Richard Manfredi, Author at Gibson Dunn

Please join us for a one-hour CLE webinar that will provide companies seeking alternative paths to going public with vital information. With the webinar’s focus on SPAC transactions and Direct Listings from both the transactional and the regulatory perspectives, attendees will gain valuable insight on new disclosure points from the U.S. Securities and Exchange Commission, expected implementation, and the different ways they can plan for these changes.

Key topics include:

SPAC Primer: An Overview of the SPAC Final Rules
Preparing for a de-SPAC and CF Staff Review Under the New Rules
Direct Listing Primer: An Overview of the Direct Listing Rules and Practices
IPO vs. Direct Listing Considerations
Trends and Lessons from Recent Direct Listings & de-SPACs

MCLE CREDIT INFORMATION:

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

Gibson, Dunn & Crutcher LLP certifies that this activity has been approved for MCLE credit by the State Bar of California in the amount of 1 hour.

Gibson, Dunn & Crutcher LLP is authorized by the Solicitors Regulation Authority to provide in-house CPD training. This program is approved for CPD credit in the amount of 1.0 hour. Regulated by the Solicitors Regulation Authority (Number 324652).

Neither the Connecticut Judicial Branch nor the Commission on Minimum Continuing Legal Education approve or accredit CLE providers or activities. It is the opinion of this provider that this activity qualifies for up to 1 hour toward your annual CLE requirement in Connecticut, including 0 hour(s) of ethics/professionalism.

Application for approval is pending with the Colorado, Illinois, Texas, Virginia, and Washington State Bars.

PANELISTS:

Evan M. D’Amico is a partner in the Washington, D.C. office of Gibson Dunn, where his practice focuses primarily on mergers and acquisitions.

Evan advises companies, private equity firms, boards of directors, and special committees in connection with a wide variety of complex corporate matters, including mergers and acquisitions, asset sales, leveraged buyouts, spin-offs, and joint ventures. He also has experience advising issuers, borrowers, underwriters, and lenders in connection with financing transactions and public and private offerings of debt and equity securities. Evan has particular expertise in advising special purpose acquisition companies (SPACs), operating companies and investors in connection with SPAC business combinations and financing transactions.

Evan has been named a Rising Star in mergers and acquisitions by Super Lawyers 2016-2019 and in Best Lawyers: Ones to Watch in America™ for M&A. In 2019, The Deal profiled him as a Rising Star, which recognizes new M&A partners who are “deemed by The Deal to be one of the most promising of 2020.” Evan was named by Lawdragon as one of the 500 Leading Dealmakers in America for 2022 and 2024.

Mellissa Duru is a corporate partner in the Washington, D.C. office of Gibson Dunn, where she is a member of the firm’s Securities Regulation and Corporate Governance Practice Group. Prior to joining Gibson Dunn, Mellissa served as Deputy Director of the Division of Corporation Finance’s Legal Regulatory Policy group at the U.S. Securities and Exchange Commission (SEC).

As Deputy Director, Mellissa oversaw transactional filings, rules, interpretative guidance, and exemptive and no-action relief requests within the Division of Corporation Finance’s Office of Mergers & Acquisitions, Office of International Corporation Finance, Office of Small Business Policy, Office of Rulemaking, and Office of Structured Finance.

Before her role at the SEC, Mellissa was a special counsel in the Securities & Capital Markets practice at a multinational law firm, advising clients on securities regulation, capital markets transactions, and strategic corporate governance. She also served as a Vice Chair of the firm’s global Environmental, Social, and Governance (ESG) practice.

Mellissa’s distinguished SEC career spanned more than 18 years, during which she served as Counsel to SEC Commissioner Kara Stein, Special Counsel in the Division of Corporation Finance’s Office of Mergers & Acquisitions, and Cybersecurity Legal and Policy Advisor in the Division of Examinations. She also was selected as the SEC Brookings Institute Legislative Congressional Fellow in the Office of U.S. Senator Jack Reed.

Her extensive experience in both private practice and at the SEC has equipped her with deep expertise in a broad range of areas, including 1933 Securities Act and 1934 Securities Exchange Act rules and advisory work, public company reporting obligations, domestic and cross-border M&A transactions, tender offer and going private transactions, proxy solicitations, strategic shareholder engagement and corporate governance advisory work, beneficial ownership reporting, and ESG and cybersecurity disclosure and governance.

Stewart L. McDowell is a partner in the San Francisco and New York offices of Gibson Dunn where she is Co-Chair of the firm’s Capital Markets Practice Group.

Stewart represents companies, investors and underwriters in a variety of complex capital markets transactions, including IPOs, convertible and non-convertible debt and preferred equity offerings, PIPEs and liability management transactions. She also represents companies in connection with U.S. and cross-border M&A and strategic investments, SEC reporting, corporate governance and general corporate matters.

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

This update summarizes key aspects of the Spring 2025 Agenda that potentially impact public companies.

On September 4, 2025, the U.S. Securities and Exchange Commission (the Commission or the SEC) issued the Spring 2025 Unified Agenda of Regulatory and Deregulatory Actions (the Spring 2025 Agenda or the Agenda). The Agenda outlines the Commission’s rulemaking priorities under the leadership of Chairman Paul Atkins. This alert summarizes key aspects of the Spring 2025 Agenda that potentially impact public companies. It should be noted that the Agenda does not contain much substantive information, only a brief “abstract” describing each rulemaking item. Nevertheless, just the addition and removal of Agenda items can be informative.[1]

As Chairman Atkins noted in his statement accompanying the issuance of the Agenda, “it is a new day at the [SEC].”[2] As discussed below, the Agenda highlights a sea-change shift in focus toward deregulatory and disclosure simplification actions, as well as crypto assets and crypto-market structure rulemaking reforms, and away from environmental, social and governance-related (ESG) topics. There are 23 short-term Agenda items, consisting of 10 Division of Corporation Finance rule proposals, eight Division of Trading and Markets rule proposals and five Division of Investment Management rule proposals.[3] Five of the Agenda’s rule proposals (over 20% of all rule proposals) relate to crypto assets and crypto-related regulatory reforms.

I. OVERVIEW OF KEY UPDATES FROM THE SPRING 2025 AGENDA: PUBLIC REPORTING COMPANIES[4]

The Spring 2025 Agenda reflects the significant realignment in focus of the Commission under the leadership of Chairman Atkins. Below is an overview of key updates:

Additions to the Spring 2025 Agenda

Division	Rule Proposal	Stage of Rulemaking
Trading and Markets	Crypto Market Structure Amendments	Proposed rule
Corporation Finance	Crypto Assets	Proposed rule
	Updating the Exempt Offering Pathways	Proposed rule
	Shelf Registration Modernization	Proposed rule
	Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies	Proposed rule
	Rationalization of Disclosure Practices	Proposed rule
	Shareholder Proposal Modernization	Proposed rule
	Rule 144 Safe Harbor	Proposed rule*

*Previously on the Fall 2024 Agenda

Dropped from the Spring 2025 Agenda[5]

Division	Topic	Previous Stage of Rulemaking
Corporation Finance	Human Capital Management Disclosure	Proposed rule
	Corporate Board Diversity	Proposed rule
	Incentive-Based Compensation Arrangements	Proposed rule*
	Disclosure of Payments by Resource Extraction Issuers	Proposed rule
	Regulation D and Form D Improvements	Proposed rule
	Proxy Process Amendments	N/A**
	Conflict Minerals Amendments	N/A**

*Now a long-term item on the Spring 2025 Agenda
**Previously a long-term item on the Fall 2024 Agenda

II. CENTRAL THEMES AND INSIGHTS

A. Crypto Assets & Crypto Market Structure Amendments

The Spring 2025 Agenda provides clarity on the long-anticipated U.S. crypto assets regulatory and market structure framework. These rule proposals were anticipated and previewed by the SEC when it established the Crypto Task Force,[6] and have since been discussed in the Crypto Task Force’s statements and guidance, roundtables, the President’s Working Group on Digital Assets Report[7] and during Chairman Atkins’s related launch of “Project Crypto.”[8] The number and inter-divisional breadth of crypto-related rule proposals on the Agenda[9] are a clear reflection of the current Administration’s intense focus on the development of the crypto markets within the United States.

B. Focus on Facilitation of Capital Formation & Deregulatory Actions

The Spring 2025 Agenda introduced new rule proposals intended to further support capital formation, simplify disclosure practices and reduce compliance costs.[10] Rule proposals include:

“Updating the Exempt Offering Pathways” to facilitate and streamline businesses’ access to the market.

“Shelf Registration Modernization” to reduce compliance burdens and facilitate access to capital.

“Enhancement of Emerging Growth Company Accommodations and Simplification of Filer Status for Reporting Companies” to expand accommodations available to emerging growth companies, simplify categorization of registrants and reduce compliance burdens.

“Rationalization of Disclosure Practices” to focus on amendments to disclosure practices and the identification of “material” disclosures. It is likely that this broadly worded rule proposal category, which emphasizes reforms that address “material disclosures” will also address anticipated reforms related to proxy advisory firm regulation, executive compensation disclosures and/or cyber-incident disclosures.

C. De-emphasis on ESG

The Commission’s re-prioritized Agenda and policy focus is most apparent in the removal from the Agenda of topics that some viewed as socio-political issues beyond the ambit of SEC authority.[11] Many of these former agenda items were generally categorized as ESG-related. Noticeably, the Agenda dropped ESG rulemaking items related to: climate-related disclosures,[12] human capital management, board diversity[13] and disclosure of payments by resource extraction issuers.

D. Shareholder Proposals

As anticipated, and on the heels of Staff Legal Bulletin No. 14M issued in February 2025 (SLB 14M),[14] the Commission remains focused on further changes to the Rule 14a-8 shareholder proposal process. The Agenda includes “Shareholder Proposal Modernization” as a new item, indicating further changes are ahead that are intended to “modernize the requirements of Exchange Act Rule 14a-8 to reduce compliance burdens for registrants and account for developments since the rule was last amended.” As with all the items on the Agenda, only estimated time frames are provided, with the shareholder proposal proposing release given a date by April 2026.

E. Dodd-Frank-Related Rulemaking

Certain Dodd-Frank-mandated rulemakings were dropped from short-term rulemaking and moved to long-term rulemaking in the 2025 Agenda, such as an interagency rulemaking intended to implement Section 956 of Dodd-Frank, which relates to incentive-based compensation practices at certain financial institutions that have $1 billion or more in total assets.[15] The 2024 Agenda item “Conflict Minerals Amendments” proposed pursuant to Section 1502 of Dodd-Frank, which Commissioner Mark Uyeda recently criticized as being ineffective, has been removed from the 2025 Agenda.[16] Similarly, “Disclosure of Payments by Resource Extraction Issuers” is no longer on the Agenda. It is possible that these rulemakings could be covered under the “Rationalization of Disclosure Practices” initiative. Nevertheless, until official SEC action or further SEC staff guidance, reporting companies remain subject to the reporting requirements on Form SD that remain in place.[17]

III. TAKEAWAYS & LOOKING AHEAD

The additions to the Spring 2025 Agenda reflect the newly constituted majority Republican Commission’s and Chairman Atkins’s efforts to address major challenges facing the marketplace while attempting to simplify disclosure requirements to facilitate capital formation and lighten compliance burdens consistent with investor protection. Expect focus on crypto assets, market structure and a major shift away from ESG priorities. Despite containing fewer agenda items than the prior Fall 2024 Agenda, the Agenda remains ambitious in the scope and breadth of regulatory reforms contemplated. Chairman Atkins will play an important role in guiding the SEC staff’s prioritization of Agenda items and the timeliness of the Agenda’s deliverables.

[1] It should also be noted that a Reg Flex agenda provides notice to the public about what future rulemaking is under consideration and is not binding upon the Commission, including with respect to the time frames presented for agency action.

[2] See Chairman Atkins, Statement on the Spring 2025 Regulatory Agenda (Sept. 4, 2025), available here (the Accompanying Statement). See also Chairman Atkins, Opening Statement at Nomination Hearing Before the Senate Banking Committee (Mar. 27, 2025), available here (defining his tenure as a “time to reset priorities and return common sense to the SEC”).

[3] In addition to three rules in the “prerule” stage, the Spring 2025 Agenda includes 18 rules in the “proposed rule” stage and two rules in the “final rule” stage. This compares to a total of 30 short-term rulemaking agenda items on the prior Fall 2024 Agenda. A “prerule” or concept release solicits public comment on whether or not, or how best, to initiate a rulemaking. In contrast, a “proposed rule” means that the Commission is at the stage in which it will propose to add to or change its existing regulations and will solicit public comment on a rule proposal.

[4] This Client Alert focuses on rule proposals relevant to public companies, but there are other notable additions to the Agenda involving rule proposals out of the Division of Trading and Markets and the Division of Investment Management (including, out of the Division of Trading and Markets, “Evaluating the Continued Effectiveness of the Consolidated Audit Trail,” “Transfer Agents,” “Publication or Submission of Quotations Without Specified Information,” “Amendments to Broker-Dealer Financial Responsibility and Recordkeeping and Reporting Rules,” “Trade-Through Rule,” “Definition of Dealer” and “Enhanced Oversight for U.S. Government Securities Traded on Alternative Trading Systems,” and out of the Division of Investment Management, “Updates to ‘Small Entity’ Definitions for Purposes of the Regulatory Flexibility Act,” “Amendments to Form N-PORT,” “Amendments to Rule 17a-7 Under the Investment Company Act,” “Amendments to the Custody Rules” and “Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers”). In addition, out of the Division of Corporation Finance, a prior proposed rule related to foreign private issuer eligibility was dropped and changed to a concept release or prerule, which was issued for notice and comment ending on September 8, 2025. The Agenda also includes a concept release on Regulation AB and the registration and disclosure requirements involving asset-backed securities.

[5] Prior to the publication of the Spring 2025 Agenda, the Commission, via Notice, withdrew 14 rulemaking actions. This withdrawal previewed the deregulatory and policy shift in focus of the Commission under Chairman Atkins and of the rules dropped from the Spring 2025 Agenda. See SEC, Withdrawal of Proposed Regulatory Actions, Release Nos. 33-11377; 34-103247; IA-6885; IC-35635 (June 12, 2025), available here.

[6] The Crypto Task Force, led by Commissioner Hester Peirce, was established on January 21, 2025. See Press Release, SEC Crypto 2.0: Acting Chairman Uyeda Announces Formation of New Crypto Task Force (Jan. 21, 2025), available here.

[7] Report of the President’s Working Group on Digital Asset Markets, Strengthening American Leadership in Digital Financial Technology (July 30, 2025), available here.

[8] See Chairman Atkins, American Leadership in the Digital Finance Revolution (July 31, 2025), available here. In launching Project Crypto, Chairman Atkins previewed that the new framework would include “clear and simple rules of the road for crypto asset distributions, custody, and trading,” with focus on: (i) clarifying the classification of crypto assets, (ii) modernizing custody requirements for registered intermediaries, (iii) facilitating “super-apps,” (iv) exploring the potential of on-chain software and (v) following a principles-based approach to promote innovation. See id. Related to the classification of crypto assets and the promotion of innovation, the proposed rules note “potential[]” exemptions and safe harbors to the offer and sale of crypto assets and the trading of crypto assets on alternative trading systems as well as securities exchanges.

[9] Crypto-related rule proposals include “Crypto Assets,” “Amendments to the Custody Rules,” “Transfer Agents,” “Crypto Market Structure Amendments” and “Amendments to Broker-Dealer Financial Responsibility and Recordkeeping and Reporting Rules.”

[10] See Accompanying Statement; see also Chairman Atkins, Prepared Remarks Before SEC Speaks (May 19, 2025), available here.

[11] In the Accompanying Statement, Chairman Atkins noted, “[i]mportantly, the agenda reflects our withdrawal of a host of items from the last Administration that do not align with the goal that regulation should be smart, effective, and appropriately tailored within the confines of our statutory authority.”

[12] After numerous challenges to the final climate rule, including the SEC’s stay of the rule and subsequent attempt to withdraw its defense of the rules, in July 2025, the SEC filed a status report with the Eighth Circuit, stating that it “does not intend to review or reconsider the [r]ules at this time” and asking the court to lift the court-imposed abeyance and rule on the pending challenges. See Gibson Dunn’s client alert, Gibson Dunn ESG: Risk, Litigation, and Reporting Update (June 2025) (July 24, 2025), available here. The stay would remain in effect during the pendency of the appeal.

[13] The Commission in January 2025 approved Nasdaq’s proposal to update its listing rules to reflect the Fifth Circuit’s vacatur of the Commission’s 2021 order approving rules related to board diversity disclosures. See SEC, Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Repeal Nasdaq’s Board Diversity Listing Requirements, Release No. 34-102281 (Jan. 24, 2025), available here.

[14] For a more detailed analysis of SLB 14M, see Gibson Dunn’s client alert, SEC Staff Reinstates Traditional Approach to Interpreting the Shareholder Proposal Rule (Feb. 13, 2025), available here.

[15] In an atypical interagency rulemaking process, four of six federal financial regulators re-proposed the Section 956 rule on May 6, 2024. Two of six, the SEC and the Federal Reserve, did not join in the issuance of the re-proposed rule. See Department of the Treasury, Federal Deposit Insurance Corporation, Federal Housing Finance Agency and National Credit Union Administration, Incentive-Based Compensation Arrangements (May 6, 2024), available here.

[16] See Commissioner Uyeda, Remarks at the “SEC Speaks” Conference 2025 (May 19, 2025), available here.

[17] See Rules 13p-1 and 13q-1 under the Securities Exchange Act of 1934, as amended.

The following Gibson Dunn lawyers prepared this update: Mellissa Campbell Duru, Thomas J. Kim, Brian J. Lane, James J. Moloney, Ronald O. Mueller, Geoffrey E. Walter, Andrea Shen, Chris Doherty, and Kevin Mills.

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

From the Derivatives Practice Group: This week, the CFTC and the SEC put out several releases this week, including a joint statement on regulatory harmonization.

New Developments

CFTC and SEC Issue Joint Statement on Regulatory Harmonization Efforts. On September 5, the CFTC and the SEC issued a joint statement on regulatory harmonization opportunities and announced a joint roundtable on September 29, from 1:00 p.m. to 5:00 p.m. The roundtable will be an opportunity to discuss regulatory harmonization priorities. “This roundtable represents a pivotal step toward building more coherent and competitive U.S. markets,” Chairman Atkins and Acting Chairman Pham said. [NEW]

Acting Chairman Pham Statement on Spring 2025 Unified Agenda. On September 4, CFTC Acting Chairman Caroline Pham made a statement about the 2025 Unified Agenda, which “implements the President’s executive orders and demonstrates that the CFTC is getting back to basics.” Additionally, she stated that the CFTC “must be laser-focused on our mission to promote market integrity and liquidity in the commodity derivatives markets that are critical to the real economy and global trade.” The CFTC’s Spring 2025 Unified Agenda includes two pre-rule activities, 19 proposed rules and five final rules, including: a concept release on the appropriate regulatory treatment of event contracts; a proposed rule on revisions to swap dealer business conduct standards; a proposed rule on swap data recordkeeping and reporting requirements; a proposed rule on cross-border application of swap dealer and security-based swap dealer requirements; a proposed rule on block trade reporting; and a final rule regarding margin requirements for uncleared swaps for swap dealers and major swap participants. [NEW]

Joint Statement from the Chairman of the SEC and Acting Chairman of the CFTC. On September 5, SEC Chairman Paul Atkins and CFTC Acting Chairman Caroline Pham announced that “the SEC and CFTC must coordinate to ensure there is not a regulatory ‘no man’s land’ due to inaction by one or both agencies. Failure to coordinate, and the resulting regulatory uncertainty, have chilled productive economic activity even when the products would otherwise be allowable under federal law. That chapter belongs to history. It is a new day at the SEC and the CFTC, and today we reaffirm the need to ensure regulation does not stand in the way of progress. By working in lockstep, our two agencies can harness our nation’s unique regulatory structure into a source of strength for market participants, investors, and all Americans.” [NEW]

CFTC Staff Issues No-Action Letter Regarding Event Contracts. On September 3, 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 QCX LLC, a designated contract market, and QC Clearing LLC, a derivatives clearing organization. The Divisions will not recommend that the CFTC initiate an enforcement action against either entity or their 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 and variable payout contract transactions executed on or subject to the rules of QCX LLC and cleared through QC Clearing LLC, subject to the terms of the no-action letter. [NEW]

CFTC and SEC Staff Issue Joint Statement on Trading of Certain Spot Crypto Asset Products. On September 2, the CFTC and the SEC issued a joint statement regarding the trading of certain spot crypto asset products. This joint statement clarifies staff’s views that SEC- and CFTC- registered exchanges are not prohibited from facilitating the trading of certain spot commodity products. The joint effort exemplifies how the two agencies can coordinate to promote trading venue choice and optionality for market participants. [NEW]

Acting Chairman Pham Announces FBOT Advisory to Provide Regulatory Clarity for Non-U.S. Exchanges. On August 28, the CFTC’s Division of Market Oversight today issued an advisory to reaffirm the foreign board of trade (“FBOT”) registration framework for non-U.S. entities legally organized and operating outside the United States that seek to provide persons physically located in the United States with direct market access to their trading platforms. The advisory provides a reminder that a FBOT must be registered with the CFTC in accordance with the procedures, requirements, and conditions set forth in the Part 48 rules. The CFTC’s FBOT registration framework applies to all markets, regardless of asset class, and includes both traditional and digital asset markets.

Commissioner Kristin Johnson Announces Departure from CFTC. On August 26, Commissioner Kristin Johnson, who joined the CFTC more than three years ago, announced that she will depart the agency later this year. Her term of service ended earlier this year in April 2025, and her last day at the Commission will be on September 3, 2025. Following Commissioner Johnson’s departure, Acting Chairman Pham will be the sole remaining Commissioner.

CFTC Enhances Market Oversight with Advanced Surveillance Technology Platform. On August 27, the CFTC announced that it is enhancing its market surveillance and fraud detection capabilities by deploying Nasdaq’s industry-leading suite of surveillance technology. As the CFTC embraces an expanding regulatory remit, Nasdaq’s Market Surveillance platform will support the agency’s mission to promote market integrity. The upgraded technological capabilities follow CFTC Acting Chairman Caroline D. Pham’s pledge in March to secure an enhanced market surveillance system as part of a broader effort to modernize the agency and replaces the CFTC’s ‘90s-era legacy system.

Acting Chairman Pham Announces Next Crypto Sprint Initiative. On August 21, CFTC Acting Chairman Caroline D. Pham announced that the CFTC will begin its next crypto sprint initiative to implement the recommendations in the President’s Working Group on Digital Asset Markets report. Starting August 21, Acting Chairman Pham will begin stakeholder engagement on all other report recommendations for the CFTC. She announced CFTC’s crypto sprint earlier in August.

New Developments Outside the U.S.

ESMA and the European Environment Agency Sign Memorandum of Understanding to Strengthen Cooperation in Sustainable Finance Area. On August 20, ESMA and the European Environment Agency (“EEA”) signed a Memorandum of Understanding (“MoU”) whose purpose is to strengthen cooperation in sustainable finance. The MoU focuses on environmental factors and their integration in the EU sustainable finance framework, including the supervision of the framework. The MoU also outlines how ESMA and the EEA will exchange expertise, information and data with one another and support mutual capacity building activities.

New Industry-Led Developments

ISDA and Joint Trades Submit Letter to BCBS Calling for Recalibration of Cryptoasset Prudential Standards. On August 25, ISDA, in partnership with a coalition of leading global financial trade associations (“Joint Trades”), and with advisory support from Boston Consulting Group, Ashurst, and Sullivan & Cromwell, submitted a letter to the Basel Committee on Banking Supervision (“BCBS”). The letter called for a pause and recalibration of the Cryptoasset Exposures Standard (i.e., SCO60). The Joint Trades urged BCBS to delay the implementation of SCO60, currently scheduled for January 2026, to allow time for a targeted consultation and redesign of the framework. The letter also argued that the current standard imposes overly conservative and punitive capital requirements that do not accurately reflect the actual risks of cryptoassets and are inconsistent with established market risk practices. The letter emphasized the need for a more balanced approach that aligns with actual risk profiles and encourages responsible innovation within the regulatory framework.

ISDA Responds to CDSC Consultation on Common Carbon Credit Data Model. On August 12, ISDA responded to a consultation from the Climate Data Steering Committee (“CDSC”) on a Common Carbon Credit Data Model. ISDA members believe the Group-of-20 carbon data model initiative is a positive step in addressing data gaps and interoperability from a top-down perspective. The response supports the setting up of a standard global carbon data taxonomy with appropriate ongoing maintenance and oversight through global industry bodies and a consensus process, which can be a more lasting and durable solution overall.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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. Should you have questions about developments in this space or about your own DEI programs, please do not hesitate to reach out to any member of our DEI Task Force or the authors of this Update (listed below).

Key Developments:

On August 21, the U.S. Supreme Court granted in part a motion to stay an order of the U.S. District Court for the District of Massachusetts, which had invalidated the termination of over $1 billion in National Institute of Health-funded research grants due to their perceived connection to DEI and certain other topics. The case is National Institutes of Health v. American Public Health Association, 604 U.S. __ (2025); we reported on the district court’s opinion in our July 1 Task Force Update. In Thursday’s decision, the Supreme Court stayed the portion of the district court’s order invalidating the grant terminations but did not stay the portion vacating the NIH’s policy guidance.

Justices Thomas, Alito, Gorsuch, and Kavanaugh would have stayed the district court’s ruling in full, while Chief Justice Roberts and Justices Sotomayor, Kagan, and Jackson would have denied the stay in full. Justice Barrett wrote the controlling opinion and provided the fifth vote for each part of the split result. She concluded that the district court likely lacked jurisdiction to adjudicate the plaintiffs’ claims relating to grant terminations, consistent with the Court’s decision last term in Department of Education v. California, 606 U.S. ___ (2025), in which the Court concluded that the Court of Federal Claims likely holds exclusive jurisdiction over claims seeking restoration of terminated grants because such claims arise from contracts with the United States government. However, Justice Barrett reasoned that the district court was likely the correct forum for the plaintiffs’ challenge to the agency guidance under the Administrative Procedure Act (“APA”), because the guidance-related claims were not contractual. Justice Barrett recognized that the plaintiffs would need to proceed sequentially in litigating the two claims, but she concluded that this was the result of the jurisdictional scheme that Congress designed. Notably, neither the Court’s order nor Justice Barrett’s opinion discuss the limited availability of injunctive relief in the Court of Federal Claims. The Chief Justice wrote an opinion, joined by Justices Sotomayor, Kagan, and Jackson, concluding that, because the district court had jurisdiction to vacate the guidance, it also had jurisdiction to reinstate the funding. Justices Gorsuch, Kavanaugh, and Jackson also wrote separately, each partially dissenting with the decision.

Also on August 21, the U.S. Court of Appeals for the Ninth Circuit issued an order denying the government’s motion to stay a preliminary injunction requiring the Environmental Protection Agency, the National Science Foundation, and the National Endowment for the Humanities to reinstate research grants terminated this year in accordance with President Trump’s executive orders relating to DEI and government spending. The agencies will be required to reinstate grants they had awarded to the plaintiffs, six researchers who work in the University of California system, pending a full appeal of the preliminary injunction order. The case is Thakur et al. v. Donald J. Trump, et al., No. 25-4249 (9th Cir. 2025).

In the order, the three judge panel (Judges Paez, Christen, and Desai) reasoned that it was “bound by the bedrock principle that the government cannot ‘leverage its power to award subsidies on the bases of subjective criteria into a penalty on disfavored viewpoints,’” and found the record showed that “the agencies selected grants for termination based on viewpoint” in violation of this principle. The court also concluded that the government had “not made a strong showing of a likelihood of success on the merits” and “the government ‘cannot suffer harm from an injunction that merely ends an unlawful practice.’” In light of the Supreme Court’s decision in National Institutes of Health v. American Public Health Association, 606 U.S. __ (2025), discussed above, the agencies might argue that the Court of Federal Claims has exclusive jurisdiction over the plaintiffs’ claims, and might seek reconsideration in light of this decision, which was released on the same day, but shortly after, the Ninth Circuit’s decision in Thakur.

On August 14, the U.S. District Court for the District of Maryland issued a memorandum opinion holding unlawful a “Dear Colleague Letter” the Department of Education (“DOE”) issued in February and a “Reminder of Legal Obligations” the DOE issued in April regarding the nondiscrimination obligations of federally funded educational institutions (the“Letter” and the “Certification Requirement”). The case is American Federation of Teachers, et al. v. Department of Education, No. 1:25-cv-00628 (D. Md. 2025).

In a 76-page opinion, the court held that both the Letter and the Certification Requirement were procedurally improper because DOE failed to put them through notice and comment before publishing. The court rejected DOE’s argument that it satisfied this requirement with a footnote to the Letter containing “mailing and email addresses for anyone ‘interested in commenting,’” reasoning that “the requirements for notice-and-comment are exacting,” and that an “after-the-fact opportunity to send an email does not satisfy them.” The court also held that the decisions to issue the Letter and the Certification Requirement were arbitrary and capricious because DOE “failed to provide an explanation for its change in position,” “announced large-scale policy changes without considering whether they were appropriate based on existing facts and law” and “issue[d] a purported ‘guidance’ that conflicts with its own regulations and existing case law.” The court also held that portions of the Letter are contrary to the First Amendment, and that the Letter exceeds DOE’s statutory authority by “exercising control over the content of curriculum.” Finally, the court held that both documents were unconstitutionally vague in violation of the Fifth Amendment because they “attach[] consequences to violating provisions rooted in ‘broad and value-laden’ terms like DEI that mean very different things to different people.” DOE may appeal this decision to the Fourth Circuit Court of Appeals.

On August 14, the U.S. District Court for the District of Columbia issued a memorandum opinion granting in part a motion for preliminary injunction filed by various nonprofit organizations who sued the United States Department of Agriculture (“USDA”) for terminating grants pursuant to President Trump’s EOs relating to DEI. The court vacated the termination of five federal grants and enjoined the USDA from terminating a sixth grant. The case is Urban Sustainability Directors Network, et al. v. United States Department of Agriculture, et al., No. 1:25-cv-1775 (D.D.C. 2025).

In a 92-page opinion, the court held that the plaintiffs demonstrated a likelihood of success in showing that the five grants were terminated arbitrarily and capriciously, in part because the terminations offered only “vague and conclusory reasoning,” failed to identify a particular reason for termination, and failed to provide sufficiently individualized explanations for the decisions. The court also held that the planned termination of a sixth grant was unlawful because it conflicted with the statute governing the grant. The court observed that Congress mandated that the grant be used to support “underserved” groups, a term the statute defines to mean “people ‘who have been subjected to racial or ethnic prejudice because of their identity.’” So, the court reasoned, the explanation the Secretary of Agriculture gave in a press release for the planned termination—that the grant was a “Diversity, Equity, and Inclusion (DEI) focused award[]” that “wasted [money] on woke DEI propaganda”—indicated that USDA intended to terminate a grant for an improper reason that directly conflicted with Congress’s mandate. The court rejected other of the plaintiffs’ claims, including a due process claim. Finally, the court held that the plaintiffs had shown they will face irreparable harm in the absence of relief because the grant terminations pose an “existential threat” to their operations and have led to the termination of programming, impairment of their “central missions,” and damage to their reputations and relationships, among other harms. USDA may appeal this decision to the D.C. Circuit Court of Appeals. In light of the Supreme Court’s decision in National Institutes of Health v. American Public Health Association, 606 U.S. __ (2025), discussed above, as well as Department of Education v. California, 6064 U. S. ___ (2025), USDA might argue that the Court of Federal Claims has exclusive jurisdiction over the plaintiffs’ claims, and might seek reconsideration of this decision on that basis.

On August 13, the United States District Court for the Northern District of Alabama issued a memorandum opinion denying a preliminary injunction to a group of University of Alabama professors and students who had sued to enjoin enforcement of Alabama Senate Bill 129 (“SB 129”). SB 129 prohibits DEI programs at state agencies, local boards of education, and public universities, and also prohibits public educational institutions from teaching on eight enumerated “divisive concepts.” It allows discipline up to and including termination for “knowing[] violat[ion]” of the law. The case is Simon et al. v. Ivey et al., No. 2:25-cv-00067 (N.D. Ala. 2025).

In a 146-page opinion, the court rejected the plaintiffs’ contention that the law was void for vagueness, concluding that the law’s definitions of “diversity, equity, and inclusion” and “divisive concepts” were sufficiently clear to allow someone to discern whether they violated SB 129. With respect to the definition of “divisive concepts,” the court found that the plaintiffs had not shown why statutory phrases such as “inherently superior” and “consciously or subconsciously” are vague, holding that “‘men of common intelligence’ do not need to guess at their meaning.” With respect to the definition of DEI programs—which the law defines as any programs or events “where attendance is based on an individual’s race, sex, gender identity, ethnicity, national origin, or sexual orientation”—the court explained that the term of “based on” “indicates a but-for causal relationship and thus a necessary logical condition.” The court also rejected the plaintiffs’ argument that the phrase “knowingly violates” is vague, observing that the phrase “encompasses a mens rea standard that has a clear and settled meaning in law” and that the phrase helps constrain enforcement discretion by demanding evidence of a culpable mental state. The court also rejected the plaintiffs’ contention that the law violates the First Amendment, concluding that the law constitutes a reasonable effort by a public employer to control curriculum and “to ensure that students were not being coerced” into advocating for viewpoints with which they disagreed. The plaintiffs may appeal this decision to the Eleventh Circuit Court of Appeals.

On August 7, President Trump issued an Executive Order titled, “Ensuring Transparency in Higher Education Admissions,” which seeks to “ensure institutions of higher education receiving Federal financial assistance are transparent in their admissions practices.” The EO states that “the persistent lack of available data—paired with the rampant use of ‘diversity statements’ and other overt and hidden racial proxies—continues to raise concerns” about whether universities are considering race in admissions decisions. The EO instructs the Secretary of Education to “revamp the online presentation of [Integrated Postsecondary Education Data Systems] data, such that it is easily accessible and intelligibly presented for parents and students.” The EO also directs the Secretary of Education to “expand the scope of required reporting,” and to “increase accuracy checks of submitted data” to “provide adequate transparency into admissions.” Lastly, the EO directs the Secretary of Education to take remedial action if “institutions fail to submit data in a timely manner or are found to have submitted incomplete or inaccurate data.”

Shortly after the EO was issued, Linda McMahon, the Secretary of Education, issued a memorandum announcing changes as directed by the President, writing that “the current survey neglects to collect important information that could reveal whether universities are discriminating against applicants based on race.” Secretary McMahon’s memorandum states that, moving forward, “the Department will collect data disaggregated by race and sex relating to the applicant pool, admitted cohort, and enrolled cohort at the undergraduate level, and for specific graduate and professional programs.” The memorandum also states that DOE will require institutions to “report quantitative measures of applicants and admitted students’ academic achievement such as standardized test scores, GPAs, first-generation-college-student status, and other applicant characteristics, for each race-and-sex pair.” Further, for each “race-and-sex pair,” the memorandum directs the National Center for Education Statistics to “expand the scope” of collected data to include “graduation rates, final GPAs, financial aid offered, financial aid provided, and other relevant measures.” Lastly, the memorandum directs the National Center for Education Statistics to “develop a rigorous quality assurance program for reported data” to ensure that the data is “accurate and consistently reported across institutions.”

On July 24, the Trump administration announced that it had reached an agreement with Columbia University to settle several federal agency investigations into alleged violations of antidiscrimination laws by the University. Under the terms of the settlement, Columbia agreed to pay $200 million to the federal government in fines, as well as an additional $21 million to settle a separate investigation launched by the Equal Employment Opportunity Commission (“EEOC”). The University also agreed not to maintain programs that promote race-based outcomes, quotas, or diversity targets; to disclose admissions data (including some demographic data) to the government and a “Resolution Monitor”; to maintain certain policies governing student protests, including a policy prohibiting face masks used to conceal one’s identity; to appoint an administrator to address antisemitism on campus; and to provide “all-female sports, locker rooms, and showering facilities,” among other things. In return, the administration agreed to restore the University’s access to federal grants and funding, including by reinstating grants terminated by the administration in March of this year.

On July 23, Claire Shipman, Acting President of Columbia University, released a statement about the settlement. Shipman noted that, under the settlement agreement, the University did not admit any wrongdoing or agree with the administration’s conclusion that Columbia violated Title VI of the Civil Rights Act. Shipman explained that the University nonetheless believed a settlement was in its best interest because “[t]he prospect of [the federal funding freeze] continuing indefinitely, along with the potential loss of top scientists, would jeopardize [the University’s] status as a world-leading research institution,” and because litigating against the administration could result in “long-term damage” to the University, including “the likely loss of future federal funding, the possibility of losing accreditation, and the potential revocation of visa status of thousands of international students.”

On August 12, the Department of Justice announced that it settled two lawsuits brought by Students for Fair Admissions against the U.S. Air Force Academy and the U.S. Military Academy at West Point challenging the military academies’ admissions policies as unconstitutional under the Fifth Amendment. Under the settlement, the military academies agreed to end the use of race and ethnicity in all aspects of their admissions process, promising that they will maintain no race or ethnicity-based objectives or goals and will shield race and ethnicity information from admissions officers. The settlement states that “the consideration of race and ethnicity in admissions at the [military academies] does not promote military cohesiveness, lethality, recruitment, retention, or legitimacy; national security; or any other governmental interest.”

On August 4, Florida Attorney General James Uthmeier sent a memorandum to certain law firms in the state alerting them that “the Florida Attorney General’s Office will no longer engage or approve the engagement of private law firms who have or continue to engage in illegal and inappropriate discrimination and bias.” The memorandum listed specific disapproved actions that would likely disqualify firms from being hired by the Office, including job postings that indicate a preference for hiring individuals of a certain race or ethnicity; workplace DEI trainings; diversity targets in hiring, promotion, and contracting; and training and mentorship opportunities open only to certain races, genders, or sexual orientations, among other things. The memorandum states that the Attorney General’s Office will immediately conduct a review of existing outside counsel engagements to assess compliance with the policy.

Media Coverage and Commentary:

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

New York Times, “Some Programs for Black Students Become ‘Illegal D.E.I.’ Under Trump” (August 26): Dana Goldstein of the New York Times reports on the increased scrutiny faced by educational programs intended to achieve racial equity. Goldstein points to the Trump administration’s use of executive orders, federal investigations, and threatened funding cuts as tools to end these programs, and uses federal investigations stemming from programs in Chicago and Evanston, Illinois as illustrations of the changing tide. In Chicago, the public school system has introduced a program called the Black Student Success Plan, which seeks to increase the number of Black male teachers, add more courses on Black history, reduce discipline against Black students, and enroll more Black children in advanced courses. In an April statement announcing an investigation related to this program, Craig Trainor, acting assistant secretary for civil rights at the Education Department, said that Chicago was reserving resources for “favored” students, and that the Trump administration “will not allow federal funds, provided for the benefit of all students, to be used in this pernicious and unlawful manner.” In Evanston, a complaint about an antiracism training for teachers resulted in the opening of a separate federal investigation. Goldstein also notes that the administration appears to be relying on what she characterizes as a novel legal theory in these actions: that the Supreme Court’s decision in Students for Fair Admission v. Harvard prohibits directing benefits to a specific racial group at any level of education.
Reuters, “ABA Ends Diversity Requirements for Governing Board Seats” (August 12): Karen Sloan of Reuters reports that the ABA will no longer set aside five seats on its Board of Governors for lawyers who are “racially or ethnically diverse, a woman, or self-identify either as LGBTQ+ or as having a disability.” Sloan reports that, moving forward, the seats will be open to candidates committed to “advancing the values of diversity, equity, and inclusion,” regardless of their demographic backgrounds. Candidates for the seats will be evaluated based on their “involvement in groups or initiatives, lived experience, professional work, or obstacles overcome and resilience developed.” Sloan also reports that the ABA did not cite political factors as the reason for making the change, but notes that the organization has previously faced pressure from the Trump administration over its diversity efforts, including a warning issued by the White House to the ABA that the ABA’s status as the federal government’s designated accreditor of law schools may be revoked due to its requirement that law schools show their commitment to diversity in recruitment and admissions (the ABA suspended that requirement through August 31, 2026).
Law360, “Reverse Bias Rulings Offer Warning About DEI Quotas” (July 28): In an article for Law360, attorney Noah Bunzl writes that recent district and appellate court decisions have allowed “reverse discrimination” lawsuits to proceed based, in part, on the “mere existence” of a targeted or quota-based diversity program. Bunzl states that these recent cases, including in the Western District of Michigan and the Ninth Circuit, must be viewed in light of the Supreme Court’s ruling in Ames v. Ohio Department of Youth Services, which held that non-minority plaintiffs in discrimination cases do not have a heightened evidentiary burden compared to minority plaintiffs.
Law360, “Wisconsin Bar Settles Atty’s Legal Challenge Over DEI Efforts” (July 17): Law360’s Madison Arnold reports that the State Bar of Wisconsin settled a lawsuit brought by a state bar member and the Wisconsin Institute for Law & Liberty challenging the State Bar’s eligibility requirements for certain bar programs as unlawfully based on race. Arnold reports that, as part of the settlement, the bar will redefine eligibility for two leadership programs to remove considerations of race, religion, and other protected characteristics, and instead focus on leadership capability, commitment to the profession, and potential to become a state bar leader.
New York Times, “The D.E.I. Industry, Scorned by the White House, Turns to ‘Safer’ Topics” (July 15): The New York Times’ Niko Gallogly reports that professionals focusing on diversity, equity, and inclusion are pivoting their work in light of shifting company priorities. Gallogly reports that these professionals are running fewer trainings related to race, gender, sexuality, and unconscious bias, and are instead focusing on topics including mental health, wellness, and generational differences in the workplace. Gallogly interviewed multiple individuals working in this area, including Joelle Emerson, founder of Paradigm, a firm focused on culture and inclusion. Some expressed concern about ignoring problems related to race and gender in the workplace, while others see the expansion of these trainings as a way to “generate broader buy-in.”

Case Updates:

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

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

- American Alliance for Equal Rights v. Bennett, No. 1:25-cv-00669 (N.D. Ill. 2025): On January 21, 2025, the American Alliance for Equal Rights (“AAER”) sued the Attorney General of Illinois, the Director of the Illinois Department of Human Rights, and the Secretary of State of Illinois. AAER alleges that an Illinois law requiring “qualifying nonprofits to gather and publicize” certain demographic data online compels organizations to engage in unlawful discrimination. They assert that “[b]y forcing charities to publicize the demographics of their senior leadership, the law pushes them to hire candidates based on race.” AAER also alleges the law violates the First Amendment by compelling organizations “to speak about a host of controversial demographic issues.” AAER seeks permanent injunction and declaratory relief. On March 4, 2025, the United States intervened as a plaintiff. AAER filed a motion for preliminary injunction on April 4, 2025. The defendants subsequently moved to dismiss both complaints—for lack of subject matter jurisdiction as to the United States and failure to state a claim as to AAER—and opposed the preliminary injunction motion.
  - Latest update: On August 20, 2025, the court issued its ruling on the motions for preliminary injunction and to dismiss. The court granted in part the defendants’ motion to dismiss. The court held that AAER lacked standing to sue on behalf of its anonymous members based on alleged public disclosure, which the court held was too speculative to constitute injury in fact. However, the court held that AAER did have standing to sue in relation to the collection of its members’ sensitive information. The court granted the motion to dismiss the United States from the case due to lack of injury in fact. The court denied AAER’s motion for preliminary injunction, reasoning that AAER proved neither likelihood of success on the merits nor irreparable harm.
- Doe v. EEOC, No. 1:25-cv-01124 (D.D.C. 2025): On April 15, 2025, three law students, proceeding under pseudonyms, sued the EEOC, challenging the EEOC’s letters seeking law firms’ demographic and diversity-related data. The plaintiffs allege that those letters exceed the agency’s authority under Title VII and violate the Paperwork Reduction Act. The plaintiffs seek declaratory judgment, an injunction barring the collection of sensitive information through improper means, and an order compelling withdrawal of the investigative letters and return of any information collected pursuant to those letters. On June 5, 2025, the plaintiffs moved for summary judgment. On July 31, the EEOC moved to dismiss the complaint, moved in the alternative for summary judgment, and opposed the plaintiffs’ summary judgment motions. The defendants argue that the letters were not a formal investigation but simply informal fact-gathering. The defendants assert that the plaintiffs lack standing because they did not experience harm, and any harm they may experience would be caused by the law firms, not the EEOC. The defendants also challenge the ultra vires claim and assert that the plaintiffs “have identified no basis for such [an] expansive” remedy as injunctive or declaratory relief.
  - Latest update: On August 14, the plaintiffs opposed the EEOC’s motions to dismiss and for summary judgment, asserting they experienced concrete harm traceable to the EEOC, as the EEOC was the “but for” cause of the requests for sensitive information.
- Glass, Lewis & Co., LLC v. Ken Paxton, No. 1:25-cv-01153 (W.D. Tex. 2025): On July 24, 2025, Glass, Lewis & Co., LLC sued Texas Attorney General Ken Paxton to enjoin Texas Senate Bill 2337, which, starting September 1, 2025, will require proxy advisory services like Glass Lewis to “conspicuously disclose” that their advice or recommendations are “not provided solely in the financial interest of the shareholders of a company” if the advice or recommendations are based wholly or in part on ESG, DEI, social credit, or sustainability factors. Glass Lewis alleges that the law unconstitutionally discriminates based on viewpoint and infringes on its freedom of association in violation of the First Amendment. Glass Lewis also contends that the law is unconstitutionally vague under the First and Fourteenth Amendments and is preempted by ERISA. Also on July 24, 2025, Glass Lewis contemporaneously moved for a preliminary injunction to prevent Texas Senate Bill 2337 from going into effect on September 1, 2025, contending that Glass Lewis will suffer “irreparable harm” if the Act becomes effective.
  - Latest update: On August 19, 2025, the Attorney General filed an opposition to the preliminary injunction motion, asserting that (1) the plaintiffs lack standing, having pled no actionable injury in fact, (2) the law does not violate the U.S. Constitution nor is it preempted by federal law, and (3) there is no irreparable harm. The court held an evidentiary hearing on August 29, 2025. During the hearing, the court granted the preliminary injunction motion, reasoning that the law compels speech likely in violation of the First Amendment. The judge stated that he will issue a written order within 30 days. He set a trial date for February 2, 2026.
- National Education Association, et al. v. Formella, et al., No. 1:25-cv-00293 (D.N.H. 2025): On August 7, 2025, the National Education Association (along with four New Hampshire school districts, DEI professionals, and a nonprofit that provides LGBTQ+ programming in schools) sued multiple New Hampshire state officials to enjoin enforcement of New Hampshire statutes RSA 21-I-:112-116 and RSA 186:71-77. These statutes, effective July 1, 2025, prohibit DEI initiatives, programs, trainings, and policies in public schools and other public entities. The plaintiffs allege that the statutes (1) violate the Supremacy Clause because they conflict with federal anti-discrimination laws, (2) violate the First Amendment rights of students and educators, and (3) are unconstitutionally vague and ambiguous under the United States and New Hampshire Constitutions.
  - Latest update: The plaintiffs filed an emergency motion for preliminary injunction on August 11, 2025. On August 21, 2025, the defendants filed an opposition to the motion, asserting that the plaintiffs lack standing, that the challenged laws do not conflict with federal law, and that no irreparable harm has been shown. Following an evidentiary hearing on August 27, 2025, the court took the motion under advisement. A decision remains pending.
- National Urban League, et al. Trump, et al., No. 1:25-cv-00471 (D.D.C. 2025), No. 1:25-cv-00471 (D.D.C. 2025): On February 19, 2025, the National Urban League, National Fair Housing Alliance, and AIDS Foundation of Chicago sued President Donald Trump challenging EO 14151, EO 14168, EO 14173, and related agency actions, alleging they violated the First Amendment, Fifth Amendment, and Equal Protection Clause of the Constitution, as well as the APA. The plaintiffs filed a motion for a preliminary injunction, which the court denied on May 2, 2025. On June 30, 2025, the plaintiffs filed an amended complaint, which included new factual allegations and omitted their APA claim.
  - Latest update: On August 8, 2025, the defendants moved to dismiss. The defendants contend that the plaintiffs lack Article III standing due to lack of alleged injury and that the court lacks jurisdiction because the Tucker Act vests jurisdiction exclusively in the Court of Federal Claims for these claims. The defendants also challenged each claim on the merits, asserting: (1) the First Amendment claim fails because the EOs do not regulate speech outside federal funds, (2) the Fifth Amendment vagueness claim fails because vagueness claims traditionally do not apply to “presidential directives,” (3) the Equal Protection claim fails because the EOs do not discriminate based on race and survive rational basis scrutiny, and (4) the EOs are not ultravires because they direct agencies to implement their directives “consistent with applicable law.” On August 24, 2025, the court granted a motion by the nonprofit entity Do No Harm for leave to file an amicus brief in support of the defendants. The plaintiffs’ opposition to the defendant’s motion to dismiss is due September 12. No hearing has been scheduled.
- State of California, et al. v. U.S. Department of Education, et al., No. 1:25-cv-10548 (D. Mass. 2025): On March 6, 2025, the states of California, Massachusetts, New Jersey, Colorado, Illinois, Maryland, New York, and Wisconsin (collectively, “the Plaintiff States”) sued DOE, alleging that it arbitrarily terminated previously awarded grants under the Teacher Quality Partnership (“TQP”) and Supporting Effective Educator Development (“SEED”) programs in violation of the APA. On June 2, 2025, the Plaintiff States filed an amended complaint. On June 30, DOE filed a motion to dismiss for lack of jurisdiction or, in the alternative, to transfer the case to the Court of Federal Claims. In its motion, DOE argued that the APA’s waiver of sovereign immunity does not extend to claims sounding in contract, like the Plaintiff States’ claims. In the alternative, DOE argued that “the Tucker Act grants the Court of Federal Claims jurisdiction over suits based on any express or implied contract with the United States.”
  - Latest update: On July 21, 2025, the Plaintiff States filed an opposition to DOE’s motion to dismiss, arguing that their claims do not sound in contract and therefore do not belong in the Court of Federal Claims under the Tucker Act. In support of their argument, the Plaintiff States reasoned that their claims are based on the defendants’ violations of the APA and the Constitution, not on whether the defendants breached any contract. The Plaintiff States also reasoned that they seek specific relief (i.e., enjoining the defendants’ actions), not contract-based remedies of contract enforcement or monetary damages.

2. Actions against educational institutions:

- Johnson v. Fliger, et al., No. 1:23-cv-00848 (E.D. Cal. 2023), on appeal at No. 24-6008 (9th Cir. 2024): On June 1, 2023, Daymon Johnson, a professor at Bakersfield College in California, sued several Bakersfield and Kern Community College District officials, alleging that the district’s commitment to “embrac[e] diversity” and “anti-racism” through state and local district statutes, regulations, and policies imposes an “ideological orientation” on district faculty by suppressing opposing viewpoints and political speech in violation of Section 1983 and the First and Fourteenth Amendments of the U.S. Constitution. On September 23, 2024, the court dismissed the complaint, reasoning that the plaintiff lacked standing to bring a pre-enforcement action because he failed to allege sufficient injury and dismissed the case without prejudice. On September 23, 2024, the plaintiff filed a notice of appeal. On July 14, 2025, the Ninth Circuit reversed the district court’s conclusion that the plaintiff lacked standing, holding that (1) the plaintiff sufficiently alleged “an intention to engage in a course of conduct arguably affected with a constitutional interest” under the First Amendment, (2) his intended conduct was “arguably proscribed” by the regulations because they directly regulate the plaintiff as a community college employee and faculty member, and (3) the plaintiff adequately alleged a “credible threat” of enforcement under the relevant provisions. The court remanded the plaintiff’s motion for preliminary injunction for the district court to consider in the first instance.
  - Latest update:On July 28, 2025, the defendants filed a petition for rehearing, arguing that (1) the plaintiff lacks standing to sue under the California Code of Regulations, Title 5, § 53605(c) because he is a faculty member and thus not subject to the provision; and (2) the plaintiff lacks standing to sue under California Education Code § 87732(f) because the defendants disavowed enforcing the statute as to the plaintiff at oral argument. On August 22, 2025, the Ninth Circuit denied defendants’ petition for rehearing.

Legislative Updates

Texas HB 171: On July 22, 2025, Texas State Representative Brian Harrison (R) introduced Texas House Bill 171. The bill provides that “[a]n institution of higher education may not offer a certificate or degree program … in lesbian, gay, bisexual, transgender or queer studies… or … in diversity, equity, and inclusion.” Further, if an institution of higher education determines that an employee has violated the statute, the institution must first “place the employee on unpaid leave for the next academic year” and then “discharge the employee” for any subsequent violation, and further “report the determination and action taken by the institution to the [Texas Higher Education] coordinating board.”
U.S. House Bill 4603: On July 22, 2025, U.S. House Representative John McGuire (R-VA) introduced U.S. House Bill 4603, which would amend the Public Utility Regulatory Policies Act of 1978. The bill would prohibit state regulatory authorities from approving the rate of a state-regulated electric utility if the utility engages in certain DEI practices or considers ESG factors in establishing rates. Prohibited DEI practices include requiring employees to undergo training teaching that any particular race, sex, or other statutorily protected trait “is inherently or systemically superior or inferior, oppressive or oppressed, or privileged or unprivileged.” The bill provides a carveout for state-regulated electric utilities to continue complying with existing federal laws and regulations that require specific ESG factors.
Ohio HB 96: On June 30, 2025, Ohio Governor Mike DeWine (R) signed the state’s effective operating appropriation bill, House Bill 96, into law. The Act prohibits, to the extent permitted by federal law, any state funding of DEI initiatives or mental health services that “promote or affirm social gender transition.” The Act also defines “sex” as the “biological indication of male and female … without regard to an individual’s psychological, chosen or subjective experience of gender.”
Texas SB 2337 (Previously covered): On June 20, 2025, Texas Governor Greg Abbott (R) signed Senate Bill 2337 into law. Effective September 1, 2025, the Act requires shareholder proxy advisors to make certain disclosures when recommending shareholder votes based “wholly or partly” on factors other than the financial interest of a company’s shareholders. Factors defined as being outside shareholders’ financial interest include DEI and ESG goals, factors, and investment principles. Proxy advisors whose recommendations incorporate these factors are required to provide “clear, factual disclosures” for recommending “casting a vote for nonfinancial reasons.” The Act renders any violation of these disclosure rules to be an unlawful deceptive trade practice and permits affected parties to pursue either declaratory or injunctive relief.
Texas HB 229: On June 20, 2025, the Texas Legislature approved House Bill 229, which defines biological sex for purposes of Texas state law. The bill, effective on September 1, 2025, defines “sex” as “either male or female,” and asserts that “biological differences between the sexes” provide “legitimate reasons to distinguish between the sexes with respect to prisons . . . locker rooms, restrooms, and other areas where biology, safety, or privacy are implicated.” The bill states that laws that distinguish between the sexes are subject to “intermediate constitutional scrutiny” which “allows the law to distinguish between the sexes where such distinctions are substantially related to important governmental objectives.” The bill also requires governmental entities that collect “statistics information that identifies the sex of an individual [to] . . . identify each individual as either male or female.”

The following Gibson Dunn attorneys assisted in preparing this client update: Jason Schwartz, Mylan Denerstein, Zakiyyah Salim-Williams, Cynthia Chen McTernan, Anna McKenzie, Cate McCaffrey, Sameera Ripley, Anna Ziv, Emma Eisendrath, Benjamin Saul, Simon Moskovitz, Teddy Okechukwu, Beshoy Shokrolla, Angelle Henderson, Lauren Meyer, Kameron Mitchell, Taylor Bernstein, Jerry Blevins, Chelsea Clayton, Sonia Ghura, Samarah Jackson, Elvyz Morales, Allonna Nordhavn, and Felicia Reyes.

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

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

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

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

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

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

The German Federal Cabinet (the Cabinet) has decided to propose amendments to the German Supply Chain Due Diligence Act (SCDDA) until the EU Corporate Sustainability Due Diligence Directive (CSDDD) will be transposed into national law. The proposal would eliminate reporting duties and exempt several due diligence obligations from the scope of administrative fines. Notably, under the proposal, the substantive due diligence obligations as well as the act’s documentation obligations would remain in place.

Following the announcement by the then-newly formed German government in April 2025 to completely abolish the SCDDA and eliminate reporting obligations as well as limit fines to serious human rights violations,[1] the Cabinet agreed on September 3, 2025, to propose amendments to the SCDDA[2]. The proposed amendments are intended to remain in effect until the CSDDD is transposed into national law, which is currently required by July 26, 2027.

I. Proposed Amendments

The proposal strikes the SCDDA’s annual reporting obligations retroactively, which thus far required both online publication and submission to the competent authority. Until now, only the review of reports by the competent authority (BAFA) had been suspended until the end of 2025.[3] Importantly, under the proposed amendments, the law’s documentation obligations would remain in place.

In addition, the substantive due diligence obligations would continue to apply. However, several obligations are now proposed to be exempted from the scope of the administrative fines, including the following:

Procedural obligations, such as conducting a risk analysis and determining a responsible individual (Human Rights Officer) for monitoring the risk management within companies
Reviewing and updating the effectiveness of preventive measures, remedial actions, and the complaints procedure
Storage and retention of documentation.

Further, fines for non-compliance with preventive measures and remedial actions would only apply to human rights risks, no longer to environment-related risks.

The Cabinet reasoned that only the more serious violations should remain subject to penalties in order to avoid excessive burdens for in-scope companies. These would include the duty to take preventive measures and remedial actions against human rights risks as well as the obligation to establish a complaints procedure.

II. Next Steps

The Cabinet proposal must still pass through the German Parliament (Bundestag) as well as the Federal Council (Bundesrat).

While the relief from the law’s reporting obligations and the elimination of some penalty provisions would certainly be welcome for in-scope companies, it remains to be seen whether the Cabinet proposal would actually reduce their compliance burden. It should be noted that the CSDDD, at least as things currently stand, is expected to introduce similar requirements in the near future. In addition, there are other regulatory frameworks requiring insights into companies’ supply chains, such as the EU Deforestation Regulation (EUDR), the U.S. Uyghur Forced Labor Prevention Act (UFLPA), and, as of December 2027, the EU Forced Labor Regulation.

Gibson Dunn will continue to monitor and report on any new developments.

[1] https://www.koalitionsvertrag2025.de/sites/www.koalitionsvertrag2025.de/files/koav_2025.pdf.

[2] https://www.bmas.de/SharedDocs/Downloads/DE/Gesetze/Regierungsentwuerfe/reg-gesetz-zur-aenderung-des-lieferkettensorgfaltspflichtengesetzes.pdf?__blob=publicationFile&v=1.

[3] https://www.bafa.de/DE/Lieferketten/Berichtspflicht/berichtspflicht_node.html.

The following Gibson Dunn lawyers prepared this update: Markus Rieder, Carla Baum, Katharina Heinrich, and Marc Kanzler.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s ESG: Risk, Litigation, & Reporting practice group, or the authors in Munich:

Markus S. Rieder – Co-Chair, Transnational Litigation Group,
(+49 89 189 33 260, mrieder@gibsondunn.com)

Carla Baum (+49 89 189 33 263, cbaum@gibsondunn.com)

Katharina Heinrich (+49 89 189 33 275, kheinrich@gibsondunn.com)

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

The Committee, through its six-month inquiry—which included taking evidence from business and industry groups—considered the UK’s current legal and voluntary framework in relation to forced labour in international supply chains, and recommends new legislation, including mandatory human rights due diligence and import bans.

On 24 July 2025, the Joint Committee on Human Rights (Committee) published a report exploring forced labour in international supply chains of goods which enter into or are sold on the UK market (Report).[1] The Committee, through its six-month inquiry—which included taking evidence from business and industry groups—considered the UK’s current legal and voluntary framework in relation to forced labour in international supply chains. The Report compares the UK’s regulatory approach to forced labour with some of its main trading partners, including the European Union (EU) and the United States (US), as well as its policy position on the inclusion of human rights-related-language in free trade agreements (FTAs)—a number of which have recently been concluded or are currently being negotiated.

The Committee concluded by finding “[t]he evidence we heard demonstrates that goods produced by forced labour are being sold in the UK”.[2] It observed that certain sectors are particularly high risk—including the green energy sector. In light of the Committee’s findings, the Report makes recommendations for the UK Government, including the introduction of mandatory human rights due diligence (mHRDD) and import bans, to be actioned within one year of the Report’s publication. This would (in the Committee’s view) “level the playing field and be welcomed by many responsible businesses”.[3]

According to the Report, new legislation should establish:

that it is unlawful to import or sell goods linked to forced labour in the UK;
new mHRDD obligations for businesses;
a right for those who have suffered forced labour to bring a claim for civil liability against those responsible;
the regulatory arrangements for imported goods, sale of goods, and ensuring business compliance with the new due diligence duties; and
how such regulations will be enforced and how those responsible for enforcement will be resourced.[4]

Whether the Government will follow such recommendations remains to be seen, and a Government response is expected later this month. Policymakers will no doubt have in mind the evolving landscape in Europe, where the European Corporate Sustainability Due Diligence Directive (CSDDD) (amongst other ESG regulations) is under increasing scrutiny as part of a proposed Omnibus package (previously reported on here).

We address some of the key findings of the Report in more detail below.

Forced Labour in Supply Chains

“Forced labour” is defined by the International Labour Organisation (ILO) as “all work or service which is exacted from any person under the threat of a penalty and for which the person has not offered himself or herself voluntarily”.[5] The ILO categorises forced labour as a form of modern slavery. The Report notes that, as of 2021, there were approximately 27.6 million people subject to forced labour globally, and that this number is increasing.

International Law on Forced Labour

The Report observes that the UK has ratified a number of international treaties with relevance to forced labour, the most important of which are: (i) the European Convention on Human Rights (ECHR) (Article 4 prohibits “slavery and forced labour”); (ii) the International Covenant on Civil and Political Rights (ICCPR) (Article 8 prohibits slavery and servitude); and (iii) the ILO Conventions. As noted by the Committee, these international agreements create legal obligations for the UK as a matter of international law, although these usually only extend to the UK’s territorial jurisdiction. With the exception of the ECHR, there are no courts which can be used by individuals to directly enforce their rights under these treaties, either internationally or in the UK.

The Report further notes that, even in the case of the ECHR, its applicability to forced labour in the UK’s supply chains is limited in the context of international supply chains—Article 4 has been relevant principally in cases of forced labour, modern slavery and human trafficking which have taken place in the UK itself rather than in the UK’s supply chains abroad.

The Report observes the UK’s support of voluntary international initiatives such as the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct—but that these are “advisory and unenforceable in the UK”.

Existing UK Legislation on Forced Labour

The Report notes that the UK has a “patchwork” of domestic legislation relevant to forced labour and supply chains.[6] Key amongst these is the Modern Slavery Act 2015 (MSA 2015), which was “world-leading” when it was passed.[7] Section 54 of the MSA 2015 introduced the UK’s first corporate reporting regulation for in-scope companies, requiring preparation and publication of an annual slavery and human trafficking statement (Section 54).[8] The Committee concluded, however, that such statements are “not effectively motivating companies to address forced labour in their supply chains”.[9]

The Report notes that other statutes in the “patchwork” include the Foreign Prison-Made Goods Act 1897, the Proceeds of Crime Act 2002, the Procurement Act 2023 and—to a lesser extent—the Human Rights Act 1998.[10] Sector-specific legislation is also in place in the UK. For example, under the Great British Energy Act 2025, one of Great British Energy’s (GBE) objectives is facilitating, encouraging and participating in “measures for ensuring that slavery and human trafficking is not taking place in [GBE’s] business or supply chains”.[11]

Overall, however, the legislation is, in the Committee’s view, “currently inadequate to address forced labour in UK supply chains”.[12] According to the Committee, legislation should, therefore, be strengthened.

Import Bans

The Report observes that the UK does not currently have any comprehensive import ban on goods produced by forced labour—which can send a strong message that forced labour in supply chains will not be tolerated. The Report explains that such bans can be an appropriate response to state-imposed force labour, where conventional due diligence approaches may be inappropriate.

The Report discusses the Uyghur Forced Labour Prevention Act 2021 (UFLPA) in the US, which established a rebuttable presumption that all goods “mined, produced, or manufactured wholly or in part in the [Xinjiang region in China], or by an entity on the UFLPA Entity List” are presumed to be linked to forced labour unless and until it is proved otherwise.[13] The Report also noted the US’ legislation prohibiting any goods produced by North Korean citizens being imported since 2017.

The Report notes that the EU has introduced its own forced labour legislation, through the Forced Labour Regulation 2024, which is expected to apply from 14 December 2027 (Regulation).[14] This Regulation prohibits “the placing and making available on the Union market of products made with forced labour or exporting domestically produced or imported products made with forced labour”.[15] Article 37 requires Member States to lay down rules on penalties which are “effective, proportionate and dissuasive”, and for compliance to be monitored by a competent authority.[16] In comparison to the UFLPA, the Regulation applies to imported and exported goods produced by forced labour globally (including in Member States). As such, it is broader in scope that the UFLPA.

Given the import bans being introduced in competitor markets such as the EU and US, the Report declared that there is a risk that the UK could become a more attractive destination for goods produced by forced labour.

Other Enforcement Mechanisms in the UK

The Report explains that the UK has a number of other domestic measures which could be better utilised to tackle forced labour in UK supply chains—in particular, the Proceeds of Crime Act 2002 (POCA). The Committee observed, however, that the POCA has, to date, been “underutilised by law enforcement agencies to seize goods linked to forced labour”.[17] In particular, the Report points to Part 5 of the POCA, which empowers agencies to seize assets linked to forced labour through civil recovery (without requiring a conviction); and Part 7 of the POCA, which requires businesses to report suspicious transactions and assist with prosecution efforts in relation to forced labour (i.e., helping to disrupt the financial drivers of forced labour).[18] The Report recommends overcoming barriers to enforcement so that agencies can use their powers under POCA to address the risk of forced-labour goods being sold in the UK.

Free Trade Agreements (FTAs)

The Report also considered the UK’s policy of including human rights language in FTAs. By way of context, it is increasingly common for provisions to be included in FTAs which display the parties’ values. Typically, such clauses commit the parties to upholding or improving rights as part of the FTA. Clauses might comprise commitments to uphold human rights in general, or be more focused commitments to uphold specific rights, such as labour rights. These clauses can create legal obligations when they are operative terms (rather than just political statements), meaning that the parties can (where the FTA permits) use a breach of the provision to initiate dispute resolution proceedings, and to potentially suspend or terminate the agreement.

Ensuring that clauses on human rights are included in FTAs can demonstrate the UK’s values and principles towards forced labour. According to the Committee, the Government should make it an explicit policy to include forced labour provisions in future trade deals. In this regard, the EU’s systemic approach to including human rights clauses in its FTAs “provides an example” for the UK.[19]

The authors note that concluding FTAs is a priority of the current Government. The UK has recently concluded an FTA with the US and there are on-going FTA negotiations between the UK and the Gulf Cooperation Council, which includes Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain. Thus, we may soon see whether the UK Government will take the Committee’s FTA recommendations on board.

Forced Labour Litigation

As regards litigation, the Report observes that, in the UK, some cases are being brought by survivors of forced labour, most commonly under tort law. The Committee considers that these cases can be protracted, complex, and expensive. Consequently, in the Committee’s view, providing a dedicated route for civil claims to be brought against companies would benefit survivors, as well as place the burden on companies to demonstrate that they have taken measures to prevent forced labour in their supply chains (i.e., establish a “duty to prevent”).

Observations

The Report’s overarching recommendation is for the UK Government to strengthen existing legislation and its enforcement, as well as create new laws to establish corporate responsibility (including mHRDD) and an import ban on goods linked to forced labour. The Report also recommends a “duty to prevent” to establish civil liability for companies who do not take adequate steps to prevent forced labour in their supply chains. As noted, it remains to be seen to what extent the UK Government will take account of the Committee’s recommendations or seek to introduce new legislation, although the Government is in fact already considering reforms to the MSA 2015 following a recommendation from a House of Lords Committee in October 2024.[20] In the event that the Committee’s recommendations were adopted, even in part, UK companies could face a significantly enhanced burden to proactively tackle forced labour in their supply chains.

[1] See ‘Forced Labour in UK Supply Chains’, Joint Committee on Human Rights, 24 July 2025, available here (the Report).

[2] Report, PDF p. 13, 82.

[3] Report, PDF p. 27.

[4] See Report, PDF p. 82.

[5] Report, PDF p. 9.

[6] Report, PDF p. 15.

[7] Report, PDF p. 15.

[8] See Report, PDF pp. 15, 20.

[9] Report, PDF p. 23.

[10] See Report, PDF p. 15.

[11] Report, PDF p. 15.

[12] Report, PDF p. 15.

[13] Report, PDF p. 44.

[14] See Forced Labour Regulation (Regulation (EU) 2024/3015), 27 November 2024 (coming into force on 13 December 2024) (the Regulation).

[15] Regulation, Recital 16.

[16] Regulation, Article 37. See also Recital 66.

[17] Report, PDF p. 47.

[18] See Report, PDF pp. 47-48.

[19] Report, PDF p. 58.

[20] ‘Government response to House of Lords Modern Slavery Act 2015 Committee report, “The Modern Slavery Act 2015: becoming world-leading again”’, UK Home Office, 16 December 2024, available here.

The following Gibson Dunn lawyers prepared this update: Susy Bullock, Robert Spano, and Stephanie Collins.

Susy Bullock – Co-Chair, ESG and Transnational Litigation Groups,
London (+44 20 7071 4283, sbullock@gibsondunn.com)

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

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

In ISS’ and Glass Lewis’ challenges to a new Texas law that imposes disclosure obligations on proxy advisory firms related to certain advice to shareholders of Texas-based companies, a Texas federal court preliminarily enjoined enforcement of the law and set trial date for early February 2026.

On Friday, August 29, 2025, after a three-and-a-half-hour hearing, Judge Albright of the U.S. District Court for the Western District of Texas entered a preliminary injunction against Texas Senate Bill 2337 (SB 2337) in two lawsuits challenging the law, which will take effect on Monday, September 1, 2025—Institutional Shareholder Services Inc. v. Paxton and Glass, Lewis & Co., LLC v. Paxton. The Court’s ruling blocks enforcement of SB 2337 by the Texas Attorney General against Institutional Shareholder Services Inc. (ISS) and Glass, Lewis & Co., LLC (Glass Lewis) while the cases proceed to discovery and trial, which the Court set for February 2, 2026. Of note, the order by Judge Albright does not enjoin the law with respect to other covered proxy advisors and enjoins actions by only the Attorney General.

SB 2337 will impose extensive public and directed disclosure obligations on proxy advisory firms when their recommendations or services are based on non-financial factors, which include environmental, social and governance (ESG) and diversity, equity and inclusion (DEI) considerations, diverge from company management’s recommendations, or provide conflicting advice across clients. This law impacts proposals presented to shareholders of publicly traded Texas-based companies or those that have proposed to become Texas companies. A violation of the law constitutes a deceptive trade practice under the Deceptive Trade Practices Act and is actionable by the company, its shareholders, the firm’s clients, and the Attorney General. For a discussion of SB 2337, please see Gibson Dunn’s prior Guide and Webcast about the recent changes in Texas law.

The Parties and Their Positions

ISS and Glass Lewis asserted several claims, some overlapping, in their attempts to invalidate SB 2337 (ISS docket) (Glass Lewis docket). ISS and Glass Lewis both argued that SB 2337:

Violates the First and Fourteenth Amendments of the U.S. Constitution through compelled speech, content-based regulation of speech and viewpoint discrimination by forcing proxy advisors to state that recommendations inconsistent with management or incorporating ESG/DEI are not in shareholders’ financial interest[1];
Is unconstitutionally vague, given the undefined and/or politically charged terms of, for example, “nonfinancial factors,” “financial interest,” “ESG,” and “DEI”; and
Violates the Dormant Commerce Clause by regulating speech of out-of-state advisors to out-of-state clients when the subject company is, or intends to become, Texas-based.

Additionally, both ISS and Glass Lewis argued that SB 2337 is preempted. ISS argued that it is expressly preempted by the Investment Advisers Act of 1940 and Glass Lewis argued that it is expressly preempted by the Employee Retirement Income Security Act of 1974.

Attorney General Ken Paxton moved to dismiss both complaints, arguing that:

Plaintiffs lack standing because SB 2337 has not yet been enforced;
Sovereign immunity bars the suits;
Proxy advisor speech is commercial in nature and subject only to rational basis or intermediate scrutiny under Zauderer and Central Hudson;
SB 2337 is not vague and simply requires factual, noncontroversial disclosures; and
To the extent provisions were problematic, they could be severed while leaving the statute largely intact.

On August 25, 2025, the Texas Stock Exchange (TXSE) and the Texas Association of Business (TAB) jointly intervened as defendants in the cases, arguing that they have direct and protectable interests at stake given their representation of Texas companies, a private right of action under SB 2337, and that their interests diverge from those of the Attorney General who may not need to defend the law on the merits.

The Alliance for Corporate Excellence filed amicus briefs in each of the Glass Lewis and ISS cases, generally supporting SB 2337 and characterizing it as a transparency requirement rather than a speech restriction.

The Hearing

The Court began the August 29th injunction hearing by agreeing that the plaintiffs have standing to sue and admitted the intervenors without discussion. The Court then heard extensive argument on the First Amendment and vagueness claims:

First Amendment. Plaintiffs emphasized that SB 2337 forces them to adopt a state-scripted message directly contradicting their professional judgment and that it singles out certain speech based on viewpoint and content for regulation. They likened this to a “scarlet letter” requirement compelling them to announce publicly and to clients that their advice “subordinates shareholder financial interests” whenever ESG/DEI is considered or they recommend against management. The Attorney General countered that these were mere “factual disclosures” akin to securities regulations. Judge Albright accepted the plaintiff’s argument they provide recommendations specifically solicited by clients, rather than factual statements that must be accompanied by a disclosure.
Vagueness. Plaintiffs highlighted that terms such as “solely in the financial interest,” “non-financial interest,” “ESG,” and “DEI” lack settled definitions. Because violations could trigger penalties of up to $10,000 per report and reports are distributed to thousands of clients, the statute exposed firms to potentially huge liability on a regular basis. The Attorney General responded that these terms are widely used in the industry and reasonably clear. The Court was sympathetic to the plaintiffs, emphasizing that the statute does not seem to indicate what would constitute a violation with sufficient particularity. ISS and Glass Lewis also explained that, due to the vagueness of the statute, nearly every recommendation they issue with respect to a Texas-based company would trigger SB 2337, requiring website disclaimers, notices to issuers and the Attorney General, and forced labeling of customized client recommendations as “conflicts,” undermining their credibility and client relationships.

After hearing arguments from both plaintiffs, the Attorney General attempted to present its arguments and was questioned extensively by the Court over the purpose of the statute, how the statute would function, and who it would protect. The intervenors were questioned, as well, after describing the statute in a way the court believed was inconsistent with its actual language.

The Outcome and Order

At the end of the hearing, the Court ruled that ISS and Glass Lewis had met the standard for the issuance of a Preliminary Injunction and enjoined the “Attorney General and his agents, employees, and all persons acting under his direction or control from taking any action to enforce SB 2337 against [ISS and Glass Lewis], including but not limited to intervention in any private right of action.”

While the Court issued the preliminary injunction only with respect to ISS and Glass Lewis, it is persuasive, though non-binding authority for any other advisor or service provider seeking a similar injunction against the Attorney General.

What to Watch Next

Judge Albright likely will issue a written order memorializing the rulings at the hearing and setting forth his reasoning. The Attorney General has the option to appeal to the Fifth Circuit for an emergency stay of the injunctions. If the Attorney General were successful in lifting the injunction on appeal, ISS and Glass Lewis would face compliance obligations while litigation proceeded on the merits.

The trial on the merits, scheduled for February 2026, will directly impact rules governing proxy advisory services in the next full proxy season. If SB 2337 or a modified version is ultimately upheld, proxy advisors will have to include disclaimers on a significant number of recommendations, notify issuers and the Attorney General of differing advice, and provide written economic analyses—all of which could alter the timing, content, and consistency of recommendations institutional investors rely upon. Conversely, if the injunction is affirmed and the law is struck down at trial, proxy advisors will continue under the limited existing federal framework without the state-imposed disclosure obligations.

We will continue to monitor the situation for developments.

[1] Glass Lewis also argued that SB 2337 violates the First and Fourteenth Amendments by infringing on its freedom of association by penalizing it for associating with a group that evaluates company value based on nonfinancial factors.

The following Gibson Dunn lawyers prepared this update: David Woodcock, Hillary Holmes, Gregg Costa, Colin Davis, Gerry Spedale, Jason Ferrari, and Hayden McGovern.

David Woodcock – Dallas (+1 214.698.3211, dwoodcock@gibsondunn.com)
Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@gibsondunn.com)
Gregg Costa – Houston (+1 346.718.6649,gcosta@gibsondunn.com)
Colin B. Davis – Orange County (+1 949.451.3993, cdavis@gibsondunn.com)
Gerry Spedale – Houston (+1 346.718.6888, gspedale@gibsondunn.com)
Jason Ferrari – Houston (+1 346.718.6736, jferrari@gibsondunn.com)
Hayden K. McGovern – Dallas (+ 214.698.3142, hmcgovern@gibsondunn.com)

We are pleased to provide you with the August 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

President Trump signed an Executive Order directing the federal banking agencies, Consumer Financial Protection Bureau (CFPB), National Credit Union Administration (NCUA) and Small Business Administration (SBA) to investigate whether financial institutions have engaged in “politicized or unlawful debanking” practices. See our Client Alert here.
On August 25, 2025, President Trump fired Federal Reserve Board Governor Lisa Cook from the Board of Governors. Governor Cook filed a complaint on August 28, 2025 in federal court in Washington, D.C., challenging the president’s attempt to remove her from office, paving the way for a legal battle over the president’s “for cause” removal authority.
Federal Reserve Board Governor Adriana Kugler submitted her resignation effective August 8, 2025. Governor Kugler’s term was set to expire January 31, 2026. Stephen Miran, Chairman of the Council of Economic Advisers, was nominated to replace Governor Kugler for the remainder of her term.
Consistent with past initiatives and agency actions with respect to crypto-related activities and digital assets, the Board of Governors of the Federal System (Federal Reserve) announced it will “sunset” its novel activities supervision program and return to monitoring those activities through the normal supervisory process.
As stated last month in a filing to the U.S. District Court for the Eastern District of Kentucky in the section 1033 open banking rule litigation, the CFPB issued an advance notice of proposed rulemaking (ANPR) on its section 1033 open banking rule. The CFPB also issued:
- four ANPRs seeking comment on raising “larger participant” thresholds in auto finance, remittances, credit reporting and debt collection markets, potentially reducing significantly the number of nonbank entities subject to CFPB supervision; and
- a proposed rule to adopt a standard definition of “risks to consumers with regard to the offering or provision of consumer financial products or services” that will bind the CFPB in proceedings to designate “nonbank covered persons” for CFPB supervision.

DEEPER DIVES

President Trump Issues Executive Order Addressing “Politicized or Unlawful” Debanking. On August 7, 2025, President Trump signed an Executive Order directing the federal banking agencies, CFPB, NCUA and SBA to investigate whether financial institutions have engaged in “politicized or unlawful debanking” practices in violation of federal law. 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.

Insights. Our Client Alert details the terms of the Executive Order and highlights potential issues associated with the agency-mandated lookback and potential Congressional investigations stemming from the Executive Order. Some principal takeaways are highlighted below:

Opportunities for (Re)Engagement

The Executive Order creates opportunities for the industry to advocate with (i) policymakers in the implementation of proposed legislative solutions 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.

Although no federal banking agency or the NCUA has signaled a formal proposed rulemaking is forthcoming, any proposed rulemaking could be informed by the OCC’s 2021 fair access rule. Even absent a proposed rulemaking, the OCC’s fair access rule may shed light on how the agencies will consider the issues of reputation risk and fair access in this administration.

Reputation Risk Assessments

The Executive Order directs the “federal banking regulators” (as defined in the Executive Order) to consider rescinding or amending existing regulations “to ensure that any regulated firm’s or individual’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.” This further establishes that reputation risk can remain embedded in “individualized, objective, risk-based analyses.”

“Individualized, objective, and risk-based analyses”

This language appears twice in the Executive Order and reinforces that 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, strategic risk, market risk, operational risk, and legal and compliance risk, among other core banking risks.

Legal Questions Surrounding the Termination of Federal Reserve Board Governor Cook. On August 25, 2025, President Trump fired Federal Reserve Board Governor Lisa Cook from the Board of Governors. Governor Cook filed a complaint on August 28, 2025 in federal court in Washington, D.C., challenging the president’s attempt to remove her from office, paving the way for a legal battle over the president’s “for cause” removal authority. A court hearing on Governor Cook’s request for a request for a temporary restraining order that President Trump be temporarily barred from firing her while her lawsuit is pending took place on August 29, 2025.

Insights. The Federal Reserve, also a named defendant in Governor Cook’s lawsuit, submitted a response to Governor Cook’s motion for a temporary restraining order. The Federal Reserve noted that it is “being sued to ensure that Governor Cook can obtain complete relief if she is successful on her claims.” The Federal Reserve further stated “it does not intend to offer arguments concerning Governor Cook’s motion … [it] merely expresses (1) its interest in a prompt ruling by [the] Court to remove the existing cloud of uncertainty; and (2) its intent to follow any order this Court issues.” At the time of this publication, no ruling has been made.

CFPB Issues Section 1033 Open Banking ANPR. On August 22, 2025, the CFPB issued an advance notice of proposed rulemaking (ANPR) on its section 1033 open banking rule. Comments on the open banking ANPR are due by October 21, 2025. On August 8, 2025, the CFPB also issued four ANPRs seeking comment on raising “larger participant” thresholds in auto finance, remittances, credit reporting and debt collection markets. Comments on the four ANPRs are due by September 22, 2025. Finally, on August 26, 2025, the CFPB issued a proposed rule to adopt a standard definition of “risks to consumers with regard to the offering or provision of consumer financial products or services” that will bind the CFPB in proceedings to designate “nonbank covered persons” for CFPB supervision. The proposed rule would explain that “conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services” consists of conduct that: (a) presents a high likelihood of significant harm to consumers; and (b) is directly connected to the offering or provision of a consumer financial product or service (as defined in Section 1002 of the Consumer Financial Protection Act). Comments on the proposed rule are due by September 25, 2025.

Insights. The open banking ANPR follows an interesting procedural history before the Eastern District of Kentucky in which the CFPB first stated to the court that the 1033 open banking rule was unlawful and should be set aside, but then pivoted and sought a stay of the court proceedings challenging the rule after deciding to initiate a new rulemaking to reconsider the rule. The ANPR focuses on four core issues: (i) who may act as a “representative” for the consumer; (ii) fee structures (i.e., whether data providers should be allowed to charge fees to offset the costs of responding to consumer data requests); (iii) data security; and (iv) data privacy concerns around unauthorized licensing or sale of consumer financial data. Each of the four ANPRs and the proposed rule appear aimed at reducing significantly the number of nonbank entities subject to CFPB supervision consistent with the CFPB’s intentional shift of supervisory focus back to depository institutions as opposed to non-depository institutions.

OTHER NOTABLE ITEMS

Federal Reserve to Sunset Novel Activities Supervision Program. On August 15, 2025, the Federal Reserve announced it will rescind the 2023 supervisory letter creating its novel activities supervision program and return to monitoring banks’ novel activities through the normal supervisory process. The supervision program was designed to focus on the following activities: (i) complex, technology-driven partnerships with non-banks to provide banking services; (ii) crypto-asset related activities; (iii) projects that use distributed ledger technology; and (iv) concentrated provision of banking services to crypto-asset-related entities and fintechs.

Federal Reserve Announces Final Individual Capital Requirements for Large Banks. On August 29, 2025, the Federal Reserve announced final individual capital requirements for large banks, effective October 1, 2025, follow its stress test earlier this year.

FDIC Issues CIP Guidance. On August 5, 2025, the FDIC issued a supervisory letter (FIL-39-2025) updating its supervisory approach regarding whether an FDIC-supervised institution can use pre-populated customer information for the purpose of opening an account to satisfy Customer Identification Program (CIP) requirements. According to the FIL, the CIP rule’s requirement to collect identifying information “from the customer” does not preclude the use of pre-filled information. According to the FIL, a financial institution could use information from current or prior accounts or relationships involving the bank or its agents, or other sources, such as parent organizations, affiliates, vendors, and other third parties to pre-fill information that is reviewed and submitted by the customer. As an examination matter, the FIL clarifies that FDIC examiners will consider the pre-filled information as “from the customer” provided: (1) the customer has opportunity and the ability to review, correct, update, and confirm the accuracy of the information; and (2) the institution’s processes for opening an account that involves pre-populated information allow the institution to form a “reasonable belief as to the identity of its customer” and such processes are based on the institution’s assessment of relevant risks, including fraud risk.

FDIC Issues Proposal to Amend Official Signs and Advertising Requirements. On August 19, 2025, the FDIC issued a proposed rule to amend its signage requirements for insured depository institutions’ digital deposit-taking channels, ATMs and similar devices. The proposed changes are intended to address implementation issues and sources of potential confusion that have arisen following the adoption of current signage requirements for those channels. Comments on the proposal are due by October 20, 2025.

Federal Reserve and FDIC Release Public Portions of Resolution Plans for Largest Banking Organizations. On August 5, 2025, the Federal Reserve and FDIC released the public sections of resolution plans for the eight largest and most complex domestic banking organizations and 56 foreign banking organizations. In addition, the FDIC released the public sections of the separate resolution plans of 12 large insured depository institutions.

Treasury Issues Request for Comment on Innovative Methods To Detect Illicit Activity Involving Digital Assets. As required under Section 9(a) of the GENIUS Act and in furtherance of the January 23, 2025 Executive Order 14178 on “Strengthening American Leadership in Digital Financial Technology,” the Department of the Treasury issued a request for comment inviting the public to provide input on the use of innovative or novel methods, techniques, or strategies to detect and mitigate illicit finance risks involving digital assets. Comments in response to the request are due by October 17, 2025.

FDIC Acting Chairman Issues Statement in Support of Debanking Executive Order. On August 8, 2025, FDIC Acting Chairman Travis Hill issued a statement in support of the Executive Order prohibiting “politicized or unlawful debanking” practices. In his statement, Acting Chairman Hill noted again that the FDIC plans to issue a rulemaking that would “prohibit examiners from criticizing institutions on the basis of reputational risk or directing or encouraging institutions to close accounts on the basis of political, social, religious, or other views.” He also added that the agency would conduct the lookback as directed by the Executive Order.

Comptroller of the Currency Issues Statement in Support of Debanking Executive Order. On August 7, 2025, Comptroller of the Currency Jonathan Gould issued a statement in support of the Executive Order prohibiting “politicized or unlawful debanking” practices. In his statement, Comptroller Gould indicated that the OCC will soon propose a rule removing reputation risk references from its regulations and conduct the agency lookback as directed by the Executive Order.

SBA Sends Letter to Lenders Following Debanking Executive Order. On August 26, 2025, Small Business Administration (SBA) sent a letter to its network lenders instructing them to end “politicized or unlawful banking practices.” In the letter, the SBA orders lenders to take the actions set forth in the Executive Order by December 5, 2025.

Speech by Vice Chair for Supervision Bowman on Innovation. On August 19, 2025, Vice Chair for Supervision Michelle Bowman gave a speech titled “Embracing Innovation” at the Wyoming Blockchain Symposium. In her speech, Vice Chair for Supervision Bowman covered four central topics: (i) innovation, namely the benefits or potential benefits of tokenization; (ii) reputational risk; (iii) engagement with regulators; and (iv) creating a tailored and proportional regulatory framework that fosters innovation in the banking industry.

Speech by Governor Waller on Payments. On August 20, 2025, Federal Reserve Board Governor Christopher Waller gave a speech titled “Technological Advancement in Payments.” In his speech, Governor Waller highlighted what he called a “technology-driven revolution” in payments systems, highlighting stablecoins, AI and real-time payments as some examples demonstrating that “the evolution of the payment system has long been a story of technological advancement.”

Speech by Vice Chair for Supervision Bowman on Community Banking. On August 10, 2025, Vice Chair for Supervision Michelle Bowman gave a speech titled “Thoughts on the Economy and Community Bank Capital.” In her speech, Vice Chair for Supervision Bowman highlighted many of the Federal Reserve’s initiatives already underway, including reviews or currently outstanding proposals on capital, liquidity and the supervisory process. Specifically, she noted her view that “it is time to consider modifications to the [community bank leverage ratio] CBLR framework that make it a more attractive framework and will encourage more banks to adopt it,” including by lowering the CBLR from 9% to 8%. On fraud, Bowman highlighted the June interagency request for information on addressing payments and check fraud and noted the need to revise “outdated regulations like Regulation CC” in furtherance of combatting fraud.

OCC Issues Annual Update to the Bank Accounting Advisory Series. On August 15, 2025, the OCC released its annual update to the Bank Accounting Advisory Series (BAAS). The BAAS contains staff responses to frequently asked questions from the banking industry and bank examiners on a variety of accounting topics and promotes consistent application of accounting standards and regulatory reporting among national banks and federal savings associations.

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)

From the Derivatives Practice Group: This week, Commissioner Johnson announced that she will depart the Commodity Futures Trading Commission on September 3. Acting Chairman Pham will be the sole remaining Commissioner.

New Developments

Commissioner Kristin Johnson Announces Departure from CFTC. On August 26, Commissioner Kristin Johnson, who joined the CFTC more than three years ago, announced that she will depart the agency later this year. Her term of service ended earlier this year in April 2025, and her last day at the Commission will be on September 3, 2025. Following Commissioner Johnson’s departure, Acting Chairman Pham will be the sole remaining Commissioner. [NEW]

Acting Chairman Pham Announces FBOT Advisory to Provide Regulatory Clarity for Non-U.S. Exchanges. On August 28, the CFTC’s Division of Market Oversight today issued an advisory to reaffirm the foreign board of trade (“FBOT”) registration framework for non-U.S. entities legally organized and operating outside the United States that seek to provide persons physically located in the United States with direct market access to their trading platforms. The advisory provides a reminder that a FBOT must be registered with the CFTC in accordance with the procedures, requirements, and conditions set forth in the Part 48 rules. The CFTC’s FBOT registration framework applies to all markets, regardless of asset class, and includes both traditional and digital asset markets. [NEW]

CFTC Enhances Market Oversight with Advanced Surveillance Technology Platform. On August 27, the CFTC announced that it is enhancing its market surveillance and fraud detection capabilities by deploying Nasdaq’s industry-leading suite of surveillance technology. As the CFTC embraces an expanding regulatory remit, Nasdaq’s Market Surveillance platform will support the agency’s mission to promote market integrity. The upgraded technological capabilities follow CFTC Acting Chairman Caroline D. Pham’s pledge in March to secure an enhanced market surveillance system as part of a broader effort to modernize the agency and replaces the CFTC’s ‘90s-era legacy system. [NEW]

Acting Chairman Pham Announces Next Crypto Sprint Initiative. On August 21, CFTC Acting Chairman Caroline D. Pham announced that the CFTC will begin its next crypto sprint initiative to implement the recommendations in the President’s Working Group on Digital Asset Markets report. Starting August 21, Acting Chairman Pham will begin stakeholder engagement on all other report recommendations for the CFTC. She announced CFTC’s crypto sprint earlier in August.

New Developments Outside the U.S.

ESMA and the European Environment Agency Sign Memorandum of Understanding to Strengthen Cooperation in Sustainable Finance Area. On August 20, ESMA and the European Environment Agency (“EEA”) signed a Memorandum of Understanding (“MoU”) whose purpose is to strengthen cooperation in sustainable finance. The MoU focuses on environmental factors and their integration in the EU sustainable finance framework, including the supervision of the framework. The MoU also outlines how ESMA and the EEA will exchange expertise, information and data with one another and support mutual capacity building activities.

New Industry-Led Developments

ISDA and Joint Trades Submit Letter to BCBS Calling for Recalibration of Cryptoasset Prudential Standards. On August 25, ISDA, in partnership with a coalition of leading global financial trade associations (“Joint Trades”), and with advisory support from Boston Consulting Group, Ashurst, and Sullivan & Cromwell, submitted a letter to the Basel Committee on Banking Supervision (“BCBS”). The letter called for a pause and recalibration of the Cryptoasset Exposures Standard (i.e., SCO60). The Joint Trades urged BCBS to delay the implementation of SCO60, currently scheduled for January 2026, to allow time for a targeted consultation and redesign of the framework. The letter also argued that the current standard imposes overly conservative and punitive capital requirements that do not accurately reflect the actual risks of cryptoassets and are inconsistent with established market risk practices. The letter emphasized the need for a more balanced approach that aligns with actual risk profiles and encourages responsible innovation within the regulatory framework. [NEW]

ISDA Responds to CDSC Consultation on Common Carbon Credit Data Model. On August 12, ISDA responded to a consultation from the Climate Data Steering Committee (“CDSC”) on a Common Carbon Credit Data Model. ISDA members believe the Group-of-20 carbon data model initiative is a positive step in addressing data gaps and interoperability from a top-down perspective. The response supports the setting up of a standard global carbon data taxonomy with appropriate ongoing maintenance and oversight through global industry bodies and a consensus process, which can be a more lasting and durable solution overall.

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

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

Gibson Dunn’s U.S. Supreme Court Round-Up provides summaries of cases decided during the October 2024 Term and highlights other key developments on the Court’s docket. During the October 2024 Term, the Court heard 62 oral arguments and released 58 opinions. It dismissed three cases after argument as improvidently granted and set one case for reargument next term. For the October 2025 Term, to date, the Court has granted 33 petitions for a total of 32 arguments.

Spearheaded by Miguel Estrada, the U.S. Supreme Court Round-Up keeps clients apprised of the Court’s most recent actions. The Round-Up previews cases scheduled for argument, tracks the actions of the Office of the Solicitor General, and recaps recent opinions. The Round-Up provides a concise, substantive analysis of the Court’s actions. Its easy-to-use format allows the reader to identify what is on the Court’s docket at any given time, and to see what issues the Court will be taking up next. The Round-Up is the ideal resource for busy practitioners seeking an in-depth, timely, and objective report on the Court’s actions.

View the Round-Up Here

Gibson Dunn has a longstanding, high-profile presence before the Supreme Court of the United States, appearing numerous times in the past decade in a variety of cases. Twelve current Gibson Dunn lawyers have argued before the Supreme Court, and during the Court’s ten most recent Terms, the firm has argued a total of 29 cases, including closely watched cases with far-reaching significance in the areas of intellectual property, securities, separation of powers, and federalism. Moreover, although the grant rate for petitions for certiorari is below 1%, Gibson Dunn’s petitions have captured the Court’s attention: Gibson Dunn has persuaded the Court to grant over 40 petitions for certiorari since 2006.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the U.S. Supreme Court. Please feel free to contact the following authors in the firm’s Washington, D.C. office, or any member of the Appellate and Constitutional Law Practice Group.

Miguel A. Estrada (+1 202.955.8257, mestrada@gibsondunn.com)

Jessica L. Wagner (+1 202.955.8652, jwagner@gibsondunn.com)

Lavi Ben Dor (+1 202.777.9331, lbendor@gibsondunn.com)

Christian Talley (+1 202.777.9537, ctalley@gibsondunn.com)

Special thanks to Hannah Bedard, Christine Buzzard, Gaby Candes, Giuliana Cipollone, Noah Delwiche, Matt Aidan Getz, Abby Holland, Maya Jeyendran, Elizabeth Kiernan, Hayley Lawrence, Sam Learner, Hunter Mason, Thomas Moore, Alec Mouser, Teddy Okechukwu, Jack Reed, Tate Rosenblatt, Psi Simon, Nick Scheuerman, Jesse Schupack, Anna Statz, Trenton Van Oss, Apratim Vidyarthi, and Abby Walters for their contributions to the Round-Up.

From the Derivatives Practice Group: This week, CFTC Acting Chairman Caroline D. Pham announced that the CFTC will begin its next crypto sprint initiative to implement the recommendations in the President’s Working Group on Digital Asset Markets report.

New Developments

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

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

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

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

New Developments Outside the U.S.

ESMA and the European Environment Agency Sign Memorandum of Understanding to Strengthen Cooperation in Sustainable Finance Area. On August&nbsp20, ESMA and the European Environment Agency (“EEA”) signed a Memorandum of Understanding (“MoU”) whose purpose is to strengthen cooperation in sustainable finance. The MoU focuses on environmental factors and their integration in the EU sustainable finance framework, including the supervision of the framework. The MoU also outlines how ESMA and the EEA will exchange expertise, information and data with one another and support mutual capacity building activities. [NEW]

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

New Industry-Led Developments

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

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

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

To continue assisting US companies with planning for SEC reporting and capital markets transactions into 2026, we offer our annual SEC Desktop Calendar. This calendar provides both the filing deadlines for key SEC reports and the dates on which financial statements in prospectuses and proxy statements must be updated before use (a/k/a financial staleness deadlines).

You can download a PDF of Gibson Dunn’s SEC Desktop Calendar for 2026 at the link below.

Read More

The following Gibson Dunn lawyers assisted in preparing this update: Hillary Holmes, Peter Wardle, Rob Kelley, David Korvin, and Kyle Clendenon.

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, the authors, or any leader or member of the firm’s Capital Markets or Securities Regulation & Corporate Governance practice groups:

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

Securities Regulation & Corporate Governance:
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
James J. Moloney – Orange County (+1 949.451.4343, jmoloney@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)
Aaron Briggs – San Francisco (+1 415.393.8297, abriggs@gibsondunn.com)
Mellissa Campbell Duru – Washington, D.C. (+1 202.955.8204, mduru@gibsondunn.com)
Brian J. Lane – Washington, D.C. (+1 202.887.3646, blane@gibsondunn.com)
Julia Lapitskaya – New York (+1 212.351.2354, jlapitskaya@gibsondunn.com)
Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)
Michael Scanlon – Washington, D.C.(+1 202.887.3668, mscanlon@gibsondunn.com)
Michael A. Titera – Orange County (+1 949.451.4365, mtitera@gibsondunn.com)

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

I. GLOBAL

The International Accounting Standards Board (IASB) publishes near-final guidance on disclosing uncertainties in financial statements, using climate risks examples

On July 24, 2025, the IASB published a near-final draft of illustrative examples of how companies could report uncertainties in their financial statements, such as climate-related risks, under the IFRS Accounting Standards. The examples provide guidance of disclosure under the existing accounting rules and respond to stakeholder feedback that raised concerns about insufficient information and apparent inconsistencies in companies’ disclosures regarding uncertainties. The climate risk-focused examples cover topics such as materiality determinations and disclosures related to assumptions, credit risk, decommissioning and restoration provisions, and the disaggregation of information based on dissimilar risk characteristics. The finalized examples are expected to be released in October 2025.

Other highlights:

On July 10, 2025, ISS Sustainability Solutions announced the launch of a new Sovereign Climate Impact Report, a complement to its Climate Impact Report covering corporate issuers, to provide investors with tools to evaluate climate risks across sovereign and sub-sovereign portfolios through the use of over 180 different metrics.
On July 22, 2025, the Science Based Targets initiative published the Financial Institutions Net-Zero Standard, which outlines science-based guidelines for financial institutions when setting targets to achieve net zero by 2050, covering lending, asset owner investing, asset manager investing, insurance underwriting, and capital market activities.
On July 3, 2025, the International Sustainability Standards Board (ISSB) published new exposure drafts of proposed amendments to the SASB Standards and the IFRS S2 industry-based guidance, including to (i) review nine prioritized industries (eight of which are in the Extractives & Minerals Processing sector), (ii) align metrics for water management and workforce health and safety, and (iii) update the IFRS S2 industry-based guidance to align with climate-related content in the SASB Standards. Both drafts are open for comment until November 30, 2025.
On July 3, 2025, the InterAmerican Court of Human Rights issued its advisory opinion regarding the obligations of States to take measures to mitigate and adapt to the effects of climate change. You can read more in our Alert here.
On July 7, 2025, the Association for Chartered Certified Accountants and Chartered Accountants Australia and New Zealand jointly published a guide for applying the International Standards on Sustainability Assurance 5000’s requirements relating to materiality assessments and disclosures in sustainability assurance. Relatedly, on July 8, 2025, Australia’s Accounting Professional and Ethical Standards Board published new auditing standards that set forth new requirements for sustainability reporting and assurance in support of the implementation of Australia’s new mandatory climate-related disclosures that became effective January 1, 2025.

II. UNITED KINGDOM

His Majesty’s Treasury (HM Treasury) responds to consultation on UK green taxonomy

On July 15, 2025, HM Treasury published its response to the UK green taxonomy consultation, which it launched in November 2024 as previously discussed in our November 2024 ESG Update, concluding a green taxonomy is not an effective tool and will not be pursued by the UK Government. Consultation feedback was mixed, with 55% of responders expressing mixed or negative sentiment. The response cited no compelling evidence that taxonomies proportionately channel capital or curb greenwashing, and noted taxonomies have a limited impact on investment risk or economics. The UK Government will instead prioritize the UK Sustainability Reporting Standard, transition plans, and sector roadmaps.

Financial Conduct Authority (FCA) publishes new climate disclosure rules for the public offers and admissions to trading regime

On July 15, 2025, the FCA published Policy Statement PS25/9, which will replace the UK Prospectus Regulation and take effect from January 19, 2026. The policy broadly aims to simplify capital raising, reduce costs, increase market competitiveness, and broaden retail investor participation. As part of the policy, the FCA has introduced a new climate-related disclosure rule for certain issuers (including issuers of equity securities and depositary receipts representing equity shares but excluding closed ended investment funds, open-ended investment companies, and shell companies) and optional disclosures for sustainability-labelled debt instruments. Any issuers subject to the new climate disclosure rule that have previously published a material transition plan must now include a summary of that transition plan in their prospectus. The FCA’s approach aligns with the recommendations of the Task Force on Climate-related Financial Disclosures and the International Sustainability Standards Board.

Other highlights:

On July 21, 2025, the Independent Water Commission published its final report. The Commission’s recommendations include the abolishment of Ofwat (the current water services regulator) and the creation of a new integrated regulator, combining the functions of Ofwat, the Drinking Water Inspectorate, and water functions from the Environment Agency and Natural England. The UK Government is set to respond to the final report in the Autumn.
On July 22, 2025, the Department for Environment, Food and Rural Affairs launched a public consultation on the proposed Environmental Compensatory Measures Reforms for offshore wind development. The reforms are intended to provide more clarity on the requirements for environmental compensation when unavoidable damage to a Marine Protected Area occurs during offshore wind development.
On July 24, 2025, the Joint Committee on Human Rights published its report on forced labour in UK supply chains. The report found that the UK was falling behind the EU and the U.S. and should introduce new legislation to, among other things, mandate a duty of human rights due diligence on companies and update the existing Modern Slavery Act 2015.

III. EUROPE

European Commission adopts voluntary sustainability reporting standards for small and medium-sized undertakings (SMEs)

On July 30, 2025, the European Commission adopted a recommendation on a voluntary sustainability reporting standard for SMEs. Prepared by the European Financial Reporting Advisory Group (EFRAG), the proposed voluntary reporting standard for small and medium-sized undertakings (VSME) is designed to ease the burden on SMEs. Even though these entities are not required to report under the Corporate Sustainability Reporting Directive (CSRD), entities in scope of the CSRD may request information from SMEs to fulfill their own reporting obligations. The VSME provides a simplified framework for entities in scope of the CSRD to raise such requests appropriately and for SMEs to respond to them. Notably, the European Commission’s recommendation also includes practical guidance, including explanations of terms used in the standard and templates for reporting.

EFRAG publishes updated European Sustainability Reporting Standards (ESRS) Exposure Drafts

On July 31, 2025, EFRAG published the revised Exposure Drafts of the ESRS. The revision is part of the EU’s Omnibus Simplification Package, which aims to reduce reporting burdens on companies. The revised ESRS are now over 55% shorter, with significantly fewer mandatory datapoints (a reduction of 68%).

A key amendment to the ESRS concerns the double materiality assessment (DMA), a key CSRD requirement. The amendment clarifies that companies should focus on the most obvious topics and ensure evidence is reasonable and proportionate. In response to feedback about the intensity and effort required for DMA, EFRAG introduced practical considerations, such as focusing on the most likely material topics based on the business model and context and allowing a top-down or bottom-up approach in performing the assessment, together with clearer criteria for determining material impacts, risks, and opportunities. Additional simplifications include making sustainability statements more concise and readable, improving alignment with IFRS sustainability standards, and introducing relief mechanisms to reduce undue reporting burdens (such as phasing in certain disclosure requirements and allowing the use of internal or publicly available data for value chain reporting, both for up to three years).

Due to ongoing discussions, some issues could not be addressed in the revised draft. For example, there is still no clarification of the meaning of the term “compatibility with 1.5°C” for climate transition plan disclosures. Also, the drafts do not address enhanced relief for commercially sensitive information.

EFRAG is seeking further feedback from stakeholders through a 60-day public consultation until September 29, 2025, with the final standards expected to be published by the end of November 2025.

European Commission publishes draft “Quick-Fix” Delegated Regulation postponing reporting requirements for wave-one companies under the ESRS by two years

On July 11, 2025, the European Commission published a draft Delegated Regulation postponing certain reporting requirements for wave-one companies (i.e., large Public Interest Entities (PIEs)), due to report under the CSRD from January 1, 2025 and unaffected by the “Stop-the-Clock” Directive, for two years. The new amendments allow all wave-one companies to postpone reporting on the anticipated financial effects of certain sustainability-related risks for an additional two years. Companies not exceeding 750 employees can also delay reporting on Scope 3 greenhouse gas emissions as well as all requirements under ESRS E4, S1, S2, S3, and S4 through financial year 2026. Importantly, all larger companies now receive similar phase-in relief regarding ESRS E4, S2, S3, S4, and several requirements under ESRS S1; however, larger companies must still report on Scope 3 emissions.

The delegated act is now subject to review by the European Parliament and the Council of the European Union. If no objections are raised, it will apply from January 2026 for reporting on the 2025 financial year.

Update on PFAS[1]: European Chemicals Industry Action Plan

On July 8, 2025, the European Commission published the “European Chemicals Industry Action Plan,” which includes a section titled “Providing clarity on PFAS.” This section outlines the European Commission’s current position on the proposed restriction of PFAS.

While the European Commission appears to support a ban on PFAS in consumer uses, such as cosmetics, food contact materials, and outdoor clothing, it also acknowledges the need for continued use in strategic sectors like healthcare, defense, semiconductors, and others, under strict conditions where adequate alternatives are not yet available. Derogations for critical uses are expected to be accompanied by requirements to reduce emissions at all lifecycle stages and by clear incentives to innovate.

A restriction proposal was submitted to the European Chemicals Agency (ECHA) in 2023 by Denmark, Germany, the Netherlands, Sweden, and Norway. ECHA’s scientific committees are currently evaluating the proposal, with conclusions expected in 2026. The European Commission plans to present its own proposal shortly thereafter.

Status of Omnibus discussions and CSRD / Omnibus “Stop-the-Clock” Directive transposition update

In light of summer recess, there have been no significant developments in the legislative process surrounding the Omnibus Simplification Package. The rapporteur of the European Parliament, Jörgen Warborn, stressed in an interview that the main goal of the project is to cut costs, reduce regulatory burden, and restore competitiveness. It is expected that the European Parliament will agree on a negotiation position by the end of October. Afterwards, trilogue negotiations between the European Parliament, the European Commission, and the Council of the EU will begin.

Similarly, there are also no updates regarding the transposition of the CSRD or of the “Stop-the-Clock” Directive. An overview of the current transposition progress across Member States can be found here.

Other highlights:

The EU Commission is thinking about delaying the review of the EU’s Sustainable Finance Disclosure Regulation until the first quarter of 2026 in light of the ongoing Omnibus Simplification discussions.

IV. NORTH AMERICA

Climate regulation developments at the U.S. Department of the Interior and the Environmental Protection Agency (EPA)

On July 17, 2025, the U.S. Department of the Interior updated its guidelines for states applying to federal orphaned wells programs. These new guidelines aim to reduce burdens on grant recipients by removing the requirement that states conduct pre- and post-plugging methane measurement, providing discretion to states in identifying and plugging orphaned wells, and eliminating the Department’s post-award environmental review and approval process. Also on July 17, 2025, the Department of the Interior stated that it seeks to eliminate longstanding right-of-way and capacity fee discounts for existing and future solar and wind projects to help increase the development of clean coal and domestic natural gas. This announcement comes in response to an executive order titled “Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources” that was issued on July 7, 2025 and directs various agencies to implement the One Big Beautiful Bill Act. For details regarding the August 15, 2025 notice from the IRS and Treasury related to the termination of tax credits for wind and solar facilities, see our client alert here.

On July 29, the EPA released a proposal to rescind the EPA’s endangerment finding. As covered in our February 2025 ESG Update, the endangerment finding declared that greenhouse gases pose a threat to public health and welfare and serve as the basis for EPA greenhouse gas regulations under the Clean Air Act. A virtual public hearing began on August 19, 2025 and will conclude on August 22, 2025, and a public comment period is open until September 22, 2025. Relatedly, on July 29, 2025, the U.S. Department of Energy published a report developed by five scientists titled “A Critical Review of Impacts of Greenhouse Gas Emissions on the U.S. Climate,” which concludes that “models and experience suggest that CO2-induced warming might be less damaging economically than commonly believed, and excessively aggressive mitigation policies could prove more detrimental than beneficial.”

On July 18, 2025, the EPA announced it is planning on shutting down the Office of Research and Development, which is responsible for the agency’s scientific research oversaw grant programs that fund universities and private companies. The EPA will instead create a new Office of Applied Sciences and Environmental Solutions, which the EPA’s press release stated “will allow EPA to prioritize research and science more than ever before and put it at the forefront of rulemakings and technical assistance to states.”

On July 24, 2025, the House Appropriations Committee approved the Fiscal 2026 Interior, Environment, and Related Agencies Appropriations Act, which proposes cutting the budget of the EPA by 23%. The bill also features provisions promoting domestic mining, increasing budgets for the Bureau of Ocean Energy Management and Bureau of Land Management for offshore and onshore oil and gas development, respectively, requiring onshore and offshore oil and gas leases, prohibiting the use of the social cost of carbon, and prohibiting the EPA from imposing methane fees on oil and gas producers.

D.C. Circuit limits plaintiffs’ ability to sue companies for remote supply chain allegations

On July 22, 2025, the D.C. Circuit issued an opinion in a case brought by West African cocoa farmers who sued several multinational cocoa and candy companies, alleging that the companies should be held liable for harms they allegedly have suffered on third-party farms. The D.C. Circuit affirmed dismissal of plaintiffs’ claims on standing grounds and adopted the arguments of defendants, reasoning that plaintiffs had not done enough to establish that any of plaintiffs’ alleged harm was “fairly traceable” to the companies—none of whom owned farms or had direct relationships with those farms. This case, together with a decision from last year similarly rejecting claims against technology companies brought by cobalt miners in the Democratic Republic of Congo, sets out limitations that courts may impose on the scope of indirect liability for companies based on alleged harms that happen throughout the global commodity supply chain.

Glass, Lewis & Co., LLC (Glass Lewis) and International Shareholder Services Inc. (ISS) sue Texas over Senate Bill (S.B.) 2337

On July 24, 2025, proxy advisors Glass Lewis and ISS each separately sued the State of Texas to block its recently enacted law (S.B. 2337) that would require proxy advisors to provide certain disclosures to shareholders and the company if the proxy advisor makes a recommendation or provides voting advice based on non-financial factors, such as ESG or diversity factors or a sustainability score. For more details on S.B. 2337, see our prior client alert.

Both ISS and Glass Lewis seek to enjoin enforcement of the law, which is set to take effect on September 1, 2025. Among other causes of action, both complaints allege that S.B. 2337 violates the First Amendment’s prohibition on viewpoint discrimination and freedom of association, is unconstitutionally vague under the Fourteenth Amendment, and is preempted by the Investment Advisers Act of 1940, federal law regulating investment advisors. ISS also argues that S.B. 2337 violates the Constitution’s Contracts Clause, and Glass Lewis argues that S.B. 2337 violates the Dormant Commerce Clause and is preempted by the Employment Retirement Income Security Act of 1974.

On July 24, 2025, Glass Lewis filed a motion for preliminary injunction, and on July 28, 2025, ISS filed a motion for preliminary injunction. On August 15, 2025, the Attorney General for the State of Texas filed a response to each motion for preliminary injunction and concurrently filed a motion to dismiss in each case. The hearing for the preliminary injunctions is scheduled for August 28, 2025, which will be a joint hearing for both cases.

Relatedly, on July 11, 2025, the Missouri Attorney General announced the launch of an investigation and parallel lawsuits against both Glass Lewis and ISS, stating that ISS and Glass Lewis “have used their influence to push far-left DEI and ESG agendas into corporate boardrooms under the guise of impartial investment advice.”

Other highlights:

On August 13, 2025, the U.S. District Court for the Central District of California denied plaintiffs’ motion to preliminarily enjoin California’s climate-related reporting laws. The California Air Resources Board has announced a second virtual workshop scheduled for August 21, 2025 at 9:30 a.m. Pacific Time, which will discuss various aspects of implementing regulations for the new laws.
On August 7, 2025, an Executive Order was signed directing the federal banking agencies, National Credit Union Administration, and Small Business Administration to investigate whether financial institutions have engaged in “politicized or unlawful debanking” practices in violation of federal law. For more information, see our recent client alert.
On July 29, 2025, state finance officials from 21 states sent letters to the top executives at 25 different U.S.-based, asset management firms pushing the firms to reaffirm their “commitment to traditional fiduciary duty” by, among other things, ceasing to frame climate change as a long-term risk.
On July 28, 2025, the Florida Attorney General launched an investigation into CDP and the Science Based Targets initiative (SBTi), claiming the organizations “violated state consumer protection or antitrust laws by coercing companies into disclosing proprietary data and paying for access under the guise of environmental transparency.” On August 8, 2025, 23 states led by the Attorney General of Iowa sent a letter to SBTi expressing their concerns that “SBTi and the financial institutions that commit to its Standards risk violating federal and state antitrust laws as well as state consumer protection laws.”
On August 1, 2025, the court denied the defendants’ motion to dismiss in the federal lawsuit brought by 11 state Attorneys General against BlackRock, Inc., State Street Global Advisors, and The Vanguard Group alleging the three illegally manipulated the coal market through their investments in publicly traded coal companies. More information on the lawsuit can be found in our November 2024 ESG Update.
As discussed in our June 2025 alert, the SEC filed a status report with the Eighth Circuit regarding how it would address the climate disclosure rules. Specifically, the status report stated that the SEC “does not intend to review or reconsider the [r]ules at this time” and asked the court to lift the abeyance and make a ruling since the case has been fully briefed. On July 30, 2025, the intervenor states responded, urging the Eighth Circuit to hold the cases in abeyance until the SEC more thoroughly explains its future course of action for the rules.

In case you missed it…

On June 20, 2025, the Texas governor signed House Bill 229, which adds definitions to the Texas Government Code to define “male,” “female,” and similar terms in relation to biological sex and requires governmental entities that collect information about the sex of individuals “for the purpose of complying with antidiscrimination laws or for the purpose of gathering public health, crime, economic, or other data” to “identify each individual as either male or female.”

The Gibson Dunn Workplace DEI Task Force has published its updates summarizing the latest key developments, media coverage, case updates, and legislation related to diversity, equity, and inclusion, including a recent client alert analyzing guidance from the U.S. Department of Justice on the application of federal antidiscrimination laws to entities receiving federal funds.

Gibson Dunn has provided analysis of the One Big Beautiful Bill Act, including changes made to the tax benefits for clean energy projects and provisions related to employee benefits and compensation matters.

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

V. APAC

Singapore issues practical guidance to advance adoption of Singapore-Asia Taxonomy (SAT) for Transition Finance

On July 9, 2025, the Singapore Sustainable Finance Association, supported by the Monetary Authority of Singapore, published practical guidance to facilitate real-world application of the SAT in green and transition financing. The guidance aims to address data gaps by recommending the use of interim thresholds, sunset dates, and revised criteria when full taxonomy alignment data is lacking, distinguishes between “amber” (i.e., activities transitioning towards green energy or enabling significant greenhouse gas emissions) thresholds and measures, and advises on assessing entity-level transition plans. It also provides early industry thinking on how financiers and borrowers can reference SAT to recognize the transition efforts.

Singapore and the UK to collaborate on energy transition and sustainable infrastructure investments in Southeast Asia

On July 12, 2025, Singapore and the UK announced a major collaboration to support clean energy transition and sustainable infrastructure development across Southeast Asia. As part of this, the UK pledged up to £70 million through British International Investment to Singapore’s Financing Asia’s Transition Partnership (FAST-P) initiative. The funding will be delivered through British International Investment and aims to support low-carbon energy projects and enhance regional energy security.

Monetary Authority of Singapore and People’s Bank of China reaffirm collaboration in green and transition finance

On July 11, 2025, the Monetary Authority of Singapore and the People’s Bank of China reaffirmed their commitment to advancing green and transition finance at the third Singapore-China Green Finance Taskforce meeting. The meeting brought together over 40 public and private sector participants to review progress on joint initiatives in sustainable finance. Key areas discussed included taxonomy interoperability, cross-border green finance flows, and leveraging technology for sustainable finance adoption. The session also explored new opportunities in biodiversity financing and Shanghai’s green finance transition.

[1] Per- and polyfluoroalkyl substances.

The following Gibson Dunn lawyers prepared this update: Lauren Assaf-Holmes, Carla Baum, Mellissa Campbell Duru, Mitasha Chandok, Becky Chung, Stephanie Collins, Samuel Fernandez*, Ferdinand Fromholzer, Saad Khan*, Julia Lapitskaya, Vanessa Ludwig, Babette Milz, Johannes Reul, Annie Saunders, Meghan Sherley, and Nicholas Tok.

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

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

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

IRS Notice 2025-42 generally requires that a taxpayer begin actual physical work on a wind or solar facility before July 5, 2026 to escape the December 31, 2027 placement-in-service deadline, eliminating a taxpayer-favorable safe harbor method available under earlier IRS and Treasury guidance.

On August 15, 2025, the IRS and Treasury issued Notice 2025-42 (the Notice), which provides highly anticipated guidance for determining whether a new solar or wind facility must meet a strict December 31, 2027 placement-in-service deadline to be eligible for certain federal income tax credits.[1] The Notice, which can be found here, generally requires that a taxpayer begin actual physical work on a wind or solar facility before July 5, 2026 to escape the placement-in-service deadline, eliminating a taxpayer-favorable safe harbor method available under earlier IRS and Treasury guidance that would have made it feasible to escape the deadline by purchasing equipment.

Background

On July 4, 2025, President Trump signed into law the legislation commonly known as the One Big Beautiful Bill Act (the OBBBA or the Act).[2] The Act generally terminates the clean electricity production credit under section 45Y (the PTC) and the clean electricity investment credit under section 48E (the ITC) for wind and solar facilities that are placed in service after December 31, 2027, but this deadline does not apply to those facilities on which construction begins before July 5, 2026.[3]

On July 7, 2025, President Trump issued Executive Order 14315 (the Executive Order), which directs the Secretary of the Treasury to issue guidance by August 18, 2025 to “strictly enforce the termination of the [section 48E ITC and section 45Y PTC] for wind and solar facilities” and to “ensure that policies concerning the ‘beginning of construction’ are not circumvented.”[4] The Executive Order can be found here.

The Notice provides the guidance directed by the Executive Order.

Prior Beginning of Construction Guidance

Beginning in 2013, the IRS and Treasury issued a series of guidance clarifying when construction on a facility has “begun” for purposes of determining various aspects of tax credit eligibility (e.g., whether a project was subject to a phased-down credit amount or subject to new prevailing wage and apprenticeship requirements). That guidance generally provided two methods for establishing the beginning of construction on a project, and each method included a four-year safe harbor for achieving placement-in-service after beginning construction.[5]

Under the first method, beginning of construction could be established under a facts-and-circumstances test by completing either off-site or on-site physical work of a significant nature (the Physical Work Test). The second method allowed a taxpayer to establish that construction had begun on a facility by paying or incurring eligible costs totaling at least five percent of the total eligible costs of the facility (the Five Percent Safe Harbor).[6] Under either method, a taxpayer was required to make progress towards completion after beginning construction, either by establishing progress through a facts-and-circumstances test or by qualifying for a safe harbor by placing the facility in service no later than the end of the fourth calendar year beginning after the calendar year in which construction began on that facility.

The Notice

The Notice provides that, with one narrow exception for certain small solar facilities,[7] for purposes of determining whether construction on an applicable wind or solar facility began before July 5, 2026, the Physical Work Test is the exclusive method, thereby eliminating the availability of the Five Percent Safe Harbor in respect of facilities that otherwise would claim PTCs or the ITC and that are not placed into service prior to January 1, 2028 (and on which construction begins on or after September 2, 2025).

The Notice also retains the continuous program of construction requirement from earlier guidance along with the same safe harbor (e.g., for a facility on which construction begins in 2026, but before July 5, 2026, the facility would need to be placed in service by December 31, 2030).

Effective Date

The Notice is effective for wind or solar facilities on which construction begins on or after September 2, 2025. For purposes of determining whether construction on a facility began before September 2, 2025, taxpayers are able to use both the Physical Work Test and the Five Percent Safe Harbor.

[1] Unless indicated otherwise, all references to the “IRS” are to the U.S. Internal Revenue Service and all references to the “Treasury” are to the U.S. Department of the Treasury.

[2] The technical name for the Act is “an Act to provide for reconciliation pursuant to title II of H. Con. Res. 14.” The text of the Act can be found here. Our prior alert on the tax highlights of the Act can be found here; our prior alert on the clean energy tax provisions in the Act can be found here.

[3] Unless indicated otherwise, all “section” references are to the Internal Revenue Code of 1986, as amended (the Code), as in effect as of the date of this alert.

[4] Section 3(b) of the Executive Order directs the Secretary of the Treasury to take prompt action as the Secretary of the Treasury deems appropriate and consistent with applicable law to implement the “Foreign Entity of Concern” restrictions, which are summarized in our earlier client alert here. The Notice indicates that guidance on the “Foreign Entity of Concern” restrictions is forthcoming.

[5] See Notices 2013-60, 2013-44 I.R.B. 431, 2016-31, 2016-23 I.R.B. 1025, 2018-59, 2018-28 I.R.B. 196, and 2022-61, 2022-52 I.R.B. 560.

[6] For a detailed discussion of the Physical Work Test and the Five Percent Safe Harbor, please see here.

[7] In particular, solar facilities that have a maximum net output (measured on the basis of a facility’s nameplate capacity) equal to 1.5 megawatts or less are permitted to rely on the Five Percent Safe Harbor for purposes of determining whether construction on that low output solar facility began before July 5, 2026. Multiple solar facilities with integrated operations that are owned by a taxpayer (or a related taxpayer) are measured on an aggregate basis to determine whether this 1.5 megawatt limitation is reached.

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

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

Tax:
Dora Arash – Los Angeles (+1 213.229.7134, darash@gibsondunn.com)
Sandy Bhogal – Co-Chair, London (+44 20 7071 4266, sbhogal@gibsondunn.com)
Michael Q. Cannon – Dallas (+1 214.698.3232, mcannon@gibsondunn.com)
Jérôme Delaurière – Paris (+33 (0) 1 56 43 13 00, jdelauriere@gibsondunn.com)
Anne Devereaux* – Los Angeles (+1 213.229.7616, adevereaux@gibsondunn.com)
Matt Donnelly – New York/Washington, D.C. (+1 212.351.5303, mjdonnelly@gibsondunn.com)
Benjamin Fryer – London (+44 20 7071 4232, bfryer@gibsondunn.com)
Evan M. Gusler – New York (+1 212.351.2445, egusler@gibsondunn.com)
James Jennings – New York (+1 212.351.3967, jjennings@gibsondunn.com)
Kathryn A. Kelly – New York (+1 212.351.3876, kkelly@gibsondunn.com)
Brian W. Kniesly – New York (+1 212.351.2379, bkniesly@gibsondunn.com)
Pamela Lawrence Endreny – Co-Chair, New York (+1 212.351.2474, pendreny@gibsondunn.com)
Kate Long – New York (+1 212.351.3813, klong@gibsondunn.com)
Gregory V. Nelson – Houston (+1 346.718.6750, gnelson@gibsondunn.com)
Benjamin Rapp – Munich/Frankfurt (+49 89 189 33-290, brapp@gibsondunn.com)
Jennifer Sabin – New York (+1 212.351.5208, jsabin@gibsondunn.com)
Eric B. Sloan – Co-Chair, New York/Washington, D.C. (+1 212.351.2340, esloan@gibsondunn.com)
Edward S. Wei – New York (+1 212.351.3925, ewei@gibsondunn.com)
Lorna Wilson – Los Angeles (+1 213.229.7547, lwilson@gibsondunn.com)
Daniel A. Zygielbaum – Washington, D.C. (+1 202.887.3768, dzygielbaum@gibsondunn.com)

Tax Controversy and Litigation:
Saul Mezei – Washington, D.C. (+1 202.955.8693, smezei@gibsondunn.com)
Sanford W. Stark – Chair, Washington, D.C. (+1 202.887.3650, sstark@gibsondunn.com)
C. Terrell Ussing – Washington, D.C. (+1 202.887.3612, tussing@gibsondunn.com)

*Anne Devereaux, of counsel in the firm’s Los Angeles office, is admitted to practice in Washington, D.C.

The case provides valuable insights into how PE sponsors and their portfolio companies can mitigate the risks associated with FCA exposure at the portfolio company-level through a careful delineation between sponsor and management involvement in these situations.

A recent settlement among the Department of Justice, a private equity firm, and its portfolio company illustrates DOJ’s continuing False Claims Act enforcement priorities of pursuing liability against third parties that—either directly or indirectly—engage in conduct that results in FCA violations, and using the FCA to pursue cybersecurity-related fraud.[1] In this instance, DOJ alleged that an employee of the PE sponsor shared restricted information with unauthorized foreign employees of a software company in violation of the terms of the portfolio company’s contract. As discussed below, the sponsor and portfolio company received credit in the settlement for their voluntary disclosure of the issue and their cooperation and remediation.

The case demonstrates the risks of PE sponsor involvement in regulated portfolio company conduct and provides valuable insights into how sponsors and their portfolio companies can mitigate the risks associated with FCA exposure at the portfolio company-level through a careful delineation between sponsor and management involvement in these situations.

The FCA in Brief

The FCA, 31 U.S.C. §§ 3729–3733, is the federal government’s primary tool to redress fraud against government agencies and programs. The FCA provides for recovery of civil penalties and treble damages from any person who knowingly submits or causes the submission of false or fraudulent claims to the United States for money or property. DOJ devotes substantial resources to pursuing FCA cases, and to considering whether qui tam cases brought by relators merit parallel criminal investigations.

DOJ has previously expressed interest in pursuing FCA enforcement actions against a “wide collection of actors that may influence the claims that are ultimately submitted to the government.”[2] This includes pursuing private equity sponsors that, “provid[e] express direction for how a provider should conduct their business, or more indirectly by providing revenue targets or other indirect benchmarks intended to prioritize reimbursement.”[3]

Overview of the Allegations

On July 31, 2025, DOJ announced a $1.75 million settlement with Gallant Capital Partners LLC (Gallant), a private equity firm, and Aero Turbine, Inc. (ATI), its portfolio company that serves as a provider of maintenance, repair and overhaul (MRO) services and consultative repair solutions, to resolve false claims allegations against the two companies.[4]

As alleged in the settlement, ATI’s contractual cybersecurity requirements included full implementation of 110 cybersecurity controls reflected in National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, “Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations.”[5] Gallant was identified as a co-defendant for “causing the submission of claims” that were false or fraudulent.[6] Specifically, DOJ alleged that:

ATI and Gallant failed to control the flow of Controlled Unclassified Information (CUI);
a Gallant employee shared CUI with unauthorized foreign employees of a software company in violation of the terms of ATI’s contract;
ATI failed to fully implement all required cybersecurity controls; and
Neither ATI nor Gallant had verified whether ATI met its contractual cybersecurity controls to safeguard the covered defense information contained in ATI’s information systems.[7]

Settlement Credit for Self-Disclosure and Remedial Actions

ATI submitted two written disclosures to the government regarding its non-compliance with contractual cybersecurity requirements.[8] According to the settlement and press release, ATI and Gallant cooperated with the government’s investigation by identifying responsible individuals, disclosing facts gathered during their independent investigation, and attributing facts to specific sources.[9] ATI and Gallant also implemented remedial measures to resolve the issues and prevent similar issues from arising in the future.[10]

DOJ “commend[ed] Aero Turbine and Gallant for disclosing the issue and promptly cooperating to address it,”[11] and ATI and Gallant received credit in the settlement under the Justice Manual for their disclosure, cooperation and remediation.[12]

Key Takeaways for Private Equity Firms Investing in Portfolio Companies with Government Contracts

The allegations regarding the sponsor’s direct participation in the covered conduct are unusual in the context of private equity-related FCA settlements, where prior cases and settlements have focused more on the PE firms’ ratification of their portfolio companies’ submissions of allegedly false claims. For example, in July 2021, DOJ entered into a settlement with Anchor Capital Partners for its violation of the False Claims Act based on its alleged failure to stop wrongdoings of a portfolio company that it had discovered during its due diligence process.[13] And in United States ex. rel. Martino-Fleming v. South Bay Mental Health Centers, relators filed suit against South Bay’s private equity investor, HIG Capital, alleging that it was aware of the false claims violations stemming from its due diligence and that HIG Capital was knowingly ratifying the alleged misconduct by rejecting recommendations to bring South Bay into compliance.[14] Here, DOJ alleged direct involvement of the PE firm’s personnel in the misconduct, as opposed to an application of the ratification theory reflected in prior cases and resolutions.

While the allegations here do not expressly rely on issues identified in diligence, part of the alleged conduct occurred before the sponsor’s acquisition of the portfolio company. The allegations of a pre-existing noncompliance serve as a reminder that careful diligence can be a first line of defense in government contracts transactions given the potential for successor liability.

PE investors must also consider risks associated with the portfolio company’s post-acquisition operations, and ensure that their principals and employees are apprised of those risks. Sponsors should consider appropriate compliance training for their personnel participating in government contracts transactions, particularly for the deal teams involved in oversight of portfolio company operations. Given cybersecurity requirements and restrictions on information sharing, sponsors should generally avoid participating in the administration of a portfolio company’s government contract. If it is necessary that sponsor employees get involved (for example, where the sponsor is seeking to sell the portfolio company, there may be a desire to limit the involvement of portfolio company personnel, but may nevertheless need to share sensitive contract information with third parties as part of the auction), the sponsor should consult with counsel to understand the risks and mitigation strategies.

The recent Gallant/Aero Turbine settlement serves as a compelling example of the increasing liability risks for private equity firms and the continued enforcement focus on cybersecurity compliance. The resolution underscores the growing need for early interdisciplinary legal expertise and careful coordination among corporate and government contracts counsel to identify and mitigate risks in aerospace and defense transactions.

[1] See e.g. Statement of Brian Boynton, Principal Deputy Assistant Attorney General, Civil Division, DOJ(Feb. 2024) (“I would like to emphasize the department’s commitment to holding accountable third parties that cause the submission of false claims. These third parties can include private equity firms, among others.”) (available at https://www.justice.gov/archives/opa/speech/principal-deputy-assistant-attorney-general-brian-m-boynton-delivers-remarks-2024) [hereinafter Boynton Remarks]; DOJ Press Release, Deputy Attorney General Lisa O. Monaco Announces New Civil Cyber-Fraud Initiative (October 6, 2021) (available at https://www.justice.gov/archives/opa/pr/deputy-attorney-general-lisa-o-monaco-announces-new-civil-cyber-fraud-initiative).

[2] See Boynton Remarks.

[3] See id.

[4] See DOJ Press Release, California Defense Contractor and Private Equity Firm Agree to Pay $1.75M to Resolve False Claims Act Liability Relating to Voluntary Self-Disclosure of Cybersecurity Violations (July 31, 2025) (available at https://www.justice.gov/opa/pr/california-defense-contractor-and-private-equity-firm-agree-pay-175m-resolve-false-claims) [hereinafter Press Release DOJ Private Equity ].

[5] See Settlement Agreement by and among DOJ, Aero Turbine, Inc., and Gallant Capital Partners, LLC (July 31, 2025) (available at https://www.justice.gov/opa/media/1409651/dl) [hereinafter Gallant Settlement].

[6] See id.

[7] See id.

[8] See id.

[9] See id.; Press Release DOJ Private Equity.

[10] See Gallant Settlement.

[11] See Press Release DOJ Private Equity.

[12] See Gallant Settlement.

[13] See Martino-Fleming, 2021 WL 2003016.

[14] See DOJ Press Release, EEG Testing and Private Investment Companies Pay $15.3 Million to Resolve Kickback and False Billing Allegations (July 21, 2021) (available at https://www.justice.gov/archives/opa/pr/eeg-testing-and-private-investment-companies-pay-153-million-resolve-kickback-and-false).

The following Gibson Dunn lawyers prepared this update: Lindsay M . Paulin, Jake M. Shields, Joseph D. West, and Joseph N. Murphy.

Gibson Dunn will continue to closely monitor enforcement trends in False Claims Act enforcement, and our attorneys are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Government Contracts, False Claims Act/Qui Tam Defense, or Private Equity practice groups:

Government Contracts:
Lindsay M. Paulin – Washington, D.C. (+1 202.887.3701, lpaulin@gibsondunn.com)
Dhananjay S. Manthripragada – Los Angeles/Washington, D.C. (+1 213.229.7366, dmanthripragada@gibsondunn.com)
Joseph D. West – Washington, D.C. (+1 202.955.8658, jwest@gibsondunn.com)

False Claims Act/Qui Tam Defense:
Jonathan M. Phillips – Washington, D.C. (+1 202.887.3546, jphillips@gibsondunn.com)
Winston Y. Chan – San Francisco (+1 415.393.8362, wchan@gibsondunn.com)
Jake M. Shields – Washington, D.C. (+1 202.955.8201, jmshields@gibsondunn.com)

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

The settlements reinforce the DOJ’s FCA cybersecurity efforts and also preview an expansion into enforcing cybersecurity in the healthcare space and against private equity firms and their portfolio companies.

On July 31, 2025, the Department of Justice broke new ground in its False Claims Act (FCA) cybersecurity enforcement efforts by resolving an FCA matter based on the Federal Drug Administration’s new cybersecurity requirement and by announcing a settlement against a private equity firm and one of its portfolio companies. Both settlements reinforce what the industry has already known since the announcement of the DOJ’s Civil Cyber Fraud Initiative: the DOJ remains steadfast in policing cybersecurity enforcement though the FCA.

The Illumina Inc. Settlement

The DOJ’s settlement with Illumina not only represents one of the larger FCA cybersecurity settlements historically (coming in at $9.8 million),[1] but also opens the door to FCA enforcement of the FDA’s new cybersecurity requirements. The settlement resolves a 2023 qui tam action brought by a former Illumina employee involved in the cybersecurity of its genomic-sequencing products.[2] The relator alleged that Illumina defrauded the federal government when selling genomic-sequencing software with extensive cybersecurity vulnerabilities to federal agencies and government funded health programs. Notably, the products allegedly provided “elevated privileges to everyday users by defaults,” which the relator described as “analogous to having super admin rights of a database.”[3] Consequently, thousands of the company’s everyday users were allegedly able to access and manipulate customers’ HIPAA-protected data without detection, “change product configurations and settings[,] install unauthorized applications[,] grant third-parties access to the system[, and] disable firewalls and other operating-system level protections.”[4]

The FCA theory hinged on 2024 FDA cybersecurity regulations. Specifically, the FDA regulates medical devices’ product safety under the Quality Systems Regulation, 21 C.F.R. § 820, which requires companies to implement a comprehensive cybersecurity risk management program.[5] The settlement resolves the first-known FCA enforcement action stemming from the FDA’s new cybersecurity regulations, indicating the DOJ’s steady focus on expanding its cybersecurity enforcement into the healthcare space.

Aero Turbine/Gallant Settlement

In another first, the DOJ settled an FCA cybersecurity action against a private equity firm, along with one of its portfolio companies. On July 31, 2025, the DOJ announced that it settled an FCA matter with private equity firm Gallant Capital Partners, LLC and its portfolio company, defense contractor Aero Turbine, Inc.[6] According to the settlement agreement, Aero Turbine allegedly failed to comply with NIST SP 800-171 as required by the DFARS clause 252.204-7012 in connection with its contracts with the Air Force and, under direction from a Gallant employee, improperly provided access to Air Force controlled unclassified information (CUI) to a software company based in Egypt.[7] The settlement agreement acknowledges Aero Turbine’s and Gallant Capital’s self-disclosure and cooperation, for which they received credit.

This is the first cybersecurity settlement with a private equity firm, and the first FCA settlement involving a private equity firm since at least 2021.

The Future for FCA Cybersecurity Actions

These two settlements not only reinforce the DOJ’s FCA cybersecurity efforts, but they also preview an expansion into enforcing cybersecurity in the healthcare space and against private equity firms and their portfolio companies.

[1] See Press Release, U.S. Dep’t of Justice Office of Public Affairs, Illumina Inc. to Pay $9.8M to Resolve False Claims Act Allegations Arising from Cybersecurity Vulnerabilities in Genomic Sequencing Systems (July 31, 2025), https://www.justice.gov/opa/pr/illumina-inc-pay-98m-resolve-false-claims-act-allegations-arising-cybersecurity.

[2] Complaint, United States ex rel. Lenore v. Illumina, Inc., 23-cv-00372-MSM (D.R.I. Sept. 8, 2023), Dkt. No. 1.

[3] Id. ¶ 7.

[4] Id. ¶ 55.

[5] 21 C.F.R. § 820.

[6] See Press Release, U.S. Dep’t of Justice Office of Public Affairs, California Defense Contractor and Private Equity Firm Agree to Pay $1.75M to Resolve False Claims Act Liability Relating to Voluntary Self-Disclosure of Cybersecurity Violations (July 31, 2025), https://www.justice.gov/opa/pr/california-defense-contractor-and-private-equity-firm-agree-pay-175m-resolve-false-claims.

[7] Id.; see also Settlement Agreement between the Dep’t of Justice; Aero Turbine, Inc.; and Gallant Capital, LLC, (July 31, 2025), available at https://www.justice.gov/opa/media/1409651/dl.

The following Gibson Dunn lawyers prepared this update: Winston Y. Chan, Jake M. Shields, and Samantha O. Hay.

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

False Claims Act/Qui Tam Defense:

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

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

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

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

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

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

Hohenshelt v. Superior Court, S284498 – Decided August 11, 2025

The California Supreme Court today, by a 5–2 vote, rejected the theory that nonpayment of arbitration fees and costs always results in waiver of the right to arbitrate under Code of Civil Procedure section 1281.98. Having concluded that section 1281.98 does not create an inflexible and harsh rule that mandates an automatic waiver for any late payments, the Court held that the Federal Arbitration Act does not preempt the statute.

“Although section 1281.98 has been interpreted by various Courts of Appeal to impose an inflexible and sometimes harsh rule resulting in loss of arbitral rights, we reject that rigid construction and instead conclude that the statute does not abrogate the longstanding principle, established by statute and common law, that one party’s nonperformance of an obligation automatically extinguishes the other party’s contractual duties only when nonperformance is willful, grossly negligent, or fraudulent. . . . So understood, the operation of section 1281.98 does not deviate from ‘generally applicable state law contract principles.’”

Justice Liu, writing for the Court

Background:

California Code of Civil Procedure section 1281.98 provides that if an arbitration agreement in the employment or consumer context requires the party that drafted the agreement to “pay certain fees and costs during the pendency of an arbitration proceeding,” failure to pay those fees and costs within 30 days of their being due renders the drafting party in “material breach” of the agreement to arbitrate and waives the party’s “right to compel the employee or consumer to proceed with that arbitration.” (Code Civ. Proc., § 1281.98, subd. (a)(1).)

Dana Hohenshelt sued his former employer. The trial court granted the employer’s motion to compel arbitration and stayed proceedings pending that arbitration. After the employer failed to timely pay arbitration fees, Hohenshelt moved in the trial court to lift the stay under section 1281.98. The court denied that motion, and the Court of Appeal granted Hohenshelt’s writ petition challenging that order. In doing so, the Court of Appeal rejected the employer’s argument that section 1281.98 is preempted by the Federal Arbitration Act (FAA), agreeing with other Court of Appeal decisions that the statute and the procedures it prescribes “further—rather than frustrate—the objectives of the FAA to honor the parties’ intent to arbitrate and to preserve arbitration as a speedy and effective alternative forum for resolving disputes.” (Hohenshelt v. Superior Court (2024) 99 Cal.App.5th 1319, 1325-26.) The California Supreme Court granted the employer’s petition for review.

Issue Presented:

Does the FAA preempt California Code of Civil Procedure section 1281.98?

Court’s Holding:

No. Contrary to how the Courts of Appeal have interpreted it, section 1281.98 does not “impose an inflexible and sometimes harsh rule resulting in loss of arbitral rights.” Although the text of section 1281.98 provides that a drafting party is in material breach of the arbitration agreement and has waived its right to arbitrate if it does not make timely payment of the fees or costs required for arbitration, the Court held that the statute leaves room for “the longstanding principle, established by statute and common law, that one party’s nonperformance of an obligation automatically extinguishes the other party’s contractual duties only when nonperformance is willful, grossly negligent, or fraudulent.” Having read section 1281.98 to not “strip companies and employers of their contractual right to arbitration where nonpayment of fees results from a good faith mistake, inadvertence, or other excusable neglect,” the Court held the statute is not preempted by the FAA because, “[s]o understood,” the statute does not deviate from generally applicable state law contract principles, disfavor arbitration, interfere with fundamental attributes of arbitration, or invent special arbitration-preferring procedural rules.

What It Means:

Before today, plaintiffs regularly used section 1281.98 to escape arbitration agreements—even when payments were merely days late and were unintentional. Multiple Court of Appeal decisions had endorsed that tactic and held that any late payment resulted in the automatic loss of the right to arbitrate.
The California Supreme Court has now adopted a new reading of section 1281.98 that will give companies who have failed to timely pay arbitration fees and costs room to argue that any such late payments were not willful or grossly negligent, or resulted from a good faith mistake, inadvertence, or other excusable neglect. There will likely be significant litigation over what circumstances are sufficient to excuse delayed payments of arbitration fees and costs.
Even under the California Supreme Court’s narrowing construction, timely payment of arbitration fees and costs will remain a critical obligation and best practice for companies seeking to enforce arbitration agreements against California plaintiffs in consumer and employment cases.
Justice Groban, joined by Justice Evans, concurred to emphasize that the Court did not address the employer’s argument that by including in its arbitration agreement a provision that the parties’ disputes would be governed by the FAA’s procedural rules and the rules of whichever private arbitrator they selected, section 1281.98 and other California arbitration rules did not even apply. The concurrence leaves open the possibility that, in many cases, California courts will not have to assess section 1281.98 issues or engage in an FAA preemption analysis at all.

The Court’s opinion is available here. Gibson Dunn attorneys Jesse A. Cripps, Bradley J. Hamburger, Patrick J. Fuster, and Lindsey K. Tanita filed an amicus curiae brief in the matter on behalf of the California Employment Law Council, 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, Matt Aidan Getz, and James Tsouvalas.

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

ENFORCEMENT ACTIONS

UNITED STATES

Founder of Tornado Cash Convicted of Conspiracy to Operate an Unlicensed Money Transmitting Business
On August 6, 2025, a jury in the U.S. District Court for the Southern District of New York returned a mixed verdict involving Roman Storm, the co-founder of Tornado Cash. Although the jury failed to reach a unanimous verdict on charges of conspiracy to commit money laundering and to violate the International Emergency Economic Powers Act, it did find Storm guilty of conspiracy to operate an unlicensed money transmitting business (the least serious of the three charges, although still one that carries a maximum sentence of five years in prison). DOJ; Wired; Bloomberg.

Samourai Wallet Developers Plead Guilty to Conspiracy to Operate an Unlicensed Money Transmitting Business
On July 30, 2025, two founders and developers of Samourai Wallet, a cryptocurrency service that allegedly facilitated non-traceable private crypto transactions, pled guilty in the U.S. District Court for the Southern District of New York to one count each of conspiracy to operate an unlicensed money transmitting business. The defendants are scheduled to be sentenced in early November. DOJ; Law360; CoinDesk.

Second Circuit Overturns Former OpenSea Product Manager’s Insider Trading Conviction
On July 31, 2025, a divided Second Circuit panel overturned the wire fraud and money laundering convictions for Nathaniel Chastain. Chastain was a product manager at OpenSea, a marketplace for non-fungible tokens (NFTs). In May 2023, a jury found Chastain guilty, based on accusations that he allegedly traded on confidential information about which NFTs would be featured on OpenSea’s homepage. The Court reversed Chastain’s conviction, holding that the trial judge erred by incorrectly instructing the jury that the featured NFT information was a property interest covered by the wire fraud statute. The Court held that there was no evidence in the record that the information about which NFTs would be featured had any commercial value to OpenSea. Judge Jose Cabranes dissented in part in a separate opinion. Opinion; Law360; Reuters.

DOJ Files Civil Forfeiture Complaint in Action Related to Business Email Compromise Scheme Impersonating Inaugural Committee
On July 2, 2025, the DOJ filed a civil forfeiture complaint in the U.S. District Court for the District of Columbia to recover approximately $40,300 in cryptocurrency that was allegedly stolen through a business email compromise scheme. According to the complaint, the perpetrators allegedly obtained over $250,000 from a donor by impersonating the co-chair of President Trump’s Inaugural Committee. The perpetrators allegedly requested the victim send money to an imposter email account; once the funds were sent, the perpetrators laundered the funds to other addresses. DOJ Press Release; Complaint.

U.S. Secret Service Recovers $400M in Crypto, Strengthens Global Crime-Fighting Efforts
According to press reports on July 5, 2025, the U.S. Secret Service has recovered nearly $400 million in cryptocurrency via seizures and forfeiture orders. This effort has been led by the Global Investigative Operations Center in collaboration with the FBI and U.S. Attorney’s offices around the country. The agency has tracked funds from alleged scams, including fake crypto investment platforms, and has also conducted training sessions in over 60 countries to help local law enforcement combat crypto crimes. The Block; CoinTelegraph.

Connecticut Man Pleads Guilty to Operating Illegal Money Transmitting Business
On July 21, 2025, William McNeilly of New Haven, CT pleaded guilty in the U.S. District Court for the District of Connecticut to charges that he allegedly operated an unlicensed money transmitting business, which exchanged more than $1 million in U.S. currency for cryptocurrency on behalf of customers throughout the U.S., knowing some of the funds involved in his illegal business were derived from fraud schemes. DOJ Press Release.

DOJ Files Civil Forfeiture Complaint in Action Related to Hamas Fundraising
On July 22, 2025, the U.S. Department of Justice filed a civil forfeiture complaint in the U.S. District Court for the District of Columbia seeking to forfeit approximately $2 million dollars in cryptocurrency allegedly connected to a Gaza-based money transfer business that DOJ alleged was involved in financially supporting the terrorist group Hamas. DOJ Press Release.

DOJ Closes Inquiry Into Crypto Exchange Co-Founder
According to public reporting, on July 22, 2025, the Justice Department closed a criminal investigation into Jesse Powell, co-founder of Kraken cryptocurrency exchange. Powell tweeted among other things that he was “[v]ery glad to have this behind me.” New York Times; Powell X Post.

DOJ Files Civil Forfeiture Complaint in Action Related to Oil and Gas Scheme
On July 22, 2025, the DOJ filed a civil forfeiture complaint in the U.S. District Court for the Western District of Washington, seeking the forfeiture of cryptocurrency valued at approximately $7.1 million seized as part of an investigation. According to DOJ, the perpetrators allegedly obtained approximately $97 million in funds by convincing victims to send funds to what was represented as escrow accounts to purchase oil tank storage. The funds were allegedly then moved to different financial institutions, and then used to purchase cryptocurrency. Beyond the civil forfeiture action, Geoffrey K. Auyeung was indicted in August 2024 as a coconspirator. DOJ Press Release.

AML Bitcoin Founder Sentenced to Seven Years in Prison for Cryptocurrency Fraud and Money Laundering
On July 29, 2025, Chief U.S. District Judge Richard Seeborg of the Northern District of California sentenced AML Bitcoin founder and CEO Rowland Marcus Andrade, to seven years in federal prison in connection with a multimillion-dollar cryptocurrency fraud scheme. In March 2025, a jury convicted Andrade of wire fraud and money laundering The court also ordered a hearing on September 16, 2025, to determine the amount of forfeiture and the amount of restitution owed to victims of Andrade’s crimes. Law360; DOJ Press Release; Cointelegraph.

REGULATION AND LEGISLATION

UNITED STATES

Trump Signs GENIUS Act into Law
On July 18, 2025, President Trump signed the GENIUS Act, passed with bipartisan votes in both the House and the Senate, into law. The GENIUS Act requires stablecoins to be fully backed by U.S. dollars or similarly liquid assets, mandates annual audits for issuers with a market capitalization of more than $50 billion, and establishes guidelines for foreign issuance. It requires issuers to make monthly, public disclosures of the composition of their reserves. Stablecoin issuers must comply with strict marketing rules to protect consumers from deceptive practices. And issuers are forbidden from making misleading claims that their stablecoins are backed by the U.S. government, federally insured, or legal tender. WhiteHouse.gov; GDC Webinar.

President’s Working Group on Digital Asset Markets Releases Extensive Report
On July 30, 2025, in furtherance of President Trump’s Executive Order 14178 (Strengthening American Leadership in Digital Financial Technology), the President’s Working Group on Digital Asset Markets released a 168-page report outlining recommendations for digital-asset regulation and legislation. Broadly, the report provides a roadmap to try to bring more digital-asset-focused businesses to the United States. The report recommends that various regulatory agencies, including the SEC and CFTC, use their existing authorities to enable the trading of digital assets at the federal level, reduce regulatory gaps, and allow innovative financial products to reach consumers. Other recommendations include proposed legislation by Congress to modernize bank regulation for digital assets, strengthen the role of the U.S. dollar in the digital assets industry, combat illicit finance, and increase predictability in digital-asset taxation. White House Fact Sheet; TheBlock; Bloomberg; SEC Chair’s Statement; GDC Client Alert; GDC Client Alert 2.

SEC Chair Paul Atkins Makes Remarks at the Crypto Task Force Roundtable on Decentralized Finance
On July 31, 2025, SEC Chair Atkins delivered a major policy address at the America First Policy Institute in Washington, D.C., unveiling “Project Crypto.” Project Crypto is a Commission-wide initiative to create “clear and simple rules of the road for crypto asset distributions, custody, and trading.” Among other things, Chair Atkins stated that “most crypto assets are not securities,” and that “it should not be a scarlet letter” for a digital asset “to be deemed a security.” For digital assets that are securities, the Chair has asked SEC staff “to propose purpose-fit disclosures, exemptions, and safe harbors, including for so-called ‘initial coin offerings,’ ‘airdrops,’ and network rewards.” The Chair also announced several other crypto policies and initiatives, including taking steps to increasing consumer choice in how they custody and trade digital assets, improving the horizontal integration of crypto product offerings into “super-apps,” integrating traditional securities markets into on-chain systems, and creating an innovation exemption for novel uses of blockchain technology. SEC; Reuters; CoinDesk.

House Passes Digital Asset Market Clarity Act of 2025, the CLARITY Act
On July 17, 2025, the House passed the CLARITY Act, a comprehensive market-structure bill that (among other things) would grant the CFTC significant additional authority over crypto trading. The bill is now being considered by the Senate. Act; NPR; CoinTelegraph; CoinDesk; GDC Client Alert.

House Passes Anti-Central Bank Digital Currency (CBDC) Surveillance State Act
On July 17, 2025, the House passed the Anti-CBDC Act. By its terms, the bill aims to prevent the Federal Reserve from developing or issuing a retail CBDC or a “digital dollar” without explicit congressional authorization. The Act prevents the Federal Reserve from offering products or services directly to individuals or maintaining accounts on their behalf, from issuing a CBDC directly or indirectly to an individual, and from using a CBDC to implement monetary policy. Bill; CoinTelegraph; Bitcoin Mag.

SEC Releases Guidance Stating that Liquid Staking Tokens Are not Securities
On August 5, 2025, the SEC provided guidance noting its position that certain forms of liquid staking fall outside the scope of securities laws. This marks a departure from the agency’s previous enforcement position. The guidance clarifies that receipt tokens representing staked digital assets are not securities when the underlying assets are not securities and the staking activities are “ministerial or administrative” and not driven by entrepreneurial effort. SEC; The Block; CoinDesk.

Connecticut Enacts Law Banning Cryptocurrency in State Government Operations
On June 30, Connecticut Governor Ned Lamont signed House Bill 7082 into law, prohibiting the use of digital assets in state government operations. The legislation specifically bans the state government from “accepting or requiring payment in the form of virtual currency” or “purchasing, holding, investing in or establishing” a crypto reserve. The law also sets requirements for crypto money transmission licensees in Connecticut, with key provisions taking effect on October 1, 2025. This move contrasts with other states exploring the establishment of Bitcoin reserves. Bill; CoinTelegraph.

Circle, Ripple, and BitGo Seek U.S. Banking Licenses
On June 30 and July 2, 2025, Circle, Ripple and BitGo each applied for national trust company charters with the U.S. Office of the Comptroller of the Currency (OCC). Wall Street Journal; Circle Press Release; Bloomberg.

SEC Commissioner States That Tokenized Equities Are Securities
On July 9, SEC Commissioner Hester Peirce issued a public statement stating that tokenized equities are securities and therefore must comply with existing federal securities laws. Acknowledging the industry’s growing interest in blockchain-based trading of traditional stocks, Peirce emphasized that blockchain technology “does not have magical abilities to transform the nature of the underlying asset.” Peirce’s statement reiterates that issuers and intermediaries distributing tokenized securities must satisfy all disclosure and registration obligations. SEC Statement; The Block.

Treasury and IRS Formally Rescind Crypto Broker Reporting Rule
On July 10, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) formally rescinded the “DeFi broker” reporting rule. Finalized in December 2024, the rule had dramatically expanded the regulatory definition of “broker” to cover decentralized exchanges and other non-custodial service providers, obligating them to gather and furnish user names, addresses and transaction details to the IRS. This year, Congress and the President nullified the rule under the Congressional Review Act (CRA). This rescission implements the CRA legislation. Federal Register; The Block.

INTERNATIONAL

European Securities and Markets Authority Issues Guidance on the offering of Unregulated Products by Licensed Crypto-Asset Service Providers
On July 11, 2025, the European Securities and Markets Authority (ESMA) issued a statement warning that authorized crypto-asset service providers (CASPs) offering both products regulated under the Markets in Crypto Assets Regulation (MiCA) and other, unregulated products expose investors to significant, often unrecognized, risks. The ESMA notes that investors may wrongly perceive that the regulatory safeguards attached to MiCA-regulated products automatically extend to unregulated offerings. The ESMA disapproves of CASPs engaging in such activities and has provided a detailed “dos and don’ts” checklist setting out its expectations. ESMA.

Abu Dhabi Global Market Updates Digital Asset Regulatory Framework
On June 25, 2025, the Financial Services Regulatory Authority (FSRA) of the Abu Dhabi Global Market implemented amendments to its digital asset framework, following a consultation conducted earlier this year. Changes include a revised process for approving Accepted Virtual Assets (AVAs), updated capital requirements and fees for virtual asset firms, a new product intervention power, and a formal ban on privacy tokens and algorithmic stablecoins. FSRA.

European Commission Adopts Delegated Regulation on Regulatory Technical Standards Governing Liquidity Management Policy and Procedures under MiCA
On June 27, 2025, the European Commission adopted Delegated Regulation C(2025)602, introducing regulatory technical standards (RTS) that prescribe the minimum contents of liquidity-management policies and procedures for issuers of asset-referenced and e-money tokens under MiCA. The standards require management of liquidity risk, contingency planning and stress-testing, drawing on the Basel framework, and other relevant frameworks. If approved by the European Council and Parliament, the rules will apply twenty days after publication in the Official Journal of the EU. European Commission.

Hong Kong Government and Securities and Futures Commission Consults on Licensing Regimes to Regulate Virtual Asset Dealers and Custodians
On June 27, 2025 the Financial Services and the Treasury Bureau and the Securities and Futures Commission (SFC) launched a consultation to introduce regulatory regimes for virtual asset (VA) dealing and custodian service providers. The proposals aim to empower the SFC to license and supervise VA dealers and VA custodians, as well as enforce relevant regulations. SFC Client Alert.

Monetary Authority of Singapore Publishes Response to Consultation on Proposed Amendments to AML/CFT Notices Affecting Regulated Crypto Businesses, Among Others
On June 30, 2025, the Monetary Authority of Singapore (MAS) published its response to an earlier consultation on proposed amendments to AML/CFT Notices and Guidelines which apply to financial institutions such as capital markets intermediaries and digital payment token service providers (FI), and variable capital companies (VCC). The response confirms, among other things, that FIs and VCCs may adopt a risk-based approach in the corroboration of source of wealth where such checks are required. The response also provides further guidance on the timeline for filing suspicious transaction reports and regulatory expectations in relation to the conduct of know-your-customer checks on trusts and legal arrangements. MAS.

ESMA Publishes Final Report on Guidelines For Assessing Knowledge and Competence of Employees of CASPs under MiCA
On July 11, 2025, the ESMA issued a set of guidelines setting out criteria for assessing the knowledge and competence of employees of CASPs under MiCA. The guidelines set out requirements on minimum professional qualifications, experience and understanding of crypto-asset volatility, cybersecurity and other risks which are applicable to staff who provide information or advice about crypto-assets or crypto-asset services. The guidelines are set to enter into force six months after the publication of translations into the national languages of EU members states on the ESMA website. ESMA.

Hong Kong Monetary Authority to Publish Explanatory Note on Licensing of Stablecoin Issuers and Final Guidelines on Supervision and Anti-Money Laundering for Stablecoin Issuers
On July 23, 2025, the Chief Executive of the Hong Kong Monetary Authority (HKMA) announced that the HKMA will be releasing the ‘Explanatory Note on Licensing of Stablecoin Issuers’ by the end of July, which will outline the HKMA’s arrangements for accepting and processing applications for a stablecoin issuance license. The HKMA will also publish final versions of the ‘Guideline on Supervision of Licensed Stablecoin Issuers’ and ‘Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Stablecoin Issuers)’ to provide interest applicants with additional guidance on the regulatory framework by the end of July. HKMA.

OTHER NOTABLE NEWS

Government Watchdog Criticizes IRS for Failing to Meet Crypto Seizure Standards
On July 1, 2025, the Treasury Inspector General for Tax Administration, which oversees the Department of Treasury, released a report criticizing the IRS Criminal Investigation division for not adhering to internal guidelines in seizing and holding cryptocurrency assets between December 2023 and January 2025. The report highlighted failures in following seizure memorandum requirements, which include documenting addresses, dates, and amounts of confiscated cryptocurrency. Recommendations for improvement include familiarizing personnel with guidelines, establishing an inventory system for tracking digital assets, and updating internal procedures. Report; CoinTelegraph.

Senate Confirms Jonathan Gould to Lead OCC
On July 10, 2025 the Senate voted 50–45 to confirm Jonathan Gould, the former OCC chief counsel, as the next Comptroller of the Currency. Gould’s extensive resume, spanning senior roles at the OCC, the Senate Banking Committee, and private industry, drew praise from industry groups and key legislators who emphasized his readiness to “hit the ground running” and safeguard both safety-and-soundness and fair access to financial services. Gould has pledged to depoliticize bank supervision by tailoring oversight to institutions’ risk profiles, curbing “debanking” based on reputational concerns, and ensuring lawful cryptocurrency activities can be conducted safely within the regulated system. Law360; The Block.

Dubai Land Department Celebrates Milestone in Property Tokenization Initiative
On July 17, 2025, the Dubai Land Department celebrated the success of its Real Estate Tokenization Initiative, marking the issuance of the world’s first Property Token Ownership Certificate following the full sale of the inaugural tokenized project on Prypco Mint, a VARA-licensed platform. The project attracted 224 investors from 44 nationalities, 70% of whom were first-time participants in Dubai’s property market. Dubai Land.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Kendall Day, Jeff Steiner, Sara Weed, Rosemary Spaziani, Sam Raymond, Nick Harper, Apratim Vidyarthi, Raquel Sghiatti, Simon Moskovitz, Tin Le, Gabriela Li, William Hallatt, Michelle Kirschner, and Hagan Rooke.

FinTech and Digital Assets Group Leaders / Members:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Substituted compliance offers a pathway for cross-border firms to navigate regulatory demands more efficiently – but regulatory oversight remains.

Rooted in the derivatives markets, substituted compliance offers a pathway for cross-border regulated entities to navigate regulatory demands more efficiently. It permits a foreign firm regulated by the U.S. Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC) to satisfy certain U.S. regulatory requirements via compliance with comparable requirements in its home jurisdiction. Security-based swap (SBS) regulations have matured and substituted compliance is likely to become increasingly important to participants in the growing digital asset markets, which are very often cross-border.

It is critical for foreign firms relying on substituted compliance orders to remain vigilant in complying with these orders. For instance, the SEC’s Examinations Division has expressly noted its focus on compliance with SBS rules generally and, specifically, whether relevant entities are complying with the SEC’s substituted compliance orders.[1] A recent first-in-kind enforcement action further signals that this topic occupies an area of interest to the SEC’s Enforcement Division.[2] And regulators, among other things, want to ensure that foreign firms active in U.S. markets do not have a competitive advantage when it comes to regulatory costs or burdens. No matter the administration, oversight of substituted compliance will remain a priority.

I. Substituted Compliance in the SBS Market

The SEC must affirmatively issue an order granting registered security-based swap dealers (SBSDs) and major security-based swap participants (SBSPs and, together with SBSDs, SBS Entities) the option to elect to apply substituted compliance for the Securities Exchange Act of 1934’s provisions and applicable rules. If an SBS Entity operates under such an order, it may satisfy specified requirements by complying with comparable foreign requirements. Many of the substituted compliance orders that the SEC has granted have also included conditions to ensure that the foreign rules truly stand in for U.S. rules. In practice, many global firms leverage substituted compliance to operate internationally. Today, 39 SBS Entities have indicated that they rely on substituted compliance orders.[3]

Substituted compliance offers a pathway for cross-border firms to navigate regulatory demands more efficiently – but regulatory oversight remains.

II. The Current Climate

The subject of substituted compliance has been in the news recently. In May 2025, the CFTC’s Market Participants Division (MPD) and Division of Enforcement issued new procedures for CFTC-registered non-U.S. swap dealers, non-U.S. major swap participants, and the foreign branches of U.S. swap dealers using substituted compliance.[4] The procedures provide that the foreign regulator, not the CFTC, will interpret and apply the home country’s rules and CFTC staff will generally defer to the foreign regulator’s findings. Any CFTC inquiry into a substituted compliance matter will initially be handled by the MPD, and only if the issue is material might it be referred for enforcement action. In essence, the CFTC will not second-guess foreign regulators on minor issues and will reserve enforcement for serious lapses.

The SEC has explicitly noted that substituted compliance does not eliminate a firm’s obligations under U.S. securities laws[5] and that a failure to comply with foreign regulations under which a firm is substituting compliance is a violation of U.S. law.[6] As such, the SEC retains full authority to inspect, examine, and enforce requirements against SBS Entities relying on substituted compliance.[7] When not operating in line with a substituted compliance order, registrants must comply directly with all relevant U.S. rules. Moreover, firms operating under substituted compliance regimes must understand that a single failure to comply can result in violations of significantly more requirements than it may first appear.[8]

III. Key Compliance Considerations for Firms Relying on Substituted Compliance

Firms relying on substituted compliance orders must live up to agreed standards, and U.S. regulators, no matter how pro-market and against overregulation and overenforcement they may be, are unlikely to forego enforcement action in the face of significant compliance lapses. Firms should proactively double-check their compliance with all applicable requirements today and take action to identify and correct weaknesses or outstanding deficiencies, whether identified by a foreign regulator, an internal review, or otherwise, as they could morph into issues in the U.S.

There are several critical compliance points to keep front-of-mind when relying on a substituted compliance order. Overall, firms should take proactive steps to ensure they meet all relevant requirements—both U.S. and foreign. Key considerations for relevant registered entities and compliance teams include:

Meet All Conditions of SEC Orders. Ensure that all relevant personnel are clear on the scope and limits of the firm’s substituted compliance order, including the specific conditions imposed in the order. Certain requirements vary depending on whether a firm is prudentially regulated.
Adhere Rigorously to Comparable Foreign Laws. Treat the substituted foreign regulations as if they were U.S. law. The SEC has been clear that if a firm falls out of compliance with applicable foreign requirements or the specific conditions of its substituted compliance order, it is violating the parallel SEC requirement.[9]
Maintain Robust Communication with Regulators. Firms engaged in substituted compliance may effectively answer to multiple regulators: the U.S. regulator(s) and their home regulator(s). Beyond ensuring required notices are made to the proper regulators, proactive, transparent communication can help prevent misunderstandings.
Prepare for Examinations and Documentation Requests. Be prepared to demonstrate compliance with documentation. The SEC requires strict recordkeeping and a failure to abide may not be overlooked, even if compliance is demonstrated retrospectively.

IV. Conclusion

Firms operating under substituted compliance orders can strengthen their control environment and reduce the risk of falling out of step with either U.S. or foreign laws by remaining attentive and proactive. The SEC is not abandoning its interest in this area; rather, it remains vigilant to ensure substituted compliance does not become a loophole for laxity or a competitive advantage for foreign firms doing business in the U.S. The importance of these precautions is only growing, as the SEC appears poised to hold a harder line on enforcement in the substituted compliance arena.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding the issues discussed in this update, including any requests for information from the regulators.

[1] SEC Division of Examinations, 2024 Examination Priorities 11 (2025), available at https://www.sec.gov/files/2025-exam-priorities.pdf.

[2] MUFG Securities EMUA plc, Exchange Act Release No. 34-103646 (Aug. 6, 2025), available at https://www.sec.gov/enforcement-litigation/administrative-proceedings/34-103646-s.

[3] Substituted Compliance Notices, U.S. Securities and Exchange Commission (last visited Aug. 6, 2025), available at https://www.sec.gov/about/divisions-offices/division-trading-markets/security-based-swap-markets/substituted-compliance-notices.

[4] CFTC Press Release, CFTC Releases Procedures on Registered Non-U.S. Swap Entities Using Substituted Compliance (May 20, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9076-25.

[5] SEC Staff Guidance, Information Regarding Foreign Regulatory Requirements for Substituted Compliance Applications (Dec. 23, 2019), available at https://www.sec.gov/files/staff-guidance-substituted-compliance-applications.pdf.

[6] Order Granting Conditional Substituted Compliance in Connection With Certain Requirements Applicable to Non-U.S. Security-Based Swap Dealers and Major Security-Based Swap Participants Subject to Regulation in the French Republic, Exchange Act Release No. 34-92484, 86 Fed. Reg. 41612 (Aug. 2, 2021), available at https://www.federalregister.gov/documents/2021/08/02/2021-16135/order-granting-conditional-substituted-compliance-in-connection-with-certain-requirements-applicable.

[7] Id.

[8] A failure to comply with certain substituted compliance obligations can create a domino effect of violations. For example, a registered SBSD may only substitute compliance for recordkeeping requirements under Exchange Act Rule 18a-5(a)(9) if it also applies substitutes compliance for the capital requirements of Exchange Act Section 15F(e) and Exchange Act Rules 18a-1 and 18a-1a through 18a-1d. As such, a violation of the capital requirements would also create a violation of the recordkeeping requirements. The same goes for certain financial reporting requirements under Exchange Act Rule 18a-7 and those same capital requirements.

Additionally, a firm that fails to comply with its substituted compliance obligations must comply with the U.S. requirements for which it was substituting compliance. If the firm also fails to comply with those U.S. requirements, it may be found to have violated both its substituted compliance obligations and its obligations to comply with the U.S. requirements. For example, a registered SBSD satisfying that fails to meet its substituted compliance obligations with respect to annual reporting obligations and methods to reasonably address non-compliance issues under Exchange Act Section 15F(k) and Exchange Act Rule 15Fk-1 may also be found to have violated Exchange Act Section 15F(k) and Exchange Act Rule 15Fk-1.

[9] Order Granting Conditional Substituted Compliance in Connection With Certain Requirements Applicable to Non-U.S. Security-Based Swap Dealers and Major Security-Based Swap Participants Subject to Regulation in the French Republic, Exchange Act Release No. 34-92484, 86 Fed. Reg. 41612 (Aug. 2, 2021), available at https://www.federalregister.gov/documents/2021/08/02/2021-16135/order-granting-conditional-substituted-compliance-in-connection-with-certain-requirements-applicable.

The following Gibson Dunn lawyers prepared this update: Osman Nawaz, Jeffrey Steiner, David Woodcock, Jina Choi, Tina Samanta, and Hayden McGovern.

Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s Securities Enforcement, Derivatives, White Collar Defense & Investigations, or Securities Regulation & Corporate Governance practice groups, or the following

Osman Nawaz – New York (+1 212.351.3940, onawaz@gibsondunn.com)

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

David Woodcock – Dallas (+1 214.698.3211, dwoodcock@gibsondunn.com)

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

Tina Samanta – New York (+1 212.351.2469, tsamanta@gibsondunn.com)

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

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

Gibson Dunn’s Workplace DEI Task Force aims to help our clients navigate the evolving legal and policy landscape following recent Executive Branch actions and the Supreme Court’s decision in SFFA v. Harvard. Prior issues of our DEI Task Force Update can be found in our DEI Resource Center. Should you have questions about developments in this space or about your own DEI programs, please do not hesitate to reach out to any member of our DEI Task Force or the authors of this Update (listed below).

Key Developments:

On July 30, 2025, the Department of Justice (“DOJ”) released guidance on the application of federal antidiscrimination laws to entities receiving federal funds. The guidance—which is non-binding—provides a detailed list of DEI policies and practices DOJ considers unlawful. This includes what DOJ characterizes as (1) programs that grant preferential treatment based on protected characteristics, (2) policies that use facially neutral proxies for protected characteristics, (3) practices that segregate individuals based on protected characteristics, (4) policies that unlawfully consider protected characteristics in selection decisions, and (5) trainings that promote discrimination or hostile environment. The document notes that these policies and practices could “result in revocation of grant funding,” and states that federal funding recipients may be liable for discrimination if they knowingly fund the unlawful practices of third parties. The guidance also provides a list of “Best Practices” entities can adopt to minimize legal risk. This includes, among other things, opening programs and events to all, eliminating diversity quotas and “diverse slate” requirements, including non-discrimination clauses in agreements with third parties, and implementing non-retaliation policies for individuals who refuse to participate in potentially discriminatory programs. For more information, please see our July 30 client alert.

On July 21, the U.S. Department of Labor issued Advisory Opinion 2025-01A, which withdraws a prior advisory opinion addressing a racial equity program operated by Citi. The Department issued the prior opinion, Advisory Opinion 2023-01A, in September 2023 in response to an inquiry from Citi about how its “Racial Equity Program”—which involved paying the investment management fees for “Diverse Managers” retained by Citi-sponsored employee benefit plans—intersected with its obligations under Title I of the Employee Retirement Income Security Act. The new opinion states that while “Advisory Opinion 2023-01A assumed that the Racial Equity Program was lawful,” the program is in fact “not lawful” because “its allocation of benefits on the basis of race clearly and unambiguously violates the civil rights laws.” The new opinion instructs Citi to “take immediate action to end all illegal activity within its Racial Equity Program and any other initiative, plan, program, or scheme it operates under the banner of diversity, equity, and inclusion.” It concludes that “ERISA does not shield Citi or the fiduciaries of the Plans from the application of the civil rights laws.”

On July 16, the Senate Health, Education, Labor, and Pensions Committee held a confirmation hearing for Brittany Bull Panuccio, President Trump’s nominee to be a Commissioner of the U.S. Equal Employment Opportunity Commission (“EEOC”). Panuccio spoke about the “full circle moment” returning as a nominee for Commissioner after having served as an EEOC intern at the start of her career. Panuccio was also a Teach for America Corps member, clerked on both the D.C. Circuit and the Fifth Circuit, and worked at the U.S. Department of Education. Panuccio is currently an Assistant U.S. Attorney. She spoke about her parents’ experience as small business owners and her own experience with disability accommodations, as well as her commitment to civil rights, including women’s rights. During the hearing, Panuccio indicated support for the Administration’s position on DEI. In response to a question about workplace diversity programs, Panuccio said that Title VII of the Civil Rights Act “does not include any exceptions for diversity, or DEI.” Panuccio’s confirmation would bring the EEOC back to a quorum. On July 24, Panuccio’s nomination cleared the Health, Education, Labor, and Pensions Committee. Her nomination will now proceed to a vote before the full Senate.

On July 10, the U.S. Department of Education’s Office for Civil Rights opened an investigation into George Mason University’s DEI initiatives for potential violations of Title VI of the Civil Rights Act of 1964. According to an official press release, “[the] investigation is based on a complaint filed with the Department by multiple professors at GMU who allege that the university illegally uses race and other immutable characteristics in university policies, including hiring and promotion.”

On July 10, the U.S. Department of Agriculture (“USDA”) issued a rule announcing that it will “no longer apply race- or sex-based criteria” in the administration of its loan and benefit programs. The rule explains that the USDA has taken considerable and effective actions over the past several decades to redress past injustice and discrimination and has now determined that past discrimination has been sufficiently addressed. The change was made to align with a June 2024 decision in which of the U.S. District Court for the Northern District of Texas preliminarily enjoined USDA relief programs that included race- and sex-based preferences (Strickland v. USDA, No. 2:24-cv-00060). Going forward, the USDA says that it will ensure that “its programs are administered in a manner that upholds the principles of meritocracy, fairness, and equal opportunity for all participants.”

On July 2, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) published a bulletin announcing that, pursuant to the Secretary of Labor’s Order 08-2025, it is lifting an abeyance previously placed in January 2025 on certain of OFCCP’s investigative and enforcement activities. On January 21, 2025, President Trump issued Executive Order 14173, which, among other things, revoked Executive Order 11246’s race and gender-based affirmative action obligations on federal contractors. In response to EO 14173, the Secretary of Labor issued Order 03-2025 on January 24, 2025 mandating that OFCCP cease and desist all investigative and enforcement activity under EO 11246 and placing OFCCP’s activity related to Section 503 of the Rehabilitation Act (regarding people with disabilities) and the Vietnam Era Veterans’ Readjustment Assistance Act (“VEVRAA”) in abeyance pending further guidance. The Secretary of Labor’s Order 08-2025, issued on July 2, 2025, lifted the abeyance to allow OFCCP to resume activity under the Section 503 and VEVRAA program areas.

On July 1, OFCCP published several Notices of Proposed Rulemaking (“NPRMs”) relating to affirmative action plan requirements. In “Modifications to the Regulations Implementing Section 503,” which relates to people with disabilities, the OFCCP proposes (1) removing the requirement for federal contractors to invite applicants and employees to self-identify their disability status; and (2) removing the utilization goal requirements (i.e., the current Section 503 requirement to apply a 7% utilization goal for employment of qualified individuals with disabilities for each of their job groups, or to their entire workforce if they have 100 or fewer employees, and to conduct a utilization analysis using that goal). These modifications would mean that federal contractors will still be required to “take affirmative action to employ and advance in employment qualified individuals with disabilities” and “develop and maintain an affirmative action program, where they must implement and document their equal employment opportunity efforts on an annual basis,” but would no longer be required to include numerical analysis. In “Modifications to Regulations Implementing VEVRAA,” which relates to certain veterans, OFCCP proposes removing cross-references to EO 11246 and moving provisions related to administrative enforcement proceedings from the C.F.R. sections on EO 11246 to the sections relating to VEVRAA. Finally, in “Rescission of Executive Order 11246 Implementing Regulations,” the OFCCP confirms that federal contractors are no longer required to prepare affirmative action plans relating to race, ethnicity, or gender, and also proposes rescinding the requirement that federal contractors and first-tier subcontractors file reports with OFCCP. These proposed changes are subject to a notice-and-comment period ending on September 2, 2025, after which OFCCP will adopt a final rule and then submit a report to Congress. Thirty days after publication of the final rule, the changes will become effective.

On June 30, 2025, the Department of Justice appealed the U.S. District Court for the District of Columbia’s May 2 ruling permanently enjoining enforcement of Executive Order against the law firm Perkins Coie LLP. Perkins Coie said in a statement that it is prepared to defend the ruling before the D.C. Circuit. On July 21, the Department of Justice also appealed the U.S. District Court for the District of Columbia’s May 23 ruling permanently enjoining enforcement of Executive Order 14250 against the law firm Wilmer Cutler Pickering Hale and Dorr LLP.

Media Coverage and Commentary:

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

Washington Post, “EEOC to Consider Some Transgender Discrimination Cases After Months-Long Pause” (July 9): Julian Mark of the Washington Post reports that the EEOC has resumed processing certain discrimination complaints filed by transgender workers, reversing an earlier policy under which such cases were automatically placed on hold. Mark writes that this shift follows the agency’s efforts earlier this year to comply with President Trump’s executive order targeting “gender ideology” and limiting federal support for gender identity policies. According to a July 1 email obtained by the Washington Post, Thomas Colclough, director of the EEOC’s field operations, stated that the agency will now process cases that “fall squarely” under the Supreme Court’s 2020 ruling in Bostock v. Clayton County, which held that firing an employee because they are transgender violates the Civil Rights Act of 1964. Mark reports that the renewed investigations will include hiring, discharge, and promotion claims, but will not extend to workplace harassment, and that all gender identity complaints will receive additional review from senior attorneys and the acting chair’s office.
Politico, “Trump Admin Asks Staff to Report Cases of Bias Due to DEI Directives” (July 7): Danny Nguyen of Politico reports that the Department of Health and Human Services distributed a “whistle-blower questionnaire” to its staff, seeking reports of discrimination linked to DEI policies. The survey asks whether employees have observed grants or contracts being rejected due to “discriminatory language” and if they are aware of any staff who were overlooked for promotions or hiring based on race, religion, gender, national origin, age, disability, or genetic information. The questionnaire, Nguyen writes, also probes whether employees know of former colleagues who resigned or faced disciplinary actions for not complying with DEI orders during the Biden administration. Nguyen further reports that although the survey does not mandate the disclosure of personal identifiers, it does request contact information for follow-up in certain cases. Nguyen notes that the outcome of the survey is uncertain, as the agency has not disclosed what it plans to do with the information.
Yahoo Finance, “More Than 200 S&P 500 Companies Scrubbed ‘Diversity’ and ‘Equity’ From Annual Reports in 2025” (July 6): Alexis Keenan of Yahoo Finance reports that, according to law firm Freshfields LLP, over 200 S&P 500 companies removed words like “diversity” and “equity” from their 2025 annual reports, and nearly 60% fewer are using the phrase “diversity, equity, and inclusion,” following President Trump’s executive order ending federal DEI programs and targeting “illegal private sector DEI actions.” Keenan reports that major companies have announced policy shifts by, for example, replacing DEI language with terms like “inclusion,” “belonging,” and “meritocratic workplace.” Keenan further reports that shareholders have recently shown less support for both pro- and anti-DEI proposals. According to Keenan, “[n]one of this season’s investor-led DEI-focused proposals” received majority approval.
Wall Street Journal, “How Trump’s Anti-DEI Push Is Unraveling College Scholarships” (July 5): Tali Arbel of the Wall Street Journal reports that colleges, companies, and philanthropic organizations are revising or eliminating scholarships that supported minority students in response to pressure from the current administration and activist groups over diversity programs and the Supreme Court’s 2023 decision in SFFA v. Harvard. Arbel reports that the number of scholarships with race, ethnicity, or gender criteria in the National Scholarship Providers Association database dropped by 25% from March 2023 to June 2025. In April, the Justice Department threatened a lawsuit over an Illinois scholarship for minority graduate students, the Diversifying Higher Education Faculty, prompting several schools, including Northwestern University and the University of Chicago, to opt out. Arbel also reports that other sponsors are broadening eligibility for scholarships and deemphasizing race as a criterion. For example, in response to a lawsuit from an activist group challenging the use of race in scholarships, McDonald’s removed its Hispanic-ancestry requirement from its 40-year-old Hacer sponsorship, instead requiring applicants to show contributions to the Hispanic community through activities and leadership. Similarly, the Gates Foundation removed race and ethnicity criteria from the Gates Scholarship, making it available to all Pell Grant-eligible students.
Law360, “Amid DEI Uncertainty, [Companies] Face Pressure From All Sides” (July 3): Sarah Jarvis of Law360 reports on the complex choices companies face as they balance government directives and consumer expectations regarding DEI programs. The article emphasizes that it is difficult to determine what “illegal DEI” means, and that companies are in a difficult spot as a result. Some experts, like Jason Schwartz of Gibson Dunn, anticipate a wave of additional reverse discrimination litigation from the government and private plaintiffs alike after the Supreme Court in June upheld the right of non-minority plaintiffs to sue under Title VII without meeting a heightened evidentiary standard. Jarvis cites a range of opinions on how employers should respond. According to Schwartz, companies are aiming to be more precise when describing their DEI programs, given that DEI is a highly charged term. According to Schwartz, this does not mean the end of DEI policies, but may mean more tightly circumscribed and rigorously defined policies.
Law.com, “Law Schools Are Quietly Changing DEI Messaging. What Does That Mean for Big Law’s Future Talent Pipeline?” (June 24): Christine Charnosky of Law.com reports that, in response to political backlash against DEI from the Trump Administration, as well as the Supreme Court’s 2023 ruling in Students for Fair Admissions v. Harvard, some law schools are playing down their DEI messaging. Charnosky notes that some law schools have dismantled their diversity-related scholarships, others have removed information about diverse admissions practices from their websites, and still others have taken down their diversity webpages and initiatives altogether. Still, Charnosky reports, law schools continue to pursue diverse classes by providing outreach and education about the law in underrepresented communities, including at the high school and college level. And Charnosky reports that minority applicants continue to apply to law school, with applications from Black, Hispanic, Asian, and Native American students up by 20–25% since June 2024.
Law360, “Shifting DEI Expectations Put Banks In Legal Crosshairs” (June 20): Writing for Law360, Dan Bray, Sean Kelly, and Shianne Thomas explore the implications of Executive Order 14173 for banks and other regulated financial institutions. First, the authors note, banks must ascertain whether they are subject to the EO by determining whether or not they are federal contractors. While OFCCP has maintained that banks may be classified as federal contractors by obtaining federal deposit insurance and acting as an issuing and paying agent for U.S. savings bonds and notes, other case law contradicts this view, according to the authors. Second, the authors explore whether banks’ compliance with the Community Reinvestment Act (“CRA”)—a law passed to combat redlining, and which requires banks to meet the credit needs of local “low- and moderate-income neighborhoods”—is consistent with EO 14173. They conclude that it is consistent, because the CRA does not require banks to address race or gender, beyond ensuring that banks are not engaging in illegal discrimination. Still, the authors argue, minority lending programs, while expressly authorized under the Equal Credit Opportunity Act (“ECOA”), may be at risk in light of EO 14173 and similar executive orders. While an executive order cannot override a federal statute like the ECOA, the authors write, an executive order can affect how regulators interpret and enforce the law. The authors argue that “[t]he most significant impact” from EO 14173 is to shift how regulators like the Consumer Financial Protection Bureau interpret existing statutes and regulations. The authors cite the recently issued Executive Order 14281, which directs federal agencies to “eliminate the use of disparate-impact liability in all contexts to the maximum degree possible,” as evidence of the administration’s goal to change how companies, including banks and financial institutions, serve underrepresented communities.

Case Updates:

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

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

Chicago Women in Trades v. Trump, et al., No. 1:25-cv-02005 (N.D. Ill. 2025): On February 26, 2025, Chicago Women in Trades (“CWIT”), a non-profit organization, sued President Trump, challenging EO 14151 and EO 14173 on constitutional grounds. On April 14, 2025, the court preliminarily enjoined enforcement of key provisions of the EOs, including a provision terminating one of CWIT’s federal grants. On May 14 and 21, 2025, the Department of Labor filed status reports indicating its continued compliance with the court’s preliminary injunction.
- Latest update: On July 7, 2025, the defendants moved to dismiss. The defendants argued that CWIT lacked standing to challenge certain “intra-governmental provisions” in the orders. They also argued that the court “should dismiss the President, DOJ and the Attorney General, and OMB and its Director based on considerations particular to those parties” and urged the court to reject each of CWIT’s claims as a matter of law. On July 8, 2025, the defendants filed a motion for an indicative ruling and partial stay. In their motion, the defendants “request[ed] that the Court issue an indicative ruling that on remand from the court of appeals it would modify the scope of its preliminary injunction” in light of Trump v. CASA’s holding that “district courts do not have equitable powers to issue a ‘universal injunction[.]’” The defendants also requested that the Court “stay the universal scope of the injunction pending resolution on appeal.” On July 25, 2025, the plaintiffs opposed this motion, asserting that “the government’s motion fails to raise any ground for reconsideration allowable under Federal Rule of Procedure 60(b).” The plaintiffs also asserted that the “injunction [the] Court entered does not conflict with CASA,” and that the government has not shown that it “would be irreparably harmed without a stay.”
Doe v. EEOC, No. 4:23-cv-03516 (S.D. Tex. 2023), No. 1:25-cv-01124 (D.D.C. 2025): On April 15, 2025, three law students, proceeding under pseudonyms, sued the EEOC, challenging the EEOC’s investigations into law firms’ demographic and diversity-related data. The plaintiffs allege that those investigations exceed the agency’s authority under Title VII because they are not based upon a charge. The plaintiffs further claim that the EEOC’s investigation into law firms violates the Paperwork Reduction Act because the EEOC did not undergo public comment or obtain approval from the Office of Management and Budget before posing “identical questions to the twenty firms.” The plaintiffs seek a declaratory judgment that the EEOC exceeded its authority, an injunction barring the collection of sensitive information through improper means, and an order compelling Acting EEOC Chair Andrea Lucas and the EEOC to withdraw the investigative letters and return any information collected pursuant to those letters. On May 16, 2025, the plaintiffs amended their complaint to bring the case as a proposed class action. On June 5, 2025, the plaintiffs moved to certify the putative class and moved for summary judgment the same day. On June 16, 2025, the EEOC moved to stay consideration of the plaintiffs’ motions for class certification and summary judgment and requested an extension to respond to the amended complaint. Specifically, the EEOC argued that the plaintiffs’ motions were premature, as the EEOC had yet to respond to the amended complaint. On June 18, 2025, the plaintiffs opposed the EEOC’s motion to stay, arguing that they would be prejudiced by the EEOC’s proposed stay. On June 26, the court granted the EEOC an extension of time to respond to the complaint and the summary judgment motion and dismissed the class certification motion without prejudice. The court denied the stay motion in all other respects.
- Latest update: On July 31, the EEOC moved to dismiss the complaint, moved in the alternative for summary judgment, and opposed the plaintiffs’ summary judgment motions. The defendants assert that the plaintiffs lack standing because they did not experience harm, and any harm they may experience would be caused by the law firms, not the EEOC. The defendants also challenge the ultra vires claim and assert that the plaintiffs “have identified no basis for such [an] expansive” remedy as injunctive or declaratory relief.”
E.K. v. Department of Defense Education Activity, 1:25-cv-00637 (E.D. Va. 2025), No. 1:25-cv-01124 (D.D.C. 2025): On April 15, 2025, twelve anonymous minor students at schools operated by the Department of Defense Education Activity (“DoDEA”) sued DoDEA, claiming DoDEA violated their First Amendment right to receive information by removing books and lesson content related to race and gender from their schools, allegedly in an effort to comply with EO 14168, EO 14185, and EO 14190. On May 5, 2025, the plaintiffs moved for a preliminary injunction. On May 23, 2025, DoDEA opposed the motion, arguing that the act of establishing a curriculum is “government speech” and that the First Amendment cannot prevent the government from “declining to express a view.” On June 3, 2025, the court orally ordered the defendants to provide a list of books under review. On June 11, 2025, the defendants filed a motion to reconsider the oral order, arguing that the deliberative process privilege protected disclosure of such a list and that the court did not need a list to address issues at the preliminary injunction stage, where “the Court is constrained to rule on the legal and factual issues only as presented by the parties.” On June 13, 2025, the plaintiffs opposed the defendant’s motion for reconsideration, arguing that the deliberative process privilege is inapplicable because it does not protect “factual information” so long as the information is “severable” from a protectable document, and that the court had discretion to request the list at this stage of the litigation. On June 16, 2025, the court ordered the DoDEA to make the list of books under review available ex parte for in camera review while the motion for reconsideration remains pending.
- Latest update: On July 11, 2025, the court denied the defendants’ motion for reconsideration and ordered that the list of books pending review by the Department of Defense be filed on the public docket. The court agreed with the plaintiffs that the list of books was purely factual and did not contain “any indicia” of deliberation. While the motion for reconsideration was pending, the defendants moved to dismiss the complaint on Juny 27, 2025. The defendants argue that the plaintiffs lack standing because they “failed to put forward any factual basis to establish that they sought information temporarily withdrawn from DoDEA’s bookshelves pending further review,” and because the First Amendment does not grant them a right to receive information. In the alternate, the defendants argue that curriculum changes and the curation of libraries constitute government speech, which is not regulated by the Free Speech Clause. On July 16, the plaintiffs opposed the motion, arguing that they have standing because they “are suffering ongoing and irreparable injury as a result of the government’s knee-jerk removal of library books and changes to school curricula.” The plaintiffs also asserted that they had successfully stated a claim under the First Amendment as to both the book and curricula removals. The motion remains pending.
NAACP v. Department of Education, et al., 1:25-cv-00637 (E.D. Va. 2025), 1:25-cv-01120 (D.D.C. 2025): On April 15, 2025, the National Association for the Advancement of Colored People (“NAACP”) sued the U.S. Department of Education (“DOE”) and various officials challenging recent DOE agency actions on the grounds that they violate the Administrative Procedure Act (“APA”) and the First and Fifth Amendments of the U.S. Constitution. The challenged actions include DOE’s February 14, 2025 Dear Colleague Letter, which instructed educational institutions to “(1) ensure that their policies and actions comply with existing civil rights law; (2) cease all efforts to circumvent prohibitions on the use of race by relying on proxies or other indirect means to accomplish such ends; and (3) cease all reliance on third-party contractors, clearinghouses, or aggregators that are being used by institutions in an effort to circumvent prohibited uses of race.” The NAACP also challenged DOE’s February 28 guidance document titled “Frequently Asked Questions About Racial Preferences and Stereotypes Under Title VI of the Civil Rights Act,” which addressed a range of issues relating to DEI initiatives in educational institutions and provided examples of DEI programming that the Trump Administration is likely to find discriminatory. Finally, the NAACP challenged DOE’s April 3, 2025 letter requiring state and local officials to certify their compliance with the Administration’s interpretation of Title VI in relation to DEI. On April 20, 2025, the NAACP moved to preliminarily enjoin these actions. On April 24, 2025, the court concluded that the NAACP was unlikely to succeed with its APA claims and that it lacked standing to challenge the February 14 Dear Colleague Letter and February 28 guidance document under the First or Fifth Amendment. However, the court determined that the NAACP had a substantial likelihood of success in challenging DOE’s April 3 letter as impermissibly vague under the Fifth Amendment and preliminarily enjoined DOE from enforcing that letter. On May 9, 2025, the NAACP filed its First Amended Complaint, asserting the same causes of action.
- Latest update: On June 23, 2025, DOE moved to dismiss the NAACP’s claims on four grounds: (1) failure to establish standing; (2) the challenged actions are not final agency actions and lack the force of law; (3) even if the challenged actions are final agency actions, the actions are interpretative rules not subject to notice-and-comment rulemaking; and (4) the constitutional claims fail as a matter of law. On July 14, 2025, the NAACP opposed DOE’s motion, countering that it had plausibly alleged standing and set forth sufficient factual allegations to survive the motion to dismiss.
National Education Association v. Department of Education, No. 1:25-cv-00091 (D.N.H. 2025), 1:25-cv-01120 (D.D.C. 2025): On March 5, 2025, the National Education Association and other groups, including the ACLU of New Hampshire, sued DOE, alleging that DOE’s letters to universities and colleges, threating to revoke federal funding for pursuing certain DEI programs, violated the First and Fifth Amendments of the U.S. Constitution and the APA. The challenged actions include the Department’s February 14, 2025 Dear Colleague Letter, described above. On April 24, 2025, the court granted the plaintiffs’ motion for a preliminary injunction, holding that plaintiffs were likely to succeed in their procedural challenge due to the Department’s failure to follow the procedural requirements that the APA imposes on legislative rules. The court also concluded that the Dear Colleague Letter was likely impermissibly vague in violation of the Due Process Clause. Finally, the court concluded that the agency actions likely violated the First Amendment by targeting speech based on viewpoint. On May 12, 2025, the plaintiffs filed an amended complaint, adding allegations that the Dear Colleague Letter and other DOE letters violate the Spending Clause of the U.S. Constitution because they exert “undue influence” by “attaching conditions to federal funds” that make them impermissibly coercive. The plaintiffs also added allegations that the Dear Colleague Letter and similar letters are unconstitutionally vague and ambiguous.
- Latest update: On June 10, 2025, the plaintiffs moved for summary judgment, contending, among other things, that the Dear Colleague Letter (1) is impermissibly vague under the First Amendment; (2) censors constitutionally protected academic speech; (3) is arbitrary and capricious under the APA; and (4) impermissibly attaches ambiguous and retroactive conditions to federal funds that are contrary to the purpose of the statutes authorizing the funding. On July 17, 2025, the defendants filed a cross-motion for summary judgment and an opposition to the plaintiffs’ motion for summary judgment. The defendants argue that none of the plaintiffs can establish standing, and that they lack a cause of action under the APA because the Dear Colleague Letter and corresponding FAQ documents are not final agency actions subject to review. Even if the letter and FAQ document were subject to review, the defendants argue they do not violate the APA. The defendants also argue that the plaintiffs’ constitutional claims fail as a matter of law. Finally, the defendants contend that “[e]ven if the Court concluded that any part of the challenged agency action is unlawful,” only vacatur—and not an injunction—would be an appropriate remedy.
National Urban League et al., v. Trump, et al., No. 1:25-cv-00471 (D.D.C. 2025), No. 1:25-cv-00471 (D.D.C. 2025): On February 19, 2025, the National Urban League, National Fair Housing Alliance, and AIDS Foundation of Chicago sued President Donald Trump challenging EO 14151, EO 14168, EO 14173, and related agency actions, as ultra vires and in violation of the First and Fifth Amendments and the APA. The plaintiffs allege that these orders penalize them for expressing viewpoints in support of diversity, equity, inclusion, accessibility, and transgender people. They also claim that, because of these orders, they are at risk of losing federal funding. The plaintiffs filed a motion for a preliminary injunction, which the court denied on May 2, 2025, finding that the plaintiffs failed to establish standing to challenge provisions of the EOs that are intra-governmental and “not aimed at them.” For the remaining challenged provisions of the EOs—including provisions mandating certification by government contractors that they do not operate unlawful DEI programs and terminating grants relating to DEI and gender ideology—the court concluded that the plaintiffs failed to show a likelihood that they would succeed on the merits. On May 20, 2025, the parties filed a joint motion to obtain leave for the plaintiffs to supplement their pleadings. The court granted the motion, setting forth deadlines for amendment and response to that amendment, as well as a briefing schedule for a motion to dismiss, should the defendants choose to file one.
- Latest update: On June 16, 2025, the National Fair Housing Alliance voluntarily dismissed its claims. On June 30, 2025, the remaining plaintiffs filed their amended complaint, which no longer includes an APA claim. The plaintiffs added factual allegations seeking to demonstrate how the EOs directly impact their operations and redrafted their claim for relief regarding ultra vires presidential action, outlining specific statutes authorizing their equity-related services. On July 7, 2025, the parties jointly moved for an extension of time for the defendants to respond to the plaintiffs’ amended complaint, which the court granted, ordering defendants to respond by August 8, 2025.
San Francisco AIDS Foundation et al. v. Donald J. Trump et al., No. 4:25-cv-01824 (N.D. Cal. 2025), No. 1:25-cv-00471 (D.D.C. 2025): On February 20, 2025, several LGBTQ+ groups filed suit against President Trump, Attorney General Pam Bondi, and several other government agencies and actors, challenging the President’s executive orders regarding DEI (EO 14151, EO 14168, and EO 14173) on constitutional grounds. On March 3, 2025, the plaintiffs filed a motion for preliminary injunction. On April 11, 2025, the defendants opposed the motion, arguing that (i) the plaintiffs are not likely to establish the court’s jurisdiction; (ii) the plaintiffs’ claims will likely fail on the merits; (iii) the plaintiffs failed to show irreparable injury; and (iv) the balance of inequities and public interest weigh against granting relief. The defendants also argued that “to the extent the Court intends to grant Plaintiffs’ request for a preliminary injunction, such relief should be narrowly tailored to apply only to [the] defendant agencies, Plaintiffs, and the provisions that affect them” and that any injunctive relief should be stayed pending an appeal and bond.
- Latest update: On June 9, 2025, the court granted the preliminary injunction motion in part after finding that the plaintiffs faced the imminent loss of federal funding critical to their ability to provide lifesaving healthcare and support services to marginalized LGBTQ+ populations, but also denied the motion in part after concluding that the plaintiffs failed to demonstrate they were likely to succeed in their challenge to the EOs’ certification provision because the plaintiffs did not show that the provision goes beyond targeting DEI programs that violate federal antidiscrimination law. On June 13, 2025, the court enjoined the agency defendants from enforcing the funding provisions of the EOs. The agency defendants were further ordered to reinstate any terminated contracts or grant awards of the plaintiffs.
Young Americans for Freedom et al. v. Department of Education et al., No. 3:24-cv-00163 (D.N.D. 2024), on appeal at No. 25-2307 (8th Cir. 2025): On August 27, 2024, the University of North Dakota Chapter of Young Americans for Freedom (“YAF”) sued DOE over its McNair Post-Baccalaureate Achievement Program, a research and graduate studies grant program that supports incoming graduate students who are either low-income, first-generation college students or “member[s] of a group that is underrepresented in graduate education.” YAF alleges that the McNair program violates the Equal Protection Clause by restricting admission based on race. On September 4, 2024, YAF filed a motion for preliminary injunction. On December 31, 2024, the court denied the plaintiffs’ preliminary injunction motion and dismissed the case without prejudice for lack of subject matter jurisdiction, ruling that there was no Article III standing because the McNair Program is not exclusively administered by DOE. On January 24, 2025, the plaintiffs filed a motion to alter or amend the judgment, which the court denied on May 6, 2025, holding that the plaintiffs failed to identify a manifest error of law or fact and affirming its prior ruling that it lacked subject matter jurisdiction.
- Latest update: On July 1, 2025, the plaintiffs filed a notice of appeal.

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

American Alliance for Equal Rights v. American Bar Association, No. 1:25-cv-03980 (N.D. Ill. 2025): On April 12, 2025, the American Alliance for Equal Rights (“AAER”) sued the American Bar Association (“ABA”) in relation to its Legal Opportunity Scholarship, which AAER asserts violates Section 1981. According to the complaint, the scholarship awards $15,000 to 20–25 first-year law students per year. To qualify, an applicant must be a “member of an underrepresented racial and/or ethnic minority.” The complaint alleges that “White students are not eligible to apply, be selected, or equally compete for the ABA’s scholarship.” AAER seeks a TRO and preliminary injunction barring the ABA from selecting winners for this year’s scholarship, as well as a permanent injunction barring the ABA from knowing or considering applicants’ race or ethnicity when administering the scholarship.
- Latest update: On June 16, 2025, the ABA moved to dismiss the complaint for failure to state a claim. The ABA argued that AAER lacks standing to pursue its Section 1981 claim because it failed to allege that it has any members with standing to pursue the claim on their own behalf. The ABA argued that AAER failed to state a Section 1981 claim because AAER did not allege a contractual relationship with the ABA. The ABA also argued that the relief sought would impede the ABA’s First Amendment rights to free speech and expression, and that the “ABA has a First Amendment right to distribute funds as it deems appropriate.” AAER filed an amended complaint on June 25, making new allegations about the ABA’s commitment to diversity and beliefs around refusing to contract with persons of certain races. On July 30, the ABA moved to dismiss the amended complaint on the same grounds it moved to dismiss the initial complaint, asserting that the new facts pled in the amended complaint failed to overcome the shortcomings of the initial complaint.

3. Employment discrimination and related claims:

Langan v. Starbucks Corporation, No. 3:23-cv-05056 (D.N.J. 2023): On August 18, 2023, a white, female former store manager sued Starbucks, claiming she was wrongfully accused of racism and terminated after she rejected Starbucks’ attempt to deliver “Black Lives Matter” T-shirts to her store. The plaintiff alleged that she was discriminated and retaliated against based on her race and disability as part of a company policy of favoritism toward non-white employees. On July 30, 2024, the district court granted Starbucks’ motion to dismiss, agreeing that the plaintiff’s claims under the New Jersey Law Against Discrimination (“NJLAD”) were untimely and that she failed to allege that her termination was based on anything other than her “egregious” discriminatory comments and her violation of the company’s anti-harassment policy. On August 11, 2024, the plaintiff filed an amended complaint. On November 8, 2024, Starbucks again moved to dismiss, arguing that the additional facts alleged to explain plaintiff’s untimeliness—specifically, her difficulty obtaining a right to sue letter—were insufficient to state a claim.
- Latest update: On June 20, 2025, in a single-page order, the court granted Starbucks’ motion to dismiss with prejudice.
Spitalnick v. King & Spalding, LLP, No. 4:23-cv-03516 (S.D. Tex. 2023), No. 24-cv-01367 (D. Md. 2024), on appeal at No. 25-1721 (4th Cir. 2025): On May 9, 2024, Sarah Spitalnick, a white, heterosexual female, sued King & Spalding, alleging that the firm violated Title VII and Section 1981 by deterring her from applying to its Leadership Counsel on Legal Diversity internship program. Spitalnick alleged that she believed she could not apply after seeing an advertisement that stated that candidates “must have an ethnically or culturally diverse background or be a member of the LGBT community.” On September 19, 2024, King & Spalding moved to dismiss, arguing that Spitalnick failed to state a claim, her claims were time-barred, and she lacked standing because she never applied to the program. On February 25, 2025, the court granted the defendant’s motion to dismiss, holding that the plaintiff had not adequately pled that she was “able and ready” to apply to the position she claims she was denied. On March 24, 2025, the plaintiff filed a motion for reconsideration, which the court denied.
- Latest update: On June 22, 2025, the plaintiff filed a notice of appeal. On June 26, 2025, the Fourth Circuit docketed the appeal and issued a briefing order.

4. Actions against educational institutions:

Johnson v. Fliger, et al., No. 1:23-cv-00848 (E.D. Cal. 2023), on appeal at No. 24-6008 (9th Cir. 2024): On June 1, 2023, Daymon Johnson, a professor at Bakersfield College, sued several Bakersfield and Kern Community College District officials, alleging that the district’s commitment to “embrac[e] diversity” and “anti-racism” through state and local district statutes, regulations, and policies imposes an “ideological orientation” on district faculty by suppressing opposing viewpoints and political speech in violation of Section 1983 and the First and Fourteenth Amendments of the U.S. Constitution. On July 20, 2023, the plaintiff sought a preliminary injunction against enforcement of the state and local statutes, regulations, and policies. On August 29, 2023, and October 3, 2023, multiple defendants separately moved to dismiss the plaintiff’s claims for, among other reasons, lack of standing and failure to state a claim. On September 23, 2024, the court granted the defendants’ motions to dismiss and denied the plaintiff’s motion for preliminary injunction as moot. The court reasoned that the plaintiff lacked standing to bring a pre-enforcement action because he failed to allege sufficient injury and dismissed the case without prejudice. On September 23, 2024, the plaintiff filed a notice of appeal.
- Latest update: On July 14, 2025, the Ninth Circuit reversed the district court’s conclusion that the plaintiff lacked standing to sue the defendants under certain California regulations, holding that (1) the plaintiff sufficiently alleged “an intention to engage in a course of conduct arguably affected with a constitutional interest” under the First Amendment, (2) his intended conduct was “arguably proscribed” by the regulations because they directly regulate the plaintiff as a community college employee and faculty member, and (3) the plaintiff adequately alleged a “credible threat” of enforcement under the relevant provisions. The court remanded the plaintiff’s motion for preliminary injunction for the district court to consider in the first instance.

Students Against Racial Discrimination v. Regents of the University of California et al., No. 8:25-cv-00192 (C.D. Cal 2025): On February 3, 2025, Students Against Racial Discrimination (“SARD”) sued the Regents of the University of California (“UC”), alleging that UC schools discriminate against Asian American and white applicants by using “racial preferences” in admissions in violation of Title VI and the Fourteenth Amendment of the U.S. Constitution. SARD alleged it has student members who are ready and able to apply to UC schools but are “unable to compete on an equal basis” because of their race.
- Latest update: On June 10, 2025, the plaintiffs filed their first amended complaint, and on June 24, 2025, the plaintiffs filed a response to the defendants’ recent notice of related cases to refute the defendants’ argument that the first amended complaint adds new claims against the UC medical schools. The plaintiffs argue that the first amended complaint narrows their claims by focusing on alleged discriminatory practices in the UC’s medical school, law school, and undergraduate admissions.

Students for Fair Admissions v. United States Naval Academy et al., No. 1:23-cv-02699 (D. Md. 2023), on appeal at No. 24-02214 (4th Cir. 2024): On October 5, 2023, Students for Fair Admissions (“SFFA”) sued the U.S. Naval Academy, arguing that consideration of race in its admissions process violates the Fifth Amendment because it was not narrowly tailored to achieve a compelling government interest. The dispute proceeded to a nine-day trial in September 2024, during which the Academy argued that its consideration of race was necessary to achieve a diverse officer corps, which furthers the compelling government interest in national security. On December 6, 2024, the district court issued a decision in favor of the Academy, holding that the Academy’s admissions process withstood strict scrutiny. SFFA then appealed the decision to the Fourth Circuit. Pursuant to President Trump’s Executive Order 14185, issued on January 27, 2025, the Academy subsequently changed its policy to prohibit the consideration of race in its admissions process. On April 1, 2025, the court granted a joint motion to hold appellate briefing in abeyance while the parties considered the recent changes to the Academy’s admission policy.
- Latest update: On June 16, 2025, the parties filed a joint motion to dismiss the appeal and vacate the district court’s judgment, as the complaint was rendered moot by the change to the Academy’s admission policy. On July 2, 2025, the court granted the parties’ motion.

The following Gibson Dunn attorneys assisted in preparing this client update: Jason Schwartz, Mylan Denerstein, Zakiyyah Salim-Williams, Cynthia Chen McTernan, Zoë Klein, Cate McCaffrey, Sameera Ripley, Anna Ziv, Emma Eisendrath, Benjamin Saul, Kristen Durkan, Simon Moskovitz, Teddy Okechukwu, Beshoy Shokralla, Heather Skrabak, Maryam Asenuga, Angelle Henderson, Kameron Mitchell, Lauren Meyer, Chelsea Clayton, Maya Jeyendran, Albert Le, Allonna Nordhavn, Felicia Reyes, Godard Solomon, Laura Wang, and Ashley Wilson.

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

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

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

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

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

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