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

New Developments

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

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

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

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

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

New Developments Outside the U.S.

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

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

New Industry-Led Developments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

In an article for Law360, partner Dirk Oberbracht and associates Annekathrin Schmoll and Simon Stöhlker explore the structure, role, and innovations of Frankfurt’s new Commercial Court at the Higher Regional Court (Oberlandesgericht) and the Commercial Chambers at the Regional Court (Landgericht).

These permanent judicial bodies offer proceedings in English and are designed to handle complex, high-value, and cross-border disputes. Their article outlines the courts’ jurisdiction and appeal procedures and the benefits of specialized judicial expertise in commercial disputes, while also examining the broader implications for the future of commercial litigation in Europe.

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

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

Read More

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

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

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

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

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

After working hands-on with AI for 90 days, partner Trey Cox shared with Corporate Counsel the three things he knows, three things he thinks, and three things he predicts about the role of AI in litigation — and what that means for clients and lawyers alike.

Gibson Dunn advises leading participants in the global digital asset economy, including exchanges, issuers, custodians, intermediaries, infrastructure providers, and investors.

Our Digital Assets Hub is built for those operating at the frontier of innovation, where the regulatory landscape is complex and quickly evolving.

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

I. GLOBAL

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

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

Other highlights:

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

II. UNITED KINGDOM

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

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

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

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

Other highlights:

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

III. EUROPE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Other highlights:

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

IV. NORTH AMERICA

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

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

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

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

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

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

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

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

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

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

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

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

Other highlights:

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

In case you missed it…

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

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

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

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

V. APAC

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

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

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

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

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

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

[1]  Per- and polyfluoroalkyl substances.

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

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

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

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

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

The U.S. Securities and Exchange Commission recently held a roundtable to consider reform of disclosure requirements on executive compensation and perquisites, and the agency has signaled a shift in overall enforcement priorities. Writing for Law360, partners David Woodcock and Osman Nawaz, along with associate Hayden McGovern, explore these topics and practical implications for corporate leadership navigating their disclosure obligations.

Writing in the International AI in Financial Services Review 2025/26, published by Beaumont Capital Markets, of counsel Sameera Kimatrai and associate Aliya Padhani examine the growing role of AI in financial services and the pressing need for responsible governance.

In their article, “Deploying AI in Financial Institutions – Legal and Governance Best Practices,” they explore how AI is rapidly moving from experimentation to mainstream deployment in jurisdictions such as the United Arab Emirates, and why boards and senior leaders should take active responsibility for ensuring its use is ethical, transparent, and well-governed. They also highlight the importance of embedding human oversight and core principles from the outset to ensure AI is harnessed responsibly.

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

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

Background

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

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

The Notice provides the guidance directed by the Executive Order.

Prior Beginning of Construction Guidance

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

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

The Notice

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

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

Effective Date

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

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

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

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

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

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

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

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

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

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

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

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

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

From the Derivatives Practice Group: This week, ISDA and the Futures Industry Association submitted a joint response to the Reserve Bank of Australia on its consultation on guidance for Australia’s clearing and settlement facility resolution regime.

New Developments

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

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

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

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

New Developments Outside the U.S.

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

New Industry-Led Developments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

This edition of Gibson Dunn’s Federal Circuit Update for July summarizes the current status of petitions pending before the Supreme Court and recent Federal Circuit decisions concerning obviousness, prosecution history estoppel, interference estoppel, and Federal Circuit jurisdiction.

Federal Circuit News

Noteworthy Petitions for a Writ of Certiorari:

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

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

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

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

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

Other Federal Circuit News:

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

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

Upcoming Oral Argument Calendar

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

Key Case Summaries (July 2025)

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

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

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

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

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

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

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

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

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

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding developments at the Federal Circuit. Please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Appellate and Constitutional Law or Intellectual Property practice groups, or the following authors:

Blaine H. Evanson – Orange County (+1 949.451.3805, bevanson@gibsondunn.com)
Audrey Yang – Dallas (+1 214.698.3215, ayang@gibsondunn.com)

Appellate and Constitutional Law:
Thomas H. Dupree Jr. – Washington, D.C. (+1 202.955.8547, tdupree@gibsondunn.com)
Allyson N. Ho – Dallas (+1 214.698.3233, aho@gibsondunn.com)
Julian W. Poon – Los Angeles (+ 213.229.7758, jpoon@gibsondunn.com)

Intellectual Property:
Kate Dominguez – New York (+1 212.351.2338, kdominguez@gibsondunn.com)
Josh Krevitt – New York (+1 212.351.4000, jkrevitt@gibsondunn.com)
Jane M. Love, Ph.D. – New York (+1 212.351.3922, jlove@gibsondunn.com)

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

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

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

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

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

Background

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

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

The Ninth Circuit’s Decision

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

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

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

What It Means

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

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

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

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

Intellectual Property:
Kate Dominguez – New York (+1 212.351.2338, kdominguez@gibsondunn.com)
Josh Krevitt – New York (+1 212.351.4000, jkrevitt@gibsondunn.com)
Jane M. Love, Ph.D. – New York (+1 212.351.3922, jlove@gibsondunn.com)

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

Partner Maurice Suh is the editor of the latest edition of Lexology’s “In-Depth: Sports Law.” He also co-authored the USA chapter with of counsel Zathrina Zasell G. Perez and associate Charlie Peskowitz.

The publication is a practical, business-oriented legal guide tailored to key stakeholders in the sports industry. It explores recent legal developments and evaluates their impact on sports law across major jurisdictions.

Read the editor’s preface, authored by Maurice, here (subscription required): https://www.lexology.com/indepth/sports-law/editors-preface

To read the In-Depth: Sports Law – USA chapter, visit (subscription required): https://www.lexology.com/indepth/sports-law/USA

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

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

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

The FCA in Brief

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

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

Overview of the Allegations

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

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

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

Settlement Credit for Self-Disclosure and Remedial Actions

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

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

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

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

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

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

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

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

[2] See Boynton Remarks.

[3] See id.

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

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

[6] See id.

[7] See id.

[8] See id.

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

[10] See Gallant Settlement.

[11] See Press Release DOJ Private Equity.

[12] See Gallant Settlement.

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

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

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

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

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

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

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

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

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

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

The Illumina Inc. Settlement

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

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

Aero Turbine/Gallant Settlement

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

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

The Future for FCA Cybersecurity Actions

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

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

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

[3] Id. ¶ 7.

[4] Id. ¶ 55.

[5] 21 C.F.R. § 820.

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

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

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

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

False Claims Act/Qui Tam Defense:

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

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

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

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

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

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

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

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

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

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

Justice Liu, writing for the Court

Background:

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

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

Issue Presented:

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

Court’s Holding:

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

What It Means:

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

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

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

Appellate and Constitutional Law

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

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

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

ENFORCEMENT ACTIONS

UNITED STATES

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

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

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

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

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

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

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

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

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

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

REGULATION AND LEGISLATION

UNITED STATES

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

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

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

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

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

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

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

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

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

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

INTERNATIONAL

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

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

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

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

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

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

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

OTHER NOTABLE NEWS

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

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

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

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

FinTech and Digital Assets Group Leaders / Members:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

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

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

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

I.   Substituted Compliance in the SBS Market

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

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

II.   The Current Climate

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

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

III.   Key Compliance Considerations for Firms Relying on Substituted Compliance

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

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

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

IV.   Conclusion

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

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

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

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

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

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

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

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

[7] Id.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Key Developments:

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

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

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

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

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

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

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

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

Media Coverage and Commentary:

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

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

Case Updates:

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

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

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

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

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

3. Employment discrimination and related claims:

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

4. Actions against educational institutions:

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

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

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

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

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

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

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

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

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

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

© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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

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© 2025 Gibson, Dunn & Crutcher LLP.  All rights reserved.  For contact and other information, please visit us at www.gibsondunn.com.

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