Publications Archives

From the Derivatives Practice Group: This week, the CFTC placed certain staff on administrative leave pending ongoing investigations.

New Developments

CFTC Staff on Leave Pending Investigation. On May 5, pursuant to the President’s executive orders on lawful governance and accountability, the CFTC placed certain staff on administrative leave for potential violations of laws, government ethics requirements and professional rules of conduct. The CFTC stated it is committed to holding employees to the highest standards, as expected by American taxpayers. Investigations are currently ongoing into these matters and the CFTC has committed to provide updates as appropriate. [NEW]
SEC Publishes New Market Data, Analysis, and Visualizations. On April 28, the SEC’s Division of Economic and Risk Analysis (“DERA”) has published new data and analysis on the key market areas of public issuers, exempt offerings, Commercial Mortgage-Backed Securities (“CMBS”), Asset-Backed Securities (“ABS”), money market funds, and security-based swap dealers (“SBSD”) in an effort to increase transparency and understanding of our capital markets amongst the public.
Paul S. Atkins Sworn in as SEC Chairman. On April 21, Paul S. Atkins was sworn into office as the 34th Chairman of the SEC. Chairman Atkins was nominated by President Donald J. Trump on January 20, 2025, and confirmed by the U.S. Senate on April 9, 2025. Prior to returning to the SEC, Chairman Atkins was most recently chief executive of Patomak Global Partners, a company he founded in 2009. Chairman Atkins helped lead efforts to develop best practices for the digital asset sector. He served as an independent director and non-executive chairman of the board of BATS Global Markets, Inc. from 2012 to 2015.
CFTC Staff Seek Public Comment Regarding Perpetual Contracts in Derivatives Markets. On April 21, the CFTC issued a Request for Comment to better inform them on the potential uses, benefits, and risks of perpetual contracts in the derivatives markets the CFTC regulates (“Perpetual Derivatives”). This request seeks comment on the characteristics of perpetual derivatives, including those characteristics which may differ across products. as well as the implications of their use in trading, clearing and risk management. The request also seeks comment on the risks of perpetual derivatives, including risks related to the areas of market integrity, customer protection, or retail trading.
CFTC Staff Seek Public Comment on 24/7 Trading. On April 21, the CFTC issued a Request for Comment to better inform them on the potential uses, benefits, and risks of trading on a 24/7 basis in the derivatives markets the CFTC regulates. This request seeks comment on the implications of extending the trading of CFTC-regulated derivatives markets to an effectively 24/7 basis, including the potential effects on trading, clearing and risk management which differ from trading during current market hours. The request also seeks comment on the risks of 24/7 trading, and the associated clearing systems, including risks related to the areas of market integrity, customer protection, or retail trading.

New Developments Outside the U.S.

- ESMA Delivers Technical Advice on Market Abuse and SME Growth Markets as Part of the Listing Act. On May 7, ESMA published its advice to the European Commission to support the Listing Act’s goals to simplify listing requirements, enhance access to public capital markets for EU companies, and improve market integrity. In relation to Market Abuse Regulation (“MAR”), the advice covers: protracted processes, identifying key moments for public disclosure; delayed public disclosure, listing situations where delays are not allowed; and Cross-Market Order Book Mechanism, indicating the methodology for the identification of trading venues with significant cross-border activity. [NEW]
- ESMA Consults on Rules for ESG Rating Providers. On May 2, ESMA published a Consultation Paper on draft Regulatory Technical Standards (“RTS”) under the ESG Rating Regulation. The draft RTS cover the following aspects that apply to ESG rating providers: the information that should be provided in the applications for authorization and recognition; the measures and safeguards that should be put in place to mitigate risks of conflicts of interest within ESG rating providers who carry out activities other than the provision of ESG ratings; the information that they should disclose to the public, rated items and issuers of rated items, as well as users of ESG ratings. [NEW]
- ESMA Publishes the Annual Transparency Calculations for Non-equity Instruments and Bond Liquidity Data. On April 30, the European Securities and Markets Authority (“ESMA”), the EU’s financial markets regulator and supervisor, published the results of the annual transparency calculations for non-equity instruments and new quarterly liquidity assessment of bonds under MiFID II and MiFIR.
- ESMA Report Shows Increased Data Use Across EU and First Effects of Reporting Burden Reduction Efforts. On April 30, ESMA published the fifth edition of its Report on the Quality and Use of Data. The report reveals how the regulatory data collected has been used by authorities in the EU and provides insight into actions taken to ensure data quality. The document presents concrete cases on data use ranging from market monitoring to supervision, enforcement and policy making. The report also highlights ESMA’s Data Platform and ongoing improvements to data quality frameworks as key advancements in tools and technology for data quality.
- ESMA Issues Supervisory Guidelines to Prevent Market Abuse under MiCA. On April 29, ESMA published guidelines on supervisory practices to prevent and detect market abuse under the Market in Crypto Assets Regulation (“MiCA”). Based on ESMA’s experience under Market Abuse Regulation (“MAR”), the guidelines intended for National Competent Authorities (“NCAs”) include general principles for effective supervision and specific practices for detecting and preventing market abuse in crypto assets. They consider the unique features of crypto trading, such as its cross-border nature and the intensive use of social media.
- ESMA Assesses the Risks Posed by the Use of Leverage in the Fund Sector. On April 24, ESMA published its annual risk assessment of leveraged alternative investment funds (“AIFs”) and its first analysis on risks in UCITS using the absolute Value-at-Risk (“VaR”) approach. Both articles represent ESMA’s work to identify highly leveraged funds in the EU investment sector and assess their potential systemic relevance.

New Industry-Led Developments

ISDA Presents Proposed Charter for the Credit Derivatives Governance Committee. On May 8, ISDA presented the proposed Charter for the Credit Derivatives Governance Committee and accompanying DC Rule changes to implement. Pursuant to the announcement made in 2024, an ISDA working group formed from ISDA’s Credit Steering Committee has worked on producing the Governance Committee solution. ISDA views the Governance Committee as the first step in implementing the other recommended changes from the Linklaters’ report as part of an independent review on the composition, functioning, governance and membership of the DCs. [NEW]
ISDA Publishes Governance Committee Proposal for CDS Determinations Committees. On May 8, ISDA published a proposal for a new governance committee for the CDS Determinations Committees (“DCs”), the first in a series of amendments to improve the structure of the DCs and maintain their integrity in changing economic and market conditions. The governance committee would be responsible for taking market feedback and adopting rule changes affecting the structure and operations of the DCs to ensure their long-term viability and meet market expectations for efficiency and transparency in credit event determinations. [NEW]
ISDA Responds to FASB Proposal on KPIs for Business Entities. On April 30, ISDA submitted a response to the Financial Accounting Standards Board’s (“FASB”) proposal on financial key performance indicators (“KPIs”) for business entities. In the response, ISDA addressed the implications of KPI standardization, its potential impact on financial reporting and risk management, and the broader cost-benefit considerations for preparers and investors. Based on proprietary analysis, ISDA does not view financial KPI standardization or the proposed disclosures as urgent priorities for the FASB at this time.
CPMI-IOSCO Assesses that EU has Implemented Principles for Financial Market Infrastructures for Two FMI Types. On April 28, CPMI-IOSCO released a report that assessed the completeness and consistency of the legal, regulatory and oversight framework in place as of October 30, 2019. The report finds that the implementation of the Principles for Financial Market Infrastructures is complete and consistent for all Principles for payment systems. The legal, regulatory and oversight frameworks in the EU for central securities depositories and securities settlement systems are complete and consistent with the Principles in most aspects. However, the assessment identified some areas for improvement, particularly in aspects where implementation was broadly, partly, or not consistent, including risk and governance principles.
ISDA/IIF Responds to EC’s Consultation on the Market Risk Prudential Framework. On April 22, ISDA and the Institute of International Finance (“IIF”) submitted a joint response to the EC’s consultation on the application of the market risk prudential framework. The associations believe the capital framework should be risk-appropriate and as consistent as possible across jurisdictions to ensure a level playing field without competitive distortions due to divergent rules.
ISDA and FIA Respond to Consultation on Commodity Derivatives Markets. On April 22, ISDA and FIA submitted a joint response to the EC’s consultation on the functioning of commodity derivatives markets and certain aspects relating to spot energy markets. In addition to questions on position management, reporting and limits and the ancillary activities exemption, the consultation also addressed data and reporting and certain concepts raised in the Draghi report, such as a market correction mechanism to cap pricing of natural gas and an obligation to trade certain commodity derivatives in the EU only.

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)

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.

In an article for Bloomberg Law, partner Michael Kahn explains that while a 2024 U.S. Supreme Court decision left unanswered questions on how courts should analyze securities fraud claims challenging risk factor disclosures, an earlier decision provides a framework for treating risk factors as statements of opinion. He argues that this approach offers a clearer legal standard and reduces uncertainty for both companies and courts.

Read: “Treat Risk Disclosures as Opinions to Clean Up Fraud Challenges” [PDF]

In “Global Trade: What to Expect on Tariffs and Related Risks” (Financier Worldwide magazine, May 2025), Washington, D.C. partner Adam M. Smith and associates Scott Toussaint and Lindsay Bernsen Wardlaw describe the U.S. policy objectives that tariffs are designed to advance, explain the legal authorities on which President Trump has relied to impose increased tariffs, and assess the characteristics of companies that may be best able to withstand (and perhaps even thrive in) this new environment.

Adam is Co-Chair of our firm’s International Trade Advisory and Enforcement Practice Group and Sanctions and Export Enforcement Practice Group.

Read the full article in Financier Worldwide [PDF].

Partner and Co-Chair of our Tax Practice Group, Eric B. Sloan, spoke to Tax Notes (subscription required) about the future of the U.S. Internal Revenue Service’s audit and litigation strategy for partnership related-party basis-shifting transactions following the repeal of Biden administration guidance.

We are pleased to provide you with the April 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

Oregon Attorney General Sues Coinbase
On April 18, Oregon Attorney General Dan Rayfield filed a lawsuit in state court against Coinbase alleging that the crypto exchange offers unregistered securities under Oregon law. The lawsuit largely parrots the theories the SEC recently abandoned in dismissing its enforcement action against Coinbase. In a blog post, Coinbase stated that “Oregon’s lawsuit, like the SEC’s, is meritless, and Coinbase will do whatever is required to beat it.” Coinbase Blog; Bloomberg Law; Complaint.
Long Island Man Gets 18-Year Term For $6 Million Crypto-Investor Fraud
On April 23, a federal court in the Southern District of New York sentenced Long Island resident Eugene William Austin, Jr. to 18 years in prison after a jury convicted him of fraud-related offenses, in connection with a scheme to defraud cryptocurrency investors. The court also ordered forfeiture of roughly $6 million and imposed restitution in an amount to be determined. Press Release.
FinCEN Identifies Cambodia-Based Huione Group as Institution of Primary Money Laundering Concern; Issues New Rule
On May 1, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a proposed rule that would prohibit U.S. financial institutions from opening or maintaining correspondent or payable-through accounts for or on behalf of Cambodia-based Huione Group because it has laundered illicit proceeds from cybercrimes. FinCEN said that Huione Group has been critical for laundering proceeds of cyber heists by the Democratic People’s Republic of Korea and for convertible virtual currency scams conducted by transnational criminal organizations in Southeast Asia. FinCEN.
SEC and DOJ File Charges Against Founder of Purported Crypto Investment Platform
On April 22, the SEC and federal prosecutors in the Eastern District of Virginia filed parallel cases against Ramil Palafox, founder of PGI Global, a purported Bitcoin investment platform, alleging that he misappropriated over $57 million of investor funds. The SEC’s complaint and the indictment allege that from January 2020 to October 2021, Palafox sold “membership” packages promising high returns from cryptocurrency investments but spent the money on luxury items instead. The complaint and the indictment further allege that Palafox ran a multilevel-marketing scheme, using remaining funds to pay other investors until the company’s collapse. Press Release; Law360.
SEC Dismisses Suit Against Dragonchain
On April 24, the SEC agreed to dismiss its enforcement action against blockchain platform Dragonchain and founder Joseph J. Roets. The SEC filed a joint stipulation in the U.S. District Court of Western District of Washington, citing the January 2025 launch of the SEC’s Crypto Task Force and its efforts to develop a regulatory framework for digital assets. The case was dismissed on April 25. The lawsuit, filed in August 2022, had alleged that Dragonchain sold unregistered securities via its DRGN tokens. Law360; CoinTelegraph.
SEC and Ripple File Joint Motion to Pause Appeals in XRP Case
On April 10, the SEC and Ripple Labs asked the U.S. Court of Appeals for the Second Circuit to pause their respective appeals in the agency’s ongoing enforcement action against the company. The Second Circuit granted the motion on April 16, holding the appeal in abeyance and requiring a status report from the SEC within 60 days. Joint Letter; CoinTelegraph; CoinDesk; Reuters.
SEC and Gemini Request Pause in Suit Over Gemini Earn Program
On April 1, the SEC and crypto exchange Gemini asked the district court for a 60-day stay of the regulator’s enforcement action while the parties discuss a potential resolution. The court granted the motion on April 2 and ordered the parties to file a joint status report on May 31. The SEC filed the action against Gemini and Genesis Global Capital, LLC in January 2023 alleging they offered unregistered securities; Genesis later agreed to a consent judgment in connection with bankruptcy proceedings. CoinTelegraph; Joint Letter.
Judge Denies SafeMoon CEO’s Motion to Dismiss Criminal Fraud Case
On April 18, U.S. District Court Judge Eric R. Komitee of the Eastern District of New York denied former SafeMoon CEO Braden Karony’s motion to dismiss his indictment, stating that a jury should assess his arguments regarding whether the charged conduct is extraterritorial and therefore not subject to U.S. law and whether SafeMoon’s token is a security. Karony faces charges of conspiracy to commit securities fraud, wire fraud, and money laundering. Trial is set for May 6. The indictment alleges that Karony, SafeMoon’s co-founder Kyle Nagy and former CTO Thomas Smith conspired to commit securities and wire fraud and money laundering in defrauding investors through a digital asset called SafeMoon. Former CTO Thomas Smith has pleaded guilty to related charges. Law360; Coin Telegraph.
Crypto Casino Founder Charged with Fraud and Misappropriation of Investor Funds
On April 13, Richard Kim, founder of cryptocurrency casino Zero Edge, was charged in the U.S. District Court in the Southern District of New York with securities fraud and wire fraud for allegedly stealing millions from investors between March 2024 and July 2024. According to the complaint, Kim raised $4.3 million from investors, promising to develop an online casino with on-chain games and a new cryptocurrency called “$RNG”, but instead allegedly used the investor funds for speculative cryptocurrency trades and gambling. He was arrested and released on a $250,000 bond. CoinDesk; Complaint.
Nova Labs Settles SEC Lawsuit Over False Client Claims
On April 23, Nova Labs, Inc., the creator of a decentralized wireless network known as the Helium Network, agreed to pay $200,000 to settle an SEC lawsuit filed in January 2025. The suit alleged that Nova Labs falsely claimed client relationships with various prominent businesses to sell preferred stock in a private placement. Nova Labs neither admitted nor denied the SEC’s allegations in its settlement. CoinDesk; Law360; Final Judgment.
CLS Global Sentenced for Running Fraudulent Wash Trading Scheme
On April 2, United Arab Emirates-based financial services firm CLS Global FZC LLC was sentenced in Massachusetts federal court for allegedly running a fraudulent “wash trading” scheme. The firm pleaded guilty to conspiracy to commit market manipulation and wire fraud and wire fraud in January. Additionally, CLS Global was ordered to pay approximately $428,059 in fines and seized cryptocurrency, and sentenced to three years of probation during which CLS Global cannot participate in U.S. cryptocurrency markets. CLS Global also entered into a separate agreement with the SEC over related civil claims. Press Release; Law360

INTERNATIONAL

ADGM Cancels HAYVN Licence, Imposes USD 8.85 Million Fine
On April 17, the ADGM Financial Services Regulatory Authority (“FSRA”) initiated an enforcement action against the HAYVN Group, a digital asset-focused financial institution, and its former CEO for regulatory breaches, including unlicensed virtual asset activity. The FSRA cancelled HAYVN ADGM’s license, banned the former CEO from ADGM’s financial sector, and imposed USD $8.85 million in fines across four related parties for misconduct including unlicensed virtual asset activity, AML failures such as not recording all of its client relationships and allowing client transactions to be routed through unregulated accounts, and providing false information to banks and the FSRA. ADGM.

REGULATION AND LEGISLATION

UNITED STATES

GOP Lawmakers Introduce Draft of Crypto Market-Structure Bill
On May 5, Republican lawmakers released a discussion draft of a bill that seeks to establish a comprehensive regulatory framework for digital assets. The bill provides for joint rulemaking by the SEC and CFTC, a pathway for digital-asset developers to raise funds under the SEC’s jurisdiction and a process for market participants to register with the CFTC for digital commodity trading. The bill would require digital-asset developers to provide accurate disclosures including relating to their digital asset’s operation, ownership and structure. Press Release; The Block.
New Hampshire Passes ‘Strategic Bitcoin Reserve’ Bill
On May 6, New Hampshire passed legislation allowing the state to invest up to 5% of the state’s public funds in precious metal and digital assets with a market cap of over $500 billion – a threshold that currently only permits Bitcoin. Business Insider.
President Trump Signs Resolution to Nullify Expanded IRS Crypto Broker Rule
On April 11, President Trump signed into law a resolution under the Congressional Review Act that nullifies a Treasury Department and IRS rule that would have subjected DeFi participants to onerous tax-reporting requirements for digital-asset transactions (the “DeFi Broker Rule”). The resolution not only effectively repeals the DeFi Broker Rule but also will prohibit the U.S. Treasury and the IRS from issuing a new rule that is “substantially the same” as the repealed rule absent new legislation. The resolution does not repeal the IRS’s July 2024 broker rule applicable to custodial digital asset trading platforms. Reuters; Bloomberg; CoinTelegraph; CoinDesk.
Paul Atkins Confirmed as SEC Chairman
On April 9, Paul Atkins was confirmed as the next Chairman of the SEC. Atkins served as an SEC commissioner under President George W. Bush and previously worked at the Commission during both Republican and Democratic administrations. Atkins founded a financial services consulting firm in 2008, Patomak Global Partners, which has advised clients on regulatory and compliance matters, including issues related to digital assets. Atkins was sworn in on April 21. SEC; New York Times.
SEC Staff Says Certain Reserve-Backed Stablecoins Are Not Securities
On April 4, the SEC’s Division of Corporation Finance issued guidance stating that the offer and sale of certain reserve-backed dollar stablecoins are not securities transactions. To qualify as a “Covered Stablecoin” under the guidance, the stablecoin’s value must be pegged to the U.S. dollar, and the stablecoin must be backed by dollars or other low-risk, liquid assets and be redeemable one-for-one for U.S. dollars at any time and in unlimited amounts, among other requirements. As is typical, the guidance states that it is nonbinding and does not have Commission-level approval. SEC.
SEC Staff Statement Urges Detailed Crypto Disclosures
On April 10, the SEC’s Division of Corporation Finance issued a staff statement providing the Division’s views about the application of certain disclosure requirements under the federal securities laws to offerings and registrations of securities in the digital-asset markets. The statement recommends that companies describe their business operations without overly relying on technical jargon and specify the business activity, “such as operating or developing a network or application, and the current stage of development” and how the issuer expects to generate revenue. With respect to risk factors for offerings and registrations of securities in the crypto asset markets, the guidance provides examples such as risks relating to technology and cybersecurity, price volatility, liquidity issues and potential registration requirements under state and federal laws. The statement also emphasizes that it “does not address all material disclosure items, and the disclosure topics addressed … may not be relevant for all issuers.” As is typical, the guidance states that it is nonbinding and does not have Commission-level approval. SEC; Coindesk.
DOJ Publishes Memorandum Announcing Shift in Enforcement Priorities and Disbandment of Crypto Enforcement Unit
On April 7, Deputy Attorney General Todd Blanche issued a memorandum (the “Blanche Memo”) announcing a shift in the Department of Justice’s enforcement priorities concerning digital assets. According to the memo, the DOJ “will no longer pursue litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets while President Trump’s actual regulators do this work outside the punitive criminal justice framework.” Instead, the focus will be on “prosecuting individuals who victimize digital asset investors, or those who use digital assets in furtherance of criminal offenses such as terrorism, narcotics and human trafficking, organized crime, hacking, and cartel and gang financing.” The memo also announced the disbandment of the National Cryptocurrency Enforcement Team. DOJ; Reuters; CoinDesk; New York Times.
Acting Chairman Pham Lauds DOJ Policy Ending Regulation by Prosecution of Digital Assets Industry and Directs CFTC Staff to Comply with Executive Orders
On April 8, CFTC Acting Chairman Caroline D. Pham praised the Blanche Memo, and directed CFTC staff to comply with the President’s executive orders and Administration policy. Consistent with the DOJ’s enforcement priorities, Pham has refocused the CFTC’s enforcement resources on cases involving combatting fraud and manipulation rather than regulating by enforcement. Specifically, Pham has directed CFTC staff not to charge regulatory violations in cases involving digital assets unless there is evidence that the defendant knew of the licensing or registration requirement at issue and willfully violated such requirement. CFTC.
Federal Reserve Retracts Crypto-Related Guidance for Banks
On April 24, the Federal Reserve Board announced that it withdrew guidance for banks related to their digital-asset and dollar-tokens activities. The agency rescinded a 2022 supervisory letter requesting state member banks to provide advance notification of digital-asset activities and a 2023 supervisory letter regarding the supervisory nonobjection process for state member bank engagement in dollar-token activities. These actions follow earlier comments from Fed Chair Jerome that the Fed does not intend to limit the bank sector’s interaction with digital assets. Federal Reserve; Cryptoslate; WSJ.
Illinois Lawmakers Advance Crypto Fraud Protection Measure
On April 10, Illinois state senators passed out of committee Senate Bill 1797, which requires crypto firms to register with the state and provide disclosures to protect consumers. It also empowers the Illinois Department of Financial and Professional Regulation to set and enforce guidelines for crypto companies. Sen. Mark Walker, one of the bill’s sponsors, emphasized the need for standards to prevent bankruptcy, fraud, and deceptive practices in the crypto industry. Illinois State Assembly; Cointelegraph.
Hidden Road Receives Broker-Dealer License Following Ripple Acquisition
On April 17, prime brokerage platform Hidden Road announced it received a broker-dealer license from the Financial Industry Regulatory Authority (FINRA), shortly after Ripple Labs agreed to acquire the firm for $1.25 billion. The license allows Hidden Road to offer FINRA-compliant prime brokerage, clearing, and financing services in fixed income assets. CoinDesk; Press Release.
CFTC Seeks Comments on 24/7 Trading and Perpetual Derivatives
On April 21, the CFTC issued a request for comment on the implications of extending the trading of CFTC-regulated derivatives markets to an effectively 24/7 basis, including the potential effects on trading, clearing and risk management which differ from trading during current market hours. 24/7 trading is already prevalent in digital assets markets. On the same day, the CFTC also requested comment on the characteristics of perpetual derivatives, the implications of their use in trading, clearing and risk management and the risks of such derivatives risks in connection with market integrity, customer protection, or retail trading. Perpetual derivatives are commonly traded on offshore digital asset exchanges. CFTC 24/7 Trading; CFTC Perpetual Derivatives.

INTERNATIONAL

European Securities and Markets Authority Publishes Official Translations of its Guidelines on Conditions for Qualification of Crypto Assets as Financial Instruments Under MiCA
On March 19, the European Securities and Markets Authority (“ESMA”) published the official translations of its guidelines on the conditions and criteria for the qualification of crypto assets as financial instruments (ESMA75453128700-1323) under Article 2(5) of MiCA. The guidelines clarify when MiCA or other rules apply to crypto assets. They are effective starting on May 18, 2025, and relevant authorities are required to update ESMA. ESMA.
Securities and Futures Commission and Hong Kong Monetary Authority Issue Circulars on Providing Virtual Asset Staking Services
On April 7, the Securities and Futures Commission (“SFC”) and the Hong Kong Monetary Authority (“HKMA”) issued circulars to SFC-licensed virtual asset trading platform (“VATP”) operators and authorized institutions to permit the offering of staking services. VATPs must obtain the SFC’s prior approval and agree to be bound by the SFC’s ‘Terms and Conditions for Staking Services’ before offering staking services. Broadly, other requirements to offer staking services include that VATPs must (i) maintain possession or control over all mediums through which clients’ virtual assets may be withdrawn from the staking service, (ii) implement policies, internal controls and operational rules to ensure that staked virtual assets are adequately safeguarded and (iii) manage operational risks and conflicts of interest. VATPs must also exercise skill, care and diligence when selecting a blockchain protocol for their staking service and when selecting its arrangement for participating in the validation process. VATPs must also ensure adequate disclosure of additional staking risks to their clients and obtain their written acknowledgement before providing them with staking services. SFC; HKMA.
Hong Kong SFC Revises Circular on SFC-Authorized Funds to Engage in Staking Activities Through VATPs and AIs
On April 7, the SFC revised an existing circular that was originally issued on December 22, 2023 delineating the requirements for authorizing investment funds with exposure to virtual assets of more than 10% of their net asset value for public offerings in Hong Kong. The fund manager must obtain the SFC’s prior approval before it can engage in staking activities for its managed SFC-authorized virtual asset fund, and the staking activities must be conducted through an SFC-licensed VATP or authorized institution, subject to a cap to manage fund liquidity. The fund manager must also ensure that the staking activities are consistent with the fund’s investment objective and strategy. SFC.
Monetary Authority of Singapore Consults on Prudential Treatment and Disclosure of Crypto Asset Exposures for Banks
On March 27, the Monetary Authority of Singapore (“MAS”) published a Consultation Paper seeking feedback on proposed amendments aimed at implementing standards promulgated by the Basel Committee on Banking Supervision (“BCBS”) on prudential treatment and disclosure of crypto asset exposures for banks. Specifically, the MAS has proposed to amend relevant MAS notices relating to capital, liquidity, large exposures and disclosure frameworks for banks to implement the BCBS’ standards on prudential treatment and disclosures for crypto asset exposures for banks. MAS.
Monetary Authority of Singapore Proposes Amendments to Anti-Money Laundering and Terrorism Financing Laws
On April 8, the MAS published a Consultation Paper seeking feedback on proposed amendments to MAS Notices on anti-money laundering and countering the financing of terrorism to take into account the latest money laundering, terrorism financing and proliferation financing developments. The amendments apply across the financial sector and are relevant to financial institutions including banks, insurers, capital markets intermediaries, payment service providers (including digital payment token or crypto asset service providers). Broadly, the proposed amendments reference the latest revised standards set by the Financial Action Task Force and cover topics ranging from risk assessments to the clarification of regulatory expectations on the filing of suspicious transaction reports. MAS.
Dubai Financial Services Authority Opens Tokenization Regulatory Sandbox for Expressions of Interest
On March 17, the Dubai Financial Services Authority (“DFSA”) called for expressions of interest to join its new Tokenization Regulatory Sandbox, with a deadline of April 24, 2025. The initiative forms part of the DFSA’s Innovation Testing Licence program and is aimed at firms offering tokenized financial products and services, including equities, bonds, sukuk, and fund units. The sandbox provides a controlled environment for testing tokenized investment solutions, offering a structured path to full regulatory authorization. DFSA.
Abu Dhabi Global Market and Chainlink Forge Alliance to Advance Tokenization Frameworks
On March 24, the Abu Dhabi Global Market (“ADGM”) signed a Memorandum of Understanding with decentralized network Chainlink to promote compliant tokenization and enhance blockchain innovation. The partnership will support projects under the ADGM Registration Authority by leveraging Chainlink’s technical expertise in blockchain interoperability and verifiable data solutions. Chainlink’s infrastructure has enabled over $19 trillion in transaction value globally and is trusted by leading financial institutions. Under the Memorandum of Understanding, ADGM and Chainlink will collaborate on regulatory dialogue and host educational initiatives focusing on blockchain, AI and tokenization. ADGM.

SPEAKER’S CORNER

New York Attorney General Letitia James Sends Letter to Congress Proposing Crypto Regulatory Framework
On April 10, New York Attorney General Letitia James sent a letter to congressional leaders warning that the lack of strong federal regulations on cryptocurrencies and digital assets increases the risk of fraud, criminal activity, and financial instability. She argued that federal regulations would bolster America’s national security, strengthen its financial markets and protect investors from cryptocurrency scams. James’s letter called for protections including “i) onshoring stablecoins to protect the U.S. dollar and the treasuries market, ii) requiring platforms to only conduct business with anti-money laundering compliant platforms, iii) providing for the registration of issuers and intermediaries to ensure accountability, transparency and basic protections to the public, iv) protecting against conflicts of interest, v) promoting price transparency, vi) requiring platforms and intermediaries to actively identify and prevent fraud and scams, and vii) disallowing digital assets in retirement accounts.” NY; Reuters.

OTHER NOTABLE NEWS

SoftBank, Tether and Cantor Fitzgerald Launch Twenty One Capital
On April 23, stablecoin issuer Tether, Bitfinex, SoftBank, and Cantor Fitzgerald announced the launch of Twenty One Capital, Inc., a Bitcoin investment vehicle. CCN.
HM Treasury and the UK Debt Management Office Publish Policy Paper on Pilot Digital Gilt Instrument
On March 18, HM Treasury and the UK Debt Management Office (“DMO”) released a policy paper detailing their pilot Digital Gilt Instrument (“DIGIT”). DIGIT is a new, short-dated, transferable security that will be held on a Distributed Ledger Technology (“DLT”) platform and issued within the Digital Securities Sandbox, operating independently from the Government’s standard debt issuance processes. The policy paper outlines the initial features of DIGIT and seeks input from financial sector firms to gauge investor demand and design preferences for further development. Additionally, it requests information from potential DLT suppliers to explore available technology options and the scope of services required for DIGIT issuance. Stakeholders are invited to submit their responses by April 13, 2025. HM Treasury.

The following Gibson Dunn lawyers contributed to this issue: Jason Cabral, Kendall Day, Jeff Steiner, Sara Weed, Sam Raymond, Nick Harper, Emma Li, Michelle Lou, Zachary Montgomery, Aliya Padhani, Henry Rittenberg, Nicholas Tok, and Apratim Vidyarthi.

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)

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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)

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

The coalition agreement includes noteworthy planned changes in the area of white collar and international trade law that identify trends that will shape the near-term future of businesses operating in Germany and the EU.

On May 6, Friedrich Merz was elected Germany’s new Chancellor, marking the start of the new legislative period. The incoming government – formed by a coalition of the center left and right parties CDU, CSU, and SPD – recently published its coalition agreement.[1]

The coalition agreement outlines the common legislative goals of the German Government for the next four years.

Enforcement proceedings in money laundering cases shall become more efficient

In the area of financial crime, federal-level competencies will be consolidated. Cooperation and information exchange between the federal and state governments, as well as with national and international organizations, the EU, and the European Anti-Money Laundering Authority (AMLA), are to be improved.[2]
Improvements in anti-money laundering efforts are planned, particularly in light of the upcoming evaluation by the Financial Action Task Force (FATF).[3] These plans are not entirely new initiatives, as they had already been put forward by the previous government in light of Germany’s poor FATF assessment.
Gaps in the German Transparency Register, which is a central database that records information on the beneficial owners of legal entities, are to be closed.[4]
Legal transactions by legal entities exceeding a net amount of EUR 10,000 may not be carried out by parties subject to anti-money laundering obligations if one or more beneficial owners cannot be identified.[5]

Lowering the thresholds for asset seizures shall help fighting organized crime

An administrative procedure for asset investigation is to be introduced, with the aim of securing suspicious high-value assets where a legal origin cannot be clearly demonstrated.[6]
Existing asset seizure instruments are to be further developed and supplemented by a procedure for confiscating assets of unclear origin.[7]
The fight against organized crime is to be intensified by fully reversing the burden of proof in the confiscation of assets of unclear origin.[8]

EU-Directives on Corporate Crimes shall be implemented, but initiatives to reform German law relating to Corporate Crimes will not be pursued

Unlike the previous coalition agreements[9], the new agreement includes neither plans to regulate internal investigations nor to introduce any legal framework for corporate criminal law. However, it is likely that the EU Anti-Corruption Directive will have to be implemented during this legislative period, which may result in relevant changes in these two areas.

Supply Chain Due Diligence Requirements shall be brought in line with updated EU-Directives and the German Supply Chain Due Diligence Act will be repealed

The German Supply Chain Due Diligence Act (LkSG) is to be repealed. It is planned to replace it with a new “International Corporate Responsibility Act” designed to implement the European Corporate Sustainability Due Diligence Directive (CSDDD) in a low-bureaucracy and enforcement-friendly manner.[10]
The reporting obligations under the LkSG are to be abolished immediately and permanently.[11]
It is planned that existing due diligence obligations will not be sanctioned, except for severe human rights violations, until the new law comes into force.[12]

FDI and Export Control topics will remain high on the agenda, while making processes more efficient

The German Foreign Trade Act is to be revised. Screening and licensing procedures are to be made faster, simpler, and more practical. Foreign investments that conflict with national interests – particularly in critical infrastructure and strategic sectors – are to be effectively blocked.[13]
The effective national implementation of sanctions due to Russia’s war of aggression is to continue to be ensured. The EU’s plans to impose tariffs on fertilizer imports from Russia and Belarus are to be endorsed.[14]
Export licensing procedures are to be simplified and accelerated, with the aim of a paradigm shift in German international trade law. Comprehensive checks are to be replaced by targeted checks on a random basis, supported by heavy penalties for violations. Within the scope of this system, prior export authorizations would no longer be required.[15]
Germany’s China Strategy is to be revised in accordance with the principle of “de-risking”.[16]

To what extent these plans will be implemented in detail remains to be seen in the next few months.

[1] Coalition Agreement of the 21st legislative period, can be found on the websites of the three parties CDU: here; CSU: here; SPD: here; and the German Bundestag: here.

[2] Coalition Agreement of the 21st legislative period, para. 1548 et. seq.

[3] Ibid., para. 1545 et. seq.

[4] Ibid., para. 1550.

[5] Ibid., para. 1550 et seq.

[6] Ibid., para. 1553 et seq.

[7] Ibid., para. 1556 et seq.

[8] Ibid., para. 2261 et seq.

[9] Coalition Agreement of the 19th legislative period, p. 126; Coalition Agreement of the 20th legislative period, p. 111.

[10] Coalition Agreement of the 21st legislative period, para. 1909 et. seq.

[11] Ibid., para. 1911 et seq.

[12] Ibid., para. 1913 et seq.

[13] Ibid., para. 275 et seq.

[14] Ibid., para. 287 et seq.

[15] Ibid., para. 290 et seq.

[16] Ibid., para. 297 et seq.

The following Gibson Dunn lawyers prepared this update: Benno Schwarz, Katharina Humphrey, Nikita Malevanny, Karla Böltz, and Annabel Dornauer*.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. If you wish to discuss any of the matters set out above, please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of Gibson Dunn’s White Collar Defense & Investigations or International Trade Advisory & Enforcement practice groups, or the authors in Munich:

Benno Schwarz (+49 89 189 33 210, bschwarz@gibsondunn.com)

Katharina Humphrey (+49 89 189 33 217, khumphrey@gibsondunn.com)

Nikita Malevanny (+49 89 189 33 224, nmalevanny@gibsondunn.com)

Karla Böltz (+49 89 189 33 219, kboeltz@gibsondunn.com)

Annabel Dornauer* (+49 89 189 33 463, adornauer@gibsondunn.com)

*Annabel Dornauer is a trainee attorney in Munich and is not admitted to practice law.

A growing number of federal, state, and international whistleblower programs create a complex and often overlapping landscape for companies facing potential allegations of misconduct. From programs established to generate enforcement leads for the SEC, CFTC, DOJ, FinCEN, and the IRS, to analogous international whistleblower mechanisms, each program has its own incentives, protections, and reporting mechanisms. These nuances result in significant enforcement risks for businesses across industries, but also opportunities to demonstrate effective compliance controls. This webcast explores the evolving whistleblower framework both in the United States and abroad, recent whistleblower trends, and best practices for managing whistleblower complaints while mitigating legal and reputational exposure.

MCLE CREDIT INFORMATION:

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

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

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

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

PANELISTS:

Greta Williams, Co-Partner in Charge of Gibson Dunn’s Washington, D.C. office, is a nationally recognized employment lawyer and trusted advisor to companies facing high-profile employment litigation, internal investigations, and executive-level employment disputes involving claims of discrimination, harassment, whistleblower retaliation, noncompete violations and trade secret theft. Known for leading sensitive workplace investigations and handling complex cases with discretion and impact, Greta is recognized by Lawdragon 500, Benchmark Litigation, and Best Lawyers in America as one of the leading employment lawyers in the country.

Matt Axelrod, a nationally recognized white-collar defense lawyer with extensive criminal, national security, and export enforcement experience, serves as co-chair of the firm’s Sanctions and Export Enforcement Practice Group. Matt’s practice focuses on internal investigations, crisis management, and white collar criminal defense for U.S. and multinational companies. From 2021-2025, Matt served as the Senate-confirmed Assistant Secretary for Export Enforcement at the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), where he led a team of over 200 agents, analysts, and compliance specialists responsible for enforcing the country’s export controls. Matt also previously spent 14 years at the U.S. Department of Justice.

John D.W. Partridge, a Co-Chair of Gibson Dunn’s FDA and Health Care Practice Group and Chambers-ranked white collar defense and government investigations lawyer, focuses on government and internal investigations, white collar defense, and complex litigation for clients in the life science and health care industries, among others. John has particular experience with the Anti-Kickback Statute, the False Claims Act, the Foreign Corrupt Practices Act, and the Federal Food, Drug, and Cosmetic Act, including defending major corporations in investigations pursued by the U.S. Department of Justice and the U.S. Securities and Exchange Commission.

Katharina Humphrey is a partner in Gibson Dunn’s Munich office. She advises clients in Germany and throughout Europe on a wide range of compliance and white collar crime matters. Katharina regularly represents multi-national corporations in connection with cross-border internal corporate investigations and government investigations. She has significant expertise in the areas of anti-bribery compliance – especially regarding the enforcement of German anti-corruption laws and the U.S. Foreign Corrupt Practices Act (FCPA) –, technical compliance, as well as sanctions and anti-money-laundering compliance. She also has many years of experience in advising clients with regard to the implementation and assessment of compliance management systems.

Osman Nawaz is a litigation partner in the New York office, and a member of the firm’s White Collar Defense and Investigations and Securities Enforcement and practice groups. He advises clients on internal and government investigations and enforcement actions, as well as follow-on civil litigation and regulatory and compliance-related issues. Prior to joining Gibson Dunn, Osman concluded a 14-year career with the U.S. Securities & Exchange Commission (SEC). During his time with the SEC, he worked in the agency’s New York Office, serving through multiple administrations and in roles ranging from Staff Attorney to Assistant Regional Director, and ultimately serving as a Senior Officer leading a nationwide enforcement group.

Sanford W. Stark is a partner in Gibson Dunn’s Washington D.C. office and the global Chair of the firm’s Tax Controversy and Litigation Practice Group. Sanford counsels on a wide range of complex domestic and international tax issues and has served as counsel in a number of the largest tax controversy and litigation matters in recent years. He is consistently named one of the nation’s leading Tax Controversy lawyers as recognized in Chambers USA, The Best Lawyers in America, the World Tax Experts Guide, the Tax Controversy Leaders Guide, ITR World Tax, and other publications. Sanford previously served as a Trial Attorney in the Tax Division of the U.S. Department of Justice, where he received the Tax Division’s Outstanding Attorney Award.

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 May 2, Judge Beryl Howell of the U.S. District Court for the District of Columbia permanently enjoined enforcement of Executive Order 14230, which, among other things, ordered federal agencies to suspend security clearances for employees of the law firm Perkins Coie, restrict their access to federal buildings, restrict communications by government officials with Perkins lawyers and employees, terminate government contracts with the law firm, and review the government contracts of Perkins Coie’s clients, and directed the Acting Chair of the EEOC to investigate the DEI practices of large law firms. In a 102-page order, the Court denied the government’s motion to dismiss the complaint, granted Perkins Coie’s motion for summary judgment, and concluded that the EO “violates the Constitution and is thus null and void.” The Court observed that, “[n]o American president has ever before issued executive orders like the one at issue,” adding, “In purpose and effect, this action draws from a playbook as old as Shakespeare, who penned the phrase: ‘The first thing we do, let’s kill all the lawyers.’ . . . Eliminating lawyers as the guardians of the rule of law removes a major impediment to the path to more power.”

The Court held that the EO violates the First Amendment by retaliating against the law firm for protected activity—specifically, the firm’s statements and viewpoint in favor of DEI as well as its association with and advocacy on behalf of the President’s opponents in the 2016 and 2020 elections. The Court also held that the EO violates the firm’s clients’ Fifth and Sixth Amendment right to counsel and First Amendment associational rights, denies the firm Equal Protection, and violates Due Process. The Court also invalidated the EO as void for vagueness, in part because the EO directs adverse action against Perkins Coie purportedly in response to the firm engaging in illegal discrimination through its DEI policies, without explaining which of the firm’s policies violate the law or otherwise clarifying what conduct of Perkins Coie’s is unlawful. The Court noted “The terms diversity, equity, and inclusion . . . could refer to a wide range of actions and programs, formal or informal, as well as basic thoughts and beliefs. The Order provides no definition or guidance as to what form of program possibly described by these terms is considered unlawful discrimination by the Trump Administration, leaving plaintiff to guess at what is and is not permissible in the government’s view, while already facing the threat of adverse actions during the guessing.” The government identified two alleged acts of illegal discrimination in which Perkins Coie engaged: (1) participating in the Sponsors for Education Opportunity (“SEO”) summer fellowship program and (2) adopting the “Mansfield Rule.” The Court rejected the government’s arguments as to both, reasoning that (a) the firm’s summer fellowship was “open to all” and does “not contain discriminatory requirements,” and (b) the Mansfield Rule “does not establish any hiring quotas or other illegally discriminatory practices, requiring only that participating law firms consider attorneys from diverse backgrounds for certain positions.” The Court concluded that neither was evidence of unlawful discrimination.

With respect to the EO’s provision directing the Acting Chair of the EEOC to “review the practices of representative large, influential, or industry leading law firms,” the Court said that “no authority is identified by the government—and the Court is aware of none—empowering the President to direct the EEOC to target specific businesses or individuals for an investigation,” and that the EEOC’s investigative authority is generally limited to formal charges filed with the agency. Addressing specifically the investigative letter the EEOC sent Perkins Coie requesting information about its hiring and employment practices, the Court held that “By not following its own procedures, the EEOC has undermined the legitimacy of its own investigation, revealing this investigation . . . to be a product of the retaliation ordered by EO 14230 rather than any legitimate investigative activity.”

On April 23, President Trump issued an Executive Order entitled “Restoring Equality of Opportunity and Meritocracy,” seeking to “eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.” The executive order directs the repeal or amendment of certain regulations that impose disparate-impact liability on recipients of federal funding under Title VI, such as universities, nonprofits, and certain contractors. It also directs the Attorney General, “in coordination with the heads of all other agencies,” to review “all existing regulations, guidance, rules, or orders that impose disparate-impact liability or similar requirements,” and to “detail agency steps for their amendment or repeal.” The order likewise directs all federal agencies to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability.” This would include Title VII, the Fair Housing Act, the Age Discrimination in Employment Act, the Affordable Care Act, and the Equal Credit Opportunity Act. Finally, the executive order instructs all heads of federal agencies to “assess” or “evaluate” all pending proceedings relying on disparate-impact theories and “take appropriate action” within 45 days, and to conduct a similar review of “consent judgments and permanent injunctions” within 90 days. For more analysis on this executive order, please see our April 25 client alert.

On April 24, 2025, federal district courts in New Hampshire, Maryland, and Washington D.C. granted preliminary injunctions in three separate cases challenging recent actions by the U.S. Department of Education in relation to DEI. The challenged actions include the Department’s February 14, 2025 “Dear Colleague” letter, which purported to “clarify and reaffirm the nondiscrimination obligations of schools and other entities that receive federal financial assistance” and 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 cases also challenge the Department’s February 28 guidance document entitled “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, including by providing examples of DEI programming that the Administration might find discriminatory. Finally, the cases challenge the Department’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. For more information on these agency actions, please see our February 19, March 5, and April 21 Task Force Updates.

The plaintiffs in these three lawsuits challenged the Department’s actions under the First and Fifth Amendments, as well as the Administrative Procedure Act (“APA”). While all three courts granted the plaintiffs’ preliminary injunction motions, each ruled on different—and at times, conflicting—grounds.

In American Federation of Teachers, et al. v. Department of Education, et al., 1:25-cv-00628 (D. Md. 2025), Judge Stephanie Gallagher concluded that the Dear Colleague letter constitutes a “legislative rule” prescribing “new law and policy”—and not merely an “interpretive rule” providing guidance on existing law—because it extends the existing reach of Title VI, substantively alters the legal landscape, and has the force and effect of law. Accordingly, Judge Gallagher concluded that the plaintiffs were likely to succeed in their procedural challenge to the Dear Colleague letter because the Department failed to follow the procedural requirements for legislative rules as set forth in the APA. Judge Gallagher also concluded that the Dear Colleague letter likely violated the APA because the Education Department likely exceeded its statutory authority, failed to explain its change of position, failed to produce any facts to support its position, failed to consider the reliance interests of educators, and acted arbitrarily and capriciously in publishing the letter. Judge Gallagher also concluded that the Dear Colleague letter likely violated the First Amendment by preemptively prohibiting speech. The court declined to enjoin the letter establishing a certification requirement because the plaintiffs had not adequately challenged it in their complaint.

In National Education Association, et al. v. Department of Education, et al., 1:25-cv-00091 (D.N.H. 2025), Judge Landya McCafferty similarly held that the Dear Colleague letter is a legislative rule because it imposes new, substantial obligations on schools. Accordingly, Judge McCafferty concluded that the 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. Judge McCafferty also concluded that the Dear Colleague letter was likely impermissibly vague in violation of the Due Process Clause, and that the Frequently Asked Questions document “does not ameliorate” the letter’s vagueness “but rather, exacerbates it.” Judge McCafferty also concluded that the agency actions likely violated the First Amendment by targeting speech based on viewpoint.

In NAACP v. U.S. Department of Education, et al., 1:25-cv-01120 (D.D.C. 2025), by contrast, Judge Dabney Friedrich concluded that the challenged Department actions were not legislative rules but rather interpretive rules intended to provide guidance on existing obligations, rather than impose new obligations. Accordingly, Judge Friedrich concluded that they did not violate the APA’s procedural requirements, nor were they arbitrary and capricious or contrary to law. Judge Friedrich also concluded that the plaintiffs lacked standing to challenge the agency’s actions on First Amendment grounds. However, she agreed with the other courts in finding that agency actions were likely void for vagueness under the Fifth Amendment because they “fail[ed] to provide an actionable definition of what constitutes ‘DEI.’” Judge Friedrich also concluded that the “shortened timeframe for certifying compliance further exacerbate[d] vagueness concerns.”

On April 21, 2025, Harvard University sued to prevent the freezing of more than $2 billion in federal funding to the university after it refused to comply with policy change demands from the Trump Administration. Naming as defendants numerous federal officials and agencies, the complaint alleges violations of the First Amendment and the Administrative Procedure Act, as well as an unconstitutional exercise of executive authority under Article II of the U.S. Constitution. Harvard argues that the Administration’s actions—including the demand that Harvard discontinue all DEI practices—are unconstitutional government interference with a private actor’s speech. The funding freeze, Harvard argues, is an unlawful use of legal sanction by the Administration seeking to suppress disfavored speech. Harvard also alleges that the Administration violated the APA by failing to follow the prescribed procedures under Title VI before revoking federal funding based on discrimination concerns. Harvard asks the court to undo the funding freeze and declare it unconstitutional.

On April 21, the National Institutes of Health (“NIH”) issued guidance stating that recipients of NIH grant funding must not “operate any programs that advance or promote DEI, DEIA, or discriminatory equity ideology in violation of Federal anti-discrimination laws.” Relatedly, the National Science Foundation (“NSF”) announced on April 18 a shift in funding priorities, including that “[r]esearch projects with more narrow impact limited to subgroups of people based on protected class or characteristics do not effectuate NSF priorities.” In its announcement, NSF also stated that “[r]esearchers may recruit or study individuals based on protected characteristics when doing so is (1) intrinsic to the research question (e.g., research on human physiology), (2) not focused on broadening participation in STEM on the basis of protected characteristics, and (3) aimed to fill an important gap in [science and engineering] knowledge. For example, research on technology to assist individuals with disabilities may be supported even when the research subject recruitment is limited to those with disabilities.”

Media Coverage and Commentary:

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

New York Times, “‘Vaguely Threatening’: Federal Prosecutor Queries Leading Medical Journal” (April 25): Teddy Rosenbluth of the New York Times reports that the interim U.S. Attorney for the District of Columbia, Ed Martin, has sent letters to various medical and scientific journals, including the New England Journal of Medicine, regarding their selection of papers for publication. According to Rosenbluth, the letters suggest the publications are “partisan in various scientific debates” and ask whether the journals “accept submissions from scientists with ‘competing viewpoints,” what they do if authors “may have misled their readers,” and whether they are “transparent about influence from ‘supporters, funders, advertisers, and others.’” The letters also ask what role the NIH plays “in the development of submitted articles.” Rosenbluth reports that it is “unclear how many journals have received these letters or the criteria that Mr. Martin used to decide which publications to target.”
NPR, “Trump Signs Executive Actions on Education, Including Efforts to Rein in DEI,” April 24): NPR’s Elissa Nadworny reports on a series of executive actions taken by the White House on April 23 aimed at educational institutions and relating to DEI. The first instructs Secretary of Education Linda McMahon to “overhaul” the college accreditation system and recognize new accreditors. The second provides that universities may lose federal grants unless they complete “full and timely disclosures of foreign funding.” The third calls for changes in disciplinary policies in K-12 schools, including by prohibiting use of “racially preferential discipline practices” and abandonment of disparate impact analyses of discipline.
Law.com, “Companies Toning Down ‘DEI’ References but Not Necessarily Ditching It, Analysis Reveals” (April 24): Law.com’s Chris O’Malley reports on an analysis of financial reports from 10 leading S&P 500 companies which found that companies are “‘recalibrating’ how they present diversity, equity and inclusion in their regulatory filings.” The study found a “measurable decline in explicit DEI mentions” in these reports. Nevertheless, “substantive commitments persist through neutral phrasing,” including “diversity of thought” and “global workforce composition.” Moreover, O’Malley notes that the study found some exceptions to the trend exist, including major companies with unchanging usage of DEI-related language in their reports year over year.
Law360, “How Proxy Advisory Firms Are Approaching AI And DEI” (April 21): Writing for Law360, Javier Ortiz, Geoffrey Liebmann, and Trevor Lamb report that proxy advisory firms Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis & Co. LLC (“Glass Lewis”) have both issued updated proxy voting policy guidelines relating to DEI. ISS will cease to consider the gender, racial, or ethnic diversity of a company’s board when making voting recommendations for the election or re-election of directors at U.S. companies. Glass Lewis, by contrast, will continue to recommend votes against nominating committee members for companies where Glass Lewis believes the board lacks sufficient diversity. However, Glass Lewis will inform clients when its recommendation concerns diversity, and it will provide two recommendations in those instances, including one that excludes gender or community diversity considerations. Glass Lewis will apply the same policy to shareholder proposals. For more information, please see our February 2025 client alert.

Case Updates:

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

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

American Alliance for Equal Rights v. Ivey, No. 2:24-cv-00104 (M.D. Ala. 2024): On February 13, 2024, AAER filed a complaint against Alabama Governor Kay Ivey, challenging a state law that requires the governor to ensure there are no fewer than two individuals “of a minority race” on the Alabama Real Estate Appraisers Board. The Board has nine seats, including one for a member of the public with no real estate background, which has been unfilled for years. Because there was only one minority member among the Board at the time of filing, AAER asserts that state law requires that the open seat go to a person with a minority background. AAER states that one of its members applied for this final seat, but was denied on the basis of race, in violation of the Equal Protection Clause of the Fourteenth Amendment. On March 29, 2024, Governor Ivey answered the complaint, admitting that the Board quota is unconstitutional and will not be enforced. On March 19, 2025, AAER moved to substitute Laura Clark, whom AAER had referred to as “Member A” in its complaint, as the plaintiff. On April 2, 2025, Governor Ivey responded to the motion to substitute, arguing that AAER lacked good cause for the substitution, and that the motion was merely an attempt by AAER to “resist discovery.”
- Latest update: On April 17, 2025, the court denied AAER’s motion to substitute because AAER failed to show “good cause” for the substitution and could have substituted Ms. Clark as named plaintiff before the deadline to amend the pleadings, but chose not to do so.
California et al. v. U.S. Department of Education et al., No. 1:25-cv-10548 (D. Mass. 2025): On March 6, 2025, the states of California, Massachusetts, New Jersey, Colorado, Illinois, Maryland, New York, and Wisconsin (collectively, “the Plaintiff States”) sued the U.S. Department of Education, 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 March 6, 2025, the Plaintiff States filed a motion for a temporary restraining order to prevent the Department of Education from “implementing, giving effect to, maintaining, or reinstating under a different name the termination of any previously-awarded TQP and SEED grants.” The Plaintiff States argued that the “abrupt and immediate” termination of the TQP and SEED programs threatened imminent and irreparable harm. The court issued a TRO on March 10, 2025, concluding that the Plaintiff States were likely to succeed on the merits of their APA claim, that they adequately demonstrated irreparable harm absent temporary relief, and that the balance of the equities weighed in their favor. The government appealed the order the next day, arguing, among other things, that the district court lacked jurisdiction to review the Department of Education’s decisions on how to allocate funds because the APA does not permit judicial review of “agency action” that “is committed to agency discretion by law.” On April 4, 2025, the United States Supreme Court stayed the TRO, concluding that the government was likely to succeed in showing the district court lacked jurisdiction to grant the TRO under the Administrative Procedure Act
- Latest update: On April 15, 2025, the parties filed a joint status report. The government indicated it intends to move to dismiss the complaint on jurisdictional grounds by May 12, its deadline to answer the complaint. The plaintiffs asked the court to order “expedited production of the administrative record to assist the court in resolving the jurisdictional arguments that the government is expected to make in its motion to dismiss.” The government opposed expedited discovery and instead contended “that the proper and most efficient approach” would be for it to file the administrative record in conjunction with its answer, should the court deny the forthcoming motion to dismiss. On April 16, the court issued an order stating that it would assess the request for expedited production of the administrative record after reviewing the forthcoming motion to dismiss.
De Piero v. Pennsylvania State University, No. 2:23-cv-02281 (E.D. Pa. 2023): A white male professor sued his employer, Penn State University, claiming that university-mandated DEI trainings, discussions with coworkers and supervisors about race and privilege in the classroom, and comments from coworkers about his “white privilege” created a hostile work environment that led him to quit his job. He claimed that after he reported this alleged harassment and published an opinion piece objecting to the impact of DEI concepts in the classroom, the university retaliated against him by investigating him for bullying and aggressive behavior towards his colleagues. The plaintiff alleged harassment, retaliation, and constructive discharge in violation of Title VI, Title VII, Section 1981, Section 1983, the First Amendment, and Pennsylvania civil rights laws. The parties filed cross-motions for summary judgment. On March 6, 2025, the court granted summary judgment to the university on the plaintiff’s hostile work environment claims. The court found that the behaviors complained of by the plaintiff, including “campus wide emails” pertaining to racial injustice, “being invited to review scholarly materials,” and “conversations about harassment levied by and against [the plaintiff],” could not reasonably be found to rise to the level of severe harassment. As to the “pervasive” conduct prong, the court explained that of the 12 incidents in the complaint, no “racist comment” was directed at the plaintiff and “only a few” involved actions that were directed at the plaintiff at all. On March 20, 2025, the plaintiff filed a supplemental brief in support of his remaining claims, arguing that these claims should proceed to trial. He presented what he asserted were undisputed facts to support his claims, including that he was reported for “micro aggressions” after objecting to racial harassment, that colleagues lodged false claims against him, and that he faced retaliatory disciplinary action and salary claw backs. On March 27, 2025, the university filed its own supplemental brief in support of summary judgment, arguing that the plaintiff’s putative Title VII and PHRA retaliation claims failed as a matter of law because the plaintiff cannot prove the university took adverse employment action against him, or there is no causal link between his alleged protected activity and adverse actions taken by the university.
- Latest update: On April 17, 2025, the court granted summary judgment for the university on the plaintiff’s remaining retaliation claims, concluding that none of the alleged acts by the university constituted adverse employment action.
Nat’l Urban League et al., v. President Donald J. Trump, et al., 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 Administrative Procedure Act. The plaintiffs allege that these orders penalize them for expressing viewpoints in support of diversity, equity, inclusion, and accessibility, and transgender people. They also claim that, because of these orders, they are at risk of losing federal funding. The complaint seeks a declaratory judgment holding that the EOs at issue are unconstitutional, as well as a preliminary injunction enjoining enforcement of these EOs. On February 28, the plaintiffs filed a motion for a preliminary injunction.
- Latest update: On May 2, 2025, the court denied the plaintiffs’ motion for a preliminary injunction. The court determined 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 executive orders—including provisions mandating certification by government contractors that they do not operate unlawful DEI 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.

2. Employment discrimination and related claims:

Beneker v. CBS Studios, Inc., et al., No. 2:24-cv-01659 (C.D. Cal. 2024): On February 29, 2024, a heterosexual, white male writer sued CBS, alleging that the company’s de facto hiring policy discriminated against him on the bases of sex, race, and sexual orientation. In his complaint, the plaintiff alleges that CBS violated Section 1981 and Title VII by refusing to hire him as a staff writer on the TV show “Seal Team,” instead hiring several black writers, female writers, and a lesbian writer. The plaintiff sought a declaratory judgment that CBS’s de facto hiring policy violates Section 1981 and Title VII, an injunction barring CBS from continuing to violate Section 1981 and Title VII, an order requiring CBS to offer the plaintiff a full-time producer job, and damages. CBS moved to dismiss the complaint on June 24, 2024, arguing that the First Amendment protects its hiring choices and that two of the plaintiff’s Section 1981 claims were untimely.
- Latest update: On April 18, 2025, the parties filed a joint stipulation to dismiss the case with prejudice, with each party bearing its own costs. The stipulation did not reveal whether the parties entered into a settlement agreement. The court ordered the case dismissed with prejudice on April 21, 2025.

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

Do No Harm v. Nat’l Assoc. of Emergency Medical Technicians, No. 3:24-cv-00011 (S.D. Miss. 2024): On January 10, 2024, Do No Harm challenged the diversity scholarship program operated by the National Association of Emergency Medical Technicians (“NAEMT”), an advocacy group representing paramedics, EMTs, and other emergency professionals. NAEMT awards up to four $1,250 scholarships annually to students of color hoping to become EMTs or paramedics. Do No Harm requested a temporary restraining order, preliminary injunction, and permanent injunction to prevent the continued operation of the program. On January 23, 2024, the court denied Do No Harm’s motion for a TRO, and NAEMT moved to dismiss Do No Harm’s amended complaint on March 18, 2024. On March 31, 2025, the court denied the defendants’ motion to dismiss, finding Do No Harm had standing and plausibly alleged a prima facie Section 1981 violation.
- Latest update: On April 17, 2025, the parties filed a joint stipulation of dismissal, indicating that the defendant will “revise” its scholarship program to remove eligibility requirements and preferences based on race or ethnicity.

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, José Madrid, Jenna Voronov, Emma Eisendrath, 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)

A recent declination by the U.S. Department of Justice offers one example of enforcement agencies’ expectations for how companies should respond to potential criminal export control violations.

Executive Summary

On April 30, 2025, the Department of Justice (DOJ) announced that it had declined to prosecute Universities Space Research Association (USRA), a nonprofit research firm and NASA contractor, for export control violations committed by a former employee. The case was jointly investigated by the Department of Commerce’s Bureau of Industry and Security (BIS), the Department of Defense’s Defense Criminal Investigative Service, and the FBI. The Counterintelligence and Export Control Section of DOJ’s National Security Division (NSD) and the U.S. Attorney’s Office for the Northern District of California prosecuted the case.

USRA is the second company to receive a declination of prosecution under NSD’s Enforcement Policy for Business Organizations (the “Policy”). As discussed in greater detail below, this case highlights steps companies can take to minimize – or avoid altogether – criminal exposure stemming from the export control violations of employees or agents. Those steps include maintaining robust compliance programs with rigorous due diligence, oversight, and auditing capabilities to detect and address misconduct. If wrongdoing nevertheless occurs, companies can consider taking advantage of the Policy by immediately conducting internal investigations, identifying root causes of the compliance violations, taking appropriate corrective actions, and promptly self-reporting.

Factual Background

According to the press release issued by DOJ, USRA contracted with NASA in 2016 to license and distribute aeronautics-related and military-owed flight control software. Between April 2017 and September 2020, Jonathan Soong, a former USRA program administrator responsible for performing due diligence on prospective purchasers, willfully exported flight control and optimization software to Beijing University of Aeronautics and Astronautics (a.k.a. “Beihang” or “Beihang University”) in the People’s Republic of China. Since May 2001, Beihang has been listed on the Commerce Department’s Entity List due to its involvement in developing military rocket and unmanned aerial vehicle systems. Under the Export Administration Regulations (EAR), a license from the Department of Commerce is required to export the software, developed by the U.S. Army and licensed by NASA, to parties on the Entity List.

Soong’s illegal scheme continued until USRA began to investigate based on an inquiry from NASA about the sales of software licenses to China-based purchasers. Soong initially attempted to conceal his action by lying to USRA and fabricating evidence of due diligence on the purchasers. He was later confronted by USRA’s counsel and eventually admitted to knowing that Beihang was on the Entity List and that a license was required when he exported the software.

According to the Declination Letter (the “Letter”), USRA self-disclosed the violations to NSD within days of Soong’s admission of misconduct and before the completion of the internal investigation. Soong was charged with willfully violating the EAR by exporting U.S. Army-developed aviation software to Beihang. He pleaded guilty in January 2023, admitting to willfully exporting software without a license, using an intermediary to complete the transfer and export to avoid detection, and separately embezzling at least $161,000 in software license sales by directing purchasers to make payment to his personal account. Soong was sentenced to 20 months in prison.

Multiple Theories of Liability Arising From The Same Facts

Companies should be aware that corporate criminal liability results from the illegal actions of employees or agents. In the USRA case, former employee Jonathan Soong exported unlicensed software to an entity subject to EAR restrictions, diverted license payments to his personal accounts, defrauded the government in connection with a federal contract, and presented false statements and falsified documentation during or in connection with a federal proceeding. According to the Letter, DOJ could have prosecuted USRA based on Soong’s misconduct for potential violations of multiple federal criminal statutes:

violations of the EAR and the Export Control Reform Act of 2018 (ECRA) predicated on export-related violations;
violations of the International Emergency Economic Powers Act (IEEPA) predicated on export-related violations;[1]
violations of the False Claims Act predicated on a federal contractor’s knowing submission of fraudulent claims to the U.S. government with the intent to receive payment or approval;
violations of 18 U.S.C. § 1001 predicated on knowingly making false statements in “any matter within the jurisdiction” of the federal government;
violations of 18 U.S.C. § 1343 predicated on using the U.S. electronic communication wires to deceive or defraud; and
violations of 18 U.S.C. § 1512 predicated on obstruction of justice during a federal proceeding.

Mitigating Factors

A declination of prosecution is a discretionary decision by NSD not to prosecute, guided by the evaluative factors set forth in the Policy. Here, by showing that it had initially lacked knowledge of the misconduct but then responded swiftly and transparently through a robust internal investigation, USRA reinforced its status as a good corporate actor and thus earned itself a declination.

Specifically, the Letter cited to a number of mitigating factors as reasons for the declination, including USRA’s “timely and voluntary” self-disclosure of misconduct, “exceptional and proactive” cooperation with the government, and “timely and appropriate” remediation measures, such as terminating the employment of Jonathan Soong, disciplining supervisory personnel, enhancing internal compliance controls, reimbursing NASA of Soong’s salary, and compensating the U.S. Treasury for financial losses resulting from Soong’s criminal embezzlement of $161,000 in sales. The government also considered the nature and seriousness of the offense to be a contributing mitigating factor given that only four unlicensed exports of software were made and the software was based on publicly available information. Furthermore, the government determined that USRA did not obtain any unlawful gains from Soong’s offenses.

Broader Context: NSD’s Voluntary Self-Disclosure Policy and MilliporeSigma

VSD Policy

NSD is responsible for criminal enforcement of U.S. export control and sanctions laws, among other matters related to national security. To qualify for the Policy, companies should make prompt disclosure directly to NSD of all potentially criminal violations of the Arms Export Control Act (22 U.S.C. § 2778), the Export Control Reform Act (50 U.S.C. § 4819), or the International Emergency Economic Powers Act (50 U.S.C. § 1705), as well as potential violations of other criminal statutes that affect national security when they arise out of or relate to enforcement of export control and sanctions laws.

When a company:

voluntarily self-discloses to NSD potentially criminal violations arising out of or relating to the enforcement of export control or sanctions laws,
fully cooperates, and
timely and appropriately remediates the underlying causes of the violation,

absent aggravating factors, NSD generally will not seek a guilty plea, and there is a presumption that the company will receive a non-prosecution agreement and will not pay a fine. NSD also has the discretion to issue a declination when warranted by the principles of federal prosecution. See Justice Manual § 9-27.000.

A deferred prosecution agreement (DPA) or guilty plea may result if the following aggravating factors are present:

pervasive and egregious conduct, including repeat violations;
concealment or involvement by upper management;
significant profit from misconduct;
involvement with Foreign Terrorist Organizations or Specially Designated Global Terrorists;
exports of items controlled for nonproliferation or missile technology reasons; or
exports of WMD components or military items to countries of concern.

Even when a DPA or guilty plea is required, though, companies can still benefit from VSDs, as they are eligible for up to a 50% reduction in criminal fines if they receive full cooperation and remediation credit.

Recent Example: MilliporeSigma Declination

USRA is only the second declination NSD has issued under the Policy. In May 2024, NSD declined to prosecute MilliporeSigma in a factually analogous case where a company employee shipped biochemical products to a Chinese customer using falsified export documents. Notably, the MilliporeSigma case shares many common factors with USRA, including prompt disclosure of misconduct after retaining counsel and before the internal investigation concluded, proactive and full cooperation, effective remediation, and lack of corporate gain or involvement. In addition, NSD considered the limited quantities of biochemical exports as a mitigating factor.

Key Takeaways

Maintain a Robust Compliance Program

The USRA case once again underscores the importance for companies, especially those consistently dealing with sensitive or controlled technologies, to maintain robust compliance programs. An effective compliance framework should implement thorough due diligence procedures, a strong oversight mechanism, and routine audits capable of detecting potentially unauthorized activities. Although companies can work to mitigate enforcement outcomes – as USRA successfully did here – through extensive post-violation cooperation with the enforcement authorities, stronger internal control and supervisory oversight can help detect and address employee misconduct involving illicit exports and embezzlement internally and thus further reduce the serious legal and reputational risks.

Conduct an Internal Investigation

Upon uncovering the misconduct, companies are well advised to acknowledge the seriousness and urgency of the violation and promptly undertake a thorough internal investigation. USRA’s response was crucial in demonstrating to NSD that the company was effectively a defender of corporate compliance integrity, rather than an enabler of the employee’s criminal actions. The comprehensive nature of USRA’s internal investigation, coupled with its full and prompt cooperation, voluntary self-disclosure, disciplinary measures, and updates to internal controls contributed to DOJ’s successful prosecution of the employee and convinced DOJ to decline charges against the company itself.

Carefully Weigh Voluntary Self-Disclosure Considerations

The Letter recognized USRA’s timely VSD to NSD as having a significant impact on DOJ’s decision to not to bring charges against the company. By choosing to self-disclose early – within days of the employee’s admission of wrongdoing and before completing its internal investigation – USRA earned significant VSD credit under the Policy. While each voluntary self-disclosure decision is dependent on individual facts and circumstances, this case, like MilliporeSigma, showcases how voluntary and timely disclosures to DOJ has the potential to substantially reduce corporate criminal exposure by demonstrating to the government corporate responsibility and commitment to compliance.

We have decades of experience conducting investigations and supporting clients with disclosures before the Department of Commerce, State, Treasury, Justice, and other international trade regulatory and enforcement agencies of the United States. We also have the deep experience advising clients on how to construe and implement trade regulation in their business operations, which is critical to mounting the most effective defense to resulting enforcement actions when they arise. Our team includes key architects of U.S. export control enforcement policies at both the Department of Justice and Department of Commerce. David P. Burns, a co-chair of Gibson Dunn’s National Security practice group, previously held senior positions within both the Criminal Division and National Security Division of the U.S. Department of Justice prior to rejoining the firm. David served at NSD during the pivotal 2019 update to its corporate enforcement policy. Mathew S. Axelrod, a co-chair of Gibson Dunn’s newly established Sanctions and Export Enforcement practice group, recently joined the firm following his tenure at the Department of Commerce’s BIS as Assistant Secretary for Export Enforcement. While at BIS, Matt overhauled a number of the agency’s enforcement policies, including those on voluntary self-disclosures. Matt brings valuable firsthand insights to help clients navigate complex export enforcement issues.

[1] The export control system created pursuant to the Export Administration Act of 1979, a statute that expired in 2001, was continued by a presidential declaration of a national emergency and the invocation of IEEPA until the passage of the ECRA in 2018.

The following Gibson Dunn lawyers prepared this update: Matthew S. Axelrod, David P. Burns, Janice Yingzhuang Jiang, Soo-Min Chae*, Adam M. Smith, Christopher T. Timura, and Samantha Sewall.

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

United States:
Matthew S. Axelrod – Co-Chair, Washington, D.C. (+1 202.955.8517, maxelrod@gibsondunn.com)
Adam M. Smith – Co-Chair, Washington, D.C. (+1 202.887.3547, asmith@gibsondunn.com)
Ronald Kirk – Dallas (+1 214.698.3295, rkirk@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Donald Harrison – Washington, D.C. (+1 202.955.8560, dharrison@gibsondunn.com)
Christopher T. Timura – Washington, D.C. (+1 202.887.3690, ctimura@gibsondunn.com)
David P. Burns – Washington, D.C. (+1 202.887.3786, dburns@gibsondunn.com)
Nicola T. Hanna – Los Angeles (+1 213.229.7269, nhanna@gibsondunn.com)
Courtney M. Brown – Washington, D.C. (+1 202.955.8685, cmbrown@gibsondunn.com)
Amanda H. Neely – Washington, D.C. (+1 202.777.9566, aneely@gibsondunn.com)
Samantha Sewall – Washington, D.C. (+1 202.887.3509, ssewall@gibsondunn.com)
Michelle A. Weinbaum – Washington, D.C. (+1 202.955.8274, mweinbaum@gibsondunn.com)
Karsten Ball – Washington, D.C. (+1 202.777.9341, kball@gibsondunn.com)
Hugh N. Danilack – Washington, D.C. (+1 202.777.9536, hdanilack@gibsondunn.com)
Mason Gauch – Houston (+1 346.718.6723, mgauch@gibsondunn.com)
Chris R. Mullen – Washington, D.C. (+1 202.955.8250, cmullen@gibsondunn.com)
Sarah L. Pongrace – New York (+1 212.351.3972, spongrace@gibsondunn.com)
Anna Searcey – Washington, D.C. (+1 202.887.3655, asearcey@gibsondunn.com)
Audi K. Syarief – Washington, D.C. (+1 202.955.8266, asyarief@gibsondunn.com)
Scott R. Toussaint – Washington, D.C. (+1 202.887.3588, stoussaint@gibsondunn.com)
Lindsay Bernsen Wardlaw – Washington, D.C. (+1 202.777.9475, lwardlaw@gibsondunn.com)
Shuo (Josh) Zhang – Washington, D.C. (+1 202.955.8270, szhang@gibsondunn.com)

Asia:
Kelly Austin – Denver/Hong Kong (+1 303.298.5980, kaustin@gibsondunn.com)
David A. Wolber – Hong Kong (+852 2214 3764, dwolber@gibsondunn.com)
Fang Xue – Beijing (+86 10 6502 8687, fxue@gibsondunn.com)
Qi Yue – Beijing (+86 10 6502 8534, qyue@gibsondunn.com)
Dharak Bhavsar – Hong Kong (+852 2214 3755, dbhavsar@gibsondunn.com)
Arnold Pun – Hong Kong (+852 2214 3838, apun@gibsondunn.com)

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

*Soo-Min Chae, a visiting attorney based in Washington, D.C., is not admitted to practice.

In a transformative step to enhance and better protect its business environment, Saudi Arabia has enacted a new Trade Name Law, which was published in the Official Gazette (Um AlQura) on October 4, 2024, and has come into effect on April 3, 2025.

Introduction

The law came into effect on April 3, 2025, replacing the previous legislation that had been in force since November 23, 1999. The implementing regulations were published on March 30, 2025, and took effect concurrently with the new law.

This law reform marks yet another significant step in the modernization of Saudi’s legal framework, streamlining processes and fostering a transparent, efficient business landscape. Below, we outline the key features of the new law and its practical implications in Saudi Arabia.

Key Features of the New Trade Name Law

1. Simplified Trade Name Selection

The updated Trade Name Law offers businesses greater flexibility in reserving and registering trade names. Trade names can be reserved for an initial period of 60 days, with the possibility of extending for an additional 60 days. Further extensions may be granted but are subject to specific registration circumstances. Given the exclusivity associated with registered/reserved trade names, there is a greater practical need to register desired trade names ahead of time. If the reservation period expires and the procedures for the issuance of a commercial register certificate are not complete, the reservation will lapse, and the trade name will become available for reservation by any person. All reservations and extensions will be subject to payment of fees.

2. Linguistic Flexibility

The old trade names regime was renowned for its strict restrictions on the use of foreign trade names with only a few exceptions being permitted for certain foreign companies or as determined on a case-by-case basis by the Minister of Commerce. The new Trade Name Law ushers in a new era as trade names can now be registered in Arabic, transliterated Arabic (i.e., Arabic words or text that have been written using the Latin (Roman) alphabet instead of the Arabic script), English, or combinations of letters and numbers (with a maximum of 9 digits).

It is recommended that all businesses ensure linguistic consistency in branding to maximize recognition. Foreign investors will need to ensure that the foreign trade name is writable in English and is capable of being translated into Arabic.

3. Independent Trade Name Ownership

Trade names are capable of being owned, sold, or assigned to other persons, which enhances their commercial value. Given that trade names are exclusive and cannot be replicated, registering and owning a trade name provides businesses with a potentially valuable asset.

What Else Has Changed? A Deeper Look at the New Trade Name Law

Trade Name Registration Process

Article 5 of the new law provides a clearer process regarding the trade name application process, including clearer decision-making timelines of up to 10 days from the date of submission of the application, compared to the old timeline which took up to 30 days (see Article 7 of the old regulation). The decision timeline is extendable in certain cases to 30 days when external approval of a trade name is required.

The Ministry of Commerce has integrated the trade name reservation service into the Saudi Business Center portal, which now manages all trade name applications. After a trade name application is accepted, publication is now mandatory, with applicants bearing associated costs.

Priority is given to the first applicant i.e. first in time to submit an application, if multiple applications for the same name exist. If the registrar rejects an application, applicants will have 60 days to appeal to the Ministry.

Trade Name Protection Against Unauthorized Use

The new law, under its Article 6, strengthens protection against unauthorized use such that no person is entitled to use a trade name registered that belongs to someone else. A fine of SAR 10,000 is now imposed as per Article 15 of the implementing regulations to strengthen adherence to the law and limit unauthorized use of registered or reserved trade names. Businesses with registered names in the Commercial Register have the right to seek compensation for damages caused by unauthorized use. This means that the commercial register serves as proof of ownership, and any person who makes any unauthorized use of a registered trade name will have committed a violation and may be liable to pay compensation to the registered owner of the trade name.

Prohibited Trade Names

Article 7 of the new law outlines the following prohibitions:

Trade names must not violate public order or morality.
Names that are misleading, deceptive, or resemble an already registered trade name (regardless of activity type) are not allowed.
Names similar to famous trademarks are restricted unless owned by the applicant.
Names containing political, military, or religious references are prohibited.
Trade names must not resemble symbols of local, regional, or international organizations.

The Ministry of Commerce will also maintain and update a public list of prohibited names regularly, for transparency. Some of the prohibitions introduced by the Trade Names Law are quite broad in nature (particularly the prohibitions relating to “public order or morality” and “famous trademarks”).

It remains unclear how broadly these prohibitions will be interpreted and applied by the Registrar, and the practical challenges such prohibitions may create for applicants wishing to register their trade names. It also remains to be seen whether other restrictions will be unilaterally imposed by the Ministry by way of practice or by way of circumstance and how far the Ministry may go in enforcing these restrictions. To date, the Ministry has already started to reject applications containing the word “company” or that otherwise include a description of an ordinary business activity such as “regional headquarter”.

Monetary Fees for Name Reservations

Article 14 of the implementing regulation introduces the following new fee structure for trade name reservations:

SAR 200 for an Arabic trade name.
SAR 500 for an English trade name.
SAR 100 to extend reservation duration.
SAR 100 to dispose of the trade name.

New Guidelines for Trade Names Similarity Criteria

Article 5 of the implementing regulation stipulates a formal set of criteria and guidelines that will be used to determine whether a trade name is deemed too similar to an existing one, reducing ambiguity. Under these guidelines, a trade name will be considered like another if its written form closely resembles that of a registered, famous, or reserved trade name. This includes:

Identical spelling with different word arrangements.
Identical spelling with a one-letter difference.
Identical spelling with minor changes, such as adding, removing, or altering pronouns, definite articles, pluralization, or diminutives.
Identical pronunciation despite differences in spelling or numbers replacing letters, and vice versa.

Criteria mentioned above shall apply to English trade names and their corresponding wording with the use of Arabic letters.

Use of ‘Saudi’ or names of Saudi Cities and Regions in Trade Names

As per Article 4 of the implementing regulation, businesses can now reserve names containing ‘Saudi’ or the name of a Saudi city or region, subject to the following conditions:

The name must not be identical or similar to any governmental entity.
The main component or essential element of the name must not be ‘Saudi’ or a Saudi city or region.
The name must not be used in a manner that would cause harm to the reputation of the Kingdom of Saudi Arabia.
For both Makkah and Madinah regions, approval from the Royal Commission for Makkah and the Holy Sites or the Madinah Development Authority is required.

Practical Considerations for Businesses

Saudi Arabia’s new Trade Name Law enhances transparency, secures commercial identities, and increases business interests in Saudi. In line with this, businesses should consider the following:

Ensure Distinctiveness: With stricter rules on name similarity and given the relative ease of reserving/registering a trade name, applicants should conduct comprehensive trade name searches and check the Ministry’s prohibited names list before applying to avoid getting rejected.
Understand New Protections: Trade names are now valuable commercial assets—businesses should actively monitor for unauthorized use and take prompt legal action if necessary.
Consider Linguistic Strategy: With increased linguistic flexibility, businesses can choose names that enhance global branding while remaining compliant with local regulations.

For Tailored Legal Guidance

For expert legal advice on trade name registration and compliance, contact our team below.

The following Gibson Dunn lawyers prepared this update: Mohamed A. Hasan and Hadeel Tayeb.

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, or the authors in Riyadh:

Mohamed A. Hasan (+966 55 867 5974, malhasan@gibsondunn.com)

Hadeel Tayeb (+966 53 944 3329, htayeb@gibsondunn.com)

Houston partner and former judge Gregg Costa joins the panel for a recent episode of the Reasonably Speaking podcast on “The Rise of the Nationwide Injunction and What It Means for the Courts.” The timely and incisive discussion on nationwide (or universal) injunctions — court orders that extend relief beyond the parties in a case, often halting federal policy nationwide — is moderated by American Law Institute president David Levi and also features Judge Robin Rosenberg and legal scholars William Baude and Samuel Bray.

Gregg and the panel explore the constitutional debates, practical consequences, and political implications of these powerful judicial tools and examine whether the nationwide injunction is a necessary check or a threat to judicial legitimacy.

In the context of M&A agreements, the choice-of-law decision between Delaware and Texas could impact the interpretation and applicability of several common provisions. Below is a brief overview of distinctions and similarities that sellers and buyers should consider when negotiating the governing law provision.

Introduction

In large M&A transactions, sophisticated parties historically default to Delaware law to govern M&A agreements. This default treatment stems from more than just habit; it also applies in light of Delaware’s specialized business court – the Court of Chancery – decades of legal precedent, a sophisticated, business-minded judicial bench, and business-favorable statutory law, all of which combine to provide greater predictability regarding how M&A provisions will be interpreted in the event of a dispute.

However, several other states have recently renewed efforts to lure entities to incorporate in their states. In particular, Texas has created a new business court and is reforming its statutory law in an effort to encourage more companies to be formed in Texas and adjudicate their business disputes in specialized Texas business courts. If more companies choose to incorporate in Texas, and a fulsome, more predictable body of case law develops in respect of M&A disputes adjudicated in Texas, M&A counterparties may seek to supplant the standard Delaware governing law provision in their M&A agreements with a Texas governing law provision.

Below is a summary of the treatment of common M&A provisions under Delaware and Texas law and considerations for deal participants in selecting the governing law to apply to their M&A agreements.

Non-Reliance

In negotiating a non-reliance provision in an M&A agreement, the question is whether a seller can be liable for fraud for representations made outside of the transaction agreement. In Delaware, parties cannot contractually limit liability for fraud contained within the transaction agreement. However, parties can include a clear and specific non-reliance provision in the transaction agreement wherein the buyer agrees that it is not relying on representations made outside the transaction agreement. Such provisions effectively waive an essential element of a fraud claim, reliance, as it pertains to representations outside the M&A agreement, such as the confidential information memorandum.

In Texas, courts will similarly uphold clear non-reliance provisions to limit a seller’s liability for statements made outside the M&A agreement; similar to Delaware, a merger clause or a provision that states that the parties have not made representations outside the M&A agreement are insufficient to foreclose fraud liability. Consequently, carefully crafted non-reliance provisions should operate to eliminate liability for fraud outside the four corners of the M&A agreement under both Delaware and Texas law.

Sandbagging

“Sandbagging” refers to a buyer seeking indemnification for breaches of representations and warranties that it knew to be false prior to closing. Under Delaware law, if the contract is silent with respect to the ability of the buyer to recover for breaches of which it had pre-closing knowledge, a buyer can recover damages for breach of a representation even if the buyer had knowledge pre-closing that the representation was false. In other words, the buyer’s pre-closing knowledge of the breach does not matter. The policy behind this approach is that the parties negotiated for the specific terms of the contract, including the division of risk between the buyer and seller, and knowledge of the buyer should not undermine this allocation of risk.

In Texas, practitioners commonly state that reliance on the seller’s representations is required for a buyer to bring a claim for indemnification. In other words, the buyer’s knowledge does matter if the contract is silent with respect to the buyer’s ability to recover for breaches of which it had pre-closing knowledge. The policy behind this approach is that the buyer did not rely on the representation to its detriment by closing the transaction if the buyer knew the representation was false prior to closing. However, the case law in Texas addressing sandbagging is less than clear. While there is nothing in the case law suggesting that Texas follows Delaware’s view, there is not a modern case specifically accepting the proposition that the “default” in Texas is that pre-closing knowledge matters in the context of sandbagging.

Parties to agreements governed by either Delaware or Texas law can include contractual provisions specifically allowing or disallowing sandbagging. But if Texas governing law applies, it would be particularly advisable to allow or disallow sandbagging explicitly rather than remaining silent because there is some uncertainty in how Texas courts would address the issue.

Statute of Limitations

In the context of an M&A agreement, a state’s statute of limitations governs the deadline by which a party must bring a claim for breach of contract. In Delaware, the statute of limitations for non-Article 2 claims is three years. However, parties can contractually agree to lengthen the statute of limitations to up to twenty years so long as the contract is in writing and involves at least $100,000. The statute of limitations in Texas for non-Article 2 transactions is four years. In contrast to Delaware, parties may not contractually agree to lengthen the statute of limitations beyond the four-year statutory period. As a result, Delaware affords parties more flexibility than Texas to negotiate a longer contractual survival period for breach claims.

Material Adverse Effect

An M&A agreement will often allow a buyer to walk away from a deal in the interim period between signing and closing if the seller’s business suffers a significant negative impact. This concept is contained within a material adverse effect (MAE) closing condition. Whether a particular occurrence constitutes an MAE can be a source of negotiation and disagreement.

There is a long line of Delaware cases interpreting the meaning of MAE clauses. In general, under this line of cases, the buyer must show that the negative change is long-term, unforeseen, and will have a substantial impact on the seller’s business. The negative impact must be seller-specific; industry-wide downturns are generally insufficient even if the impact on the seller’s business is severe. Even in Delaware courts, where MAE cases are commonly litigated, judicial determinations that an event constituted an MAE are extremely rare. A commonly repeated industry rule-of-thumb is that the seller’s financial results must decline at least 20% to trigger an MAE walk-away right.

In contrast to Delaware, very little case law in Texas exists interpreting MAE clauses. As in Delaware, whether an event is an MAE will likely depend upon the contractual language and the facts. Because the breadth of case law in Delaware provides parties a higher degree of predictability, parties signing M&A agreements governed by Texas law should be aware that in the event of future litigation, there is greater uncertainty regarding the ultimate interpretation of the MAE clause. This uncertainty may weigh in favor of including more precise contractual language in the M&A agreement describing the parties’ intent regarding what constitutes an MAE.

Lost Premium Damages

In an M&A deal where the target is a public company, the counterparties often negotiate what damages the target company can obtain in the event of a termination of the deal due to the buyer’s breach. A potential measure of damages is the diminution in the target’s share price caused by the deal failing to close, otherwise known as lost premium damages. Whether lost premium damages are an appropriate measure of damages has been hotly contested because the recovery, theoretically paid to compensate the shareholders, is retained by the target company. Some argue in favor of lost premium damages because of the practical difficulty in calculating damages without using the diminution in share price, because buyers would otherwise lack incentives to close the deal, and because the shareholders’ interests in the transaction closing closely mirror the target’s interest. Others argue against awarding lost premium damages because the shareholders, who were neither party to the M&A agreement nor third-party beneficiaries thereunder, cannot recover the damages themselves.

Following the latter reasoning, courts in Delaware historically have been reluctant to allow lost premium damages. In response to this reluctance, the Delaware General Corporation Law was amended in 2024 to specifically allow lost premium damages so long as the transaction agreement contains a provision allowing loss in shareholder value to be used as a measure of damages. Courts in Texas have not yet addressed the issue of lost premium damages. Given the debate outlined above, how Texas courts would view these provisions is uncertain.

If lost premium damages are a desired remedy, parties to M&A agreements governed by Delaware and Texas law should include a clause in the agreement specifically allowing lost premium damages. However, in the case of M&A agreements governed by Texas law, practitioners should consider additional contractual protections in the event that the lost premium provision is not upheld in court.

Successor Liability in Asset Purchases

Buyers in asset purchases typically do not inherit the seller’s obligations that are not specifically assumed liabilities in the deal. However, buyers can be liable for the seller’s debts and obligations, also termed successor liability, under several common law theories. First, the buyer expressly or impliedly assumes the liability under the transaction. Second, the transaction is a de facto merger under state law. Third, the transaction is fraudulent or was entered into to defraud creditors. Fourth, the buyer is a mere continuation of the seller.

Courts in Delaware mostly reject the traditional theories of successor liability and only impose liability on the buyer if the buyer expressly assumes the liability or if not allowing a creditor to recover from the buyer would be unjust given the circumstances. There is limited case law upholding successor liability under the traditional theories, but Delaware courts construe these narrowly. As a result, successor liability is relatively uncommon in Delaware.

In contrast, Texas’ successor liability law is governed by statute and is more restrictive than Delaware. Under the Texas Business Organizations Code, a buyer is not subject to successor liability unless required by statutory law or unless the buyer expressly assumes the liability under the transaction. This approach rejects the common law theories wholesale and provides parties with more certainty regarding whether a buyer can be held liable post-closing for a liability of the seller. In determining whether to subject the M&A agreement to Texas or Delaware governing law in the context of an asset purchase transaction, particularly in a transaction where the buyer wants to exclude particularly significant liabilities from the transaction, the buyer should weigh the treatment of successor liability issues under Delaware common law versus Texas’ statutory regime.

Conclusion

Delaware law is the default governing law for many M&A agreements due to its decades of case law, sophisticated bench, and business-friendly statutory law, which provide a high degree of certainty regarding the likely outcome of disputed matters. While Texas continues to build out its body of case law, there will be, in some respects, greater uncertainty for M&A agreements governed by Texas law. However, by being informed of the subtle differences in the relevant Delaware and Texas law, utilizing clear language that has been upheld in other jurisdictions, and contracting in the alternative so that protections are in place regardless of judicial interpretation, parties seeking to subject their M&A agreements to Texas governing law can help bridge the uncertainty gap.

The following Gibson Dunn lawyers prepared this update: Robert Little and Marie Baldwin.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. For further information, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or the leaders or members of the firm’s Mergers & Acquisitions or Private Equity practice groups:

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

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

Gibson Dunn partners Branden Berns, James Moloney, and Ryan Murr discussed current securities law issues surrounding reverse merger transactions in a recent DealLawyers.com podcast.

The topics covered range from the rationale for reverse mergers, to how changes in rules and interpretations have influenced the structure of reverse mergers, to key considerations for parties considering reverse mergers, and much more.

Listen to the podcast here: https://www.gibsondunn.com/wp-content/uploads/2025/05/Berns-Murr-Moloney-Deal-Lawyers-Download-Podcast-Shell-Companies-and-Reverse-Mergers-DealLawyers.com-5-5-25.mp3

Partner and Global Chair of our Business Restructuring and Reorganization Practice Group Scott Greenberg joins Debtwire’s co-managing editor Madalina Iacob on the Debtwired podcast to discuss how changing market dynamics are impacting deal activity, liability management exercises (LMEs), and what the rest of 2025 may hold for restructurings.

In their wide-ranging conversation, Scott explores trends in multi-tier LMEs, carve-out premiums, and group formation strategies. He also analyzes the impact of cooperation agreements on deal outcomes, provides insights into cross-border LMEs, and discusses how cultural differences can affect investment decisions.

Washington, D.C. partner Matthew Axelrod recently spoke with Export Compliance Manager about how the ability of the U.S. Commerce Department’s Bureau of Industry and Security (BIS) to deliver on leadership’s desire for increased export controls enforcement is tied to its budget. “There is tension between two things: folks in the administration wanting aggressive enforcement and a real focus on cost containment and budget,” says Matt, who served as BIS Assistant Secretary for Export Enforcement before joining Gibson Dunn. Companies should maintain their long-term compliance objectives, he adds, while ensuring that trade compliance programs are “ready to meet the moment.”

Matthew is Co-Chair of our firm’s Sanctions and Export Enforcement Practice Group, where he works closely with clients to conduct internal investigations, evaluate compliance programs, advise on voluntary self-disclosures, and defend against government-facing investigations.

Read the article, “Mixed Messaging or Mission Pivot?” in Export Compliance Manager [PDF].

Dallas partner Ashley E. Johnson and associates Jennafer M. Tryck and Rachel K. Nardone are the authors (with contributions from partner Michael Collins) of a Law360 article discussing two recent divergent federal district court decisions on whether plaintiffs had Article III standing to bring class actions challenging pension risk transfer transactions under the Employee Retirement Income Security Act (ERISA).

The article provides an overview of ERISA pension risk transfer litigation and an update on what may be next for ERISA plan sponsors and fiduciaries following the decisions.

From the Derivatives Practice Group: This week, ESMA was active, publishing various reports and guidelines concerning non-equity instruments, liquidity assessments of bonds, and data usage.

New Developments

SEC Publishes New Market Data, Analysis, and Visualizations. On April 28, the SEC’s Division of Economic and Risk Analysis (“DERA”) has published new data and analysis on the key market areas of public issuers, exempt offerings, Commercial Mortgage-Backed Securities (“CMBS”), Asset-Backed Securities (“ABS”), money market funds, and security-based swap dealers (“SBSD”) in an effort to increase transparency and understanding of our capital markets amongst the public. [NEW]
Paul S. Atkins Sworn in as SEC Chairman. On April 21, Paul S. Atkins was sworn into office as the 34th Chairman of the SEC. Chairman Atkins was nominated by President Donald J. Trump on January 20, 2025, and confirmed by the U.S. Senate on April 9, 2025. Prior to returning to the SEC, Chairman Atkins was most recently chief executive of Patomak Global Partners, a company he founded in 2009. Chairman Atkins helped lead efforts to develop best practices for the digital asset sector. He served as an independent director and non-executive chairman of the board of BATS Global Markets, Inc. from 2012 to 2015.
CFTC Staff Seek Public Comment Regarding Perpetual Contracts in Derivatives Markets. On April 21, the CFTC issued a Request for Comment to better inform them on the potential uses, benefits, and risks of perpetual contracts in the derivatives markets the CFTC regulates (“Perpetual Derivatives”). This request seeks comment on the characteristics of perpetual derivatives, including those characteristics which may differ across products. as well as the implications of their use in trading, clearing and risk management. The request also seeks comment on the risks of perpetual derivatives, including risks related to the areas of market integrity, customer protection, or retail trading.
CFTC Staff Seek Public Comment on 24/7 Trading. On April 21, the CFTC issued a Request for Comment to better inform them on the potential uses, benefits, and risks of trading on a 24/7 basis in the derivatives markets the CFTC regulates. This request seeks comment on the implications of extending the trading of CFTC-regulated derivatives markets to an effectively 24/7 basis, including the potential effects on trading, clearing and risk management which differ from trading during current market hours. The request also seeks comment on the risks of 24/7 trading, and the associated clearing systems, including risks related to the areas of market integrity, customer protection, or retail trading.
CFTC Staff Issues Advisory on Referrals to the Division of Enforcement. On April 17, the CFTC’s Market Participants Division, the Division of Clearing and Risk, and the Division of Market Oversight (“Operating Divisions”) and the Division of Enforcement (“DOE”) issued a staff advisory providing guidance on the materiality or other criteria that the Operating Divisions will use to determine whether to make a referral to DOE for self-reported violations, or supervision or non-compliance issues. According to the CFTC, this advisory furthers the implementation of DOE’s recent advisory, issued February 25, 2025, addressing its updated policy on self-reporting, cooperation, and remediation.
CFTC Staff Issues No-Action Letter Regarding the Merger of UBS Group and Credit Suisse Group. On April 15, the CFTC’s Market Participants Division (“MPD”) and Division of Clearing and Risk (“DCR”) issued a no-action letter in response to a request from UBS AG regarding the CFTC’s swap clearing and uncleared swap margin requirements. The CFTC said that the letter is in connection with a court-supervised transfer, consistent with United Kingdom laws, of certain swaps from Credit Suisse International to UBS AG London Branch following the merger of UBS Group AG and Credit Suisse Group AG. The no-action letter states, in connection with such transfer and subject to certain specified conditions: (1) MPD will not recommend the Commission take an enforcement action against certain of UBS AG London Branch’s swap dealer counterparties for their failure to comply with the CFTC’s uncleared swap margin requirements for such transferred swaps; and (2) DCR will not recommend the Commission take an enforcement action against UBS AG or certain of its counterparties for their failure to comply with the CFTC’s swap clearing requirement for such transferred swaps.
CFTC Staff Issues Interpretation Regarding U.S. Treasury Exchange-Traded Funds as Eligible Margin Collateral for Uncleared Swaps. On April 14, MPD issued an interpretation intended to clarify the types of assets that qualify as eligible margin collateral for certain uncleared swap transactions under CFTC regulations. CFTC Regulation 23.156 lists the types of collateral that covered swaps entities can post or collect as initial margin (“IM”) and variation margin (“VM”) for uncleared swap transactions. The CFTC indicated that the regulation, which includes “redeemable securities in a pooled investment fund” as eligible IM collateral, aims to identify assets that are liquid and will hold their value in times of financial stress. Additionally, MPD noted that the interpretation clarifies its view that shares of certain U.S. Treasury exchange-traded funds may be considered redeemable securities in a pooled investment fund and may qualify as eligible IM and VM collateral subject to the conditions in CFTC Regulation 23.156. According to MPD, swap dealers, therefore, (1) may post and collect shares of certain UST ETFs as IM collateral for uncleared swap transactions with any covered counterparty and (2) may also post and collect such UST ETF shares as VM for uncleared swap transactions with financial end users.

New Developments Outside the U.S.

ESMA Publishes the Annual Transparency Calculations for Non-equity Instruments and Bond Liquidity Data. On April 30, the European Securities and Markets Authority (“ESMA”), the EU’s financial markets regulator and supervisor, published the results of the annual transparency calculations for non-equity instruments and new quarterly liquidity assessment of bonds under MiFID II and MiFIR. [NEW]
ESMA Report Shows Increased Data Use Across EU and First Effects of Reporting Burden Reduction Efforts. On April 30, ESMA published the fifth edition of its Report on the Quality and Use of Data. The report reveals how the regulatory data collected has been used by authorities in the EU and provides insight into actions taken to ensure data quality. The document presents concrete cases on data use ranging from market monitoring to supervision, enforcement and policy making. The report also highlights ESMA’s Data Platform and ongoing improvements to data quality frameworks as key advancements in tools and technology for data quality. [NEW]
ESMA Issues Supervisory Guidelines to Prevent Market Abuse under MiCA. On April 29, ESMA published guidelines on supervisory practices to prevent and detect market abuse under the Market in Crypto Assets Regulation (“MiCA”). Based on ESMA’s experience under Market Abuse Regulation (“MAR”), the guidelines intended for National Competent Authorities (“NCAs”) include general principles for effective supervision and specific practices for detecting and preventing market abuse in crypto assets. They consider the unique features of crypto trading, such as its cross-border nature and the intensive use of social media. [NEW]
ESMA Assesses the Risks Posed by the Use of Leverage in the Fund Sector. On April 24, ESMA published its annual risk assessment of leveraged alternative investment funds (“AIFs”) and its first analysis on risks in UCITS using the absolute Value-at-Risk (“VaR”) approach. Both articles represent ESMA’s work to identify highly leveraged funds in the EU investment sector and assess their potential systemic relevance.
ESAs Publish Joint Annual Report for 2024. On April 16, the Joint Committee of the European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) published its 2024 Annual Report. The main areas of cross-sectoral focus in 2024 were joint risk assessments, sustainable finance, operational risk and digital resilience, consumer protection, financial innovation, securitisation, financial conglomerates and the European Single Access Point (“ESAP”). Among the Joint Committee’s main deliverables were policy products for the implementation of the Digital Operational Resilience Act (“DORA”) as well as ongoing work related to the Sustainable Finance Disclosure Regulation.
EC Publishes Consultation on the Integration of EU Capital Markets. On April 15, the European Commission (“EC”) published a targeted consultation on the integration of EU capital markets. This forms part of the EC’s plan to progress the Savings and Investment Union (“SIU”) strategy, published in March. According to the EC, the objective of the consultation is to identify legal, regulatory, technological and operational barriers hindering the development of integrated capital markets. Its focus includes barriers related to trading, post-trading infrastructures and the cross-border distribution of funds, as well as barriers specifically linked to supervision. The deadline for responses is June 10, 2025.
Japan’s Financial Services Agency Publishes Explanatory Document on Counterparty Credit Risk Management. On April 14, Japan’s Financial Services Agency (“JFSA”) published an explanatory document on the Basel Committee on Banking Supervision’s Guidelines for Counterparty Credit Risk Management. The document, co-authored with the Bank of Japan, indicates that it was published to facilitate better understanding of the Basel Committee’s guidelines and is available in Japanese only.

New Industry-Led Developments

ISDA Responds to FASB Proposal on KPIs for Business Entities. On April 30, ISDA submitted a response to the Financial Accounting Standards Board’s (“FASB”) proposal on financial key performance indicators (“KPIs”) for business entities. In the response, ISDA addressed the implications of KPI standardization, its potential impact on financial reporting and risk management, and the broader cost-benefit considerations for preparers and investors. Based on proprietary analysis, ISDA does not view financial KPI standardization or the proposed disclosures as urgent priorities for the FASB at this time. [NEW]
CPMI-IOSCO Assesses that EU has Implemented Principles for Financial Market Infrastructures for Two FMI Types. On April 28, CPMI-IOSCO released a report that assessed the completeness and consistency of the legal, regulatory and oversight framework in place as of October 30, 2019. The report finds that the implementation of the Principles for Financial Market Infrastructures is complete and consistent for all Principles for payment systems. The legal, regulatory and oversight frameworks in the EU for central securities depositories and securities settlement systems are complete and consistent with the Principles in most aspects. However, the assessment identified some areas for improvement, particularly in aspects where implementation was broadly, partly, or not consistent, including risk and governance principles. [NEW]
ISDA/IIF Responds to EC’s Consultation on the Market Risk Prudential Framework. On April 22, ISDA and the Institute of International Finance (“IIF”) submitted a joint response to the EC’s consultation on the application of the market risk prudential framework. The associations believe the capital framework should be risk-appropriate and as consistent as possible across jurisdictions to ensure a level playing field without competitive distortions due to divergent rules.
ISDA and FIA Respond to Consultation on Commodity Derivatives Markets. On April 22, ISDA and FIA submitted a joint response to the EC’s consultation on the functioning of commodity derivatives markets and certain aspects relating to spot energy markets. In addition to questions on position management, reporting and limits and the ancillary activities exemption, the consultation also addressed data and reporting and certain concepts raised in the Draghi report, such as a market correction mechanism to cap pricing of natural gas and an obligation to trade certain commodity derivatives in the EU only.
ISDA Submits Letter on Environmental Credits. On April 15, ISDA submitted a response to the Financial Accounting Standards Board’s (FASB) consultation on environmental credits and environmental credit obligations. ISDA said that the response supports the FASB’s overall proposals to establish clear and consistent accounting guidance for environmental credits, but highlights that clarification is needed in certain areas, including those related to recognition, derecognition, impairment and hedge accounting impacts.

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)

Partners Colin B. Davis and Jonathan D. Fortney are the editors of Lexology Panoramic: M&A Litigation 2025. Written by leading practitioners, the wide-ranging guide is a comparison tool that provides local insights into the legal and regulatory frameworks governing M&A litigation across multiple jurisdictions.

In “IRS-Imposed DeFi Tax-Reporting Obligations May Be Dead for Good” (Bloomberg Law, April 25, 2025), partners Jason Mendro, Matt Gregory and Nick Harper have written that the disapproval of a rule that would have imposed tax-reporting requirements on certain DeFi participants helps preserve decentralization and privacy by making it harder to make similar rules in the future.

Read the full article

Partner Mary Beth Maloney discussed a lawsuit filed by our client the Palm Beach Health Network against hospital ratings website Leapfrog with WPEC-TV in West Palm Beach, Florida.

Watch the segment