—and adjusts those country-specific rates based on “the status of trade negotiations, [trading partners’] efforts to retaliate against the United States . . . and [their] efforts to align with the United States on economic and national security matters.” The Order also introduces what appears to be a new tariff category—the “transshipment tariff”—aimed at curbing tariff evasion through transshipments used to secure preferential rates. All measures are announced pursuant to the President’s authority under the International Emergency Economic Powers Act (IEEPA).

These new tariffs come after a string of trade deals were announced, beginning with the May 8, 2025, announcement of the U.S.-UK Economic Prosperity Deal. That framework agreement was followed by announcements of trade deals with China, Vietnam, Indonesia, the Philippines, Japan, the European Union, and South Korea. Each of these announcements have indicated that trading partners have agreed to a certain “baseline” tariff on goods originating in that country (for example, 10 percent for the United Kingdom, 15 percent for the European Union, Japan, and South Korea, 19 percent for Indonesia and the Philippines, and 20 percent for Vietnam). In addition, the announcements have included commitments by some trading partners to make significant new investments in U.S. industries—according to the announcement, the European Union agreed to make new investments worth $600 billion in U.S. industries by 2028, Japan agreed to investments worth $550 billion, and South Korea agreed to $350 billion. The announcements also address a range of tariff and non-tariff trade issues, including commitments to establish preferential quotas for certain categories of goods, exemptions or partial relief from Section 232 duties (discussed further below), agreements to align on country of origin rules and cooperate to address duty evasion, commitments to negotiate non-tariff barriers (such as technical and safety standards, and importation formalities), and agreements to cooperate on economic security priorities, including supply chain resilience and investment security.

Effective Dates. The order provides that all modifications, either effectuated in the form of the 10 percent baseline tariffs or country-specific rates, will take effect “on or after 12:01 a.m. eastern daylight time 7 days after the date of this order,” or August 7, 2025.

For goods that are loaded onto a vessel at the port of loading and in transit on the final mode of transport before the effective date, and that are entered for consumption or withdrawn from warehouse for consumption before 12:01 a.m. EDT on October 5, 2025, the applicable duty rate will remain as previously imposed under Executive Order 14257, as amended.

Country-Specific Rates. Annex I[i] of the July 31 Reciprocal Order outlines specific tariff rates for U.S. trading partners, ranging from 10 percent to 41 percent. As noted above, several of these rates reflect the outcome of trade agreements announced in recent months. For instance, the United Kingdom secured the lowest rate—10 percent—matching the baseline reciprocal rate. The European Union obtained a two-tiered structure based on the existing Column 1 duty rates for goods originating in the European Union. For example, for EU-origin goods that already have a tariff rate over 15 percent under the United States’ Column 1 duty (this is the duty applicable to U.S. trading partners eligible for “normal trading relations” status, also referred to as “Most Favored Nation” rates), the reciprocal tariff rate will be zero. For EU-origin goods that have an existing tariff rate less than 15 percent, the reciprocal tariff rate is 15 percent minus the amount of the existing duty.

In contrast, countries that have not reached an agreement with the United States generally received higher rates. For example, India was assigned a 25 percent ad valorem rate; Laos, 40 percent; Switzerland, 39 percent; and Syria the highest, at 41 percent. The rates announced on July 31 are on average lower than those announced on Liberation Day, when the highest country-specific rate was 50 percent. However, many countries have received higher rates than originally proposed.

Notably, the Order leaves room for rapid revision, emphasizing that “[c]ertain foreign trading partners identified in Annex I to this order have agreed to, or are on the verge of concluding, meaningful trade and security agreements,” which may be formalized through “subsequent orders memorializing the terms of those agreements.”

10 Percent Baseline Tariff. Under the July 31 Reciprocal Order, goods from any foreign trading partner (other than Canada or Mexico) not listed in Annex I will be subject to an additional 10 percent ad valorem duty, consistent with the framework set forth in Executive Order 14257, as amended—thereby preserving the 10 percent baseline worldwide rate announced on Liberation Day.

It bears noting that the reciprocal tariff structure described above is separate from the Administration’s distinct tariff regime on imports from China, which is discussed further below. It is also separate from the fentanyl-related tariff framework applicable to Canada and Mexico.

The Transshipment Tariff. Notably, the July 31 Reciprocal Order appears to introduce a new subcategory within the reciprocal tariff framework: the so-called “transshipment tariff.” The Order states that “[a]n article determined by CBP to have been transshipped to evade applicable duties under section 2 of this order” will be subject to a 40 percent duty rate, replacing the reciprocal rate otherwise applicable.

While further guidance from U.S. Customs and Border Protection (CBP) will be necessary to clarify implementation, this new tariff category may carry significant implications. Traditionally, a country-of-origin analysis alone has governed the tariff rate that would be applied to imports originating from multi-country supply chains, subject to limited adjustment in certain trade cases where “circumvention” could be demonstrated. The “transshipment tariff,” by contrast, could introduce a second layer of inquiry—whether the item’s production or shipment history reflects an intent to circumvent duties but without the procedural and substantive limitations in the current “circumvention” rules that apply in some trade cases. If such a finding is made, the applicable rate could default to 40 percent regardless of a potentially more favorable country-of-origin determination. However, it is not clear from the language of the order what criteria CBP will use to distinguish “transshipment” or “evasion” from the everyday decisions companies make when selecting suppliers and manufactures in different jurisdictions—decisions that are often informed, at least in part, by tariff mitigation strategies.

Importantly, the application of the transshipment tariff rate is separate from and in addition to CBP’s existing authority to impose penalties for tariff evasion. The Order further directs CBP to “publish every 6 months a list of countries and specific facilities used in circumvention schemes,” intended to inform public procurement decisions, national security reviews, and commercial due diligence.

Available Exemptions. The Order provides that “[e]xcluding the changes set forth in subsections (a) through (d),” the terms of E.O. 14257, as amended, “continue to apply.” Based on this language, the exemptions previously established in Annex II of E.O. 14257—as well as the semiconductor exemption introduced in the April 11, 2025 presidential memorandum—appear to remain available under the July 31 Reciprocal Order.

The 14257 Order exemptions include:

Items that are exempt from regulation under IEEPA, such as informational materials and donations of articles, such as food, clothing, and medicine, intended to be used to relieve human suffering;
Articles and derivatives of steel and aluminum that are subject to previously imposed 25 percent duties, subsequently raised to 50 percent duties, under Section 232 of the Trade Expansion Act of 1962 (Section 232). Section 232 is a statutory provision that authorizes the President to impose duties on articles that the U.S. Department of Commerce has determined are imported into the United States in quantities or under circumstances that threaten to impair national security;
Automobiles and automotive parts subject to additional 25 percent duties under a separate Section 232 action announced by President Trump on March 26, 2025;
Other items enumerated in Annex II to the April 2 Executive Order, including semi-refined and copper derivates (which now have a 50 percent tariff rate), refined copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, and energy and energy products (the Trump Administration has separately initiated investigations into, or imposed tariffs on, most of these items under Section 232);
Articles from countries that do not have Permanent Normal Trade Relations (PNTR) with the United States, which presently includes Cuba, North Korea, Russia and Belarus (imports from these countries are subject to punitive tariffs, and may also be separately subject to restrictions under sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control); and
All articles that may become subject to duties pursuant to future actions under Section 232.

Separate Tariff Regime for Chinese Goods. The July 31 Reciprocal Order makes clear that “[n]othing in this order shall be construed to alter or otherwise affect Executive Order 14298 of May 12, 2025.” Executive Order 14298 provides that all goods imported from China—including goods from Hong Kong and Macau—remain subject to an additional 10 percent ad valorem duty under the reciprocal tariff structure established by E.O. 14257 of April 2, 2025.

The White House Fact Sheet that accompanied the May 12 order confirmed that the United States retained all previously imposed tariffs on Chinese-origin goods. As explained in our prior alert, these tariffs include a 20 percent IEEPA-based tariff tied to the fentanyl-related national emergency declared in Executive Order 14195. As a result, goods from China are currently subject to a cumulative IEEPA-related tariff burden of 30 percent. In addition to the IEEPA tariff burden, additional duties may apply depending upon the item, including (i) Most Favored Nation (or “normal trading relations”) tariffs; (ii) Section 301 tariffs; and (iii) industry-specific tariffs under Section 232.

The Section 301 tariffs, which were originally imposed during the first Trump Administration in response to China’s technology transfer and industrial policies, remain in effect and generally range from 7.5 percent to 25 percent, with certain products subject to duties as high as 100 percent.

Taken together, the effective average duty rate on most imports from China now ranges from approximately 40 to 55 percent, with higher duties for some products.

E.O. 14298 contemplates a potential sunset of this arrangement on August 12, 2025, unless a new agreement is reached. In effect, absent an additional agreement or a decision to extend the agreement reflected in E.O. 14298, the current 10 percent reciprocal tariff rate for goods of China and Hong Kong will increase to 34 percent (raising the cumulative average to approximately 65 to 79 percent, and higher for some products). As of this writing, neither the White House nor the Chinese government has announced such an agreement. We will continue to monitor developments in the ongoing negotiations.

Fentanyl-Related Duties on Canadian and Mexican Goods. In a separate executive order issued on July 31, titled “Amendment to Duties to Address the Flow of Illicit Drugs Across Our Northern Border,” President Trump increased fentanyl-related duties on Canadian goods, citing “Canada’s lack of cooperation in stemming the flood of fentanyl and other illicit drugs across our northern border.”

By way of background, President Trump initially imposed a 25 percent ad valorem duty on Canadian-origin goods in Executive Order 14193 of February 1, 2025, invoking national emergency authorities described in IEEPA to address fentanyl trafficking. (Unlike most other countries, Canada was not subject to reciprocal tariffs under E.O. 14257.) In the July 31 Order, President Trump raised the rate to 35 percent, while a 10 percent duty remains in place for a limited set of goods, including Canadian potash and energy products. The revised rates take effect at 12:01 a.m. EDT on August 1, 2025.

Notably, the Order preserves preferential treatment for goods that qualify as originating under the United States-Mexico-Canada Agreement (USMCA), which goods remain eligible for a zero percent duty rate. At the same time, the Order, similar to the July 31 Reciprocal Order, introduces a transshipment rule for non-USMCA qualifying goods, providing that “all articles of Canada that do not qualify as originating under USMCA and are determined by U.S. Customs and Border Protection (CBP) to have been transshipped to evade applicable duties” will be subject to a 40 percent duty in lieu of the otherwise applicable 35 percent. It remains unclear how this transshipment rule will apply to goods undergoing substantial transformation or assembly in Canada or Mexico for the purpose of satisfying USMCA origin rules or otherwise.

On the same day, President Trump and Mexican President Claudia Sheinbaum agreed to extend their existing tariff arrangement for an additional 90 days, during which the 25 percent fentanyl-related tariff—imposed under Executive Order 14194, as amended—on Mexican goods that do not qualify for USMCA remains in effect.

Suspension of Duty-Free De Minimis Treatment Universally. As part of the July 31 actions, President Trump issued an Executive Order suspending duty-free de minimis treatment for imports from all countries, which followed the Trump Administration’s targeted removal of de minimis tariff treatment for Chinese goods in E.O. 14298. The suspension takes effect on August 29, 2025. The Order provides that “all such shipments [that would have qualified for the duty-free de minimis exemption provided under 19 U.S.C. 1321(a)(2)(C)], except those sent through the international postal network, shall be subject to all applicable duties, taxes, fees, exactions, and charges.” For international postal shipments, duties are to be assessed in accordance with the methodology set forth in Section 3 of the Order. Section 3 offers two options for transportation carriers: (1) collect a duty equal to the IEEPA tariff rate applicable to the country of origin of the product assessed on an ad valorem basis, or (2) collect a specific duty (i.e. a flat fee) calculated according to a schedule: $80 per postal item for countries with an IEEPA tariff rate less than 16 percent, $160 for countries with a 16-25 percent IEEPA tariff rate, and $200 for countries with a 25 percent and higher IEEPA tariff rate. The second option will phase out after six months, after which time the ad valorem method of duty assessment will be required for international postal items.

II. Brazil IEEPA Tariffs and Section 301 Investigation

On July 30, President Trump issued an Executive Order resulting in a duty rate of 50 percent on certain goods of Brazil—adding a 40 percent “free speech” tariff to a range of goods in addition to the 10 percent reciprocal tariff rate for Brazil. Notably, the additional 40 percent rate will not apply to most of Brazil’s most significant exports to the United States, including certain aircraft parts, oil, coal, minerals, orange juice, various chemicals and Brazil nuts. However, this rate does apply to coffee and could disrupt U.S. coffee supply chains, as Brazil—already the world’s top grower and exporter—supplies roughly one-third of all U.S. coffee imports.

In parallel, on July 15, the U.S. Trade Representative (USTR) announced the initiation of an investigation of Brazil under Section 301 of the Trade Act of 1974. The investigation will “seek to determine whether acts, policies, and practices of the Government of Brazil related to digital trade and electronic payment services; unfair, preferential tariffs; anti-corruption interference; intellectual property protection; ethanol market access; and illegal deforestation are unreasonable or discriminatory and burden or restrict U.S. commerce.”

A Section 301 investigation allows the USTR to investigate and act against foreign trade practices deemed unfair, unreasonable, or discriminatory and that burden or restrict U.S. commerce. In cases not involving trade agreements, USTR must make its determinations within 12 months after the investigation begins. If the investigation results in a determination that unfair practices exist, the United States may take the following actions:

Impose duties on goods or services. The statute includes a preference for the use of this remedy above the options below.
Withdraw or suspend trade agreement concessions.
Enter into a binding agreement with the offending country to eliminate discriminatory policies or practices or provide compensatory trade benefits.

Public comments on the investigation will remain open until August 18, with a public hearing scheduled for September 3, 2025.

In addition, the Trump Administration has imposed sanctions in response to actions by the government of Brazil that are alleged to threaten U.S. national security, foreign policy, and economic interests, including concerns regarding the ability of U.S. persons to engage in protected political speech on U.S. social media platforms and the government of Brazil’s pursuit of criminal charges against former Brazilian president Jair Bolsonaro for his alleged involvement in plans to stage a coup, among other charges. On July 30, the United States sanctioned Brazilian Supreme Court Justice Alexandre de Moraes, who is currently presiding over the criminal proceedings involving Bolsonaro.

III. IEEPA Legal Challenges and Implications

Since April 3, 2025, at least nine complaints have been filed challenging the tariffs imposed on the basis of IEEPA. Plaintiffs—including small businesses, universities, and state governments—argue that IEEPA, by its text, context, and legislative history, does not authorize the President to impose tariffs. Rather, the Constitution commits this power to Congress in Article 1, Section 8, where it states that the “Congress shall have power to lay and collect taxes, duties, imposts and excises…” By contrast, IEEPA makes no mention of “tariffs” and has never before been used to impose tariffs. Rather, that statute allows the President, following a declaration of a national emergency in response to “any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States,” to exercise certain powers, including the power to “regulate … importation” of any property in which any foreign person has any interest. Across cases, plaintiffs tend to make the following arguments:

The alleged national emergencies related to illegal drugs, irregular migration, and/or the “large and persistent” U.S. goods trade deficits are not unusual or extraordinary circumstances;
Congress has expressly delegated authority to the President to impose increased tariffs, including to address national security concerns and balance-of-payment emergencies, under separate trade-related statutes that require investigations and procedures; and
Certain canons of constitutional law, including the Major Questions Doctrine and Non-Delegation Doctrine, require a reading of IEEPA that either does not include the ability to impose tariffs or imposes limits on the scope of tariff measures that can be imposed by the executive branch.

On May 28, 2025, the United States Court of International Trade (CIT) invalidated the IEEPA-based tariffs—including the fentanyl-related and reciprocal tariffs—and permanently enjoined their enforcement nationwide. The U.S. Government immediately appealed to the United States Court of Appeals for the Federal Circuit and sought a stay, which was granted the next day, reinstating the tariffs. On July 31, the United States Court of Appeals for the Federal Circuit heard oral arguments in the CIT case, with a number of the judges on the panel expressing skepticism that President Trump has the power to use IEEPA to impose tariffs.

On May 29, 2025, the United States District Court for the District of Columbia (D.C. District Court) similarly found that the IEEPA tariffs lacked statutory authority and issued a preliminary injunction halting tariff collection. This action has also been stayed pending appeal. While CIT and D.C. District Court relied on different reasoning, both decisions reflect constitutional concerns over the President wielding an apparently unbounded ability to set, revise, lift, or remove tariffs.

On June 20, 2025, the United States Supreme Court denied certiorari to hear an expedited challenge to the IEEPA-based tariffs, meaning the Supreme Court will not weigh in until at least October. In the meantime, the tariffs remain in effect.

If found invalid, tariffs levied under IEEPA could be vacated, in whole or in part. Notably, President Trump’s July 31 Reciprocal Order and other recent actions that rely upon IEEPA have included “severability” clauses that could keep in place measures that are not affected by a future judicial determination regarding the validity of some or all of the tariffs. If vacated, a court could order the United States to refund duties paid. If the IEEPA-based tariffs remain in place for most of the next year (when a final decision might be announced), the amount of such refunds could potentially reach hundreds of billions of dollars. Further, there could be procedural issues that would complicate the availability of a refund, including whether importers would be required to file formal “protests” to contest the finalization (i.e. “liquidation”) of duties in order to be eligible. The proceedings to date have not addressed the issue of remedies in detail, and much remains to be determined as the litigation progresses.

IV. Conclusion

The myriad tariff developments leading into August reflect a mix of some emerging clarity and persistent uncertainty. Informal trade deals and a flurry of executive orders—some introducing entirely new categories of tariffs—continue to add layers of complexity to the trade landscape. Moreover, we have already seen countries prepare retaliatory measures against U.S. tariffs, further unsettling the global trading system. Consequently, it remains critical for companies with international exposure to carefully assess their customs compliance practices, including product classification, country-of-origin determinations, valuation, duty mitigation measures, and contractual terms governing responsibility for paying the duties.

Uncertainty also exists with respect to the ongoing legal challenges against the IEEPA-based tariffs. As the use of tariffs is likely, absent judicial or other constraints, to play an increasingly central role in the Trump Administration’s foreign policy, it may become challenging for a court to wholly invalidate the trade measures. In addition, even if a final judicial determination finds that IEEPA does not provide authority for the President’s imposition of tariffs, the President has other statutory trade authorities to deploy, including Section 301 and Section 232 discussed above. While the President’s use of more traditional trade measures, such as Section 301 and 232, carry certain procedural provisions—such as an expectation that the administration will at least solicit public comments on potential tariffs and also provide the opportunity for a hearing—the resulting tariff actions could, at least for the products targeted by these measures, provide for tariff levels comparable to the IEEPA-based tariffs the Trump Administration has already imposed and be (based on historical precedent) less susceptible to judicial challenge. Accordingly, companies need to stay aware of the fluidity of trade rules and judicial decisions. Further, it will likely become even more important to monitor these possible trade actions such as Section 301 and Section 232, to participate in current and future public comment periods, and to plan possible countermeasures relating to these actions.

Gibson Dunn lawyers are working throughout the world to help clients navigate this rapidly evolving tariff landscape, to mitigate tariffs when possible, and to develop public comments and conduct other outreach to ensure that Administration officials are implementing the tariff orders with an understanding of how tariffs will impact different sectors.

[i] The chart below is compiled based on Annex I to the July 31 Reciprocal Order and E.O. 14257:

	Countries and Territories	Reciprocal Tariff, Adjusted (effective August 7, 2025)	Original Liberation Day Rate, as Announced in E.O. 14257 (of April 2, 2025)
1	Afghanistan	15%	10%
2	Algeria	30%	30%
3	Angola	15%	32%
4	Bangladesh	20%	37%
5	Bolivia	15%	10%
6	Bosnia and Herzegovina	30%	35%
7	Botswana	15%	37%
8	Brazil	10%	10%
9	Brunei	25%	24%
10	Cambodia	19%	49%
11	Cameroon	15%	11%
12	Chad	15%	13%
13	Costa Rica	15%	10%
14	Côte d`Ivoire	15%	21%
15	Democratic Republic of the Congo	15%	11%
16	Ecuador	15%	10%
17	Equatorial Guinea	15%	13%
18	European Union: Goods with Column 1 Duty Rate[1] > 15%	0%	20%
19	European Union: Goods with Column 1 Duty Rate < 15%	15% minus Column 1 Duty Rate	20%
20	Falkland Islands	10%	41%
21	Fiji	15%	32%
22	Ghana	15%	10%
23	Guyana	15%	38%
24	Iceland	15%	10%
25	India	25%	26%
26	Indonesia	19%	32%
27	Iraq	35%	39%
28	Israel	15%	17%
29	Japan	15%	24%
30	Jordan	15%	20%
31	Kazakhstan	25%	27%
32	Laos	40%	48%
33	Lesotho	15%	50%
34	Libya	30%	31%
35	Liechtenstein	15%	37%
36	Madagascar	15%	47%
37	Malawi	15%	17%
38	Malaysia	19%	24%
39	Mauritius	15%	40%
40	Moldova	25%	31%
41	Mozambique	15%	16%
42	Myanmar (Burma)	40%	44%
43	Namibia	15%	21%
44	Nauru	15%	30%
45	New Zealand	15%	10%
46	Nicaragua	18%	18%
47	Nigeria	15%	14%
48	North Macedonia	15%	33%
49	Norway	15%	15%
50	Pakistan	19%	29%
51	Papua New Guinea	15%	10%
52	Philippines	19%	17%
53	Serbia	35%	37%
54	South Africa	30%	30%
55	South Korea	15%	25%
56	Sri Lanka	20%	44%
57	Switzerland	39%	31%
58	Syria	41%	41%
59	Taiwan	20%	32%
60	Thailand	19%	36%
61	Trinidad and Tobago	15%	10%
62	Tunisia	25%	28%
63	Turkey	15%	10%
64	Uganda	15%	10%
65	United Kingdom	10%	10%
66	Vanuatu	15%	22%
67	Venezuela	15%	15%
68	Vietnam	20%	46%
69	Zambia	15%	17%
70	Zimbabwe	15%	18%

The following Gibson Dunn lawyers prepared this update: Adam M. Smith, Chris Timura, Matt Axelrod, Don Harrison, Ron Kirk, Samantha Sewall, Hui Fang, and Alana Sheppard.

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

United States:
Ronald Kirk – Co-Chair, Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
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Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
Matthew S. Axelrod – Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
David P. Burns – Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
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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)
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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)
Hui Fang – Hong King/Washington, D.C. (+852 2214 3805, hfang@gibsondunn.com)
Dharak Bhavsar – Hong Kong/New York (+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 Accounting Firm Quarterly Update for Q2 2025. The Update is available in .pdf format at the below link, and addresses news on the following topics that we hope are of interest to you:

PCAOB Survives One Big Beautiful Bill but Board Changes Underway
SEC Considers Changing Definition of Foreign Private Issuer
SEC Maintains but FINRA Plans to Revise Off-Channel Communications Settlements
White House and DOJ Announce Criminal Enforcement Measures
Fifth Circuit Scrutinizes FDIC Internal Enforcement Actions
Supreme Court Issues Decisions on Agency Deference, Employment Lawsuits, and Federal Fraud
Federal District Court Bars Clawback of Accidentally Produced Privileged Documents
U.K. Serious Fraud Office Issues Guidance on Corporate Self-Reporting and Cooperation
Other Recent SEC and PCAOB Regulatory and Enforcement Developments

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

Download Full Newsletter

Warmest regards,
Jim Farrell
Monica Loseman
Michael Scanlon

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

In addition to the practice group chairs, this update was prepared by David Ware, Monica Limeng Woolley, Bryan Clegg, Hayden McGovern, Nicholas Whetstone, and Ty Shockley.

Accounting Firm Advisory and Defense Group Chairs:

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

Monica K. Loseman – Co-Chair, Denver (+1 303-298-5784, mloseman@gibsondunn.com)

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

In this update, we review the most significant trends and developments in anti-money laundering (AML) regulation and enforcement during the first six months of 2025.

President Trump has appointed experienced individuals to high offices at Treasury and DOJ, suggesting that there will be consistency in AML enforcement even where the underlying policy rationale will be focused on administration priorities. Indeed, the first half of 2025 and Trump Administration policy statements indicate that the federal government will continue to aggressively police anti-money laundering generally and particularly as it relates to focal areas of narcotics trafficking and national security broadly defined. At the same time, federal authorities have taken a more deregulatory approach, and reduced some limited-in-scope AML-related regulations that would otherwise complicate the management of businesses. We summarize these developments and more below.

1. Key Appointments at Treasury and DOJ

President Trump has nominated several individuals who have and will continue to shape AML enforcement and policy.

At the Treasury Department, the newly minted Deputy Secretary Michael Faulkender wasted little time articulating the Administration’s regulatory agenda and BSA modernization efforts.[1] In a speech to the 62nd Bank Secrecy Act Advisory Group plenary meeting on June 18, 2025, Faulkender emphasized the importance of hearing from “Main Street financial institutions,” stated that Treasury is “working to change the AML/CFT status quo so that the framework focuses on our national security priorities and highest risk areas and explicitly permits financial institutions to de-prioritize lower risks,” and previewed further changes to streamline Suspicious Activity Report and Currency Transaction Report filings.[2]

Separately, our clients are interested in how AML enforcement and guidance will be impacted by John Hurley’s July 23, 2025 confirmation as Undersecretary for Terrorism and Financial Intelligence (TFI).[3] Hurley assumes the reins of TFI and oversees the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), along with the Office of Terrorist Financing and Financial Crimes, Office of Intelligence and Analysis, and the Treasury Executive Office for Asset Forfeiture. One major question is whether and to what extent Hurley will retain existing leaders at OFAC and FinCEN or, as has been a pattern in prior administrations, consider new leadership. Andrea Gacki remains the Director of FinCEN, a position she assumed in July 2023 after serving as Director of OFAC for approximately five years, and Brad Smith remains the Director of OFAC, a position he has held since Director Gacki moved from OFAC to FinCEN.

President Trump’s nominees and appointments to the Department of Justice have similarly issued early guidance applicable to AML enforcement and policy. Attorney General Pam Bondi, the former Attorney General for the State of Florida, was confirmed by the Senate on February 5, 2025, and issued a slew of memoranda, discussed below, that same day. Todd Blanche, a former defense attorney and federal prosecutor, was confirmed as Deputy Attorney General on March 6, 2025, and he issued a memorandum addressing prosecution of offenses related to digital assets about a month later. In March 2025, Matthew Galeotti, a former federal prosecutor, was named Head of the Criminal Division, and on June 5, 2025, John Eisenberg, a long-time attorney within government, was confirmed as Assistant Attorney General for the National Security Division. As described further below, memoranda and guidance issued by Attorney General Bondi, Deputy Attorney General Blanche, and Mr. Galeotti have provided important standards for ongoing AML enforcement, and we anticipate Assistant Attorney General Eisenberg will also shape enforcement.

2. Guidance Documents

a. Executive Orders Deemphasize Regulatory Violations, Unless They Involve Cartels or TCOs

President Trump has issued a series of executive orders that bear on AML guidance and enforcement. As described in the following section, one of the most important orders relates to the government’s focus on cartels and transnational criminal organizations (TCOs).

On May 9, 2025, President Trump signed an Executive Order aimed at combatting “overcriminalization in federal regulations.”[4] This executive order states that “it is the policy of the United States” that “[c]riminal enforcement of criminal regulatory offenses is disfavored,” except as to “the enforcement of the immigration laws or regulations” or “laws or regulations related to national security or defense.” Because the Bank Secrecy Act is a regulatory violation, the Order could deemphasize enforcement of pure BSA violations (such as AML program offenses), except when the violations implicate immigration or national security. Whether the May 9th EO will impact criminal prosecutions remains to be seen, however, since for criminal prosecution the BSA requires the government to establish a defendant acted “willfully,”[5] and the Order recognizes that enforcement “[p]rosecutions of criminal regulatory offenses should focus on matters where a putative defendant is alleged to have known his conduct was unlawful.”

b. AG Memoranda Streamlines Internal DOJ Protocols and Prioritizes Sanctions Evasion and TCOs

Immediately after being sworn in, Attorney General Pam Bondi issued 14 memoranda, which foreshadowed a sizable shift in enforcement priorities under the Trump Administration. Although Gibson Dunn has analyzed these memoranda in more depth here and here, this update focuses on the changes most relevant to the Department of Justice’s approach to anti-money laundering enforcement:

The “Total Elimination” Memorandum seeks to implement President Trump’s January 20, 2025 executive order directing that government policy is to ensure the total elimination of cartels and TCOs. Attorney General Bondi directed DOJ resources toward cartels and TCOs, including by making bureaucratic changes to expedite prosecution of such cases, and prioritizing resources from the Money Laundering and Asset Recovery section (MLARS), which typically enforces Bank Secrecy Act violations, to prioritize cases relating to cartels and TCOs.[6]
A separate memorandum describing the Department’s “General Policy Regarding Charging, Plea Negotiations, and Sentencing,” which prioritized immigration enforcement, human trafficking and smuggling, transnational organized crime, cartels, gangs, protecting law enforcement, and shifting resources in the National Security Division. This memorandum also disbanded NSD’s Corporate Enforcement Unit.[7]

Read together with the policies discussed below, Attorney General Bondi’s Memoranda indicate that the Justice Department will continue to prioritize criminal enforcement of national security offenses, including sanctions evasion, which are often investigated alongside money laundering or anti-money laundering violations.

c. Criminal Division Memoranda Refine Corporate Enforcement Priorities

As Gibson Dunn previously reported, the Criminal Division issued four foundational guidance documents in May 2025: 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”).

The Enforcement Plan lists 10 high-impact areas on which the Criminal Division will be “laser-focused,” including areas that involve violations of the Bank Secrecy Act, and in particular, offenses that implicate sanctions. As laid out in the Enforcement Plan, “exploitation of our financial system” can “enable underlying criminal conduct,” and “[f]inancial institutions, shadow bankers, and other intermediaries aid U.S. adversaries by processing transactions that evade sanctions.” The Enforcement Plan further identifies as priorities:

“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;”
“Complex money laundering, including Chinese Money Laundering Organizations, and other organizations involved in laundering funds used in the manufacturing of illegal drugs;” and
With reference to the Digital Assets DAG Memorandum discussed below, “willful [registration and compliance] violations that facilitate significant criminal activity.”

The Enforcement Plan also directs the Criminal Division, which includes MLARS, the Main Justice component which prosecutes and oversees investigations of Bank Secrecy Act violations, to review existing agreements between the Criminal Division and companies to determine whether to terminate any monitorship agreements early based on factors including but not limited to 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. This directive may help align previously resolved matters with new guidance limiting the use of independent compliance monitors and revised policies on self-reporting.

Finally, the Criminal Division also expanded the Whistleblower Awards Pilot Program, which was first announced in August 2024, to cover eligible tips related to the priority areas identified in the Enforcement Plan, while maintaining the Department’s focus on violations by financial institutions or their employees for schemes involving money laundering and violations of the Bank Secrecy Act.

d. Blanche Memo De-emphasizes Crypto Prosecutions Absent Aggravating Factors

In a significant shift from the prior administration’s oft-criticized focus on bringing cases targeting the crypto industry, Deputy Attorney General Todd Blanche directed DOJ to “[e]nd[] [r]egulation [b]y [e]nforcement” in the context of digital asset cases, including with respect to enforcement of money transmission laws and Bank Secrecy Act violations.[8]

In an April 7, 2025 Memorandum (Blanche Memo), Deputy Attorney Blanche explained that “[t]he Department of Justice is not a digital assets regulator” and stated that “[t]he Justice Department will no longer pursue litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets while President Trump’s actual regulators do this work outside the punitive criminal justice framework.”[9] Contrasting against areas that DOJ will prioritize—like cases against individuals that “(a) cause financial harm to digital asset investors and consumers; and/or (b) use digital assets in furtherance of other criminal conduct”—the Blanche Memo directs the Department not to pursue “regulatory violations in cases involving digital assets—including but not limited to unlicensed money transmitting under 18 U.S.C. §1960(b)(1)(A) and (B) [or] violations of the Bank Secrecy Act, [or other registration-related charges]—unless there is evidence that the defendant knew of the licensing or registration requirement at issue and violated such a requirement willfully.” The Blanche Memo explains that “matters premised on regulatory violations resulting from diffuse decisions made at lower levels of digital asset companies often fail to advance the priorities of the Department.”

In the first applications of the Blanche Memo, DOJ has dismissed some money transmitting charges brought pursuant to the purely registration violations of 18 U.S.C. § 1960(b)(1)(A) and (B). However, DOJ has continued prosecutions against the same defendants on theories that the digital asset companies they ran violated the third prong of the money transmitting statute, that prohibits businesses that “otherwise involve[] the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity.” 18 U.S.C. § 1960(b)(1)(C). It remains to be seen how much of an effect the Blanche Memo will have on actual criminal prosecutions brought by DOJ.[10]

e. Relevant Regulatory Actions

The Trump Treasury Department has issued three important regulatory actions related to anti-money laundering.

First, FinCEN and Treasury provided some finality to the obligations of businesses under the Corporate Transparency Act (CTA). That law was enacted in 2021, and was designed to require certain corporations and other entities to file a beneficial ownership interest report with FinCEN identifying, among other information, the natural persons who are beneficial owners of the entity.[11] In September 2022, FinCEN issued a rule implementing the CTA.[12]

After President Trump’s inauguration and years of litigation, culminating in appeals to the Fifth Circuit and Supreme Court, in March 2025, the Department of the Treasury announced[13] and then FinCEN issued an interim final rule, that removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information to FinCEN under the CTA.[14] This Interim Final Rule means that only certain companies, namely those formed under the law of a foreign country and registered to do business in the United States, must file beneficial ownership information with FinCEN, and even then must only disclose information regarding their non-U.S. beneficial owners. FinCEN is also soliciting comments from the public on a permanent rule that the agency intends to adopt later this year.[15]

Second, on March 11, 2025, FinCEN issued a Geographic Targeting Order (GTO) “to further combat the illicit activities and money laundering of Mexico-based cartels and other criminal actors along the southwest border of the United States.”[16] Pursuant to the GTO and the associated Frequently Asked Questions guidance published by FinCEN, all money services businesses located in 30 zip codes must file Currency Transaction Reports (CTRs)—complete with details regarding the identity of the person presenting the transaction—with FinCEN for cash transactions totaling at least $200, effectively reducing the $10,000 threshold that typically applies.[17]

Within a few weeks of the GTO, two separate lawsuits were filed challenging its constitutionality. As of this writing, a judge in the Western District of Texas issued a preliminary injunction barring enforcement of the GTO against the plaintiffs named in the suit before him;[18] and a judge in the Southern District of California issued a preliminary injunction barring enforcement as to all money services businesses located in the Southern District of California.[19] The cases remain pending in the district courts as the judges decide whether to enter permanent injunctions; the preliminary injunctions are currently on appeal, respectively, to the Fifth and Ninth Circuit Courts of Appeal.[20]

Third, FinCEN, the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA), issued a coordinated order that was later also adopted by the Federal Reserve permitting banks to collect Tax Identification Number (TIN) information from a third party rather than from the bank’s customer.[21] This order, issued in response to an interagency request for information, grants an exemption from the Customer Identification Program (CIP) rules[22] applicable to banks.[23] While by its terms, the CIP rules require banks to obtain TIN from their customers before allowing the customers to open accounts, the order allows banks to use an alternative collection method. FinCEN and the banking agencies issued this order after stating that they “recognize that the way customers interact with banks and receive financial services has changed significantly since 2001,” and that the new order “reduces burden by providing banks with greater flexibility in determining how to fulfill their existing regulatory obligations without presenting a heightened risk of money laundering, terrorist financing, or other illicit finance activity.”

Fourth, as we have previously reported, on July 21, 2025, FinCEN announced that it intends to postpone the effective date for the final IA AML Rule establishing AML/CFT program and SAR filing requirements for SEC-registered investment advisers and exempt reporting advisers.[24] The effective date will be delayed from January 1, 2026 to January 1, 2028 to allow for a broader review of the rule’s scope and substance to ensure it is efficient and appropriately tailored. During the postponement period, FinCEN plans to revisit the substance of the IA AML Rule through a future rulemaking process. In addition, FinCEN, in coordination with the SEC, intends to reconsider the joint proposed rule regarding customer identification program requirements for investment advisers.

3. Enforcement Actions

a. End of the Biden Administration

At the end of the Biden Administration, the outgoing SEC resolved a series of actions involving alleged anti-money laundering violations.

i. Broker-Dealer Action

On January 13, 2025, the SEC settled charges with two affiliated broker-dealers relating to a variety of alleged compliance violations.[25] According to the SEC, the alleged deficiencies were remediated in or around June 2022 after the brokers “hired managers and other AML personnel with specialized experience in investigating such activity,” “updated their procedures, implemented additional training and guidance for personnel, implemented a new system for tracking and managing investigations, and implemented a new transaction surveillance system.”[26] One entity agreed to pay a $33.5 million penalty and the other agreed to pay an $11.5 million penalty.[27]

ii. Broker-Dealer and Investment Adviser

On January 17, 2025, the SEC sued and settled with a broker-dealer and investment adviser, alleging that from May 2019 through December 2023, the company experienced failures in its customer identification program, including a failure to timely close accounts for which it had not properly verified the customer’s identity.[28] The company also allegedly failed to close or restrict thousands of high-risk accounts, such as cannabis-related and foreign accounts, that were prohibited under the company’s AML policies.[29] According to the SEC, after the SEC contacted the company regarding its investigation, the company retained a third-party compliance consultant to conduct a review and assessment of the company’s CIP and customer due diligence program, and it has taken steps to address the consultant’s recommendations. The company has new personnel in key legal and compliance roles and has increased resources for compliance. The company also agreed to undertake additional remedial steps, and to pay an $18 million fine.[30]

iii. Investment Adviser

On January 14, 2025, the SEC sued and settled with an investment adviser, alleging that the company made misrepresentations with respect to its AML procedures and had compliance failures.[31] Specifically, the SEC alleged that between October 2018 and January 2022, the company made statements in various documents addressed to private fund investors that the firm was compliant with AML due diligence laws even though the company allegedly “did not, in fact, always conduct the AML due diligence as described.”[32] As part of its settlement, the company agreed to pay a $150,000 civil penalty.[33]

b. Beginning of the Trump Administration

In the first months of the Trump Administration, FinCEN and DOJ have both announced public enforcement actions and resolutions related to the BSA and AML. Some of the most notable actions are discussed below.

i. Seychelles-Based Crypto Exchange

On January 27, 2025, a Seychelles-based cryptocurrency exchange pled guilty to one count of operating an unlicensed money transmitting business.[34] In March 2024, the exchange, along with two of its founders, had been charged with violations of the BSA and operation of an unlicensed money transmitting business.[35] According to that initial Indictment, the exchange had allegedly operated as a money transmitting business by operating in the United States without registering as an MSB with FinCEN or implementing an adequate AML program.[36]

As part of its plea agreement, the exchange agreed to criminally forfeit $184.5 million and pay a criminal fine of approximately $112.9 million. The exchange also agreed to exit the U.S. market for at least the next two years, and the charged founders reached deferred prosecution agreements whereby they agreed to no longer have any role in the exchange’s management or operations.

ii. Seychelles-Based Crypto Exchange

On February 24, 2025, a different Seychelles-based cryptocurrency exchange pled guilty to one count of operating an unlicensed money transmitting business.[37] According to DOJ, the exchange allegedly operated as an unlicensed money transmitting business in the United States, without registering with FinCEN or implementing an adequate AML program. In total, the company agreed to pay monetary penalties totaling more than $504 million.

iii. Armored Car Company

On February 6, 2025, the U.S. Attorney’s Office for the Southern District of California announced an NPA,[38] and FinCEN announced a consent order, with an armored car service company.[39] The company allegedly failed to register with FinCEN as a money services business or implement an effective AML program. The company agreed to pay approximately $42 million in penalties, and agreed to an AML program review.

iv. FinCEN 311 Action Against Cambodia Financial Services Conglomerate

On May 1, 2025, FinCEN issued a proposed rule that identified Huione Group—a Cambodia-based financial institution—as a “primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act”[40] According to FinCEN, Huione Group has been critical for laundering proceeds of cyber heists by the Democratic People’s Republic of Korea and for convertible virtual currency scams conducted by transnational criminal organizations in Southeast Asia.[41] The rule effectively prohibits U.S. financial institutions from engaging in financial transactions with Huione Group.[42]

v. Application of Statute to Target Illicit Opioid Trafficking

On June 25, 2025, FinCEN issued three orders that identified Mexico-based financial institutions—CIBanco S.A., Institution de Banca Multiple (CIBanco), Intercam Banco S.A., Institución de Banca Multiple (Intercam), and Vector Casa de Bolsa, S.A. de C.V. (Vector)—as “primary money laundering concern[s] in connection with illicit opioid trafficking.”[43] The orders effectively prohibit U.S. financial institutions from engaging in financial transactions with the three entities. According to FinCEN, the entities have “collectively played a longstanding and vital role in laundering millions of dollars on behalf of Mexico-based cartels” and have facilitated payments to China-based companies for the “procurement of precursor chemicals needed to produce fentanyl.”[44] These orders are notable as they are the first orders issued by FinCEN pursuant to the Fentanyl Sanctions Act and the FEND Off Fentanyl Act. FinCEN stated that this action reflects an unprecedented commitment by FinCEN to “us[e] all tools at [its] disposal” to target financial institutions that may aid “criminal and terrorist organizations trafficking fentanyl and other narcotics.”[45]

4. State Regulators

When President Trump was elected, there was much speculation that certain state regulators would become more aggressive, in light of the anticipated deregulatory federal environment. So far, that appears to have been borne out, as state regulators have been active in bringing actions under the BSA.

a. Casino

On May 15, 2025, the Nevada Gaming Control Board (NGCB) imposed a $5.5 million fine on a casino for “activities related to unregistered money transmitting businesses, facilitating international monetary transactions, [and] allowing proxy betting and other prohibited monetary transactions.”[46] According to NGCB, former employees of the casino allegedly “allowed international patrons to obtain and/or transfer money improperly for the purposes of wagering, and also allowed wagers to be placed for other patrons at” the casino.[47] As part of its settlement, the casino agreed to improve its AML program and provide employee training in AML requirements.[48]

b. Licensed Money Transmitter

On July 9, 2025, DFS and state regulators from Massachusetts, Texas, California, Minnesota, and Nebraska entered into a consent order with a licensed money transmitter related to alleged inadequacies in the company’s BSA/AML/CFT program. The company agreed to pay a $4.2 million penalty and take a number of corrective actions to remediate alleged deficiencies in its AML/CFT Program, including conducting a lookback for previously closed accounts, enhancing its reporting procedures for suspicious activity, strengthening its due diligence procedures for AML/CFT risk, and improving its systems for data integrity regarding customer accounts.[49]

Conclusion

The first half of 2025 was notable as the new Administration refined its enforcement priorities and the effects of those changes began to take root. We anticipate that the remainder of 2025 will be similarly active, as the Trump Administration relies on AML enforcement as a way to advance its own policy priorities involving national security and TCO offenses. We will continue to monitor these developments and report accordingly on steps individuals and entities should take to navigate the ever-changing regulatory regime.

[1] Press Release, Dep’t of Treasury, Deputy Secretary Faulkender Lays Out Guiding Principles for Bank Secrecy Act Modernization (June 18, 2025), https://home.treasury.gov/news/press-releases/sb0173. The Treasury Department designates Faulkender as acting essentially as a Chief Operating Officer for the Department. See Michael Faulkender, https://home.treasury.gov/about/general-information/officials/michael-faulkender. Faulkender is thus responsible for overseeing the formulation and implementation of policies and programs at Treasury, including those pertaining to the Bank Secrecy Act.

[2] Press Release, Dep’t of Treasury, Deputy Secretary Faulkender Lays Out Guiding Principles for Bank Secrecy Act Modernization (June 18, 2025), https://home.treasury.gov/news/press-releases/sb0173.

[3] Press Release, Dep’t of Treasury, John Hurley Confirmed by the United States Senate (July 23, 2025), https://home.treasury.gov/news/press-releases/sb0204. Hurley is a former hedge fund manager, who served on President Trump’s first-term Intelligence Advisory Board.

[4] Executive Order, Fighting Overcriminalization in Federal Regulations (May 9, 2025), https://www.whitehouse.gov/presidential-actions/2025/05/fighting-overcriminalization-in-federal-regulations/. For further insight and analysis, please see our client alert. Gibson Dunn: New Executive Order Seeks to Combat “Overcriminalization in Federal Regulations” (May 16, 2025).

[5] 31 U.S.C. § 5322.

[6] Total Elimination of Cartels and Transnational Criminal Organizations (Feb. 5, 2025), https://www.justice.gov/ag/media/1388546/dl?inline.

[7] General Policy Regarding Charging, Plea Negotiations, and Sentencing (Feb. 5, 2025), https://www.justice.gov/ag/media/1388541/dl?inline.

[8] Ending Regulation by Prosecution (Apr. 7, 2025), https://www.justice.gov/dag/media/1395781/dl?inline.

[9] Id.

[10] Gibson Dunn attorneys provided more thoughts on this topic in a Law 360 Article analyzing the Blanche Memo.

[11] See William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L. 116-283, Division F; 31 U.S.C. § 5336.

[12] FinCEN, Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59498.

[13] Press Release, Dep’t of Treasury, Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies, https://home.treasury.gov/news/press-releases/sb0038.

[14] Beneficial Ownership Information Reporting Requirement Revision and Deadline Extension, 90 Fed. Reg. 13688.

[15] For the history of the litigation and Gibson Dunn’s prior client alerts, please see Gibson Dunn’s Corporate Transparency Act Resource Center: Insights and Updates.

[16] Press Release, FinCEN, FinCEN Issues Southwest Border Geographic Targeting Order (Mar. 11, 2025), https://www.fincen.gov/news/news-releases/fincen-issues-southwest-border-geographic-targeting-order.

[17] Id.; see also Updated Geographic Targeting Order Involving Certain Money Services.

Businesses in California and Texas on the Southwest Border, Frequently Asked Questions (Apr. 16, 2025), https://www.fincen.gov/sites/default/files/shared/SWB-MSB-GTO-Order-FINAL508.pdf.

[18] Texas Ass’n of Money Servs. Businesses v. Bondi, No. CV SA-25-CA-00344-FB, 2025 WL 1540621, 13–16 (W.D. Tex. May 19, 2025).

[19] Novedades y Servicios, Inc. v. FinCEN, No. 25-CV-886 JLS (DDL), 2025 WL 1501936, at *8–10, 22 (S.D. Cal. May 21, 2025).

[20] Texas Ass’n of Money Servs. Businesses v. Bondi, No. 25-50481 (5th Cir.); Novedades y Servicios, Inc. v. FinCEN, No. 25-4238 (9th Cir.).

[21] Press Release, FinCEN, FinCEN Permits Banks to Use Alternative Collection Method for Obtaining TIN Information (June 27, 2025), https://www.fincen.gov/news/news-releases/fincen-permits-banks-use-alternative-collection-method-obtaining-tin-information; Press Release, Federal Reserve Board of Governors, Federal Reserve Board joins other federal financial institution regulatory agencies in providing banks the flexibility to use an alternative method for collecting certain customer identification information (July 31, 2025), https://www.federalreserve.gov/newsevents/pressreleases/bcreg20250731a.htm.

[22] 31 C.F.R. § 1020.220; 12 C.F.R. § 21.21(c)(2); 12 C.F.R. § 326.8(b)(2); and 12 C.F.R. § 748.2(b)(2).

[23] A “bank” is defined in the BSA and its associated regulations as including each agent, agency, branch, or office within the United States of banks, savings associations, credit unions, and foreign banks. 31 C.F.R. § 1010.100(d). The exemption applies only to those banks subject to the jurisdiction of the OCC, FDIC, and NCUA.

[24] Press Release, U.S. Dep’t of the Treasury, Treasury Announces Postponement and Reopening of Investment Adviser Rule (July 21, 2025), https://home.treasury.gov/news/press-releases/sb0201; Press Release, FinCEN, Treasury Announces Postponement and Reopening of Investment Adviser Rule (July 21, 2025), https://www.fincen.gov/news/news-releases/treasury-announces-postponement-and-reopening-investment-adviser-rule.

[25] SEC Order Instituting Administrative and Cease and Desist Proceedings at ¶ 5 (Jan. 13, 2025), available at https://www.sec.gov/files/litigation/admin/2025/34-102170.pdf.

[26] Id. at ¶¶ 64–66.

[27] Press Release, Securities and Exchange Commission (Jan. 13, 2025), https://www.sec.gov/newsroom/press-releases/2025-5.

[28] Press Release, Securities and Exchange Commission (Jan. 17, 2025), https://www.sec.gov/newsroom/press-releases/2025-17.

[29] Id.

[30] Id.

[31] Press Release, Securities and Exchange Commission (Jan. 14, 2025), https://www.sec.gov/newsroom/press-releases/2025-8.

[32] Id.

[33] Id.

[34] Press Release, Dep’t of Justice (Jan. 27, 2025), https://www.justice.gov/usao-sdny/pr/kucoin-pleads-guilty-unlicensed-money-transmission-charge-and-agrees-pay-penalties; United States v. Peken Global Limited et al., 24 Cr. 168 (S.D.N.Y.), Dkt. No. 19 (Consent Preliminary Order of Forfeiture/Money Judgment).

[35] United States v. Peken Global Limited et al., 24 Cr. 168 (S.D.N.Y.), Dkt. No. 1 (Sealed Indictment).

[36] Id.

[37] Press Release, Dep’t of Justice (Feb. 24, 2025), https://www.justice.gov/usao-sdny/pr/okx-pleads-guilty-violating-us-anti-money-laundering-laws-and-agrees-pay-penalties.

[38] Press Release, Dep’t of Justice (Feb. 6, 2025), https://www.justice.gov/usao-sdca/pr/brinks-forfeits-50-million-failing-register-money-transmitting-business; https://www.justice.gov/usao-sdca/media/1388711/dl?inline.

[39] Press Release, U.S. Dep’t of the Treasury (Feb. 26, 2025), https://www.fincen.gov/news/news-releases/fincen-announces-37000000-civil-money-penalty-against-brinks-global-services-usa.

[40] Press Release, U.S. Dep’t of the Treasury, FinCEN, FinCEN Finds Cambodia-Based Huione Group to be of Primary Money Laundering Concern, Proposes a Rule to Combat Cyber Scams and Heists (May 1, 2025), https://www.fincen.gov/news/news-releases/fincen-finds-cambodia-based-huione-group-be-primary-money-laundering-concern.

[41] Id.

[42] Id.

[43] Press Release, U.S. Dep’t of the Treasury, FinCEN, Treasury Issues Historic Orders under Powerful New Authority to Counter Fentanyl (Jun. 25, 2025), https://home.treasury.gov/news/press-releases/sb0179.

[44] Id.

[45] Id. To see more about these orders, please review the Gibson Dunn client alert.

[46] Press Release, Nevada Gaming Control Board (May 15, 2025), https://gaming.nv.gov/uploadedFiles/gamingnvgov/content/Home/Features/News%20Release%20-%20NGCB-Wynn%20LV%20(15May2025).pdf.

[47] Id.

[48] Id.

[49] Press Release (July 9, 2025), https://www.dfs.ny.gov/reports_and_publications/press_releases/pr20250709; https://www.dfs.ny.gov/system/files/documents/2025/07/ea20250709-co-mse-wise-us-inc.pdf (Consent Order).

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

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

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

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

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

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

International Trade:
Ronald Kirk – Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Adam M. Smith – Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)

From the Derivatives Practice Group: This week, the President’s Working Group on Digital Asset Markets released a multi-agency report on recommendations to strengthen American leadership in digital financial technology.

New Developments

New Developments Outside the U.S.

ESAs Publish Guide on DORA Oversight Activities. On July 15, the European Supervisory Authorities (“ESAs”) published a guide on oversight activities under the Digital Operational Resilience Act (“DORA”). The aim of this guide is to provide an overview of the processes used by the ESAs through the Joint Examination Teams to oversee critical Information and communication technology third party service providers (“CTPPs”). This guide provides high-level explanations to external stakeholders regarding the CTPP Oversight framework. Furthermore, it provides an overview of the governance structure, the oversight processes, the founding principles and the tools available to the overseers.

New Industry-Led Developments

ISDA Launches Notices Hub and Protocol to Streamline Delivery and Receipt of Critical Notices. On July 17, ISDA launched the ISDA Notices Hub and the ISDA 2025 Notices Hub Protocol, giving users a faster and more efficient method for delivering critical notices and reducing the uncertainty and risk of losses that can result from delays. The ISDA Notices Hub is a secure online platform provided by S&P Global Market Intelligence that enables fast delivery and receipt of termination notices and waivers and ensures address details for physical delivery are updated centrally.

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)

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

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

Gibson Dunn is pleased to announce its DOJ Data Security Program Task Force—a cross-disciplinary team designed to help clients understand and comply with the U.S. Department of Justice’s (DOJ) new regulatory framework: the Data Security Program (DSP). Under rules issued by the DOJ’s National Security Division (NSD), this framework restricts access to bulk U.S. sensitive personal data and U.S. government-related data and affects a broad range of U.S. businesses—particularly those that collect, process, transfer, or grant access to such data through relationships with foreign vendors, investors, partners, or service providers.

The Task Force brings together seasoned lawyers from Gibson Dunn’s market-leading National Security, White Collar Defense and Investigations, Cybersecurity, International Trade, and Corporate Governance Practice Groups. This integrated team offers clients comprehensive, practical counsel on how to identify, assess, and manage potential legal obligations and compliance risks under the DSP.

“As the federal government sharpens its focus on the protection of sensitive personal and government data, companies must be prepared to meet new and evolving compliance obligations,” said Vivek Mohan, a Task Force member who Co-Chairs the Artificial Intelligence Practice Group and is a member of the Privacy, Cybersecurity, and Data Innovation Practice Group. “At its core, the DSP reflects a new paradigm for regulating access to data under U.S. law—subjecting globally integrated companies to U.S. national security scrutiny and exposing businesses to potential civil or criminal penalties if risks are not properly assessed and managed. Our Task Force is uniquely positioned to provide strategic, actionable guidance that addresses these challenges while aligning with overlapping obligations under domestic and international privacy, security, and trade frameworks.”

Stephenie Gosnell Handler, a Task Force member and Partner in the International Trade and Privacy, Cybersecurity, and Data Innovation Practice Groups, added: “The DOJ’s new Sensitive Data Regulations create a complex, high-stakes compliance environment for businesses that handle large volumes of personal data or work with the U.S. government. These rules are a regulatory chimera—adapting concepts from export controls, CFIUS, sanctions, cybersecurity, and data protection laws in a manner intended to achieve national security objectives and carrying significant enforcement implications. Our Data Security Program Task Force is designed to help clients cut through that complexity. We bring together regulatory depth, investigative insight, and real-world experience to help companies build durable, defensible compliance strategies that align with DOJ expectations and global data regimes.”

Gibson Dunn’s Data Security Program Task Force includes former senior government officials, former in-house legal department leaders, and experienced white collar defense counsel. The team is equipped to advise on:

Assessing exposure to DOJ data security regulations;
Implementing compliance frameworks and policies aligned with DOJ expectations;
Managing competing obligations under U.S. and international data protection regimes;
Advising senior leadership on their oversight and management responsibilities;
Responding to DOJ inquiries and enforcement actions; and
Demonstrating proactive compliance posture to regulators and stakeholders.

DOJ DATA SECURITY PROGRAM TASK FORCE:

The Task Force underscores Gibson Dunn’s ongoing commitment to helping clients navigate complex legal environments with forward-thinking, multidisciplinary solutions. For more information, please visit DOJ Data Security Program Task Force, or feel free to contact any member of the team:

David P. Burns – Washington, D.C.
(+1 202.887.3786, dburns@gibsondunn.com):
David is a litigation partner and co-chair of the firm’s National Security Practice Group, and a member of the White Collar and Investigations and Crisis Management practice groups. His practice focuses on white-collar criminal defense, internal investigations, national security, and regulatory enforcement matters. David represents corporations and executives in federal, state, and regulatory investigations involving securities and commodities fraud, sanctions and export controls, theft of trade secrets and economic espionage, the Foreign Agents Registration Act, accounting fraud, the Foreign Corrupt Practices Act, international and domestic cartel enforcement, health care fraud, government contracting fraud, and the False Claims Act.

Mellissa Campbell Duru – Washington, D.C.
(+1 202.955.8204, mduru@gibsondunn.com):
Mellissa is a corporate partner and a member of the firm’s Securities Regulation and Corporate Governance Practice Group. Prior to joining Gibson Dunn, Mellissa served as Deputy Director of the Division of Corporation Finance’s Legal Regulatory Policy group at the U.S. Securities and Exchange Commission (SEC). As Deputy Director, Mellissa oversaw transactional filings, rules, interpretative guidance, and exemptive and no-action relief requests within the Division of Corporation Finance’s Office of Mergers & Acquisitions, Office of International Corporation Finance, Office of Small Business Policy, Office of Rulemaking, and Office of Structured Finance.

Melissa Farrar – Washington, D.C.
(+1 202.887.3579, mfarrar@gibsondunn.com):
Melissa is a partner and member of the firm’s White Collar Defense and Investigations Practice Group. Melissa represents and advises multinational corporations in internal and government investigations on a wide range of topics, including the U.S. Foreign Corrupt Practices Act, the False Claims Act, anti-money laundering, export controls compliance, and accounting and securities fraud, including defending U.S. and global companies in civil and criminal investigations pursued by the DOJ and the SEC. Melissa also routinely counsels corporations on the design and implementation of their corporate ethics and compliance programs. She frequently leads corporate compliance program assessments and has experience in all areas of corporate compliance, including policy and procedure and code of conduct development, program governance and structure design, risk assessment planning and implementation, and the conduct of internal investigations, among others.

Stephenie Gosnell Handler – Washington, D.C.
(+1 202.955.8510, shandler@gibsondunn.com):
Stephenie is a partner and member of the International Trade and Privacy, Cybersecurity, and Data Innovation practices. She advises clients on complex legal, regulatory, and compliance issues relating to international trade, cybersecurity, and technology matters. Stephenie ’s legal advice is deeply informed by her operational cybersecurity and in-house legal experience at McKinsey & Company, and also by her active duty service in the U.S. Marine Corps. Stephenie returned to Gibson Dunn as a partner after serving as Director of Cybersecurity Strategy and Digital Acceleration at McKinsey & Company, where she led development of the firm’s cybersecurity strategy and advised senior leadership on public policy and geopolitical trends relating to cybersecurity, technology, and data.

Vivek Mohan – Palo Alto
(+1 650.849.5345, vmohan@gibsondunn.com):
Vivek is a partner and Co-Chair of the top-ranked Artificial Intelligence practice and a core member of the Privacy, Cybersecurity and Data Innovation practice. Vivek advises clients on legal, regulatory, compliance, and policy issues on a global scale with a focus on cutting-edge technology issues. His practice spans counseling, regulatory response, incident response, advocacy, and transactional matters, allowing him to provide clients with strategic advice whether they are developing a new product or service, responding to a regulatory inquiry, setting up a privacy program, responding to a data breach, or negotiating a complex agreement. Vivek previously worked at Apple Inc., where he was head of information security law and a leader of the company’s global privacy law & policy team and was responsible for privacy and security legal issues associated with the company’s products, services, and corporate infrastructure.

F. Joseph Warin – Washington, D.C.
(+1 202.887.3609, fwarin@gibsondunn.com):
F. Joseph Warin is chair of the 250-person Litigation Department in Washington, D.C. and co-chair of the firm’s global White Collar Defense and Investigations Practice Group. Mr. Warin’s practice includes representation of corporations in complex civil litigation, white collar crime, and regulatory and securities enforcement – including Foreign Corrupt Practices Act investigations, False Claims Act cases, special committee representations, compliance counseling and class action civil litigation. Mr. Warin has handled cases and investigations in more than 40 states and dozens of countries involving federal regulatory inquiries, criminal investigations, and cross-border inquiries by dozens of international enforcers. He is the only person ever to serve as a compliance monitor or counsel to the compliance monitor in three separate FCPA monitorships, pursuant to settlements with the SEC and DOJ.

Contributing Associates:

Christine A. Budasoff – Washington, D.C. (+1 202.955.8654, cbudasoff@gibsondunn.com)

Kyle D. Clendenon – Houston (+1 346.718.6641, kclendenon@gibsondunn.com)

Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)

Amanda Estep – Palo Alto (+1 650.849.5241, aestep@gibsondunn.com)

Sarah L. Pongrace – New York (+1 212.351.3972, spongrace@gibsondunn.com)

This update summarizes key class action-related developments from the second quarter of 2025 (April through June).

Table of Contents

Part I reviews end-of-Term developments from the U.S. Supreme Court involving Article III standing and Rule 23(b)(2) injunctive-relief classes, including another misfire in resolving a recurring circuit split over absent class member standing;
Part II explores an en banc Sixth Circuit decision authored by Chief Judge Sutton, offering insights on Rule 23’s commonality and predominance requirements; and
Part III highlights decisions across three federal courts of appeals exploring knotty issues relating to the enforcement of arbitration agreements.

I. End-of-Term Supreme Court Developments

The Supreme Court’s OT 24 ended in June—and with it came two developments that will invite further litigation in the lower courts on foundational issues.

Rule 23(b)(3) and Uninjured Members. As previewed in recent alerts, the Supreme Court granted review in Laboratory Corp. of America Holdings v. Davis to resolve an important, recurring question that has split the courts of appeals: whether a Rule 23(b)(3) damages class can be certified when some class members lack Article III standing. 145 S. Ct. 1133, 1133 (2025). But following the grant, the respondents raised jurisdictional and prudential concerns and urged the Supreme Court to dismiss review. After oral argument, the Court did so, dismissing the case as improvidently granted. 145 S. Ct. 1608, 1608 (2025) (per curiam)

Justice Kavanaugh dissented from the dismissal, attributing it to the Court’s reluctance to address a threshold mootness issue relating to initial and revised class definitions. 145 S. Ct. at 1609-10. Justice Kavanaugh also wrote that he would hold that no Rule 23(b)(3) class can be certified when it contains uninjured class members, largely on the theory that individualized issues relating to injury would necessarily predominate over common questions. Id. at 1611. No other Justices weighed in on the question the Court had previously agreed to answer.

For now, then, the split remains in place. As previously detailed, some courts of appeals have held that no class can be certified when it contains uninjured members. Others have permitted certification only when the number of uninjured class members is de minimis. Others have held that a Rule 23(b)(3) class can be certified even with more than a de minimis number of class members, provided issues of Article III injury do not predominate over common questions. And still other circuits, to date, have avoided taking a position. With the dismissal in Labcorp, these issues remain live, and class-action defendants should be careful to preserve arguments on this front both in circuits that have not yet taken a side and in those that have.

Universal-Injunction Decision Spotlights Rule 23(b)(3). Late in the Term, a divided Court held in Trump v. CASA that federal courts likely exceed their equity powers by issuing most “universal” injunctions. 145 S. Ct. 2540, 2548-49 . As the Court explained, such injunctions violate traditional limits on equitable relief insofar as they go beyond awarding “complete relief” to the parties. Id. at 2556.

One issue implicated by the Court’s decision, and debated across the splintering opinions, was the potential alternatives to universal injunctions—including Rule 23(b)(2) injunctive-relief class actions. The majority in CASA declined to address Rule 23(b)(2) classes, though it cautioned that Rule 23 comes with vital requirements that safeguard due process and fairness. Id. at 2555-56. But Justices writing separately dueled over the Rule 23(b)(2) issue. Justice Alito, concurring along with Justice Thomas, warned that Rule 23’s requirements ought not be diluted to facilitate more sweeping relief. Id. at 2566. Justice Kavanaugh struck a similar chord in a separate concurrence. Id. at 2567. Conversely, Justice Sotomayor, dissenting along with Justices Kagan and Jackson, highlighted Rule 23(b)(2) as an “important” if “cumbersome” tool, particularly for challenging government conduct.

CASA leaves Rule 23(b)(2) as an open battleground and, in the coming years, lawsuits that challenge government policies or otherwise seek nationwide relief may generate further circuit splits and precedent affecting nongovernment class actions.

II. Sixth Circuit Issues Landmark En Banc Opinion

Authored by Chief Judge Sutton, the Sixth Circuit’s en banc opinion in Speerly v. GM, LLC provides a robust analysis of Rule 23’s commonality and predominance requirements that will be useful to defendants litigating product-defect and other class actions.

Commonality. The Sixth Circuit emphasized that Rule 23(a)’s commonality requirement may not be satisfied even when the factual variation among the class (there, differing consumer experiences with defective vehicle transmissions) is modest. Such variations may unstick the “glue” that Rule 23 requires. 2025 WL 1775640, at *5-7 (6th Cir. 2025). The court distinguished between common questions and common answers, cautioning that while all plaintiffs may advance the same “defect” theory, that alone does not resolve whether each was actually injured or misled in the same way. Id. at *7-8. The court’s analysis of commonality—an independent requirement that is often overlooked or lumped together with predominance—could prove useful in future cases to support arguments about whether a proposed common question could yield an answer that actually resolves a material element (e.g., injury, causation, or reliance) of the claims of all class members.

Predominance. The Sixth Circuit also emphasized that predominance, with its “all-questions-considered” inquiry being far more demanding than commonality’s “one-question” inquiry, requires a comparative evaluation: courts must look beyond the existence of common issues and assess, with an eye toward a potential classwide trial, whether those common issues outweigh individual ones. Id. at *7-9. In rejecting a sweeping class for lack of predominance, the court underscored the “high costs to a legal system that asks one district court to understand and apply nearly 60 causes of action across 26 states,” the similar difficulties that arise with litigating a class action involving multiple “theories of defect,” and the high costs that often accompany class certification. Id. at *8-9. Nationwide or multistate classes raising state law claims raise particularly serious concerns, given that even “slight variations” in state law often will eliminate any efficiencies to be gained in a class action. Id.

III. Courts of Appeals Provide Clarity on Enforcement of Arbitration Agreements

Three courts of appeals issued decisions addressing arbitration, an important issue that is often intertwined with class actions. Some high-level takeaways:

Avoid relying on arbitration clauses in other companies’ contracts. In Morales-Posada v. Culture Care, Inc., 141 F.4th 301 (1st Cir. 2025), the First Circuit affirmed the denial of a motion to compel arbitration based on an agreement to arbitrate between the plaintiffs and a third-party company. Id. at 305.

Culture Care argued it was a third-party beneficiary to the contract and so could compel arbitration. But the court of appeals held that Culture Care did not meet its burden of showing with “special clarity” that the plaintiffs and the third-party company had intended to confer arbitration rights on Culture Care. Id. at 313-14. The court also refused to apply equitable estoppel, reasoning that the plaintiffs were not relying on the terms of the contract containing the arbitration agreement and so could not be required to arbitrate under that contract. Id. at 319–20.

Morales-Posada provides an important caution: third- and non-party theories of enforcement of arbitration agreements often are viable, but their viability depends on the specific circumstances and the showing made by the party urging enforcement.

Use caution with online arbitration agreements. A panel in the Ninth Circuit recently analyzed the frequently recurring issue of assent with respect to online contracts in Godun v. JustAnswer LLC, 135 F.4th 699 (9th Cir. 2025).

JustAnswer moved to compel arbitration of users’ claims based on the arbitration agreement in its terms of service, but the Ninth Circuit affirmed the district court’s ruling that no agreement to arbitrate had been formed. Id. at 715. The court of appeals held that, as to some users, there was insufficient “reasonably conspicuous notice” of the terms because the notice was in small text, “blended into the background,” and was not “directly above or below” the action button. Id. at 711-12. And for other users, the court held that clicking an “I Agree” button did not reveal “unambiguous assent” to the terms and to the arbitration agreement they contained. Id. at 712-13.

Godun shows the dramatic difference that the phrasing, placement, and prominence of terms can make in a court’s analysis of whether an online agreement to arbitrate is valid.

In a concurrence, Judge Nelson critiqued the majority for “com[ing] very close” to requiring “magic words” to find assent in online contracts, a departure from traditional contract law. Id. at 715. Judge Nelson lauded the Second Circuit’s approach, which looks to both the text and other evidence in context to determine assent. Id. at 716-17.

The panel in Godun reached a different conclusion from other decisions in the Ninth Circuit. For example, last year the Ninth Circuit emphasized that “mutual assent is based on ‘the reasonable meaning’ of the parties’ words” and that “‘[r]easonable meaning’ considers ‘the context or the surrounding circumstances and the conduct of the parties.’” Keebaugh v. Warner Bros. Ent. Inc., 100 F.4th 1005, 1021 & n.6 (9th Cir. 2024). The majority in Godun cited Keebaugh, see 135 F.4th at 711, but did not engage with that aspect of Keebaugh’s analysis in the opinion.

Beware of waiving rights to compel arbitration. Finally, in Merritt Island Woodwerx, LLC v. Space Coast Credit Union, 137 F.4th 1268 (11th Cir. 2025), the Eleventh Circuit upheld the district court’s ruling that Space Coast had waived its right to arbitration. Id. at 1276.

The parties’ agreement selected AAA as the administrator but provided that “[i]f [the] AAA is unavailable to resolve the Claims, and if you and we do not agree on a substitute forum, then you can select the forum for the resolution of the Claims.” Id. at 1271. When one of the plaintiffs demanded arbitration, AAA declined to administer the dispute due to Space Coast’s failure to submit the required dispute resolution plan and fee. The Eleventh Circuit affirmed the district court’s ruling that South Coast “failed to perform its contractual obligations under the arbitration agreement” and thus waived its right to arbitrate. Id. at 1271-72. The court of appeals was unimpressed with South Coast’s submitting the agreement and fee to AAA two days after the plaintiffs sued in the district court, holding that “post-filing conduct cannot cure the prior noncompliance” because “[a]ny rule to the contrary would result in gamesmanship by companies attempting to remedy an arbitration roadblock that they knowingly caused.” Id. at 1276.

Merritt Island sounds an important cautionary note: even where an arbitration agreement is validly formed and fully enforceable, a party can lose the right to demand arbitration by failing to comply with arbitral procedures.

The following Gibson Dunn lawyers contributed to this update: Soumya Bhat Kandukuri, Psi Simon, Jeremy Weese, Matt Aidan Getz, Wesley Sze, Lauren Blas, Bradley Hamburger, Kahn Scolnick, and Christopher Chorba.

Gibson Dunn attorneys 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, Litigation, or Appellate and Constitutional Law practice groups, or any of the following lawyers:

Theodore J. Boutrous, Jr. – Los Angeles (+1 213.229.7000, tboutrous@gibsondunn.com)

Christopher Chorba – Co-Chair, Class Actions Practice Group, Los Angeles
(+1 213.229.7396, cchorba@gibsondunn.com)

Theane Evangelis – Co-Chair, Litigation Practice Group, Los Angeles
(+1 213.229.7726, tevangelis@gibsondunn.com)

Lauren R. Goldman – Co-Chair, Technology Litigation Practice Group, New York
(+1 212.351.2375, lgoldman@gibsondunn.com)

Kahn A. Scolnick – Co-Chair, Class Actions Practice Group, Los Angeles
(+1 213.229.7656, kscolnick@gibsondunn.com)

Bradley J. Hamburger – Los Angeles (+1 213.229.7658, bhamburger@gibsondunn.com)

Michael Holecek – Los Angeles (+1 213.229.7018, mholecek@gibsondunn.com)

Lauren M. Blas – Los Angeles (+1 213.229.7503, lblas@gibsondunn.com)

Wesley Sze – Palo Alto (+1 650.849.5347, wsze@gibsondunn.com)

We are pleased to provide you with the July 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

As previewed in Vice Chair for Supervision Bowman’s first remarks as Vice Chair for Supervision, the Board of Governors of the Federal Reserve System (Federal Reserve) issued a proposal to revise its Large Financial Institution (LFI) rating system for large bank holding companies and its rating system for supervised insurance organizations (SIOs), specifically to address the “well managed” status of those firms under the frameworks. Comments on the proposal are due by August 14, 2025.

The Federal Reserve held its Integrated Review of the Capital Framework for Large Banks Conference. In his opening remarks, Federal Reserve Board Chair Powell echoed a theme from throughout the conference: the need to “ensure that all the different pieces of the capital framework work together effectively” and all elements of the capital framework are considered “in concert, rather than … in isolation.”
The GENIUS Act was signed into law. See our Client Alert on the GENIUS Act here and webcast here.
The White House released the report of the President’s Working Group on Digital Asset Markets outlining recommendations for how cryptocurrency should be regulated, including language around banking, a crypto stockpile, stablecoins, taxes and illicit finance.
As signaled by Acting Chairman Travis Hill in April, the Federal Deposit Insurance Corporation (FDIC) issued a request for information (RFI) on how the agency reviews filings submitted by industrial banks. Comments on the RFI are due by September 19, 2025. Separately, the FDIC withdrew an August 2024 proposed rule that would have made the parent company of an industrial bank subject to Part 354 of the FDIC’s regulations.
Also as signaled by Acting Chairman Travis Hill in April, the FDIC issued a proposed rule to adjust and index certain regulatory thresholds, including thresholds that would raise the applicability of the Part 363 audit committee requirements for insured depository institutions.
The federal banking agencies published interagency guidance on risk management considerations related to crypto-asset safekeeping—i.e., the service of holding an asset on a customer’s behalf.
As signaled by the federal banking agencies in March, the Federal Reserve, Office of the Comptroller of the Currency (OCC) and FDIC issued a joint notice of proposed rulemaking to amend their Community Reinvestment Act (CRA) regulations by rescinding the CRA regulations issued in October 2023 and replacing the October 2023 CRA final rule with the 1995 CRA regulations. Comments on the proposal are due by August 18, 2025.
Jonathan Gould was sworn in as Comptroller of the Currency.

DEEPER DIVES

Federal Reserve Proposes Revisions to Supervisory Rating Framework for Large Bank Holding Companies and Supervised Insurance Organizations. On July 10, 2025, the Federal Reserve issued a proposal to revise its LFI rating system for large bank holding companies and its rating system for SIOs specifically to address the “well managed” status of those firms. Under the proposal, a firm with at least two Broadly Meets Expectations or Conditionally Meets Expectations component ratings and no more than one Deficient-1 component rating would be considered “well managed” under the LFI framework. A firm would not be considered “well managed” under the LFI framework if it receives a Deficient-1 for two or more component ratings or it receives a Deficient-2 for any of the component ratings.

The proposal also would eliminate the presumption that firms with one or more Deficient-1 component ratings will be subject to an informal or formal enforcement action and, instead, firms with one or more Deficient-1 component ratings may be subject to a formal or informal enforcement action, depending on particular facts and circumstances. The proposal would make parallel changes to the SIO ratings framework. The proposal was approved by a 5-1 vote, with Governor Barr voting against and Governor Kugler abstaining. Comments on the proposal are due by August 14, 2025.

Insights. As Vice Chair for Supervision Bowman has consistently advocated, the proposal would aim to align an institution’s “well managed” status more closely with its financial and operational strength by, according to a statement from Vice Chair for Supervision Bowman, “addressing this mismatch between ratings and overall firm condition” and “adopt[ing] a pragmatic approach to determining whether a firm is well managed.” In her statement, Vice Chair for Supervision Bowman also noted that “the Board will continue to evaluate whether additional changes to our ratings systems are warranted. These could include adding a composite rating for the LFI framework and revisiting the weighting of the management and risk management components respectively under the CAMELS and RFI frameworks in determining a holding company’s or bank’s composite rating.” The proposal intends to calibrate the ratings to more accurately reflect the presence of material deficiencies in an institution’s management and control framework.

Federal Reserve Holds Integrated Review of the Capital Framework for Large Banks Conference. On July 21, 2025, the Federal Reserve convened the Integrated Review of the Capital Framework for Large Banks Conference. The conference emphasized the importance of coordination across the four key pillars of capital—Basel III, leverage ratios, GSIB surcharges, and stress testing—with input from all stakeholders.

Insights. Secretary of the Treasury Scott Bessent gave remarks at the conference. In those remarks, Bessent stated that the Treasury Department is “committed to playing an active role” in the “fundamental reset of financial regulation,” including by “conven[ing] interagency consultations to define a strategic policy direction,” encouraging regulators “to consider how proposed rules will impact growth” and centering “financial regulation on Main Street, not Wall Street.” Near the end of his remarks he included a clear message with respect to a pending capital proposal: “We need to take a closer look at regulatory capital requirements,” adding that he “looks forward” to a proposal that will “simplify and rationalize the framework” and address “known deficiencies.”

GENIUS Act Signed Into Law. On July 18, 2025, the President signed the GENIUS Act (the Act) into law. The legislation is the most significant United States law affecting the digital assets industry to date and reflects the Administration’s and Congress’ priorities of establishing a comprehensive framework for the United States’ approach to digital assets and related activities. The Act, which benefited from strong bipartisan support, was adopted on June 17, 2025 in the U.S. Senate by a vote of 68 to 30, and in the U.S. House of Representatives by a vote of 308 to 122, on July 17, 2025. See our Client Alert on the GENIUS Act here and webcast here.

Insights. There is much to come through the rulemaking process implementing key provisions of the GENIUS Act. In particular, the development of the federal certification process of state regulators and the enforcement power of federal banking agencies over state-permitted payment stablecoin issuers in unusual and exigent circumstances present novel issues on the state-level and how potential licensees measure the certainty in their permitted stablecoin issuance status at the state level.
There are also considerations on technical matters related to the role of banks in the permitted stablecoin ecosystem. The Act enables permitted payment stablecoin issuers to place funds at banks, but does not generally allow for marketing of deposit insurance. It is unclear if the marketing limitation would otherwise impede the ability of permitted payment stablecoin issuers to provide pass-through deposit insurance (and, thus, also does not address potential brokered deposit considerations). Another area of focus for rulemaking will be the comparable supervision consideration requirements for foreign payment stablecoin issuers and the level of certainty for issuers currently engaged in the U.S. market. As the rulemaking process continues, it is critical for all industry participants to engage in advocacy efforts with federal and state regulators and other policymakers to minimize unintended consequences.

FDIC Issues RFI on ILCs and their Parent Companies. On July 15, 2025, the FDIC issued an RFI soliciting comments on the FDIC’s approach to evaluating the statutory factors applicable to certain filings submitted by industrial banks (ILCs). In a statement issued by Acting Chairman Travis Hill, he noted that “[a]lthough many of the arguments related to ILCs are familiar, sustained interest in the charter by a diverse set of institutions suggests that a wide-ranging RFI would be a helpful step.” He continued, the FDIC’s “ultimate objective should be a policy statement or similar issuance that provides clarity on how the FDIC interprets the applicable statutory factors in the context of ILC filings.” Comments on the RFI are due by September 19, 2025.

Insights. The RFI includes 34 prompts, many with multiple embedded questions. At least 12 questions relate specifically to “nonfinancial” companies, retailers and/or technology companies, including all of Section B.3 (“Characteristics of Industrial Bank Parent Companies: Non-Financial Companies”), while others refer to ILCs with a “large parent company dominant in certain markets.” The preamble to the proposal traces the agency’s history with ILCs back through the moratorium on ILC deposit insurance applications and change in control notices to 2005 and 2006 when two large retailers filed applications for deposit insurance, but draws no conclusions as to the viability of a modern day nonfinancial company’s application for federal deposit insurance. The RFI also includes a post-GENIUS Act prompt, asking: “If nonfinancial companies begin offering payment stablecoins, how, if at all, should that impact the FDIC’s analytical framework?” The GENIUS Act currently prohibits a public company not “predominantly engaged” in financial activities (and its wholly or majority-owned subsidiaries) from issuing payment stablecoins, unless the company receives a unanimous vote by the Stablecoin Certification Review Committee; however, the CLARITY Act reduces that standard to all companies (public or private) that derive a majority of revenue from nonfinancial activities and would not prohibit such companies from owning depository institutions, such as ILCs, that could form subsidiaries to issue payment stablecoins.

FDIC Issues Proposed Rule on Adjusting and Indexing Certain Regulatory Thresholds. On July 15, 2025, the FDIC issued a notice of proposed rulemaking amending certain regulatory thresholds in the FDIC’s regulations to reflect inflation and provide for future adjustments pursuant to an indexing methodology. The proposed rule adjusts thresholds in six FDIC parts: 303 (filing procedures); 335 (securities of nonmember banks and state savings associations); 340 (restrictions on sale of assets by a failed institution by the FDIC); 347 (international banking); 363 (audit committee requirements); and 380 (orderly liquidation authority). Acting Chairman Travis Hill issued a statement on the proposal.

Insights. Most notably, the proposed rulemaking adjusts 24 thresholds in 12 C.F.R. Part 363, including:

12 C.F.R. Part 363	Subject	Current threshold	Proposed threshold
§ 363.1(a)	Applicability	$500 million	$1 billion
§ 363.2(b)(3)	Assessment of the effectiveness of internal controls	$1 billion	$5 billion
§ 363.3(b)	Independent auditor attestation concerning effectiveness of internal control over financial reporting	$1 billion	$5 billion
§ 363.4(a)(2)	Part 363 Annual Report	$1 billion	$5 billion
§ 363.4(c)(3)	Independent public accountant’s letters and reports	$1 billion	$5 billion
§ 363.5(a)(1)	Audit committee composition – all independent directors	$1 billion	$5 billion
§ 363.5(a)(2)	Audit committee composition – majority independent directors	$500 million/ $1 billion	$1 billion/ $5 billion
§ 363.5(b)	Members with “banking or related financial management expertise”	$3 billion	$5 billion
Remaining thresholds in the Part 363 Guidelines would be increased from $500 million to $1 billion; $1 billion to $5 billion; and $3 billion to $5 billion. The “independent of management” criteria concerning director compensation would be increased from $100,000 to $120,000 to align with the listing standards of national securities exchanges for purposes of making director independence determinations.

OTHER NOTABLE ITEMS

CFPB to Reissue 1033 Rule. Although the Consumer Financial Protection Bureau (CFPB) had previously stated to a court in the Eastern District of Kentucky that it thought the 1033 open banking rule is unlawful and should be set aside, the agency has now sought a stay of the court proceedings challenging the rule. According to the court filings, “the [CFPB] has now decided to initiate a new rulemaking to reconsider the Rule with a view to substantially revising it and providing a robust justification.” The CFPB further states that it “seeks to comprehensively reexamine this matter alongside stakeholders and the broader public to come up with a well-reasoned approach to these complex issues that aligns with the policy preferences of new leadership and addresses the defects in the initial Rule” in an “accelerated rulemaking process.”

FDIC Issues Proposal to Amend Guidelines for Appeals of Material Supervisory Determinations. On July 15, 2025, the FDIC issued a proposal to amend the FDIC’s Guidelines for Appeals of Material Supervisory Determinations. Under the proposal, the FDIC would replace the existing Supervision Appeals Review Committee with an independent office within the FDIC—the Office of Supervisory Appeals. Under the proposal, the office would be established as the final level of review of material supervisory determinations, independent of the Divisions that make supervisory determinations. The proposal defines those material supervisory determinations that are appealable to the office (e.g., ratings, matters requiring board attention) and those that are not appealable to the office (e.g., formal enforcement actions). Acting Chairman Travis Hill issued a statement on the proposal.

Federal Banking Agencies Propose Rescinding 2023 CRA Regulations. On July 16, 2025, the Federal Reserve, OCC and FDIC issued a notice of proposed rulemaking to rescind the final CRA rule issued in October 2023 and reinstate the prior CRA framework with certain minor technical amendments. As noted by the federal banking agencies in their release announcing the proposed rule, because the October 2023 final rule remains subject to legal action and has not taken effect, the agencies continue to apply the 1995 regulations, as amended, to banks. As the notice of proposed rulemaking progresses through the public comment phase, bank’s CRA obligations will continue to be evaluated under the traditional metrics and methodology which have been in place in substantially the same form since 1995. Comments on the proposal are due by August 18, 2025.

Federal Banking Agencies Seek Further Comment on Interagency Effort to Reduce Regulatory Burden. On July 21, 2025, the Federal Reserve, OCC and FDIC announced the three remaining categories of regulations for which they will solicit comments to reduce regulatory burden: Banking Operations, Capital and the CRA. Commenters are requested to submit comments in response to the request by October 23, 2025.

Federal Reserve Joins OCC, FDIC and NCUA Order Granting Exemption to CIP Rule. On July 31, 2025, the Federal Reserve joined the other federal banking agencies and the National Credit Union Administration, with the concurrence of FinCEN, in an order granting an exemption from the Customer Identification Program (CIP) rule requirement that a bank or credit union obtain taxpayer identification number (TIN) information from its customer before opening an account. The exemption permits a bank or credit union to use an alternative collection method to obtain TIN information from a third-party rather than from the customer.

FDIC Issues Proposed Rule on Establishment of Branches. On July 15, 2025, the FDIC issued a notice of proposed rulemaking on the establishment and relocation of branches and offices by state nonmember banks and insured branches of federal banks. The proposal would: (i) shorten the approval period for expedited processing for “eligible depository institutions;” (ii) eliminate the FDIC’s discretion to remove a filing from expedited processing for eligible filers; (iii) eliminate the public notice and related public comment period on branch applications; and (iv) permit state nonmember banks that seek to make a de minimis change in the address of a branch to notify the FDIC of such a change, rather than submit an application. Comments on the proposal are due by September 16, 2025. Acting Chairman Travis Hill issued a statement on the proposal.

Speech by Governor Barr on Financial Regulation. On July 16, 2025, Federal Reserve Board Governor Michael Barr gave a speech titled “Booms and Busts and the Regulatory Cycle.” In his speech, Governor Barr spoke about “regulatory weakening”—both “direct deregulatory actions by regulators or legislators” and also “failure of the regulatory framework to keep up with changing circumstances”—and its role in past financial crises.

Remarks by Vice Chair for Supervision Bowman on Financial Inclusion. On July 15, 2025, Vice Chair for Supervision Bowman gave the opening remarks at Unleashing a Financially Inclusive Future, the second annual financial inclusion conference hosted by the Federal Reserve. In her remarks, Vice Chair for Supervision Bowman highlighted banks’ innovative use of alternative data to provide services like small-dollar loans or provide credit to unbanked or underbanked consumers.

Remarks by Governor Barr on Financial Inclusion. On July 15, 2025, Federal Reserve Board Governor Barr gave a speech titled “Expanding Financial Inclusion” at Unleashing a Financially Inclusive Future. In his speech, Governor Barr highlighted several ways that the public and private sectors are helping to increase financial inclusion, including through faster payments services, responsible small-dollar lending methods and the use of alternative data to promote credit access.

Speech by Governor Cook on AI. On July 17, 2025, Federal Reserve Board Governor Lisa Cook gave a speech titled “AI: A Fed Policymaker’s View.” In her speech, Governor Cook spoke about the effects AI will have on both sides of the Federal Reserve’s dual mandate of maximum employment and price stability.

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

Adam Cohen Named OCC Chief Counsel. On July 30, 2025, the OCC announced that Adam Cohen has been named Senior Deputy Comptroller and OCC Chief Counsel. Mr. Cohen assumes the role on August 11, 2025.

Kate Tyrrell Named Chief of Staff. On July 23, 2025, the OCC announced that Kate Tyrrell has been named Chief of Staff and Senior Deputy Comptroller.

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

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

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

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

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

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

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

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

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

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

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

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

The Antitrust Division’s announcement builds on existing federal whistleblower rewards programs. This update discusses key elements of the new program and the key implications and risks it may introduce for businesses.

Introduction

On July 8, 2025, the U.S. Department of Justice’s Antitrust Division (Antitrust Division) announced a new “Whistleblower Rewards Program” (Program) to incentivize individuals to report criminal antitrust violations and related offenses.[1]

Adopting an antitrust whistleblower rewards program to incentivize self-reporting has been discussed for more than a decade. While the SEC and CFTC received legislative congressional approval for their programs in 2010,[2] Congress has never adopted legislation authorizing a similar rewards program at the Antitrust Division. In the absence of statutory authority, the Whistleblower Rewards Program is creatively structured to allow the Antitrust Division to partner with the U.S. Postal Service (USPS) to use USPS’s authority to pay whistleblower rewards.[3] In essence, the Antitrust Division will transfer the reward payment to USPS, which will in turn make the reward payments to qualified claimants.

The operation of the new Program is detailed in a Memorandum of Understanding (MOU) between the Antitrust Division, USPS, and the U.S. Postal Service Office of Inspector General (USPS OIG).[4] Qualifying whistleblowers will presumptively be paid at least 15%—and up to 30%—of any criminal fines recovered.[5] Whistleblowers are eligible under the Program if they report certain types of federal criminal conduct, including (i) price fixing, bid rigging, and market allocations agreements that violate Section 1 of the Sherman Act; (ii) abuse of a dominant market position that violates Section 2 of the Sherman Act; (iii) federal crimes “targeting or affecting federal, state, or local public procurement”; (iv) efforts to “effectuate, facilitate, or conceal” Sherman Act violations; and (v) actions “targeting or affecting the conduct of federal competition investigations or proceedings.”[6]

Key Program Limitations and Relationship with Antitrust Leniency Policies

The Whistleblower Rewards Program is subject to several limitations. As a threshold qualification, the Antitrust Division has limited the Program to individuals who report conduct leading to criminal penalties of at least $1 million.[7] Despite the range of qualifying federal crimes under the Program, potential whistleblowers will need to report involvement by companies in significant Sherman Act violations or crimes involving government procurement to satisfy this $1 million threshold. Because criminal antitrust fines are calculated using the volume of commerce affected by the unlawful conduct, a business will typically need to engage in collusion affecting millions of dollars in sales to generate a fine exceeding $1 million. In several prior criminal cases against companies, the DOJ Antitrust Division has secured fines well below this threshold. For example, four companies were sentenced in 2023 for a nearly two-year conspiracy to fix the prices of DVDs and Blu-Ray discs sold through an online marketplace, yet the highest fine imposed was $234,000.[8] Additionally, DOJ Antitrust criminal cases against individuals rarely result in fines exceeding $1 million. While the Program also covers efforts to conceal antitrust violations or obstruct investigations, these crimes have a maximum fine of $250,000 for individuals and $500,000 for companies [9]—– well below the $1 million minimum.

Because the program is funded through USPS’s statutory authority to pay whistleblowers,[10] rewards are also limited to cases involving “violations of law affecting the Postal Service, its revenues, or property.”[11] The MOU states that the harm posed to the USPS by the offense must be “identifiable” but “need not be material or otherwise pose any substantial detriment.”[12] Neither the Antitrust Division’s press release nor the MOU provides specific guidance about what conduct may satisfy this standard. We expect that the Postal Service will broadly interpret this requirement to find a nexus whenever possible to maximize the scope of the Program.

Further, payment of a reward is limited to individuals who provide “original” information that is derived from their independent knowledge and not already known to the Antitrust Division, USPIS, or USPS OIG from other sources.[13]

The Antitrust Division has sought to prevent corporate officers, directors, trustees, and compliance and audit employees from using internal whistleblower reports to file a reward claim, rather than using that information to investigate and consider whether the company should itself report the conduct. These individuals are generally disqualified from using the internal reporting information they received to pursue a whistleblower reward until 120 days have passed, thereby giving the company an opportunity to respond and seek leniency.[14]

Notably, the Whistleblower Rewards Program does not exclude individuals who were personally involved in the illegal conduct and allows such individuals to report crimes and qualify for rewards as long as they did not “coerce[] another party to participate in the illegal activity” and were not “clearly the leader or originator of that activity.”[15] And, although self-reporting could cause a whistleblower to incur personal criminal liability, whistleblowers would generally remain eligible to apply for immunity in parallel pursuant to the Antitrust Division’s longstanding Individual Leniency Policy. Indeed, the Program’s eligibility criteria limiting rewards to individuals who did not coerce, lead, or originate the criminal conduct is the same limitation required to qualify under the Individual Leniency Policy. The only caveat for potential whistleblowers is that the Antitrust Division may consider “[w]hether and to what extent the whistleblower participated in the criminal violation reported” when determining the appropriate reward payment.[16] However, the ability to apply for both programs and potentially receive both Leniency and a monetary reward may reinvigorate the Individual Leniency Policy, which has been rarely used as compared to the well-known Corporate Leniency Policy.

The Whistleblower Rewards Program also does not prohibit individuals from seeking multiple rewards under different government programs. Instead, the Program allows the Antitrust Division to consider “[w]hether the whistleblower received any award from any other government agency for reporting factually related conduct, or whether the whistleblower recovered in any related civil suit” in determining an appropriate award. The possibility of duplicative rewards is most likely to arise in cases involving collusion on government contracts, in which individuals can file private qui tam lawsuits under the False Claims Act on behalf of the government in exchange for a portion of any recovery. In fiscal year 2024, whistleblowers filed a record 979 qui tam lawsuits under the False Claims Act, resulting in over $2.9 billion in settlements and judgments—netting more than $400 million for the individuals who filed these lawsuits. The Antitrust Division has already benefitted from several of these qui tam lawsuits, including an investigation into collusion among fuel supply service providers at military bases in South Korea, which resulted in five companies pleading guilty and more than $162 million in FCA recoveries.[17] With the availability of the Whistleblower Rewards Program, whistleblowers can now enhance their potential reward by filing a claim with the Antitrust Division concurrent with the filing of a qui tam lawsuit.

The Whistleblower Rewards Program may create friction with companies’ internal compliance and whistleblower programs. By requiring whistleblowers to report “original” information, the Antitrust Division is incentivizing individuals to report any potential conduct to the government rather than internally. Internal whistleblower programs afford companies an opportunity to conduct internal investigations and, in appropriate cases, self-report unlawful conduct to the government. For example, a company may self-report conduct under the Antitrust Division’s Corporate Leniency Program, which provides protection from prosecution under the Sherman Act to the company—and potentially its current directors, officers, and employees—if it is the first to report participation in a criminal antitrust violation and cooperates with any subsequent investigation. Yet, the Program would disqualify any whistleblower who comes forward after a company has self-reported the conduct, including in response to an internal whistleblower report from the same person. Individuals will therefore have strong incentives to report suspected antitrust violations directly to the government, or to file a whistleblower claim concurrent with an internal whistleblower report.

Interestingly, a company may still qualify for leniency after a whistleblower reports conduct under the Program. Companies may remain eligible for leniency after an investigation has been opened if they are the first to apply and the Antitrust Division does not already have evidence “likely to result in a sustainable conviction” against the company.[18] In most instances, it would be difficult for a single whistleblower to offer sufficient evidence to meet this threshold.

Building on Precedent: How the Antitrust Program Draws from Established Models

The launch of the Whistleblower Rewards Program builds on other whistleblower initiatives launched by the government, including those administered by the DOJ Criminal Division, the Financial Crimes Enforcement Network, the Commodity Futures Trading Commission, the Internal Revenue Service, and the Securities and Exchange Commission. The Program incorporates many of the core features common to these other programs, including the requirement to voluntarily submit original information, percentage-based awards tied to successful recoveries, and the anonymity given to many whistleblowers. A common throughline of all of these programs is that they harness the power of the private bar by incentivizing attorneys to seek out whistleblowers, generating a large volume of submissions that agencies need to assess and increasing potential exposure to companies.

The Antitrust Division has notably departed from other enforcers’ reward programs by allowing many individuals to qualify for payouts despite their participation in the unlawful conduct. Because the Antitrust Division already has an Individual Leniency Policy that affords immunity to qualifying individuals who self-report their conduct, it is unusually generous to additionally offer the possibility of a reward payment. The DOJ Criminal Division, in contrast, disqualifies anyone who “meaningfully participated in the criminal activity they reported, including by directing, planning, initiating, or knowingly profiting from that criminal activity.” [19] The SEC, CFTC, and FinCEN whistleblower programs also include provisions that significantly limit the ability of wrongdoers to subsequently claim a reward for their own conduct.

Studying the performance and outcomes of similar programs offers insight into how this new program may take shape. For instance, if the program keeps pace with the DOJ Criminal Division’s Corporate Whistleblower Program, which received over 100 tips in its first month, we can expect a high level of involvement with the program that will often increase year-on-year. For instance, the SEC’s whistleblower program has rewarded more than $2.2 billion to 444 individual whistleblowers since the program’s inception in 2011, and in 2024 alone, the SEC awarded $255 million to 47 individuals, including a $98 million reward that was split between two whistleblowers.[20] Of those 47 whistleblowers, 62% were “insiders” – current and former employees – while 38% were “outsiders.”[21] Similarly, in 2023, the IRS received 6,455 whistleblower reports regarding 16,932 taxpayers, an increase of 44% compared to the average of the prior 4 years, and paid out $88.8 million in rewards.[22] In 2024, the CFTC received 1,744 whistleblower reports – a 14% increase from the prior year – and paid 15 awards totaling over $42 million.[23] Notably, approximately 42% of the CFTC’s enforcement matters involve whistleblowers, reflecting how instrumental they are to government enforcement efforts.[24]

For a detailed discussion of these other whistleblower programs, please see our alerts covering the DOJ Whistleblower Program, FinCEN’s Whistleblower Program, and the SEC Whistleblower Program and our Recent Webcast comparing these and other whistleblower programs.

Looking Forward: Will the Program Deliver on Its Promises?

The success of the Whistleblower Reward Program will depend on several developments in the years ahead. First, the Program appears to envision using whistleblowers to build criminal cases against alleged wrongdoers, but it remains to be seen if that will work in practice. Juries will need to view these witnesses as credible despite their significant financial incentives to secure a conviction. This has already been a challenge for the Antitrust Division in using trial witnesses secured through the Corporate Leniency Policy, who receive immunity in exchange for their cooperation against other parties. These difficulties may be further heightened when the witnesses stand to recover a potential multimillion dollar reward payment.

Second, the Program will need to be embraced by attorneys who are willing to encourage and support potential whistleblower applicants. Qui tam lawsuits under the False Claims Act have gained significant traction over the past 29 years, in part, because of the numerous law firms that have built practices on supporting individual claimants. The Program will need to secure similar traction among practitioners to produce similar results.

Third, the Antitrust Division has retained significant discretion in determining the amount of reward payments available under the Program. The way that discretion is exercised, and whether large award payments are made in the early years, will significantly influence the incentives for potential whistleblowers. For example, the SEC has made headlines on several occasions with its nine-digit reward payments, including a $279 million reward paid in 2023. These eye-popping rewards bring considerable press coverage and visibility to a reward program and thus encourage future potential applicants.

And finally, the Division will need to allocate resources and develop processes to screen whistleblower claims and identify promising leads. These initial investigations can be burdensome, especially if there is an influx of reward claims, at a time when the Antitrust Division’s personnel are already stretched thin.

DOJ has reserved authority to publish additional guidance in the future, which may resolve uncertainty regarding how certain aspects of the Whistleblower Rewards Program will ultimately function.[25] For now, the Antitrust Division, USPS, and the USPS OIG have not provided any guidance for the Program beyond what is contained in the MOU and DOJ’s press release.

New Challenges Ahead – and How to Manage Them

The Antitrust Division’s announcement introduces new risks for businesses, including those with established compliance programs. Like other whistleblower programs, the Antitrust Whistleblower Rewards Program creates a powerful financial incentive for employees—including, in some cases, corporate leadership—and third-party business associates to report known or suspected antitrust violations conduct directly to the government. As Assistant Attorney General Abigail Slater of the Antitrust Division put it, “[t]his program raises the stakes: If you’re fixing prices or rigging bids, don’t assume your scheme is safe—we will find and prosecute you, and someone you know may get a reward for helping us do it.”[26] The terms and guardrails for this whistleblower program are largely consistent with other whistleblower programs, including those provided by the SEC, CFTC, FinCEN, and IRS; given those similarities, companies can expect significant increases in the number of antitrust-related whistleblower reports made to the government—and consequently, increases in antitrust government investigations and enforcement – similar to what occurred following the launch of other whistleblower programs.

In order to mitigate these anticipated enforcement risks, companies should maintain a series of best practices, including:

(i) Review and, as appropriate, enhance their policies, procedures, and controls for detecting, investigating, and remediating potential antitrust risks.

(ii) Maintain robust internal reporting, investigation, and anti-retaliation policies and procedures. This is important as whistleblowers frequently turn to the government because they felt as though they were not heard internally. By having a robust internal process, companies can address and fix issues raised on their own timeline, rather than the government’s.

(iii) When potential antitrust violations are detected, consider whether a voluntary disclosure to the government may be prudent. Procedures for investigating antitrust reports and considering a voluntary disclosure should also take into consideration the criticality of the first 120 days following receipt of the report under the Antirust Leniency Program and Whistleblower Rewards Program.

(iv) In addition to avoiding any measures that punish whistleblower disclosures, companies should ensure that they do not create incentives or disincentives that can deter whistleblower reports to the government, such as employee or third-party contract terms that prevent disclosures to the government, as these types of measures may similarly violate anti-retaliation or other applicable laws and have been an area of enforcement focus by other agencies, particularly following their launch of a whistleblower program.

For a more detailed discussion of best practices and lessons learned from other whistleblower programs, many of which are likely to be similarly applicable to the new Antitrust Whistleblower Reward Program, see Gibson Dunn’s May 2025 webcast, The Patchwork Quilt of Whistleblower Programs.

[1] DOJ, “Justice Department’s Antitrust Division Announces Whistleblower Rewards Program,” https://www.justice.gov/opa/pr/justice-departments-antitrust-division-announces-whistleblower-rewards-program (July 8, 2025).

[2] Dodd-Frank Wall Street Reform & Consumer Protection Act, Pub. L. No. 111-2003, § 748, 124 Stat 1376, 1739 (2010); Id. §924.

[3] 39 U.S.C. § 404(a)(7).

[4] DOJ Antitrust Div., Memorandum of Understanding Regarding the Whistleblower Rewards Program and Procedures (“MOU”) at 2, available at https://www.justice.gov/atr/media/1407261/dl?inline.

[5] Id. at 3.

[6] Id. at 7.

[7] DOJ Antitrust Div., Memorandum of Understanding Regarding the Whistleblower Rewards Program and Procedures (MOU) at 2, available at https://www.justice.gov/atr/media/1407261/dl?inline.

[8] https://www.justice.gov/archives/opa/pr/five-amazon-marketplace-sellers-and-four-amazon-marketplace-companies-sentenced-price-fixing

[9] 18 U.S.C. § 3571.

[10] See 39 U.S.C. § 2601.

[11] MOU at 3.

[12] Id. at 8.

[13] Id. at 5.

[14] MOU at 6.

[15] Id. at 4.

[16] Id. at 9.

[17] DOJ, “Justice Department Recovers over $3 Billion from False Claims Act Cases in Fiscal Year 2019,” https://www.justice.gov/archives/opa/pr/justice-department-recovers-over-3-billion-false-claims-act-cases-fiscal-year-2019 (January 9, 2020).

[18] DOJ, Antitrust Division Leniency Policy and Procedures, 7-3.320 – Type B Corporate Leniency, https://www.justice.gov/atr/page/file/1490246/dl?inline.

[19] Program Guidance § II.1.e, https://www.justice.gov/criminal/media/1362321

[20] SEC, Whistleblower Annual Report to Congress for Fiscal Year 2024 (Nov. 2024), available at https://www.sec.gov/files/fy24-annual-whistleblower-report.pdf.

[21] Id.

[22] IRS, Whistleblower Office Annual Report for FY 2023 (June 2024), available at https://www.irs.gov/pub/irs-pdf/p5241.pdf.

[23] CFTC, Whistleblower Program: Customer Education Initiatives: FY 2024 Annual Report (Oct. 2024), available at https://www.whistleblower.gov/sites/whistleblower/files/2024-11/FY24%20Customer%20Protection%20Fund%20Annual%20Report%20to%20Congress.pdf.

[24] Id.

[25] MOU at 10.

[26] DOJ, “Justice Department’s Antitrust Division Announces Whistleblower Rewards Program,” https://www.justice.gov/opa/pr/justice-departments-antitrust-division-announces-whistleblower-rewards-program (July 8, 2025).

The following Gibson Dunn lawyers prepared this update: Jeremy Robison, Matt Axelrod, Ella Alves Capone, Sarah Akhtar, Katherine Warren Martin, Akila Bhargava, Sarah Burns, and Lynn Gurskey.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s Antitrust and Competition practice group:

Scott D. Hammond – Washington, D.C. (+1 202.887.3684, shammond@gibsondunn.com)
Jeremy Robison – Washington, D.C. (+1 202.955.8518, wrobison@gibsondunn.com)
Kristen C. Limarzi – Washington, D.C. (+1 202.887.3518, klimarzi@gibsondunn.com)
Cindy Richman – Washington, D.C. (+1 202.955.8234, crichman@gibsondunn.com)
Rachel S. Brass – San Francisco (+1 415.393.8293, rbrass@gibsondunn.com)
Ali Nikpay – London (+44 20 7071 4273, anikpay@gibsondunn.com)
Christian Riis-Madsen – Brussels (+32 2 554 72 05, criis@gibsondunn.com)

On July 30, 2025, the Department of Justice (“DOJ”) released guidance from the Attorney General on the application of federal antidiscrimination laws to entities receiving federal funds. The guidance provides a detailed list of Diversity, Equity, and Inclusion (“DEI”) policies and practices that DOJ considers unlawful. It also provides a list of “Best Practices” entities can adopt to minimize legal risk.

The memorandum addresses a number of examples specific to educational institutions, but makes clear that the guidance is directed broadly, encouraging all “[e]ntities that receive federal financial assistance or that are otherwise subject to federal anti-discrimination laws, including educational institutions, state and local governments, and public and private employers,” to review the memorandum “to ensure all programs comply with their legal obligations.” The guidance is non-binding and does not have the force of law, but it reflects how DOJ interprets and intends to apply federal antidiscrimination statutes.

The document provides a “non-exhaustive” list of policies and practices DOJ considers unlawful. The document notes that these policies and practices could “result in revocation of grant funding,” and also states that federal funding recipients may be liable for discrimination if they knowingly fund the unlawful practices of third parties. The practices that DOJ identified as unlawful include what it characterizes as:

Programs that grant preferential treatment based on protected characteristics, including:

Programs or scholarships exclusively for students of a specific race;
Hiring or promotion practices that prioritize candidates from “underrepresented groups”; and
Policies that designate access to facilities or resources based on race (e.g. lounges exclusively for minority students).

Policies that use facially-neutral proxies for protected characteristics, such as:

Policies requiring job applicants to explain their “cultural competence,” “lived experience,” or “cross-cultural skills” when doing so “effectively evaluate[s] candidates’ racial or ethnic backgrounds rather than objective qualifications”;
Policies requiring applicants to describe “obstacles they have overcome” or submit a “diversity statement” if those statements result in advantage to applicants based on protected characteristics; and
Recruitment strategies that target specific geographic areas, institutions, or organizations primarily because of their racial or ethnic composition.

Practices that segregate individuals based on protected characteristics, such as:

Conducting trainings that separate participants into race-based groups (e.g. “Black Faculty Caucus” or “White Ally Group”);
Segregating access to facilities or resources based on protected characteristics (e.g. a “BIPOC-only study lounge”); and
Basing program eligibility on protected characteristics (e.g. mandating sex-specific eligibility and excluding others who meet objective program criteria).

Note: The guidance provides an exception for sex-separated athletic competitions and intimate spaces, noting that allowing “males, including those self-identifying as ‘women,’ to access single-sex spaces designed for females—such as bathrooms, showers, locker rooms, or dormitories” may violate Title IX or create a hostile environment under Title VII.

Policies that unlawfully consider protected characteristics in selection decisions, including:

Policies requiring a “diverse slate” for hiring or setting “racial benchmarks or mandat[ing] demographic representation” in candidate pools;
Policies requiring a set number of participants in a program (e.g., a scholarship, fellowship, or leadership initiative) be from a specific demographic group; and
Policies prioritizing women- or minority- owned businesses for contracts.

Trainings that promote discrimination or hostile environments, including:

Trainings that exclude or penalize participants based on protected characteristics; and
Trainings that include “severe or pervasive use” of materials that “single out, demean, or stereotype” based on protected characteristics (e.g., “toxic masculinity” and “white privilege”).

The guidance ends with a recitation of what DOJ recommends as best practices, including:

Ensuring all programs, activities, and resources are open to all qualified individuals and do not exclude participants based on protected characteristics (except when “necessary where biological differences implicate privacy, safety, or athletic opportunity”);
Basing selection decisions on measurable skills and qualifications;
Discontinuing the use of policies designed to favor specific demographic groups, even if phrased using neutral language;
Documenting the legitimate rationale for decisions and ensuring those reasons are consistently applied;
Scrutinizing neutral criteria for whether they serve as proxies for protected characteristics;
Eliminating diversity quotas, including for applicant pools;
Ensuring all trainings are open to all and do not “segregate” participants or create a hostile environment by requiring participants to affirm ideological positions or “confess” biases or privileges;
Including non-discrimination clauses in agreements with third parties; and
Implementing non-retaliation policies for individuals who refuse to participate in potentially discriminatory programs or complain about them.

The guidance urges the recipients of federal funds to review their policies and practices to ensure compliance with federal law and recommends the best practices listed above.

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

The following Gibson Dunn attorneys assisted in preparing this client update: Jason Schwartz, Stuart Delery, Cynthia McTernan, Cate McCaffrey, and Sameera Ripley.

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

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

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

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

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

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

Cynthia Chen McTernan – Partner, Labor & Employment Group,
Los Angeles (+1 213.229.7633, cmcternan@gibsondunn.com )

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

Gibson Dunn is closely monitoring developments and is prepared to help companies consider and address the implications of the agencies’ request for information, including through regulatory counseling, preparing comments in response, agency and legislative engagement, and litigation.

On July 25, 2025, the U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) published in the Federal Register a request for information (RFI) seeking public input on a definition of “ultra-processed foods” (UPFs) (the “UPF RFI”).[1] The UPF RFI represents a significant opportunity for affected parties to shape food policy and regulation. Comments on the UPF RFI are due by September 23, 2025, and should be submitted to Docket No. FDA-2025-N-1793. A formalized, federal definition of UPF has the potential to have far-reaching impacts, not just on food regulation, but on government programs, on how consumers approach nutrition, and more.

Key features of the UPF RFI include:

Reference to Existing UPF Definitions but Open to Alternatives: FDA and USDA note that there is no single uniform definition for UPFs but acknowledge various existing definitions. The UPF RFI highlights as the most common classification the Nova system, which identifies UPFs based on factors including “the use of certain ingredients and substances (such as emulsifiers, bulking agents, or thickeners), industrial processing technologies, as well as sophisticated packaging, that result in a palatable and appealing product.”[2] However, the UPF RFI acknowledges that a number of states and third parties have taken different approaches, including by defining UPFs as foods that: (1) include substances with certain intended effects, such as stabilizers, thickeners, and coloring or flavoring agents; (2) have undergone certain processing steps, such as hydrogenation of oils or hydrolysis of proteins; or, (3) contain one or more specified ingredients.[3] The agencies note that existing UPF classification systems may not be able to fully capture the characteristics of UPFs that impact health. For example, some foods classified as UPFs under existing frameworks may include foods considered beneficial to health and recommended as part of healthy dietary patterns, such as whole grain products and yogurt. Accordingly, the UPF RFI opens the door for interested parties to propose an alternate pathway for the agencies to define the term “UPF.” Indeed, the agencies seek input on whether an alternative to the term “ultra-processed” is appropriate.[4]

A Multi-Faceted Approach to Defining UPF: The UPF RFI requests inputs on a broad, diverse set of factors for potential inclusion in a UPF definition. This request could foreshadow a complex regulatory regime determining what foods are UPFs, and what requirements apply to both UPFs and foods that do not fall within the category.
- Food ingredients: The agencies seek input on both ingredients that form significant part of finished foods by weight and that minimally contribute to their composition (including those listed as consisting of 2% or less of the food), as well as on whether the relative amounts of ingredients within a food should impact whether it is characterized as a UPF. The UPF RFI also asks whether a UPF definition should incorporate, and distinguish between, “certified” food colorings that are synthetically produced and “non-certified” food colorings that generally include dyes and pigments from natural sources.[5]
- Food processing steps: Specific food processing steps may also impact whether a food is considered a UPF. In particular, the agencies request feedback on what physical (e.g., cutting, extraction, heating, freezing, extrusion), biological (e.g., non-alcoholic fermentation, enzymatic treatment), and chemical (e.g., pH adjustment) manipulations to food and food ingredients should or should not be incorporated into a UPF definition.[6]
- Nutritional and other attributes of food: FDA and USDA also seek input on other characteristics of food that might be relevant to whether it is a UPF. These include nutritional attributes, including information on the Nutrition Facts label, and other attributes, such as energy density and palatability.[7]
Broad Implications at FDA, USDA, and Beyond: The implications of a formalized, federal definition of UPF will be significant, both for members of the food industry that seek to ensure that their products are not considered UPFs and for those members of industry whose products fall within the definition. FDA and USDA make clear that the UPF definition is part of the Trump Administration’s approach to combatting preventable diet-related chronic diseases, including cardiovascular diseases and type 2 diabetes, which was foreshadowed in the May 2025 report of the Make America Healthy Again (MAHA) Committee (the “MAHA Report”).[8] The Department of Health and Human Services (HHS), which includes FDA, and USDA, as well as other federal and state governmental entities could use the UPF definition in far-reaching ways, such as by:
- Developing new or modified FDA food labeling and manufacturing requirements;
- Including recommendations regarding the consumption of UPFs in the Dietary Guidelines for Americans;
- Limiting types of foods that are eligible the National School Lunch Program (NSLP) and nutrition assistance programs, including the Supplemental Nutrition Assistance Program (SNAP), and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), as well as the National School Lunch Program (NSLP);
- Shaping research on food and nutrition the federal government conducts and funds; and
- Including the definition of UPF in federal and state legislation, including legislation on new food labeling requirements, research funding, and limits on government-funded nutrition assistance and school lunch programs.

Interested parties should consider submitting comments to the docket. Gibson Dunn is closely monitoring developments and is prepared to help companies consider and address the implications of the UPF RFI, including through regulatory counseling, preparing comments in response, agency and legislative engagement, and litigation.

[1] 90 Fed. Reg. 35305 (July 25, 2025).

[2] Id. at 35306.

[3] Id. at 35307.

[4] Id. at 35308.

[5] Id. at 35307; see also FDA, “Color Additives in Foods.”

[6] UPF RFI at 35307-08.

[7] Id. at 35308.

[8] UPF RFI at 35306; see also Make America Healthy Again (MAHA) Commission, The MAHA Report: Make Our Children Healthy Again (May 22, 2025) (“MAHA Report”).

The following Gibson Dunn lawyers prepared this update: Katlin McKelvie, Eric Womack, and Carlo Felizardo.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Consumer Protection or FDA & Health Care practice groups:

Gustav W. Eyler – Washington, D.C. (+1 202.955.8610, geyler@gibsondunn.com)
Katlin McKelvie – Washington, D.C. (+1 202.955.8526, kmckelvie@gibsondunn.com)
John D. W. Partridge – Denver (+1 303.298.5931, jpartridge@gibsondunn.com)
Jonathan M. Phillips – Washington, D.C. (+1 202.887.3546, jphillips@gibsondunn.com)
Eric Womack – Washington, D.C. (+1 202.887.3528, ewomack@gibsondunn.com)
Carlo Felizardo – Washington, D.C. (+1 202.955.8278, cfelizardo@gibsondunn.com)

Sea Change, Shifting Priorities, Back to Basics

I. A New Day in SEC Enforcement: Sea Change in Crypto Enforcement, Shifting Priorities, Dismissals and Back to Basics Enforcement

As predicted in our Securities Enforcement 2024 Year-End Update, the first half of 2025 ushered in a newly constituted Securities and Exchange Commission and a new Chairman with new priorities that resulted in sweeping changes at the agency and its enforcement agenda. After a flurry of enforcement activity in early January before the inauguration of President Trump and resignation of then-SEC Chairman Gary Gensler, acting Chairman Mark Uyeda led a three-member, Republican-controlled Commission from mid-January until Chairman Paul Atkins was sworn in on April 21, 2025. Chairman Atkins came in with a wealth of experience at the Commission, having served as a Commissioner of the SEC from 2002 to 2008 as well as serving on the staff of two former chairmen. Interestingly, in returning to the Commission, Chairman Atkins is now working with his own former counsel, Commissioners Mark Uyeda and Hester Pierce, who both served on his staff while he was a commissioner in the early 2000s and largely share the Chairman’s view on regulation. It is rare, at least in recent memory, to see such close alignment on the commission.

A. A Sea Change in Crypto Enforcement

Before Chairman Atkins took the helm, Commissioner Mark Uyeda was appointed the Acting Chairman and immediately implemented changes at the Commission, notably with regard to the regulation of crypto assets. Days after the change in administration, on January 21, 2025, Acting Chairman Uyeda announced the formation of the Crypto Task Force, which is dedicated to helping develop a comprehensive and clear regulatory framework for crypto assets, and named fellow Republican Commissioner Hester Pierce, also known as “Crypto Mom,” to lead the task force. The announcement of the task force specifically called out the prior Commission that had “relied primarily on enforcement actions to regulate crypto retroactively and reactively, often adopting novel and untested legal interpretations along the way.”

A month later, on February 20, 2025, to complement the work of the Crypto Task Force, the SEC announced the creation of the Cyber and Emerging Technologies Unit (CETU) to replace the Crypto Assets and Cyber Unit, which had been given additional resources and brought a host of enforcement action in the prior administration. The newly announced CETU trimmed the number of attorneys dedicated to crypto enforcement and was established “to deploy enforcement resources judiciously.”

In the weeks following the creation of the Crypto Task Force and the CETU, several enforcement actions that had been filed in the previous administration were dismissed, citing the Commission’s exercise of its “discretion” and “its judgment that the dismissal will facilitate the Commission’s ongoing efforts to reform and renew its regulatory approach to the crypto industry, not on any assessment of the merits of the claims alleged in the action.”[1] And several crypto and digital asset platforms and exchanges announced that they had heard from the SEC that it had closed ongoing investigations without taking action, including some who had received Wells notices during the prior administration.[2]

B. A New Day at the SEC

On May 6, 2025, Chairman Atkins made opening remarks addressing the staff in his first “town hall” meeting announcing a return to the SEC’s core mission and emphasizing that “Investor protection is the cornerstone of our mission – to hold accountable those who lie, cheat and steal.” In alluding to the Commission’s enforcement program, Chairman Atkins highlighted the values of “[p]redictability, due process, rule of law, integrity” and “project[ing] a sense that one can get a fair shake without vindictiveness or ulterior motives.” In his remarks, Chairman Atkins acknowledged that the agency’s headcount was down 15% from the beginning of FY2025, with approximately 4,200 employees and 1,700 contractors down from approximately 5,000 employees plus 2,000 contractors at its height in spring of 2024. He also announced a dedication to the regional offices, from which the majority of enforcement and examination staff work: “Let me say unequivocally that I firmly believe in our regional office concept. We cannot and should not have everyone in Washington and New York.”

C. Shifting Priorities

In line with our predictions at the end of 2024, the SEC has shifted its enforcement priorities. While several agency director appointments have been made, the Division of Enforcement remains under acting leadership who remarked in May that notwithstanding structural and process changes, the Division’s work continues. Stated priorities include insider trading, accounting and disclosure fraud, offering fraud, market manipulation and breaches of fiduciary duty.

1. Specialized Units

In addition to reorganizing and renaming the Crypto Assets and Cyber Unit as set forth above, other structural changes were made in the Division including with respect to units, which now have a new deputy director for all units. Along with these changes, the FCPA Unit is no longer listed as a specialized unit after the retirement of unit leadership earlier this year. Although the pause has since been lifted, given President Trump’s February 10, 2025 Executive Order temporarily suspending enforcement of the FCPA and directing the Attorney General to reevaluate existing investigations and enforcement, there were no new FCPA enforcement actions filed by DOJ or SEC in the first half of 2025. A closely watched, ongoing FCPA case against the President and Chief Legal Officer of a public information technology company for alleged bribery to an Indian government official, which was originally charged in 2019, was set for trial on the criminal charges in the early days of the Trump administration. In early April 2025, the DOJ moved to dismiss its case against the executives, citing the February 10, 2025 Executive Order, and the next day the court granted the order and dismissed the case with prejudice.[3] On July 15, 2025, the SEC announced filing a joint stipulation to similarly dismiss its case against the defendants with prejudice.

2. Dismissals of Controls and Registration Cases

In line with Chairman Atkins’ stated priority of holding accountable those who lie, cheat and steal, the Commission dismissed certain cases that involved alleged controls and registration violations, without alleging fraudulent conduct.

On April 4, 2025, the Commission announced that it filed a joint stipulation to dismiss its case, with prejudice, against a registered investment adviser for failing to establish, implement and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information. The case, which was charged on December 20, 2024, alleged violations of Section 204A and 206(4) of the Investment Advisers Act of 1940.[4]

On June 18, 2025, the Commission announced that it was moving to dismiss, with prejudice, three separate cases involving three groups of defendants that were charged with violations of Section 15(a) of the Securities and Exchange Act of 1934—failing to register as a dealer. In all three stipulations, the Commission stated its belief that dismissal was appropriate “in the exercise of its discretion and as a policy matter” and that the decision to dismiss “does not necessarily reflect the Commission’s position on any other case.”[5]

3. Cyberbreach Disclosure Cases

After several disclosure and controls cases were brought by the Commission under Chairman Gary Gensler against public companies who were victims of a cyberbreach, and last year’s dismissal by a federal district court of much of the SEC’s SolarWinds complaint,[6] there were no new cyberbreach disclosure cases filed by the Commission in the first half of 2025. In fact, on July 2, 2025, the SEC and the defendants in SolarWinds sent a letter to the court setting forth that they had reached a settlement in principle that would completely resolve the litigation.[7] This may evidence the new Commission’s position on cyberbreach disclosure enforcement and its potential return to its earlier mantra: “We do not second-guess good faith exercises of judgment about cyber-incident disclosure.”[8]

D. Back-to-Basics Enforcement

Since the inauguration, the Commission has brought cases that reflect a return to “back to basics” enforcement that include charges of fraud and allegations of “lying, cheating and stealing.” It brought several actions involving large-scale offering frauds, including in the crypto space, a handful of cases involving public company reporting and disclosure, as well as cases against investment advisers and broker dealers involving fraud. The SEC also brought cases in traditional areas like municipal bond fraud, insider trading, and market manipulation.

II. Large Scale Fraud

As anticipated, SEC enforcement focused heavily on offering fraud, with the following notable actions involving significantly high monetary amounts, and/or impacting numerous investors.

In February, the SEC filed fraud charges against a New York-based commercial real estate firm and its owner for allegedly using an internet funding platform to obtain over $52 million from over 700 investors nationwide by falsely claiming the funds would be used to purchase or recapitalize two specific commercial real estate deals.[9] The funds were allegedly misused for unrelated real estate projects and debt payments, luxury purchases, and personal stock trading. The SEC seeks injunctions, disgorgement, and civil penalties; and in a parallel action, the U.S. Attorney’s Office and DOJ filed criminal fraud charges against the firm owner.
In March, the SEC announced settled charges pending court approval against a Washington, D.C.-based real estate developer and 27 affiliated companies for allegedly commingling more than $50 million of property-specific funds and underpaying investors by approximately $1.47 million following the funds’ property sales.[10] Without admitting or denying the allegations, the defendants agreed to pay more than $3.3 million in penalties and disgorgement and to install an independent consultant, and the individual defendant agreed to a five-year officer-and-director bar and five-year bar on trading securities outside his own account.
In April, the SEC filed charges against the founder and former CEO of a privately held technology startup for allegedly raising over $42 million through the sale of company stock, including the sale of approximately $3 million of his own personal shares, by making false and misleading statements about the company’s use of artificial intelligence (AI).[11] According to the complaint, the former CEO allegedly told investors that the startup’s mobile shopping application used AI to complete purchases sans human involvement, even though such purported AI tasks were in actuality carried out by human contract workers. The SEC seeks permanent injunctions, an officer-and-director bar, conduct-based injunctions, disgorgement, and civil penalties; and in a parallel action, DOJ and the U.S. Attorney’s Office for the Southern District of New York brought criminal charges against the former CEO.[12]
Later in April, the SEC charged the former CFO of a real estate development company for allegedly participating in a $93 million fraud scheme involving more than 50 investors and multiple real estate development projects.[13] The alleged scheme—for which the SEC had already charged a separate executive and related corporate entities—involved the alleged comingling of investor funds and misappropriation of over $6 million, $1 million of which was allegedly misappropriated by the former CFO himself. The SEC seeks permanent injunctions, disgorgement, civil penalties, and an officer-and-director bar.
Also in April, the SEC filed charges against three individuals in Texas for allegedly defrauding investors in a $91 million Ponzi scheme by falsely promising high monthly returns from international bond trading.[14] The venture allegedly promised a return of capital in 14 months through returns from investments and international bond trading, though the account had no material revenue throughout the life of the alleged scheme. The SEC seeks permanent injunctions, disgorgement, and civil penalties.
In May, the SEC filed charges against the former CEO of a real estate investment company for allegedly operating a multimillion-dollar Ponzi-like scheme that defrauded approximately 200 investors, many of whom were retirees, out of at least $46 million.[15] Despite managing around 50 legitimate real estate investment partnerships, the former CEO offered and sold allegedly illegitimate and fake partnership shares to the defrauded investors. The SEC seeks permanent injunctions, a conduct-based injunction, disgorgement, civil penalties, and an officer-and-director bar; and in a parallel action, the U.S. Attorney’s Office for the Northern District of California filed criminal fraud charges against the former CEO.

III. Cryptocurrency and Other Digital Assets

With the formation of the Crypto Task Force led by Commissioner Hester Peirce, cryptocurrency-related enforcement actions overall subsided and focused more on fraudulent schemes involving crypto. Here are two notable actions filed:

In April, the SEC filed fraud charges against the founder of a now defunct cryptocurrency trading firm for allegedly orchestrating a fraudulent scheme and misappropriating investor funds.[16] According to the SEC, the cryptocurrency firm allegedly sold membership packages that the founder claimed guaranteed high returns from the firm’s crypto asset and foreign exchange trading, and offered members multi-level-marketing-like referral incentives to encourage them to recruit new investors. The SEC alleges that the founder misappropriated over $57 million in investor funds for a variety of personal expenses, and that he used the majority of the remaining investor funds to pay other investors their purported returns and referral rewards in a Ponzi-like scheme. The complaint seeks permanent injunctive relief, disgorgement, and civil penalties; and in a parallel action, the U.S. Attorney’s Office for the Eastern District of Virginia brought criminal charges against the founder.
In May, the SEC filed charges against a New York City-based crypto company and its CEO, former board chairwoman and current board member, and former Chief Investment Officer for alleged false and misleading statements related to offerings of crypto assets and common stock of the company.[17] The complaint alleges that the company marketed rights certificates to crypto assets through extensive promotional efforts, including advertisements in major airports, on thousands of New York City taxis, and on television and social media. The company allegedly convinced over 5,000 people to purchase the certificates, and allegedly claimed to have sold over $3 billion of the certificates even through it had sold no more than $110 million. The SEC further alleged that the company claimed the certificates were “SEC-registered” or “U.S. registered” despite have no such registration. The complaint seeks permanent injunctive relief, disgorgement, and additional civil penalties, along with office-and-director bars for each of the executives. Relatedly, the SEC charged the company’s general counsel with violating antifraud provisions of the federal securities laws by negligently making similar misstatements in private placement memoranda the company used to offer and sell rights certificates and common stock. Without admitting or denying the allegations, the general counsel agreed to a permanent injunction and a $37,500 civil penalty.

IV. Public Company Accounting, Financial Reporting, and Disclosure

The SEC slowed accounting-, reporting-, and disclosure-related enforcement against public companies following the presidential inauguration, and the resulting penalty amounts were significantly lower than in past years. The most notable actions that the Commission brought in this space tended to focus on disclosures in the pharmaceutical industry or accountant conduct that resulted in bars to practice before the Commission pursuant to Rule 102(e) of the Commission’s Rules of Practice (Rule 102(e)).

In February, the SEC announced settled charges, pursuant to Rule 102(e), against a certified public accountant who served as the controller and a vice president of a then-publicly traded medical services company.[18] The SEC order found that a judgment was entered against the accountant in a case enjoining her from future violations of certain federal securities laws. The SEC had originally charged her with making improper “topside adjustments” to the company’s revenue targeting desired financial metrics rather than reflecting actual collections, and making misleading statements or omissions to the company’s auditors. Without admitting or denying the SEC’s findings, the individual agreed to a civil penalty and disgorgement totaling approximately $95,000, and a one-year suspension from appearing or practicing before the SEC as an accountant.

In March, the SEC announced settled charges against a publicly traded Boston-based biopharmaceutical company.[19] The SEC order alleged that even though the company was informed by the Food and Drug Administration (FDA) that its pending drug application would be rejected without a new trial, the company submitted its application anyway—without conducting a new trial—and proceeded to obtain a $20 million investment without informing the investor about the FDA’s known likelihood of rejecting the application. Without admitting or denying the SEC’s findings, the company agreed to pay a civil penalty of $2.5 million and to cooperate with the Commission as part of any related judicial or administrative proceedings that may arise.

Also in March, the SEC filed charges against a New York-licensed certified public accountant and former CFO of a publicly traded company in the cannabis industry.[20] The SEC’s complaint alleges that the accountant falsified accounting records and lied to auditors in connection with a “round trip” cash transfer of approximately $4.2 million between the company and an affiliate that lacked economic substance and was allegedly designed to artificially inflate the company’s cash balance at fiscal year-end. The complaint seeks permanent injunctive relief, civil penalties, and a conduct-based injunction.

In April, the SEC announced settled charges against a publicly traded global life sciences company focused on providing products that address public health threats.[21] The SEC order alleged the company made a series of materially misleading public statements regarding its readiness to support commercial-scale manufacturing of COVID vaccines despite having knowledge—including from FDA inspection reports—of alleged problems with its facilities, personnel training, and quality control protocols. Without admitting or denying the SEC’s findings, the company agreed to pay a $1.5 million civil penalty.
In June, the SEC announced settled charges pursuant to Rule 102(e), against a certified public accountant who served as the CFO of a publicly traded, New York-based telecommunications and cloud software company.[22] According to the SEC order, a judgment was recently entered against the accountant in a case enjoining him from future violations of certain federal securities laws. The SEC had originally charged him with engaging in a fraudulent revenue recognition scheme, resulting in the company filing materially false and misleading financial statements in its publicly filed reports, and improper accounting practices that resulted in revenue recorded for unsupported, aspirational amounts in connection with non-binding purchase orders not in accordance with generally accepted accounting principles (GAAP). The accountant also allegedly provided false information to auditors regarding accounts receivable and thereby manipulated the auditor’s revenue confirmation process. Without admitting or denying the SEC’s findings, except as to the final judgment, the accountant agreed to a suspension from appearing or practicing before the SEC as an accountant. In a December 2024 action, the U.S. Attorney’s Office for the Northern District of Georgia and DOJ brought criminal charges against the accountant.

V. Investment Advisers

Investment advisers remain one of the most heavily regulated market participants. Many of the related actions either involved alleged fraud, and or were brought against individual representatives and officers of investment adviser firms, emphasizing the SEC’s focus on fraud and individual accountability. Notably, there were no enforcement actions in the first half of 2025 for violations of the recordkeeping provisions due to failure to maintain and preserve electronic communications, representing a noticeable shift in enforcement priorities.

In February, the SEC announced settled charges against a New York-based registered investment adviser and one of its former representatives for alleged fraud and compliance violations.[23] From June 2020 to October 2023, the investment adviser and representative, who was simultaneously employed at an unaffiliated broker-dealer, allegedly recommended that his customers at the broker-dealer convert more than 180 brokerage accounts to advisory accounts with the investment adviser, without adequately disclosing the significantly higher fees and increased compensation related thereto, and without considering whether the conversions were in the clients’ best interests. Without admitting or denying the SEC’s findings, the investment adviser agreed to a $150,000 penalty and undertakings, including disclosures to affected account holders and the retention of an independent compliance consultant to review policies and procedures related to its retail business. Without admitting or denying the SEC’s findings, the representative agreed to pay a penalty of $75,000 and to be subject to a nine-month industry suspension.
In March, the SEC announced settled charges against a registered investment adviser, its former managing partner, and its former COO and partner.[24] The SEC alleged that from August 2021 to February 2024, the two officers breached their fiduciary duties and violated antifraud provisions of federal securities laws by misusing fund and portfolio company assets. Specifically, the former COO allegedly misappropriated approximately $223,000 from portfolio companies of a private fund that the two officers managed, and the former managing partner allegedly failed to reasonably supervise the former COO. The former managing partner also allegedly caused the fund to pay a business debt of $346,904 that should have been paid by an entity the two officers controlled, resulting in unearned benefits to the entity. As to the investment adviser, the SEC order alleged that it violated compliance and custody rules of the Advisers Act by failing to adopt and implement adequate policies and procedures and by failing to have the fund audited as required. Without admitting or denying the SEC’s findings, the investment adviser and its former officers agreed to the entry of cease and desist orders; the former COO agreed to pay a $200,000 penalty and to be subject to an associational bar; the former managing partner agreed to pay an $80,000 penalty and to be subject to a 12-month supervisory suspension; and the investment adviser agreed to a censure and to pay a $235,000 penalty. The SEC made note of the investment adviser’s and former managing partner’s cooperation and remedial efforts.
Also in March, the SEC filed charges against a New Jersey resident and his investment advisory firm for violating antifraud and other provisions of the federal securities laws.[25] The SEC complaint alleges that despite the fund’s disclosed policy to invest no more than 25 percent of its total assets in one industry, and despite the defendants’ agreement in a November 2021 settlement with the SEC to limit their investments accordingly, the defendants allegedly invested more than 25 percent of the fund’s assets in a single company through at least September 2023, and invested more than 25 percent of the fund’s assets in the semiconductor industry through at least June 2024, resulting in losses of $1.6 million. The complaint also alleges that the defendants engaged in further misconduct by misleading the fund’s board about their conduct and operating the board without the required votes. Emphasizing the defendants’ repeated violations of securities laws, the complaint seeks permanent injunctive relief, disgorgement, and civil penalties.
In April, the SEC announced settled charges against a Michigan-based capital management corporation for allegedly causing its client, a registered investment company, to violate Section 34(b) of the Investment Company Act by allegedly including materially false and misleading information in its Form N-8F filed with the Commission.[26] According to the SEC Order, while helping the client apply to deregister itself as an investment company, the capital management corporation indicated on the client’s Form N-8F that the client was not a party to any litigation or administrative process, even though the client allegedly had class action lawsuits pending resolution with potential distributions to the class. Without admitting or denying the SEC’s findings, the corporation agreed to pay a civil penalty and disgorgement totaling approximately $600,000. The Commission’s order made note of the corporation’s remedial steps to modify its compliance processes, policies, and procedures.

In April, the SEC announced settled charges against a registered investment adviser for violating Section 206(2) of the Advisers Act through alleged failures to disclose conflicts of interest.[27] From 2017 to 2022, while providing financial consulting and education services to pending retirees under certain employer plans, the investment adviser allegedly recommended its own investment vehicles and plans to the pending retirees without adequately disclosing that personnel enrolling the participants in such programs would receive a flat fee per enrollment and/or variable compensation based on the amounts that participants invested. Without admitting or denying the SEC’s findings, the investment adviser agreed to a censure and civil penalty of $2.9 million. The Commission’s order made note of the investment adviser’s remedial acts and cooperation.

In May, the SEC brought fraud charges against two Florida-based asset management corporations, along with their sole owner and president, for allegedly misappropriating over $17 million from 40 advisory clients, most of whom were Venezuela nationals.[28] From 2015 through 2024, the defendants allegedly offered and sold limited partnership interests in a fund that purportedly invested in IPOs. According to the SEC’s complaint, the defendants misled clients about the legitimacy of, and returns on, their investments, including through falsified periodic account statements. The defendants further allegedly misappropriated $17.3 million of the clients’ funds and separately made approximately $7.8 million in Ponzi-like payments to advisory clients. The Commission seeks permanent injunctions, civil penalties, and disgorgement.

In June, the SEC announced settled charges against a Minnesota-based registered investment adviser and its principal for allegedly defrauding clients through an 18-month cherry-picking scheme.[29] According to the SEC’s order, the principal and his wholly owned investment adviser disproportionately allocated profitable trades—which generated profits of approximately $105,820—to the principal’s personal accounts, yet allocated unprofitable trades—which resulted in losses of approximately $112,667—to 78 client accounts. Without admitting or denying the SEC’s findings, the investment adviser agreed to pay approximately $13,000 in disgorgement, and its principal agreed to pay a civil penalty and disgorgement totaling approximately $240,000.
In June, the SEC charged an investment advisory firm based in New Mexico, along with its owner and managing member, with violations of Sections 206(1) and 206(2) of the Investment Advisers Act for allegedly failing to disclose conflicts of interest to their clients.[30] The firm and its owner allegedly falsely assured clients that advisory fees would not exceed a certain percentage, despite allegedly failing to take steps to deliver on that promise. The defendants further allegedly billed clients hourly fees without adequately informing those clients about the underlying billed-for services. The Commission seeks injunctions, civil penalties, and disgorgement.

VI. Broker-Dealers

In February, the SEC announced settled charges against a California-based registered broker-dealer, and four of its representatives, for alleged violations of Regulation Best Interest (BI).[31] According to the SEC’s order, the broker-dealer and its four representatives recommended risky corporate bonds to 18 retail customers without having a reasonable basis to believe that the bonds were in the customers’ best interests based on their profiles and on the bonds’ risk vs. reward characteristics. The broker-dealer further allegedly failed to enforce its own policies and procedures with respect to Regulation BI-related training. Without admitting or denying the SEC’s findings, the broker-dealer agreed to pay a civil penalty and disgorgement totaling approximately $170,000, and each of the four representatives also agreed to pay a $12,500 civil penalty, and disgorgement ranging from $1,122 to $6,407.
In early April, the SEC announced settled charges against a California-based registered broker-dealer for alleged failures to design or adequately implement anti-money laundering (AML) policies and, as a result, to file hundreds of Suspicious Activity Reports (SARs) for transactions that it allegedly had reason to suspect were related to illegal activity, designed to evade the Bank Secrecy Act, had no business or apparent lawful purpose, or involved the use of the broker-dealer to facilitate criminal activity.[32] Without admitting or denying the SEC’s findings, the broker-dealer agreed to pay a $500,000 civil penalty and to hire an independent consultant to review its AML compliance program.

VII. Market Manipulation

In June, the SEC announced a final judgment against a Canadian securities lawyer for his involvement in a fraudulent scheme to promote securities offered pursuant to Regulation A.[33] The SEC’s complaint, filed in May, alleged that the lawyer and an associate falsely represented that they had not received compensation for publishing or authoring articles promoting securities offerings despite receiving approximately $800,000 for the same pursuant to sham consulting agreements. Without admitting or denying the allegations, the lawyer settled the charges and agreed to disgorgement and civil penalties totaling approximately $323,000, and a three-year officer and director bar.

VIII. Municipal Bond Fraud

In April, the SEC filed charges against three Arizona individuals for defrauding investors out of $284 million in municipal bonds to build a multi-sports park and family entertainment complex in Mesa, Arizona.[34] The SEC complaint alleges that between August 2020 and June 2021, these individuals provided false revenue projections to investors by fabricating and altering documents—which included letters of intent and contracts with sports clubs for facility use—to support claims that the complex would generate multiple times the amount of revenue needed to cover payments to investors. When the complex opened in January 2022, it generated millions less in revenue and had far less attendance than the allegedly false revenue projections claimed, and the associated bonds defaulted in October 2022. The SEC complaint seeks permanent injunctions, conduct-based conjunctions, and civil penalties.

IX. Insider Trading

Despite speculation that enforcement would increase with respect to insider trading or mishandling of material nonpublic information (MNPI), the Commission’s enforcement in this space was relatively slower than typical in the first half of 2025. Interestingly, in two criminal insider trading cases brought by the U.S. Attorney’s Office in the Southern District of New York, the SEC was acknowledged and thanked in the press releases issued by SDNY but no parallel SEC cases were filed.[35]

In January, the SEC announced settled charges—pending court approval—against an electrical engineering professor for insider trading in relation to the acquisition of a company in the radio frequency filters industry by the subsidiary of a Japanese electronic component manufacturer.[36] The professor served on the acquired company’s Technical Advisory Committee and had access to proprietary information. The SEC alleged that the professor purchased 60,000 shares of the acquired company’s stock the day after speaking to one of the company’s executives over the phone regarding the impending acquisition, and purchased 60,000 more shares the following week. The acquired company’s stock price increased 257 percent, resulting in the professor gaining $360,673 in illegal trading profits. Without admitting or denying the allegations, the professor agreed to a five-year officer and director bar and to pay over $780,000 in civil penalties and disgorgement.
In March, the SEC filed charges against a German national and a Singaporean national for an alleged insider trading scheme that generated $17.5 million in illegal profits between 2017 and 2024.[37] The complaint alleges that the German national obtained MNPI from corporate insiders and/or investment bankers about upcoming public company announcements and communicated this information to the Singaporean national and a third individual through disappearing messages. The three used the information to trade profitably in advance of 10 corporate announcements, and the German national allegedly demanded and received kickbacks and trading profits from the third individual. The SEC seeks injunctions, disgorgement, and civil money penalties; and in a parallel action, the U.S. Attorney’s Office for the District of Massachusetts brought criminal charges against the German and Singaporean nationals.
That same day, the SEC announced settled charges against an employee of a clinical-stage biopharmaceutical company for alleged insider trading resulting in illegal profits for the employee.[38] The SEC alleged that the employee had access to MNPI regarding positive patient responses in certain clinical trials, and with this information allegedly purchased 1,905 shares of the company’s common stock through multiple transactions from August 2020 to December 2020. After the company’s subsequent announcement in December 2020 regarding the positive patient responses, the company’s stock value increased by 40%, garnering $64,618 in allegedly illegal profits for the employee. Without admitting or denying the SEC’s findings, the employee agreed to pay approximately $145,000 in disgorgement and civil penalties.
Later in March, the SEC announced settled charges against a former vice president of a pharmaceuticals company for alleged insider trading that allowed the executive to avoid losses of about $1.3 million.[39] The complaint alleges that, on March 3, 2021, the FDA informed the company about deficiencies in the company’s then-pending application regarding a Parkinson’s disease psychosis drug, and that proposed drug labeling would not be forthcoming. Subsequently, on the morning of March 8, 2021, the vice president allegedly exercised nearly all of his vested stock options in the company and immediately sold his shares based on MNPI indicating that the FDA would not provide labeling information. Later that day, the company announced the FDA’s March 3 communication, and its share price dropped by approximately 45 percent. Without denying the allegations, the vice president consented to an entry of judgment—pending court approval—including a five-year office and director bar, and to-be-determined disgorgement and civil penalties. In a parallel action, the U.S. Attorney’s Office for the Southern District of California filed criminal charges against the vice president.

X. Whistleblowers Awards

In April, the SEC announced an award of about $6 million to joint whistleblowers who provided information that led to a covered enforcement action.[40] According to the SEC order, the joint whistleblowers provided original information that caused the Commission’s Division of Examinations to open an exam which ultimately provided the Enforcement Staff with a “roadmap” to the investigation underlying the enforcement action.

XI. Senior Staffing Updates

As we covered during the 2024 Year-End Update, there were myriad senior staffing changes at the Commission in sync with the change in presidential administration, including most notably the nomination of Paul Atkins as the new Chairman—who was sworn-in in April as the 34th Chairman of the SEC,[41] the selection of Mark Uyeda as Acting Chairman for the interim period of Atkins’ confirmation, and the selection of Samuel Waldon as the Acting Director of the Enforcement Division. Staffing changes and updates continued after the inauguration, reflecting an emphasis on the recruitment of practiced experts with private sector, legislative, and regulatory experience.

In January 2025, Acting Chairman of the SEC Mark T. Uyeda appointed Natalie Díez Riggin as Senior Advisor and Acting Director of the Office of Legislative and Intergovernmental Affairs.[42] Then in June, the Commission renamed Riggin as Director of the agency’s Office of Legislative and International Affairs.[43]
In June, the SEC named Kevin Muhlendorf as the agency’s new Inspector General.[44] Muhlendorf was a law firm partner for the last nine years. During parts of 2023 and 2024, Mr. Muhlendorf served as Acting Inspector General for the Washington Metropolitan Area Transit Authority (WMATA).
In June, the SEC announced that Natasha Vij Greiner would conclude her tenure as Director of the Division of Investment Management. Greiner first joined this position in March 2024, which capped her 23-year career at the SEC.[45] Brian Daly will be the new Director of the Division of Investment Management, entering the role after four years in private practice.[46]
Later in June, Jamie Selway was appointed the Director of the Division of Trading and Markets.[47] Before joining the Commission, Mr. Selway was a partner at a financial advisory firm, a board member at a public utility company, board chair at an online trading platform, advisor to multiple financial technology companies, and co-founder, managing director, and chairman of a brokerage firm.
Also in June, Erik Hotmire returned to the SEC as Chief External Affairs Officer and Director of the Office of Public Affairs.[48] Hotmire has served in various roles throughout the federal government including former Senior Advisor and spokesman to then-SEC Chairman Christopher Cox, Senior Advisor to the SEC’s Division of Enforcement, Special Assistant to the President and a White House domestic policy spokesman for President George W. Bush, and as a spokesman for two U.S. Senators.
Near the end of June, the SEC announced that David Saltiel would retire from the SEC as Acting Director of the Division of Trading and Markets, after serving in that role since December 2024.[49] During his tenure at the Commission, Mr. Saltiel served as a Deputy Director and Associate Director within the Division, and was awarded for leadership excellence in 2020.
In July, Kurt Hohl took over as Chief Accountant at the SEC while Acting Chief Accountant Ryan Wolfe returned to his sole role as Chief Accountant for the Division of Enforcement.[50] Hohl founded a consulting firm and before that spent 26 years as a partner at a major consulting and auditing firm in a variety of roles.
Later in July, the Public Company Accounting Oversight Board (PCAOB) Chair, Erica Williams, resigned from her position as Chair and Board member, and the Commission subsequently announced openings for all five board seats.[51] Under the Sarbanes-Oxley Act of 2002, the Commission has authority to select each of the five board members of PCAOB, along with the Chairperson, for a five-year term—and may reappoint members for a second full term. The Commission’s Office of the Chief Accountant, which administers the PCAOB Board member selection process, will be accepting applications through August 25. George Botic will serve as Acting Chair for the time being.[52]

[1] SEC Press Release, SEC Announces Dismissal of Civil Enforcement Action Against Coinbase (Feb. 27, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-47; SEC Litigation Release, SEC Announces Dismissal of Civil Enforcement Action Against Cumberland (Mar. 27, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26276; SEC Litigation Release, SEC Announces Dismissal of Civil Enforcement Action Against Consensys Software Inc. (Mar. 27, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26277; SEC Litigation Release, SEC Announces Dismissal of Civil Enforcement Action Against Kraken (Mar. 27, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26278.

[2] E.g., Robinhood, SEC Closes Investigation Into Robinhood Crypto with No Action (Feb. 24, 2025), available at https://newsroom.aboutrobinhood.com/sec-closes-investigation-into-robinhood-crypto-with-no-action/.

[3] See Gibson Dunn’s FCPA Update: 2024 & Q1 2025 Developments.

[4] Osman Nawaz, et al., Predicting What’s Next For SEC By Looking At Past Dissents, Law 360 (Jan. 6, 2025), available at https://www.gibsondunn.com/wp-content/uploads/2025/01/Nawaz-Zimmerman-Ulmer-Predicting-Whats-Next-For-SEC-By-Looking-At-Past-Dissents-Law360-1-6-25.pdf.

[5] E.g., SEC v. John M. Fife, et al., Stipulation to Dismiss and Release (June 18, 2025), available at https://www.sec.gov/files/litigation/litreleases/2025/stip26330-fife.pdf.

[6] See Gibson Dunn Client Alert: Dismissal of Much of SEC’s SolarWinds Complaint Has Potentially Broad Implications for SEC Cybersecurity Enforcement.

[7] Jessica Corso, SEC Strikes Deal With SolarWinds In Data Breach Case, Law 360 (July 2, 2025), available at https://www.law360.com/articles/2360384/sec-strikes-deal-with-solarwinds-in-data-breach-case.

[8] SEC Press Release, Altaba, Formerly Known as Yahoo!, Charged With Failing to Disclose Massive Cybersecurity Breach; Agrees To Pay $35 Million (Apr. 24, 2018), available at https://www.sec.gov/newsroom/press-releases/2018-71.

[9] SEC Litigation Release, SEC Charges New York-Based Commercial Real Estate Firm and its Owner with Using an Internet Funding Platform to Steal Over $52 Million from Investors Nationwide (Feb. 21, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26254.

[10] SEC Litigation Release, SEC Charges Washington, D.C. Real Estate Developer And Twenty-Seven Companies With Negligently Misleading Investors (Mar. 10, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26263.

[11] SEC Litigation Release, SEC Charges Founder and Former CEO of Artificial Intelligence Startup with Misleading Investors (Apr. 11, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26282.

[12] DOJ Press Release, Tech CEO Charged In Artificial Intelligence Investment Fraud Scheme (Apr. 9, 2025), available at https://www.justice.gov/usao-sdny/pr/tech-ceo-charged-artificial-intelligence-investment-fraud-scheme.

[13] SEC Litigation Release, SEC Charges Former CFO of Real Estate Development Company with Participating in a $93 Million Fraud Scheme (Apr. 28, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26293.

[14] SEC Press Release, SEC Charges Three Texans with Defrauding Investors in $91 Million Ponzi Scheme (Apr. 29, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-71.

[15] SEC Press Release, SEC Charges Former Real Estate Investment CEO With Operating Multimillion Dollar Ponzi-Like Scheme (May 22, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-76-sec-charges-former-real-estate-investment-ceo-operating-multimillion-dollar-ponzi-scheme.

[16] SEC Press Release, SEC Charges PGI Global Founder with $198 Million Crypto Asset and Foreign Exchange Fraud Scheme (Apr. 22, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-69.

[17] SEC Press Release, Unicoin, Top Executives Charged in Offering Fraud That Raised More than $100 Million from Thousands of Investors (May 20, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-75.

[18] SEC Administrative Proceedings Order, In the Matter of Karen J. Smith, CPA (Feb. 4, 2025), available at https://www.sec.gov/files/litigation/admin/2025/33-11364.pdf.

[19] SEC Administrative Proceedings Order, In the Matter of Allarity Therapeutics, Inc. (Mar. 12, 2025), available at https://www.sec.gov/files/litigation/admin/2025/33-11367.pdf.

[20] SEC Litigation Release, SEC Charges Former Public Company CFO with Lying to Auditors and Falsifying Records (Mar. 17, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26271.

[21] SEC Administrative Proceedings Order, In the Matter of Emergent BioSolutions, Inc. (Apr. 7, 2025), available at https://www.sec.gov/files/litigation/admin/2025/33-11371.pdf.

[22] SEC Administrative Proceedings Order, In the Matter of Edward O’Donnell, CPA (June 9, 2025), available at https://www.sec.gov/files/litigation/admin/2025/34-103214.pdf.

[23] SEC Press Release, SEC Charges One Oak Capital Management and Michael DeRosa with Breaching Fiduciary Duties to Clients (Feb. 14, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-39.

[24] SEC Press Release, SEC Charges Investment Adviser and Two Officers for Misuse of Fund and Portfolio Company Assets (Mar. 7, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-53.

[25] SEC Press Release, SEC Charges New Jersey Investment Adviser and His Firm with Fraud and Other Violations (Mar. 17, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-55.

[26] SEC Administrative Proceedings Order, In re Advance Capital Management (Apr. 7, 2025), available at https://www.sec.gov/files/litigation/admin/2025/ic-35522.pdf.

[27] SEC Administrative Proceedings Order, In re TransAmerica Retirement Advisors, LLC (Apr. 5, 2025), available at https://www.sec.gov/files/litigation/admin/2025/ia-6876.pdf.

[28] SEC Litigation Release, SEC Charges Investment Advisers and Their Principal with Defrauding Clients and Misappropriating Over $17 Million (May 29, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26317.

[29] SEC Administrative Proceedings Summary, SEC Charges Minnesota Investment Adviser and Principal in Cherry-Picking Scheme (June 3, 2025), available at https://www.sec.gov/enforcement-litigation/administrative-proceedings/34-103173-s.

[30] SEC Litigation Release, SEC Charges New Mexico Investment Adviser Firm and Owner With False And Misleading Statements And Failing To Disclose Conflicts Of Interest (June 4, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26319.

[31] SEC Administrative Proceedings Order, In re Centaurus Financial, Inc., et al. (Feb. 7, 2025), available at https://www.sec.gov/files/litigation/admin/2025/34-102379.pdf.

[32] SEC Administrative Proceedings Order, In re Velox Clearing LLC (Apr. 4, 2025), available at https://www.sec.gov/files/litigation/admin/2025/34-102769.pdf.

[33] SEC Litigation Release, SEC Obtains Final Judgment Against Canadian Resident for Involvement in Scheme to Fraudulently Promote Securities (June 13, 2025), available at https://www.sec.gov/files/litigation/complaints/2025/comp26325.pdf.

[34] SEC Press Release, SEC Charges Three Arizona Individuals with Defrauding Investors in $284 Million Municipal Bond Offering That Financed Sports Complex (Apr. 1, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-59.

[35] DOJ Press Release, Corporate Insider And Two Associates Plead Guilty To Million-Dollar Insider Trading Scheme (May 23, 2025), available at https://www.justice.gov/usao-sdny/pr/corporate-insider-and-two-associates-plead-guilty-million-dollar-insider-trading; DOJ Press Release, Executive At Investor Relations Firm And Two Associates Plead Guilty To Insider Trading Scheme (June 6, 2025), available at https://www.justice.gov/usao-sdny/pr/executive-investor-relations-firm-and-two-associates-plead-guilty-insider-trading.

[36] SEC Litigation Release, SEC Charges Technical Consultant with Insider Trading (Jan. 21, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26231.

[37] SEC Litigation Release, SEC Charges Foreign Traders in International Insider Trading Scheme (Mar. 4, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26268.

[38] SEC Administrative Proceedings Order, In re Jeffrey Suchecki (Mar. 4, 2025), available at https://www.sec.gov/files/litigation/admin/2025/34-102515.pdf.

[39] SEC Litigation Release, SEC Charges Former Biopharmaceutical Company Vice President with Insider Trading (Mar. 7, 2025), available at https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26262.

[40] SEC Press Release, SEC Awards $6 Million to Joint Whistleblowers (Apr. 21, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-67-sec-awards-6-million-joint-whistleblowers.

[41] SEC Press Release, Paul S. Atkins Swore in as SEC Chairman (Apr. 21, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-68.

[42] SEC Press Release, Acting Chairman Mark T. Uyeda Names Natalia Díez Riggin as Senior Advisor and Acting

Director of Legislative and Intergovernmental Affairs (Jan. 30, 2025), available at

https://www.sec.gov/newsroom/press-releases/2025-34.

[43] SEC Press Release, Natalia Díez Riggin Named Senior Advisor and Director of Legislative and Intergovernmental Affairs (June 2, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-81-natalia-diez-riggin-named-senior-advisor-director-legislative-intergovernmental-affairs.

[44] SEC Press Release, Kevin Muhlendorf Named SEC Inspector General (June 23, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-92-kevin-muhlendorf-named-sec-inspector-general.

[45] SEC Press Release, Natasha Vij Greiner Will Conclude Her Tenure as Director of Investment Management (June 10, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-84-natasha-vij-greiner-will-conclude-her-tenure-director-investment-management.

[46] SEC Press Release, Brian Daly Named Director of Division of Investment Management (June 13, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-88-brian-daly-named-director-division-investment-management.

[47] SEC Press Release, SEC Names Jamie Selway as Director of Trading and Markets (June 13, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-87-sec-names-jamie-selway-director-trading-markets.

[48] SEC Press Release, SEC Names Erik Hotmire as Chief External Affairs Officer and Director of the Office of Public Affairs (June 13, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-90-sec-names-erik-hotmire-chief-external-affairs-officer-director-office-public-affairs.

[49] SEC Press Release, SEC Announced Departure of David Saltiel (June 18, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-91-sec-announces-departure-david-saltiel.

[50] SEC Press Release, SEC Names Kurt Hohl as Chief Accountant (June 13, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-89-sec-names-kurt-hohl-chief-accountant.

[51] SEC Statement, Statement on the Departure of PCAOB Chair Erica Y. Williams (July 22, 2025), available at https://www.sec.gov/newsroom/speeches-statements/crenshaw-statement-departure-pcaob-chair-erica-y-williams-072225-statement-departure-pcaob-chair-erica-y-williams; SEC Speech, Statement on Commencement of Appointment Process for Five Public Company Accounting Oversight Board Seats (July 23, 2025), available at https://www.sec.gov/newsroom/speeches-statements/atkins-pcaob-board-072325.

[52] SEC Press Release, SEC Announces George Botic to Serve as Acting Chair of the Public Company Accounting Oversight Board (July 21, 2025), available at https://www.sec.gov/newsroom/press-releases/2025-100-sec-announces-george-botic-serve-acting-chair-public-company-accounting-oversight-board?utm_medium=email&utm_source=govdelivery.

The following Gibson Dunn lawyers prepared this update: Mark Schonfeld, David Woodcock, Jina Choi, Osman Nawaz, Tina Samanta, Lauren Jackson, Michael Ulmer, Hayden McGovern, Lauren Guzman, Ty Shockley, and Timoteo L’Esperance.

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

Mark K. Schonfeld – Co-Chair, New York (+1 212.351.2433, mschonfeld@gibsondunn.com)
David Woodcock – Co-Chair, Dallas (+1 214.698.3211, dwoodcock@gibsondunn.com)
Jina L. Choi – San Francisco (+1 415.393.8221, jchoi@gibsondunn.com)
Osman Nawaz – New York (+1 212.351.3940 ,onawaz@gibsondunn.com)
Tina Samanta – New York (+1 212.351.2469, tsamanta@gibsondunn.com)
Lauren Cook Jackson – Washington, D.C. (+1 202.955.8293, ljackson@gibsondunn.com)
Michael Ulmer – Denver (+1 303.298.5752, mulmer@gibsondunn.com)

In June, the California Law Revision Commission made new and revised proposals for changes to California competition law on “misuse of market power,” single-firm conduct, and mergers—all of which may significantly impact Japanese companies doing business in California.

カリフォルニア州法改正委員会職員が新たな独占禁止法に関する広範な提案を推進

6月、カリフォルニア州法改正委員会は、カリフォルニア州の競争法に関する「市場支配力の濫用」、単一企業による行為、および合併に関する新たな改正案を提案しました。これらの改正案は、カリフォルニア州で事業を展開する日本企業に重大な影響を与える可能性があります。

Navigate to the English version here

カリフォルニア州法改正委員会職員が新たな独占禁止法に関する広範な提案を推進

カリフォルニア州法改正委員会（CLRC）は、州の独占禁止法改正を検討してきました。[1]過去1ヶ月間、CLRC職員は（1）市場支配力の濫用に関する新たな立法案の2つの選択肢を提案しました。[2]（2）単一企業行為に関する新たな立法案の以前の提案を改訂しました。[3]（3）合併規制に関する新たなカリフォルニア州法の4つの選択肢を提案しました。[4]職員が支持する提案は、既存の競争法に大胆で広範な変更を加えるもので、カリフォルニア州法は連邦法よりも大幅に広範かつ企業に対する規制が厳格なものとなります。これらの提案が成立した場合、カリフォルニア州で事業を展開する日本企業に重要な影響を及ぼす可能性があります。そして、カリフォルニア州法が日本の独占禁止法に類似する点で注目されます。

CLRCの委員は、職員の提言を検討しています。CLRCは2025年6月26日に会議を開催し（議事録は後日公開予定）、2025年9月18日に再び会議を開催し、これらの問題を検討しています。一般市民はこれらの会議前にコメントを提出できます。CLRCは6月26日の会議前に受け付けたコメントを既に公開しています。[5]ギブソン・ダン弁護士はこれらの提言を監視しており、貴社の事業への影響についてご相談いただくか、CLRCへの提出用の公的コメントの作成を支援いたします。

市場支配力の濫用に関する提案

CLRC事務局は、いわゆる「市場支配力の濫用」に対処するための追加の法定条項を提案しました。これは、市場支配力を持つ企業が競合他社や顧客に不利益を及ぼす行為を指します。そして、欧州の「支配的地位の濫用」枠組み（米国競争法で採用されたことのない基準）と類似する概念を導入する可能性があります。また、日本の独占禁止法で独占的または不公正な取引慣行として扱われる可能性があるような行為（タイイング、排他的取引、取引拒否など）を標的とする可能性もあります。

具体的には、関連市場における市場シェアが30％以上、または資産、年間売上高、時価総額のいずれかが500億米ドルを超える企業を「重要な市場支配力」を有するものとみなすことを提案しました。[6]その後、そのような支配力を有する企業が実施した場合に競争制限的と推定される行為のリストを以下に提示します。

1つの市場における相当な市場力を別の市場に活用すること
バンドリング、タイイング、忠誠度割引の使用、または相互運用を拒否すること
不可欠施設（「エッセンシャル・ファシリティ」）または不可欠資源の使用を拒否すること
取引を拒否する
コストを下回る価格設定を含む略奪的価格設定手法の実施
取引条件として独占権を課す
自己優遇措置
直接的または間接的に、他者の株式またはその他の出資持分の全部または一部を取得すること。[7]

これらの規定は、(1)企業の規模のみを根拠に市場支配力の推定を認める点で、一般的な競争理論に反する、(2)連邦法において一方的行為が競争制限的とみなされるための市場シェアのレベルを大幅に引き下げる、および(3)経済理論や経験がこれらの行為がしばしば競争促進的で消費者利益に資するものであることを示しているにもかかわらず、多くの行為を競争制限的と推定する点で、特に注目すべきものである。

単一企業行為に関する改正案

CLRCのスタッフは、単一企業行為に関する提案に対する公衆のコメントにも回答しました。以前、スタッフはカリフォルニア州法における単一企業行為を規制する規定に関する以下の3つの可能なアプローチを提案していました。[8]

連邦シャーマン反トラスト法第2条を模倣した「基本」単一企業行為規定を追加し、独占的買手地位の禁止を明示的に定める。
上記規定を追加し、単一企業主体が「独占的地位の取得または維持」に結びつかない「取引制限」を行うことを禁止する。
連邦法から離れて、「被告の競合他社が課す競争制約を減少させたり、そのリスクを意味ある程度まで高めたりする」行為を禁止し、かつ「被告の取引相手方が損害を受けることを防止する十分な利益を提供しない」行為を禁止する「競争阻害的排除行為」の禁止規定を新設する。

市場支配力の濫用に関する提案と同様、CLRC事務局の単一企業行為に関する第2および第3の提案は、カリフォルニア州法が日本の独占禁止法における独占的行為および不公正な取引慣行の取り扱いとより近似する可能性を有する。さらに、3つの提案すべてにおいて、スタッフは法の解釈を導く目的条項の追加を提案しました。例として、カリフォルニア州の独占禁止法は労働者の保護を含むことを明示する条項や、同法は連邦法よりも広範であり、連邦法をモデルとしていないことを明示する条項が挙げられました。

スタッフは現在、提案のうち2つについて採用を推奨しないことを決定しました。まず、スタッフは、特定の利益団体とCLRCが任命した経済学者からなる「単一企業行為作業部会」から、この提案が不十分だと指摘されたため、最も穏健な改革案（シャーマン法第2条の類推規定を創設する提案[9]）を否決しました。[10]第二に、スタッフは、CLRCのSingle Firm Conduct Working Groupが推進していた「連邦法からの完全な分離」を定める提案の放棄を推奨しました。[11]反トラスト法の専門家からなる両陣営のコメント提供者は、この提案が重大な不確実性と訴訟の増加を引き起こすとして反対しました。[12]

これにより、提案された立法案として残る第二の選択肢は、連邦法と同様に「違法な独占」を禁止し、同時に「一方的な取引制限」も禁止する内容です。[13]複数のコメント提出者は、このアプローチに対し懸念を表明しました。具体的には、一方的な行為と共同行為の概念を混同している点、[14]広範で曖昧なため不確実性を招くリスクがある点、[15]競争促進的な行為の多くを違法化し（これにより抑制する）可能性がある点です。[16]CLRC職員はこれらの懸念を主に却下しましたが、提案を「不当な取引制限の禁止」に限定すべき点では同意しました。[17]

CLRC職員は、大幅な改革を推奨する立場から、カリフォルニア州の独占禁止法は連邦法よりも広範であり、連邦法に準拠しないことを明記する立法上の宣言を提案しました。具体的には、特定の連邦裁判所判決を拒否する具体的な文言を含めるべきだとしました。[18]CLRC職員は、コメント提出者が指摘した「草案の規定が不確実性を増大させ、価格引き下げやロイヤルティプログラムなどの競争促進的実践を疑問視する可能性がある」との懸念を主に却下しました。[19]

合併に関する提案条項

米国連邦レベルでは、クレイトン法第7条は、その効果が「競争を実質的に減少させるおそれがあるか、または独占状態を招く傾向がある」合併を禁止しています。[20]特定の業界における合併は州法に基づき争われる可能性があり[21]、カリフォルニア州司法長官は連邦法に基づき合併に異議を申し立てる権限を有していますが、カリフォルニア州には現在、広範な州レベルの合併規制法が存在しません。職員は、潜在的な州合併規定に関する4つのオプションを提示しました。

オプション1は「クレイトン法とほぼ同様の内容」です。[22]ただし、連邦法に追加して、独占的買手市場（monopsony）の形成を招く合併を明示的に禁止し[23]、共通運送業者に対する連邦の免除規定を削除します。[24]CLRC職員は、連邦法に準じた州法を採用するデメリットとして、既存の連邦合併法判例を州法に導入する点を指摘しました。[25]
オプション2は、改訂された連邦法類推を採用し、（1）合併が「関連市場における不当な割合の市場シェアを支配する企業」（おそらく30％前後）と「当該市場における企業の集中度が著しく増加する」結果をもたらす場合、その合併は本質的に競争制限的であると推定する規定を追加し、[26](2)2023年連邦合併ガイドラインを、当該法規の解釈における「説得力のある先例」として認める。[27]
オプション3はオプション2よりもさらに進み、ハーフィンダール・ヒルシュマン指数（HHI）の変化に基づく推定を法典化します。[28]具体的には、HHIスコアが1,800以上、市場シェアが30%を超える、またはHHIが100ポイント以上増加する合併について、違法性を推定する規定を盛り込みます。[29]
オプション4は「連邦法からの離脱」を創設し、[30]合併の効果が、「競争の著しい減少を招くおそれがある場合」を禁止します。[31]これにより、合併の違法性を立証するための立証責任が軽減されます。[32]

これらのすべてのオプションは、程度は異なるものの、連邦独占禁止法よりも広範な内容となっています。スタッフのオプションの一部、例えばHHI指標を法律に組み込む措置は、日本の合併審査のより形式的な側面との類似性を導入する可能性があります。検討中のオプションの多様性を踏まえ、ギブソン・ダンは、カリフォルニア州合併法に関するCLRCの今後の審議を注意深く監視していきます。CLRCは、合併前通知法に関する正式な提言を提示していません。これは、合併前通知に関する提案が既に立法機関で審議中であるためです。[33]

ポイント

CLRC職員の提案は、カリフォルニア州および米国全体における現行法から依然として重大な変更を伴うものです。提案された変更は、独占禁止法上のリスクを大幅に拡大し、かつカリフォルニア州司法長官の役割を拡大し、そしてカリフォルニア州の裁判所における訴訟を促進する可能性があります。これらは、特に複数の管轄区域で事業を展開する企業、特にカリフォルニア州で事業を展開する多くの日本企業を含む企業にとって、不確実性とコンプライアンス上の課題を生じさせる可能性があります。

CLRC職員は、州の合併法を追加するだけでも「カリフォルニア州の独占禁止法における重大な変更」であると認めています。[34]また、多くの提案は、連邦法と異なる解釈を裁判所が求める可能性があり、合併や買収が連邦法やほぼすべての州の法律下では合法的であるにもかかわらず、州法に基づきカリフォルニア州で阻止されるという不確実性と非対称性を生じさせる可能性があります。

6月の覚書は、CLRCの職員が、採用されればカリフォルニア州で事業を行う企業に前例のない制限を課す積極的な提案を進めていることを示しています。これらの制限は、実質的にそのような企業を全米で拘束する可能性があります。CLRCの職員は、連邦法との広範な離脱が不当であり、不確実性を生むという懸念をほぼ無視しているようです。「市場支配力の濫用」禁止規定の導入は、既存の州法および連邦法から劇的な変更を意味します。この規定は、欧州連合やニューヨーク州の提案された『21世紀独占禁止法』よりも低い水準で企業を支配的と認定します。[35]また、定義が曖昧で広範かつ競争促進的な行為を含む、長いリストの行為を非難する内容となっています。

CLRCはスタッフの提言を審査し、採用するかどうかを決定した後、自身の提言を立法府に提出する前に、公衆の意見聴取期間を設ける必要があります。CLRCの最終提言は歴史的に高い確率で法律に採用されてきたため、[36]対象企業や業界団体は、職員の提案が事業に与える影響を慎重に検討し、2025年9月18日に委員がこれらの選択肢を議論する会議までに、CLRCへのコメントを提出するかどうかを検討すべきです。ギブソン・ダン弁護士は、CLRCまたは立法府が法案を検討する際に提出するパブリックコメントの作成、提案されている変更がお客様の事業にどのように適用されるかについての協議、または本最新情報で取り上げた問題に関するその他のご質問に対応いたします。

このニュースレターを作成したのは、ギブソン・ダン法律事務所のレイチェル・S・ブラス、ダニエル・G・スワンソン、チェーリ・ヒグニー、ジュリアン・クラインブロット、イーライ・ラザラス、サラ・ロバーツの各弁護士です。

ギブソン・ダン法律事務所の弁護士は、本ニュースレターに記載された問題に関するご質問に対応いたします。本ニュースレターの執筆者、またはカリフォルニア州の独占禁止法・競争法、M&A、プライベート・エクイティ・プラクティス・グループのリーダーおよびメンバーまでお問い合わせください。連絡先情報は本ニュースレターの下部をご覧ください。

English:

The California Law Revision Commission (CLRC) has been considering changes to the state’s antitrust law.[37] Over the past month, CLRC staff (1) proposed two options for new legislation targeting alleged “misuses of market power,”[38] (2) revised its previous proposals for new legislation governing single-firm conduct law,[39] and (3) proposed four options for a new California law to regulate mergers.[40] The staff’s favored proposals would be aggressive and far-reaching changes to existing competition law, making California law significantly broader, and more restrictive on businesses, than federal law. If enacted, the proposals may have important implications for Japanese companies doing business in California, and in notable ways, could make California law more similar to Japan’s Anti-Monopoly Act.

The CLRC’s commissioners will now consider the staff’s recommendations. The CLRC met on June 26, 2025 (meeting minutes are forthcoming) and will meet again on September 18, 2025 to consider these issues. The public can submit comments ahead of these meetings; the CLRC has posted comments received in advance of the June 26 meeting.[41] Gibson Dunn attorneys are monitoring these recommendations and are available to discuss the implications for your business or assist in preparing a public comment for submission to the CLRC.

Proposed Misuse of Market Power Language

The CLRC staff proposed additional statutory provisions to address so-called misuses of market power—practices in which a company with more market power allegedly disadvantages its rivals or customers. This could in effect import concepts similar to those in the European “abuse of dominance” framework (a standard that has never been adopted in any U.S. competition law) and target some types of conduct like tying, exclusionary dealing, and refusals to deal that can be treated as monopolistic or unfair trade practices under Japan’s Anti-Monopoly Act.

Specifically, the staff recommended that any company with (i) thirty percent or more of the relevant market, or (ii) assets, net annual sales, or market capitalization greater than $500 billion be deemed to have significant market power.[42] They then proposed a list of conduct that would be presumed anticompetitive when practiced by a firm with such presumed power:

Leveraging substantial market power in one market into a separate market;
Bundling, tying, using loyalty rebates, or refusing to interoperate;
Denying use of essential facilities or resources;
Refusing to deal;
Engaging in predatory pricing tactics such as pricing below costs;
Imposing exclusivity as a condition of doing business;
Self-preferencing; or
Acquiring, directly or indirectly, the whole or any part of the stock, or other share capital of another person.[43]

These provisions are particularly notable because (1) they would allow for a presumption of market power based merely on a company’s size, contrary to general competition theory; (2) they significantly reduce the market share threshold generally required under federal law for unilateral conduct to be deemed anticompetitive; and (3) they presume numerous practices are anticompetitive even when economic theory and experience indicate that the practices are often procompetitive and beneficial to consumers.

Revised Single-Firm Conduct Proposals

The staff also responded to public comments about its single-firm conduct proposals. Previously, the staff had suggested three possible approaches for a provision to address single-firm conduct in California law:[44]

Add a “basic” single-firm conduct provision, mirroring Section 2 of the federal Sherman Antitrust Act, with an explicit prohibition on monopsony.
Add the above provision, with a prohibition on single firm actors engaging in “restraints of trade,” untethered to the acquisition or maintenance of monopoly power.
Break from federal law with a prohibition on “anticompetitive exclusionary conduct” that would “diminish or create a meaningful risk of diminishing the competitive constraints imposed by the defendant’s rivals” and which “[d]oes not provide sufficient benefits to prevent the defendant’s trading partners from being harmed.”

Like the proposals on misuse of market power, the second and third of the CLRC staff’s single-firm conduct proposals could bring California law closer to Japan’s treatment of monopolistic conduct and unfair trade practices under the Anti-Monopoly Act. And with all three proposals, the staff suggested including statements of purpose to guide the law’s interpretation; examples included statements holding that California antitrust law is intended to include protection for workers and that California antitrust law is broader than and not modeled on federal law.

The staff has now recommended against adoption of two of its proposals. First, staff disapproved of the least aggressive reform proposal—to create an analogue to Section 2 of the Sherman Act[45]—in response to criticism from certain interest groups and the Single Firm Conduct Working Group, a group of economists appointed by the CLRC, who argued that this proposal would not go far enough.[46] Second, the staff recommended abandoning a proposal for a “clean break” from federal law that the Single Firm Conduct Working Group had championed.[47] Other commenters—from both sides of the antitrust bar—objected that that proposal would cause significant uncertainty and increased litigation.[48]

This leaves the second option as proposed legislation: a prohibition both of unlawful monopolization (as federal law does) and of unilateral “restraints of trade.”[49] Several commenters raised concerns with this approach—noting that it conflates unilateral and joint conduct concepts;[50] that it is broad and vague, which risks creating uncertainty;[51] and that it could be construed to outlaw (and thus chill) many forms of procompetitive conduct.[52] CLRC staff largely dismissed these concerns but agreed the proposal should be limited to “prohibiting unreasonable restraints of trade.”[53]

Consistent with their recommendation for significant reform, CLRC staff had also proposed legislative declarations that California antitrust law should be broader than and not modeled on federal law—with specific language rejecting certain federal court decisions.[54] CLRC staff largely dismissed commenters’ concerns that the draft provisions would increase uncertainty and call into question procompetitive practices, like price-cutting and loyalty programs.[55]

Proposed Merger Language

At the federal level in the United States, Section 7 of the Clayton Act prohibits mergers whose effects “may be substantially to lessen competition, or to tend to create a monopoly.”[56] While mergers in certain industries can be challenged under state laws[57] and the California Attorney General can bring challenges to mergers under federal law, California currently lacks a broad state-level merger statute. The staff presented four options for a potential state merger provision.

Option 1 “largely mirrors the Clayton Act.”[58] But it would expand on federal law by also expressly prohibiting mergers that tend to create a monopsony[59] while removing analogous federal exemptions, such as those for common carriers.[60] The CLRC staff framed adopting a state analogue to the federal law as having the “downside” of importing existing federal jurisprudence on mergers.[61]
Option 2 would adopt the modified federal analogue and (1) add a presumption that mergers which would result in a “a firm controlling an undue percentage share of the relevant market”—likely at or around 30%—and “a significant increase in the concentration of firms in that market” are inherently anticompetitive,[62] and (2) recognize the 2023 Federal Merger Guidelines as “persuasive authority” in interpreting the statute.[63]
Option 3 would go farther than Option 2 and codify presumptions based on changes in the Herfindahl-Hirschman Index (“HHI”),[64] including a presumption of unlawfulness for mergers that result in a market with an HHI score of 1,800 or more, a market share greater than 30%, or a change in HHI of over 100 points.[65]
Option 4 would create a “break from federal law,”[66] prohibiting mergers whose effect “may be to create an appreciable risk of lessening competition more than a de minimis amount.”[67] The practical effect would be to reduce the burden of proof required to prove the illegality of a merger.[68]

All of these options are, to varying degrees, broader than federal antitrust law. Some parts of the staff’s options, like incorporation of HHI metrics into statute, could introduce similarities to some of the more formulaic aspects of merger review in Japan. Given the diversity of options still under consideration, Gibson Dunn will be closely monitoring the CLRC’s further deliberations regarding a potential California merger law. The CLRC has not presented a formal recommendation for premerger notification laws, because a proposal addressing premerger notification is already pending in the Legislature.[69]

Takeaways

The CLRC staff’s proposals continue to represent significant departures from existing law in California and the United States generally. The proposed changes have the potential to vastly expand antitrust risk, create a larger role for the California Attorney General, and encourage litigation in California courts. They may further create uncertainty and compliance challenges for businesses, particularly those operating in multiple jurisdictions, including many Japanese companies with dealings in California.

The CLRC staff acknowledged that the mere addition of a state merger statute is itself “a significant change to California’s antitrust law.”[70] And many of the proposals would invite the courts to interpret California law differently than federal law, creating uncertainty and asymmetry where mergers or acquisitions could potentially be lawful under federal law and the laws of almost every state—but held up in California on state-law grounds.

June’s memoranda also indicate that the CLRC’s staff is proceeding with aggressive recommendations that, if adopted, would result in unprecedented restrictions on businesses operating in California—restrictions that could effectively bind such businesses across the United States. The CLRC staff appear to have largely dismissed concerns that a wide divergence with federal law is unwarranted and would create uncertainty. And the introduction of a “misuse of market power” prohibition would mark a dramatic change from existing state and federal law: It would deem companies to be dominant at lower levels than in the European Union or in New York’s proposed ‘Twenty-First Century Anti-Trust Act.’[71] And it would condemn a long list of conduct that is ill-defined, potentially sweeping, and often procompetitive.

The CLRC must review the staff’s recommendations, decide whether to adopt them, and then subject their own recommendations to a period of public comment before submitting them to the legislature. Because the CLRC’s final recommendations have historically been adopted into law at a high rate,[72] companies and industry associations should think carefully about how the staff’s proposals may affect their businesses and whether to provide comments for the CLRC before the September 18, 2025 meeting at which the commissioners plan to discuss these options. Attorneys from Gibson Dunn are available to help in preparing a public comment for submission to the CLRC or to the legislature as they consider potential bills, to discuss how these proposed changes may apply to your business, or to address any other questions you may have regarding the issues discussed in this update.

[1]議事録、カリフォルニア州法改正委員会（2025年1月23日）4頁、https://www.clrc.ca.gov/pub/2025/MM25-12.pdf。アレックス・ウィルツ、カリフォルニア州法改正委員会、独占禁止法研究を推進（2025年1月24日）、https://content.mlex.com/#/content/1626343/california-law-revision-commission-advances-antitrust-law-study?referrer=email_dailycontentset&dailyId=d5d6cf8456554839aa6843bf750c0cde&paddleid=201&paddleaois=2000。

[2]メモランダム 2025-32、状況報告：市場支配力の濫用に関する草案条項、カリフォルニア州法改正委員会（2025年6月19日）[以下「MMPオプションメモ」]、https://clrc.ca.gov/pub/2025/MM25-32.pdf。

[3]メモランダム 2025-30、単一企業行為規定の草案文言と公衆コメント、カリフォルニア州法改正委員会（2025年6月17日）[以下「SFC公衆コメントメモ」]、https://clrc.ca.gov/pub/2025/MM25-30.pdf。

[4]覚書2025-31、合併規定の草案、カリフォルニア州法改正委員会（2025年6月16日）[以下「合併オプション覚書」]、https://clrc.ca.gov/pub/2025/MM25-31.pdf。

[5]覚書2025-30の第一補足、カリフォルニア州法改正委員会（2025年6月25日）、https://clrc.ca.gov/pub/2025/MM25-30s1.pdf。2025-31号メモランダムの第一補足書、カリフォルニア州法改正委員会（2025年6月25日）、https://clrc.ca.gov/pub/2025/MM25-31s1.pdf。参照：2025年1月15日および2025年3月25日のクライアントアラート。

[6]MMPオプションメモの4～7ページ。

[7]同上、3-4頁、7頁。

[8]メモランダム、単一法律事務所の行為に関する規定の草案言語、カリフォルニア州法改正委員会（2025年3月24日）2-7頁 [以下「SFCオプションメモ」]、https://www.clrc.ca.gov/pub/2025/MM25-21.pdf。

[9]同上、2-3頁。

[10]SFC 公開コメントメモ 5-6頁。

[11]同上、10-13頁。

[12]同上、12-13頁（カリフォルニア州商工会議所、カリフォルニア州ライフサイエンス協会、カリフォルニア州民事司法協会、カリフォルニア州経済安全保障行動とそのパートナー）。

[13]SFC オプションズ・メモ 3-5頁。

[14]SFC 公的コメントメモ 8頁（カリフォルニア生命科学協会、カリフォルニア民事正義協会、映画協会）。

[15]同上 8-9頁（カリフォルニア生命科学協会、カリフォルニア民事正義協会、映画協会、単一企業行動作業部会）。

[16]同上、7-9頁（カリフォルニア州商工会議所、カリフォルニア生命科学協会）。

[17]同上、8-9頁。

[18]SFC オプション覚書 9-14 ページ。

[19]SFC 公聴会意見書 14-15頁。

[20]15 U.S.C. § 18。

[21]参照：会社法 §§ 5914 – 5926（非営利医療施設）、§§ 14700 – 14707（小売食品販売業者および小売医薬品販売業者）、および健康・安全法 §§ 127507 – 12507.6（医療）。

[22]合併オプションメモ 3頁。

[23]同上、3-4頁。

[24]同上、3 頁脚注 20。

[25]同上、4頁。

[26]同上、5-6頁。

[27]同上。2023年合併ガイドラインの詳細については、ガイドラインの公表に関するギブソン・ダンの2023年12月21日のクライアント・アラートをご覧ください。

[28]ハーフィンダール・ヒルシュマン指数（HHI）は、市場集中度を評価する手法で、特定の市場における市場シェアの二乗和を算出します。HHIスコアが高いほど、市場集中度が高いことを示します。

[29]合併オプションメモ 8頁。

[30]同上、10頁。

[31]同上、10-11頁（上院議員クロブチャーの「競争と独占禁止法執行改革法」、上院法案第130号、第119回議会第1会期（2025年）を引用）。

[32]同上、11頁。

[33]SB 25（ウムバーグ、2025年）は統一法委員会（ULC）が提案した法案で、1976年連邦ハート・スコット・ロディノ独占禁止法改正法に基づき通知を提出する義務を負う者は、当該通知書および指定された追加書類の写しを、カリフォルニア州司法長官（AG）に提出することを義務付けています。その他の特定の条件下での規定も含まれます。SB 25は上院で可決され、下院に送付されました。

[34]合併オプションメモ4頁。

[35]MMPオプションメモ5頁および脚注31～33。立法府は、CLRCの独占禁止法調査を指示する際、これらの法律を念頭に置いていました。2022年カリフォルニア州立法調査第147章（ACR 95）参照。

[36]カリフォルニア州法改正委員会、https://clrc.ca.gov/（2025年6月18日最終アクセス）。

[37] Minutes, Cal. L. Revision Comm’n (Jan. 23, 2025) at 4, https://www.clrc.ca.gov/pub/2025/MM25-12.pdf; Alex Wilts, California Law Revision Commission Advances Antitrust Law Study (Jan. 24, 2025), https://content.mlex.com/#/content/1626343/california-law-revision-commission-advances-antitrust-law-study?referrer=email_dailycontentset&dailyId=d5d6cf8456554839aa6843bf750c0cde&paddleid=201&paddleaois=2000.

[38] Memorandum 2025-32, Status Update: Draft Language on Misuse of Market Power, Cal. L. Revision Comm’n (June 19, 2025) [henceforth “MMP Options Memo”], https://clrc.ca.gov/pub/2025/MM25-32.pdf.

[39] Memorandum 2025-30, Draft Language for Single Firm Conduct Provision and Public Comment, Cal. L. Revision Comm’n (June 17, 2025) [henceforth “SFC Public Comment Memo”], https://clrc.ca.gov/pub/2025/MM25-30.pdf.

[40] Memorandum 2025-31, Draft Language for Merger Provisions, Cal. L. Revision Comm’n (June 16, 2025) [henceforth “Merger Options Memo”], https://clrc.ca.gov/pub/2025/MM25-31.pdf.

[41] First Supplement to Memorandum 2025-30, Cal. L. Revision Comm’n (June 25, 2025), https://clrc.ca.gov/pub/2025/MM25-30s1.pdf; First Supplement to Memorandum 2025-31, Cal. L. Revision Comm’n (June 25, 2025), https://clrc.ca.gov/pub/2025/MM25-31s1.pdf; see also our January 15, 2025 and March 25, 2025 Client Alerts.

[42] MMP Options Memo at 4-7.

[43] Id. at 3-4, 7.

[44] Memorandum, Draft Language for Single Firm Conduct Provision, Cal. L. Revision Comm’n (Mar. 24, 2025) at 2-7 [henceforth “SFC Options Memo”], https://www.clrc.ca.gov/pub/2025/MM25-21.pdf

[45] Id. at 2-3.

[46] SFC Public Comment Memo at 5-6.

[47] Id. at 10-13.

[48] Id. at 12-13 (California Chamber of Commerce, California Life Sciences, Civil Justice Association of California, Economic Security California Action and its partners).

[49] SFC Options Memo at 3-5.

[50] SFC Public Comment Memo at 8 (California Life Sciences, Civil Justice Association of California, Motion Pictures Association).

[51] Id. at 8-9 (California Life Sciences, Civil Justice Association of California, Motion Pictures Association, Single Firm Conduct Working Group).

[52] Id. at 7-9 (California Chamber of Commerce, California Life Sciences).

[53] Id. at 8-9.

[54] SFC Options Memo at 9-14.

[55] SFC Public Comment Memo at 14-15.

[56] 15 U.S.C. § 18.

[57] See Corp. Code §§ 5914 – 5926 (nonprofit health facilities), §§ 14700 – 14707 (retail grocery firms and retail drug firms), and Health & Safety Code §§ 127507 – 12507.6 (health care).

[58] Merger Options Memo at 3.

[59] Id. at 3-4.

[60] Id. at 3 n.20.

[61] Id. at 4.

[62] Id. at 5-6.

[63] Id. For additional detail on the 2023 Merger Guidelines, see Gibson Dunn’s December 21, 2023 Client Alert on the release of the Guidelines.

[64] The Herfindahl-Hirschman Index is a method for assessing market concentration; it takes the sum of the squares of the market shares in a given market. The greater the HHI score, the higher the concentration.

[65] Merger Options Memo at 8.

[66] Id. at 10.

[67] Id. at 10-11 (citing Senator Klobuchar’s Competition and Antirust Law Enforcement Reform Act, Sen. No. 130 119th Cong. 1st Sess. (2025)).

[68] Id. at 11.

[69] SB 25 (Umberg, 2025) is sponsored by the Uniform Law Commission (ULC) and requires a person who is obligated to file a notification pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 to file a copy of that form and any additional documentation, as specified, with the California Attorney General (AG), among other provisions under certain circumstances. SB 25 was passed by the Senate and ordered to the Assembly.

[70] Merger Options Memo at 4.

[71] MMP Options Memo at 5 & nn.31-33. The legislature had these laws in mind when it directed the CLRC’s antitrust study. See 2022 Cal. Stat. Res. Ch. 147 (ACR 95).

[72] Cal. L. Revision Comm’n, https://clrc.ca.gov/ (last visited June 18, 2025).

The following Gibson Dunn lawyers prepared this update: Rachel S. Brass, Daniel G. Swanson, Caeli Higney, Julian Kleinbrodt, Eli Lazarus, and Sarah Roberts.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the following leaders and members of the firm’s Antitrust and Competition or Mergers and Acquisitions practice groups in California:

Antitrust and Competition:

Rachel S. Brass – San Francisco (+1 415.393.8293, rbrass@gibsondunn.com)

Christopher P. Dusseault – Los Angeles (+1 213.229.7855, cdusseault@gibsondunn.com)

Caeli A. Higney – San Francisco (+1 415.393.8248, chigney@gibsondunn.com)

Julian W. Kleinbrodt – San Francisco (+1 415.393.8382, jkleinbrodt@gibsondunn.com)

Eli M. Lazarus – San Francisco office (+1 415.393.8340, elazarus@gibsondunn.com)

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

Daniel G. Swanson – Los Angeles (+1 213.229.7430, dswanson@gibsondunn.com)

Jay P. Srinivasan – Los Angeles (+1 213.229.7296, jsrinivasan@gibsondunn.com)

Chris Whittaker – Orange County (+1 949.451.4337, cwhittaker@gibsondunn.com)

Mergers and Acquisitions:

Candice Choh – Century City (+1 310.552.8658, cchoh@gibsondunn.com)

Matthew B. Dubeck – Los Angeles (+1 213.229.7622, mdubeck@gibsondunn.com)

Abtin Jalali – San Francisco (+1 415.393.8307, ajalali@gibsondunn.com)

Ari Lanin – Century City (+1 310.552.8581, alanin@gibsondunn.com)

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

Ryan A. Murr – San Francisco (+1 415.393.8373, rmurr@gibsondunn.com)

From the Derivatives Practice Group: This week, the CFTC’s Division of Market Oversight and the Division of Clearing and Risk announced they have taken a no-action position regarding swap data reporting and recordkeeping regulations.

New Developments

CFTC Issues Advisory on Referrals for Potential Criminal Enforcement. On July 9, the CFTC’s Division of Enforcement (“DOE”) issued an advisory to provide guidance describing its plan to address criminally liable regulatory offenses in accordance with Executive Order 14294, Fighting Overcriminalization in Federal Regulations. The advisory announces the framework to be followed when DOE, as the CFTC division responsible for making referrals to the Department of Justice (“DOJ”), considers whether to refer potential violations of criminal regulatory offenses to DOJ. The advisory also includes a set of factors DOE staff should consider when determining whether to refer alleged violations of criminal regulatory offenses to DOJ.

CFTC Staff Issues No-Action Letter Extension Regarding Counterparties Clearing Swaps through Relief DCOs. On July 9, the CFTC issued a no-action letter extending the no-action position in CFTC Staff Letter No. 22-18 concerning certain swap reporting requirements of Part 45 of the CFTC’s regulations. The letter applies to counterparties clearing swaps through derivatives clearing organizations (“DCOs”) operating consistent with a CFTC exemptive order or a CFTC Division of Clearing and Risk no-action letter (Relief DCOs).

SEC Commissioner Peirce Releases Statement on Tokenization of Securities. On July 9, SEC Commissioner Hester M. Peirce released a statement that “[t]okenized securities are still securities” and “market participants must consider – and adhere to – the federal securities laws when transacting” in tokenized securities. Commissioner Peirce said “[m]arket participants who distribute, purchase, and trade tokenized securities . . . should consider the nature of these securities and the resulting securities laws implications” and that “a token that does not provide the holder with legal and beneficial ownership of the underlying security could be a ‘security-based swap.’”

New Developments Outside the U.S.

ESMA Publishes Guidelines for Assessing Knowledge and Competence of Staff at Crypto-Asset Service Providers. On July 11, ESMA published guidelines specifying the criteria for assessing the knowledge and competence of staff at crypto-asset service providers (“CASPs”) who provide information or advice on crypto-assets and services under the Markets in Crypto-Assets Regulation (“MiCA”). The guidelines will apply six months after translation into all EU languages and publication on ESMA’s website. Within two months of the date of publication of the guidelines on ESMA’s website in all EU official languages, competent authorities to which these guidelines apply must notify ESMA whether they comply, do not comply, but intend to comply, or do not comply and do not intend to comply with the guidelines.

ESMA Warns Investors of Unregulated Crypto Products. On July 11, ESMA issued a public statement warning investors of the ‘halo effect’ that can lead to overlooking risk when authorized CASPs offer both regulated and unregulated products and/or services. The statement also reminds CASPs of the issues that they should consider when providing unregulated products and services, and recommends that they should be particularly vigilant about avoiding any client confusion regarding the protections attached to unregulated products and/or services. According to ESMA, to avoid any misunderstanding CASPs should clearly communicate the regulatory status of each product or service in all client interactions and at every stage of the sales process. In addition, ESMA reminded crypto-assets entities of their obligation to act fairly, professionally and in the best interests of their clients, ensuring that all information, including marketing communications, is fair, clear and not misleading.

ESMA Identifies Opportunities to Strengthen MiCA Authorizations. On July 10, ESMA published the results of a peer review looking at the authorization of Crypto Asset Service Providers in Malta under MiCA. The peer review analyzes the approaches adopted by the Malta Financial Services Authority and provides recommendations to strengthen those processes. According to ESMA, it identifies overall a good level of resources and supervisory engagement within the authority, with some areas for improvement related to the assessment of authorizations.

New Industry-Led Developments

ISDA Responds to Voluntary Carbon and Nature Markets Consultation. On July 10, ISDA responded to the UK government’s consultation on voluntary carbon and nature markets. ISDA recommends that the UK continues to play a leading role in promoting the consistent legal treatment of carbon credits internationally, with the development of global standards currently underway. The response identifies several key barriers to participation in the voluntary carbon markets and recommends ways to solve them.

ISDA Responds to ESMA MiFIR Review Consultation. On July 8, ISDA announced that it submitted a response to ESMA’s fourth package of Level 2 consultation under the Markets in Financial Instruments Regulation Review (“MiFIR”), on transparency for derivatives, package orders and input/output data for the derivatives consolidated tape. In the response, ISDA said that it argues against ESMA’s proposal to use a modified International Securities Identification Number as the identifier for those over-the-counter (“OTC”) derivatives in scope for transparency, and reiterated its longstanding view that the unique product identifier is the correct identifier for OTC derivatives. ISDA also noted that the response also strongly opposes the assessment of single name credit default swaps referencing global systemically important banks as liquid, and proposes a modified deferral framework for these contracts. ISDA stated that the response generally supports the deferral framework for interest rate derivatives, but notes that any benefit gained from the inclusion of basis swaps, forward rate agreements and forward starting swaps is disproportionate to the effort of including them, due to the very small numbers of these instruments that will be in scope of transparency under MiFIR.

ISDA Updates Canadian Transaction Reporting Party Requirements Guidance. On July 8, the ISDA updated its Canadian Transaction Reporting Party Requirements document to account for the Canadian OTC derivatives rule amendments going live on July 25, 2025. According to ISDA, the purpose of the document is to provide a method for a single reporting party determination that can be incorporated by reference in a written agreement in compliance with the Canadian Reporting Rules where the Canadian Reporting Rules otherwise provide for two reporting parties.

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)

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

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