Publications Archives

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

I. GLOBAL

The Global Reporting Initiative (GRI) announces new finalized climate change and energy standards

On June 26, 2025, GRI announced the release of new climate change and energy standards (GRI 102: Climate Change and GRI 103: Energy). GRI cites increased attention on climate change at the international level and increased stakeholder demand for transparency as drivers for the new standards. GRI 102 requires new disclosures on transition plans and the use of greenhouse gas (GHG) removals and carbon credits and incorporates “just transition” metrics related to impacts on workers, communities, and Indigenous Peoples. GRI 103 requires new disclosures on energy consumption (both renewable and non-renewable), decarbonization efforts, and energy reduction policies and commitments. Both standards are fully aligned with the GHG Protocol.

Also on June 26, 2025, GRI and the International Sustainability Standards Board (ISSB) issued a joint statement on reporting in alignment with both GRI 102 and ISSB’s IFRS S2, including to note that IFRS S2 emissions disclosures can fulfil GRI 102’s requirements so long as GHG emissions are measured in accordance with the GHG protocol.

Other highlights:

On June 12, 2025, the Science Based Targets initiative (SBTi) announced the release of its initial draft of the SBTi Automotive Sector Net-Zero Standard, a new standard designed to enable companies in the automotive sector to set science based, net zero targets. The standard is open for consultation until August 11, 2025.
On June 13, 2025, the Basel Committee on Banking Supervision, a global standard and policy setter for the banking industry, published a voluntary climate-related financial risk disclosure framework (BCBS597) featuring eight qualitative and quantitative disclosures. National regulators can voluntarily choose to adopt the guidance, which replaces references to “forecast” with “targets” and emphasizes materiality over mandatory reporting.
The United Nations Ocean Conference was held from June 9 to June 13, 2025, resulting in an intergovernmental declaration calling for action to protect the ocean as well as various voluntary commitments by countries and other entities in support of ocean conservation (including commitments by the European Commission, New Zealand, Indonesia, the World Bank, Canada, and 37 countries as part of the High Ambition Coalition for a Quiet Ocean).
From June 16 to June 26, 2025, the United Nations Framework Convention on Climate Change held its mid-year conference in Bonn, Germany to prepare for COP30, to be held in November 2025, focusing on issues such as adaptation, mitigation, climate finance, and just transition.
From June 30 to July 3, 2025, the 4^th International Conference on Financing for Development was held in Sevilla, Spain, where the intergovernmental Sevilla Commitment was adopted, reaffirming the Sustainable Development Goals and setting forth joint commitments to support investment in sustainable development to help close the $4 trillion annual gap in financing, particularly for developing countries.

II. UNITED KINGDOM

UK Government consults on climate transition plan requirements

On June 25, 2025, the Department of Energy Security and Net Zero (DESNZ) launched a consultation on climate-related transition plan requirements, signalling an accelerated regulatory trajectory towards Paris-aligned, net zero disclosures. The proposal envisages mandatory publication of 1.5°C-consistent transition plans by UK-regulated financial institutions (including banks, asset managers, pension funds, and insurers) and FTSE 100 companies, with sanctions for “explain-or-comply” shortfalls.

The consultation also seeks views on alignment with the Transition Plan Taskforce framework, interaction with forthcoming UK Sustainability Reporting Standards, integration of nature-related disclosures, and future assurance and accountability mechanisms. The consultation closes on September 17, 2025.

UK Government launches full review of statutory parental leave and pay system

On July 1, 2025, the UK Government launched a full-scale review of the current parental leave and pay system, which is expected to run for 18 months. The review comes after the June 2025 Women and Equalities Select Committee report, which concluded that the current statutory system does not adequately support working families and has fallen behind the majority of comparable countries (e.g., Canada, Finland, Iceland, Norway, Spain, Sweden, and other countries in the EU). The types of leave and pay in scope of the review are those related to maternity (including maternity allowance), paternity, adoption, shared parental leave, parental bereavement, unpaid parental leave, and neonatal care. Unpaid bereaved partner’s paternity leave is also currently in development and expected to come into force in 2026. The objectives against which the Government will consider the current system and future reforms are support for maternal health, economic growth through labour market participation, and ensuring sufficient resources to facilitate the best start in life for children and support for parents’ childcare needs. Certain changes to the current system are already underway via the Employment Rights Bill currently making its way through Parliament (see below). The call for evidence for the review closes on August 25, 2025.

UK Government publishes implementation roadmap for Employment Rights Bill

On July 1, 2025, the UK Government published a roadmap for the phased implementation of the Employment Rights Bill setting out a proposed timeline for when the various measures outlined in the Bill are expected to come into force. The roadmap is intended to provide employers with sufficient time and certainty to adapt to each of the measures as they become law. Amongst other things, the roadmap indicates that immediately after the Bill is enacted, the Strikes (Minimum Service Levels) Act 2023 will be repealed and measures to enhance protection against dismissal for engaging in industrial action will come into force. In April 2026, the maximum period for the protective award for collective redundancies will be doubled, paternity leave and unpaid parental leave will become Day One rights, and enhanced whistleblowing protections will be implemented, as will a number of trade union measures designed to simplify the union recognition process and changes related to electronic balloting. In October 2026, restrictions will be placed on the controversial “fire and rehire” method of unilaterally changing employment terms and conditions, employers will be required to take all reasonable steps to prevent sexual harassment, including by third parties, and changes will be made to the time limits for bringing employment tribunal claims. Certain other measures, including making unfair dismissal a Day One right, enhanced protections against dismissal for new and expectant mothers, and the introduction of rules to give greater certainty to workers on zero-hours contracts are not expected to be implemented until 2027. The Government has confirmed that it will produce guidance in advance of the various implementation guidelines to assist organisations in navigating the upcoming legal changes.

Other highlights:

On June 19, 2025, DESNZ issued supplementary guidance (implementing the Supreme Court’s Finch decision) on assessing the effects of downstream Scope 3 emissions from offshore oil and gas projects on the climate. This guidance is supplementary to existing guidance on Environmental Impact Assessments for oil and gas projects.
On June 26, 2025, the UK Government launched its new trade strategy, focusing on boosting exports, supporting high growth sectors, and strengthening trade defence. As part of this strategy, the Department for Business and Trade has replaced the National Contact Point with the Office for Responsible Business Conduct, to, among other things, “improve its visibility with industry,” “strengthen cooperation and coordinated action to promote responsible business conduct through multilateral forums,” and “support[] businesses to integrate responsible business practices.”

III. EUROPE

Omnibus discussions ongoing

The legislative process surrounding the Omnibus Simplification Package is continuing to progress. For more details, see our client alert of June 18, 2025.

Following the publication of a draft report by the European Parliament’s lead rapporteur Jörgen Warborn on June 12, 2025, the Council of the EU released its initial position on June 23, 2025. The proposed revisions include significantly increasing the applicability thresholds for both the Corporate Sustainability Due Diligence Directive (CSDDD) and Corporate Sustainability Reporting Directive (CSRD) and easing requirements related to climate transition plans. Therefore, all three bodies required for EU legislation, namely Parliament, Council, and Commission (see the Commission proposal of February 26, 2025 and our related client alert), have now provided first proposals.

In parallel, the European Financial Reporting Advisory Group (EFRAG) published a status report on the ongoing European Sustainability Reporting Standards (ESRS) revision process, which notably aims to reduce the number of mandatory data points by at least 50 percent, align more closely with ISSB standards, and streamline disclosures, particularly by significantly narrowing the scope of ESRS 2. Furthermore, on July 10, 2025, EFRAG published working drafts of revised ESRS standards that formed the basis for internal meetings and discussions on July 15 and 16, 2025. The non-authoritative working drafts prescribe, among other things, significantly simplified and reduced “shall” disclosure requirements, a different structure regarding the application requirements, the almost full abandonment of the current “may” disclosures and the introduction of non-mandatory illustrative guidance documents alongside the ESRS standards.

Further developments are expected in the coming months with negotiations within the European Parliament formally set to begin in mid-July and a plenary vote currently scheduled for October 2025. However, recent discussions within the European Parliament have revealed significant political disagreement over the direction and substance of the proposed changes. Concerns have been raised that the rapporteur’s proposals could weaken the overall coherence and ambition of the CSRD and CSDDD.

European Commission adopts new taxonomy measures

On July 4, 2025 the European Commission adopted a delegated act under the Taxonomy Regulation, aiming to streamline sustainability reporting and reduce administrative burden. Alongside the legal text, the Commission also published Q&As and model reporting templates to support implementation.

The new measures introduce a materiality concept for both financial and non-financial undertakings. Companies will no longer be required to assess the Taxonomy eligibility or alignment of economic activities that are not financially material to their business. In parallel, reporting obligations for financial market participants have been eased, including temporary exemptions from certain key performance indicators. Reporting templates have also been significantly simplified, with a substantial reduction in the number of required data points. In addition, the technical screening criteria have been adjusted, particularly the Do No Significant Harm requirements under the environmental objective of pollution prevention and control.

The delegated act is now subject to a four-month scrutiny period by the European Parliament and the Council. If no objections are raised, it will apply from January 2026 for reporting on the 2025 financial year. However, undertakings are given an option to apply the changes at a later date.

Update on greenwashing regulations in the EU and in Germany

In the EU, there is new momentum in the debate around the future of the proposal for the Green Claims Directive. A June 23, 2025 press release from the European Parliament indicates that the European Commission has announced its intention to scrap the legislative proposal. As a result, the Council of the EU cancelled the final trilogue negotiations with the European Parliament, which was set for June 23, 2025. There is various conflicting media coverage, claiming both that the European Commission intends to completely withdraw the Green Claims Directive and that it does not. There is currently no reliable official statement as to the status. Until now, there has been no formal withdrawal of the directive. The proposal for the Green Claims Directive was introduced in 2023 to make non-mandatory, commercial environmental claims more reliable, comparable, and verifiable across the EU and protect consumers from greenwashing and introduces obligations for third-party verifications prior to the publication of such claims.

Germany

There are also developments in Germany in the context of greenwashing regulations. The German Ministry of Justice has presented a draft bill within the framework of competition law (UWG) to transpose the so-called “Empowering Consumers Directive” or “EmpCo Directive” (EU Regulation 2024/825) into German national law. The deadline for EU member states to transpose the directive into national law is March 27, 2026. The EU directive aims to better protect consumers from greenwashing in advertising and prohibits companies, amongst others, from using certain terms that qualify as greenwashing.

CSRD / Omnibus “Stop-the-Clock” Directive Transposition Update

Since our last update, Estonia, Lithuania, and Poland have proceeded to transpose the Stop-the-Clock Directive into national law, and Liechtenstein has initiated the legislative process. Unexpectedly, on July 10, 2025, the German Federal Ministry of Justice and Consumer Protection published a new draft law that aims to transpose both the CSRD and the Stop-the-Clock Directive into national law. The draft generally maintains the applicability thresholds established in the original CSRD; it does, however, provide for an exemption of reporting obligations of wave 1 companies (i.e., public interest entities) below 1,000 employees for financial years 2025 and 2026.

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

Other highlights:

In a time when Germany is waiting for the repeal of the national Supply Chain Due Diligence Act—as anticipated in the German coalition agreement—BAFA (Federal Office for Economic Affairs and Export Control) somewhat surprisingly has released a new guidance document and FAQs focused on the protection of children’s rights.
On June 18, 2025, the European Parliament and the Council of the EU agreed on changes to the carbon border adjustment mechanism (CBAM), the EU´s carbon tax on imported goods, including introducing a 50-ton threshold to the regulation, which would exempt 90% of importers—primarily small- and medium-sized enterprises—from the scope of CBAM rules.
On July 9, 2025, the European Parliament passed a resolution rejecting the European Commission’s proposed methodology to classify countries by their deforestation risk level under the EU Deforestation Regulation (EUDR).
The European Commission is preparing for an additional Omnibus Package, this time focusing on EU environmental laws in the areas of circular economy, industrial emissions, and waste management. EU officials suggest that this Environmental Omnibus could propose amendments to the EUDR, the Green Claims Directive, and the Industrial Emissions Directive. A Call for Evidence to simplify environmental legislation and reduce administrative burdens at the implementation level was launched on July 22, 2025.

IV. NORTH AMERICA

The Securities and Exchange Commission (SEC) withdraws proposed rules related to ESG disclosures and shareholder proposals

On June 17, 2025, the SEC announced that it was formally withdrawing various proposed rules issued between 2020 and 2023. Among the withdrawn rules is a rule proposal that would have required investment advisers and funds to provide additional disclosures regarding ESG strategies, investment practices, and, for certain environmentally focused funds, the greenhouse gas emissions associated with their portfolios. Also withdrawn is a rule proposal that would have amended Rule 14a-8’s substantive bases for the exclusion of shareholder proposals, making changes to the substantial implementation basis for exclusion, the duplication basis for exclusion, and the resubmission basis for exclusion. The withdrawn rule proposal will adversely impact some of the provisions that shareholder proponents rely on to advance ESG-related proposals. The SEC stated that it will issue new proposed rules if it decides to pursue future regulatory action in any of the areas covered by the withdrawn rules.

Canada’s Competition Bureau announces the release of final guidelines on environmental claims

On June 5, 2025, Canada’s Competition Bureau announced the release of final guidelines on environmental claims, which are designed to help companies comply with anti-greenwashing laws passed last year as an amendment to the Competition Act’s provisions related to deceptive marketing. The guidelines cover four provisions of the Competition Act relevant to environmental claims: (i) false or misleading representations, (ii) product performance claims, (iii) claims about environmental benefits of a product, and (iv) claims about environmental benefits of a business or business activity. Among other principles, the guidelines emphasize that (i) claims relating to performance or environmental benefits of a product should be “adequately and properly tested” and (ii) claims about the future, including net zero claims, should be “adequately and properly substantiated in accordance with internationally recognized methodology.”

States sue Trump Administration over electric vehicle waiver repeal

On June 12, 2025, President Donald Trump signed joint resolutions under the Congressional Review Act (CRA) repealing waivers of preemption by the Clean Air Act previously issued by the Environmental Protection Agency (EPA) authorizing California to establish electric vehicle emissions standards, including banning the sale of gas-powered vehicles by 2035, mandating the sale of zero-emission trucks, and implementing nitrogen oxide engine emissions standards. The President stated that the EPA is authorized to grant waivers only to “address compelling and extraordinary localized issues,” and that the repeal was to prevent California’s “attempts to impose an electric vehicle mandate, regulate national fuel economy, and regulate greenhouse gas emissions.”

That same day, ten states joined California’s Attorney General in filing a complaint against the Trump Administration in federal court, arguing that the CRA applies to federal agency rules but does not apply to EPA waivers. Specifically, the complaint alleges, among other causes of action, that the Trump Administration’s actions are beyond its statutory authority, violate the Administrative Procedure Act and the CRA, and violate the Constitution’s separation of powers, principles of federalism, and Take Care Clause. The complaint asks the court to declare that the joint resolutions are unconstitutional, to declare that the CRA does not apply to EPA waiver decisions, and to enjoin the EPA from taking any action to implement the joint resolutions.

SEC files status update in climate disclosure rules litigation

As discussed in our April 2025 alert, after the SEC withdrew from its defense of the climate disclosure rules, the Eighth Circuit directed the SEC to file a report advising (i) whether the SEC intends to review or reconsider the rules and (i) if the SEC determines to take no action, whether it “will adhere to the rules if the petitions for review are denied.” On July 23, 2025, the SEC filed a status report with the Court stating that the SEC “does not intend to review or reconsider the [r]ules at this time” and asking the court to lift the abeyance and make a ruling since the case has been fully briefed. The SEC stated it is possible the SEC may take action to “replace, rescind, or modify” the rules, but that the Court’s decision would “inform the scope and need for such action, including providing insights as to the [SEC’s] jurisdiction and authority” to issue the rules. SEC Commissioner Caroline Crenshaw issued a statement the same day criticizing the status update as being unresponsive to the Court’s request and as avoiding the “statutorily-required work” under the Administrative Procedure Act to rescind, repeal, or modify the rules.

In case you missed it…

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

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

V. APAC

Singapore issues draft guidance on the voluntary carbon market

On June 20, 2025, Singapore’s National Climate Change Secretariat, Ministry of Trade and Industry, and Enterprise Singapore jointly issued draft guidance and consultation on companies’ use of carbon credits as part of their decarbonization plans under Singapore’s voluntary carbon market. The draft guidance aims to aid companies in assessing the environmental integrity of carbon credits and ensuring that reductions from credits are not double counted. Moreover, they remind companies that carbon credits should only be used after a company has prioritized all feasible emission abatement efforts. The draft guidance is open for public feedback until July 20, 2025.

The Australian Sustainable Finance Institution releases sustainable finance taxonomy

On June 17, 2025, the Australian Sustainable Finance Institution released the Australian sustainable finance taxonomy, marking a step toward aligning investment with the country’s net zero ambitions. The taxonomy provides financial institutions and businesses with a voluntary framework to assess the green claims of economic activities and invest in projects aimed at achieving net zero. Some additional goals of the taxonomy are to direct private investments to these sustainable activities and prevent companies from “greenwashing.” The taxonomy represents an almost two-year collaboration between the government and the finance sector.

The Securities and Exchange Board of India publishes ESG debt securities framework

On June 5, 2025, the Securities and Exchange Board of India announced the release of a comprehensive framework for ESG debt securities designed to increase transparency and credibility. The framework includes a set of regulations for the issuance of social bonds, sustainability bonds, and sustainability-linked bonds. The framework provides guidelines for pre-issuance, post-issuance, and ongoing reporting, including requiring issuers to define how proceeds will be allocated and submit disclosures regarding project objectives and selection criteria. Additionally, only debts that align with internationally recognized standards (such as the International Capital Market Association standards or the ASEAN or EU standards) may be labeled as a social bond, sustainability bond, or sustainability-linked bond. Third-party reviewers must be appointed pre- and post-issuance to ensure alignment with recognized frameworks.

Other highlights:

On June 26, 2025, the Singapore Business Federation recommended a one- to two-year time extension and more specific regulatory guidance for small- and medium-sized companies listed on the Singapore Exchange Regulation to prepare for new climate-related disclosure requirements.
The Korea Stock Exchange announced that it will introduce carbon emissions futures in 2026, with the goal of improving liquidity in the carbon market and providing businesses with tools to manage risks related to emissions costs.

The following Gibson Dunn lawyers prepared this update: Carla Baum, Mitasha Chandok, Becky Chung, Stephanie Collins, Georgia Derbyshire, Mellissa Campbell Duru, Samuel Fernandez, Ferdinand Fromholzer, Saad Khan, Julia Lapitskaya, Vanessa Ludwig, Babette Milz, Johannes Reul, Julianne Saunders, and Meghan Sherley.

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

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

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

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.

Associate Annekathrin Schmoll is the author of the LexisNexis practice note, “Enforcing ICSID Awards in Germany.”

The practice note considers the recognition and enforcement of International Centre for Settlement of Investment Disputes (ICSID) awards in Germany.

Employers are advised to take note of certain provisions of the Act related to employee benefits and compensation matters, which are summarized in this update.

On July 4, 2025, President Trump signed into law the “One Big Beautiful Bill Act” (the Act), a tax and spending package. Employers are advised to take note of certain provisions of the Act related to employee benefits and compensation matters, which are summarized below. Most of the employee benefits-related changes will be effective January 1, 2026, except as otherwise noted below.

Tips and Overtime Deductions

The Act provides temporary gross income deductions for (i) “qualified tips” and (ii) the overtime‑premium portion of FLSA overtime pay. Beginning with the 2025 tax year and continuing through 2028, employees (and eligible self‑employed individuals) may deduct up to $25,000 of qualified tips each year, while individuals may deduct up to $12,500 of overtime premiums (or $25,000 for joint filers). Both deductions phase out once modified AGI exceeds $150,000 ($300,000 for joint filers) and are available whether or not the individual itemizes deductions. Importantly, the tips deduction is limited to occupations the IRS identifies by October 2, 2025 as “customarily and regularly” tipped as of December 31, 2024, and is unavailable to employees (or self‑employed taxpayers) in specified service trades or businesses.

For employers, these provisions create new information‑reporting and payroll‑coding obligations beginning with wages paid in 2025. Employers must file information returns and furnish annual statements that separately state (a) cash tips meeting the Act’s requirements and the recipient’s occupation, and (b) total qualified overtime compensation. The IRS has promised transition relief for 2025, but W‑2 and 1099 layouts, time‑and‑attendance systems, and payroll codes will need to be updated before 2026 to capture and report these amounts accurately in the future. Employers in hospitality, food service, retail, and other high‑tip or overtime‑heavy sectors should begin coordinating with payroll vendors, review classification practices, and train managers on the heightened importance of contemporaneous tip and overtime tracking.

Health Savings Accounts

Several changes to Health Savings Accounts (HSAs) were made by the Act, including:

Coverage of Direct Primary Care Arrangements. Direct primary care arrangements—which provide access to certain primary care services for a fixed monthly fee—will not be considered disqualifying coverage for purposes of HSA eligibility, so long as the membership fee does not exceed $150 per month for an individual or $300 per month for a family (indexed for inflation). There had been uncertainty prior to the Act whether direct primary care services were compatible with High Deductible Health Plans (HDHPs) and HSAs because the monthly fee that covers office visits was payable prior to the satisfaction of the HDHP deductible. After passage of the Act, direct primary care fees within the statutory limits are qualified medical expenses that are eligible for reimbursement from an HSA.
Telehealth Services Available without Regard to HDHP Deductible. During the COVID-19 pandemic, Congress temporarily allowed HDHPs to allow participants access to telehealth services irrespective of whether the minimum HDHP deductible had been met (i.e., allowed for “first-dollar coverage” for telehealth services). The Act permanently extends this telehealth relief so that HDHPs may provide first-dollar coverage of telehealth or other remote care services without impacting HSA This provision of the Act is effective for all plan years beginning on or after January 1, 2025.

Increased Dependent Care FSA Limits

The Act increases the annual limit on dependent care FSA contributions, the first increase in the amount since 1986. In 2026, the limit will increase to $7,500 (or $3,750 for married couples filing separately). Although the increased contribution limit may help employees cover rising childcare costs, this increase may make it more difficult for plans to pass the 55% Average Benefits Non-Discrimination Test, which is based on utilization, because more highly compensated employees tend to utilize FSAs as compared to non-highly compensated employees.

“Trump Accounts” – Child Savings Program

Section 503A of the Act created new tax-preferred savings accounts for children, similar to individual retirement accounts (IRAs), referred to as “Trump Accounts.” The accounts may be established for children under the age of 18 with contributions of up to $5,000 per year (indexed for inflation) permitted until the calendar year in which the beneficiary reaches the age of 18. U.S. citizens born between 2025 and 2028 with U.S. social security numbers will be automatically enrolled for such accounts and receive a $1,000 one-time contribution from the federal government. Investments are limited to qualified broad-based market index funds and will grow on a tax-deferred basis. Distributions are generally prohibited until the first day of the calendar year in which a child attains age 18 and are generally subject to the same rules as IRA distributions, but with several exceptions to the 10% early withdrawal penalty that typically applies for withdrawals before age 59 ½ for qualified expenses such as qualified higher education expenses or the first-time purchase of a principal residence.

Employers may adopt Trump Account contribution programs and contribute up to $2,500 per year (as indexed for inflation) on a tax-free basis to the Trump Account of an employee or an employee’s dependent; however, such contributions will count against the annual $5,000 contribution limit. Employers that wish to do so must adopt written plan documents and the program must meet nondiscrimination requirements similar to those applicable to dependent care FSAs.

Student Loan Repayment Assistance

Section 127 of the Internal Revenue Code (the Code) allows employers to sponsor qualified educational assistance programs that provide employees, on a tax-free basis, up to $5,250 per year for certain education expenses, such as tuition and related fees. During the COVID-19 pandemic, Congress temporarily allowed student loan payments to qualify as education expenses allowable under these programs. The Act makes permanent employers’ ability to pay or reimburse student loan payments on a tax-free basis through qualified education assistance programs.

In addition, the $5,250 annual limit for qualified education assistance programs will be indexed for inflation starting in 2026.

Fringe Benefits

Moving Expense Deductions. In 2017, the Tax Cuts and Jobs Act disallowed the moving expense deduction and employer-reimbursed moving expense income exclusion, but the suspension was set to lapse at the end of 2025. The Act makes the disallowance permanent. Employers should be aware that moving expenses will continue to be includible as taxable compensation for employees.
Bicycle Commuting Reimbursement. The Act permanently eliminates the exclusion from an employee’s gross income the $20/month bicycle commuting employer reimbursement, which had been temporarily suspended by the Tax Cuts and Jobs Act through the end of 2025.

Executive Compensation Changes

Code Section 162(m) generally limits the annual compensation deduction for publicly held corporations to $1 million per covered employee. Current Treasury regulations under 162(m) apply affiliated group rules under Code Section 1504 to determine the nondeductible amount of compensation. For tax years beginning in 2026, the Act changes the aggregation rule under Code Section 162(m) to include all members of a corporation’s controlled group and affiliated service group, as determined under Code section 414, for purposes of both determining covered employees and calculating the deduction limit. The $1 million deducible compensation limit will be allocated to each member of the controlled group or affiliated service group based on the pro-rata portion of the total compensation paid by that member.

With respect to tax-exempt organizations, the Act expands the application of Code Section 4960’s existing 21% excise tax on employers that paid more than $1 million in remuneration in a year to certain highly paid employees or paid an “excess parachute payment” to a covered employee to apply with respect to any employee or former employee of the tax-exempt organization who was employed in 2017 or later years.

Employer Tax Credits for Family and Medical Leave, Child Care

The Act permanently establishes a paid family medical leave credit (that was set to expire in 2025), which allows an employer to offset the costs of that benefit with credits against wages paid to qualifying employees on family and medical leave. Employers are allowed to elect a credit amount of either the percentage of wages paid to qualifying employees on family and medical leave or the percentage of premiums paid or incurred for family and medical leave insurance. In addition, the Act allows employers to consider employees with six-months’ tenure as qualified employees that can be taken into account for the credit (the minimum service requirement previously had been one year).

The Act also makes permanent employer tax credits for childcare and increases the employer-provided child tax credit up to $500,000 on up to 40% of the employer’s qualified childcare expenses and indexes the amount of the credit for inflation.

The following Gibson Dunn lawyers assisted in preparing this update: Michael Collins, Sean Feller, Krista Hanvey, Christina Andersen, and Spencer Bankhead.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these issues. To learn more about these developments, please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Executive Compensation & Employee Benefits practice group:

Sean C. Feller – Los Angeles (+1 310.551.8746, sfeller@gibsondunn.com)
Krista Hanvey – Dallas (+1 214.698.3425, khanvey@gibsondunn.com)
Michael J. Collins – Washington, D.C. (+1 202.887.3551, mcollins@gibsondunn.com)
Christina Andersen – New York (+1 212.351.3857, candersen@gibsondunn.com)
Spencer Bankhead – Orange County (+1 949.451.3839, sbankhead@gibsondunn.com)

On July 21, 2025, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced that it intends to postpone the effective date for the final rule establishing Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Program and Suspicious Activity Report Filing Requirements for SEC-registered investment advisers and exempt reporting advisers (IA AML Rule).[1] The effective date, originally set for January 1, 2026, will be delayed to January 1, 2028.

According to the announcement, FinCEN’s decision to postpone the IA AML Rule is intended to allow for a broader review of the rule’s scope and substance to ensure it is efficient and appropriately tailored to the diverse business models and risk profiles within the industry, while still addressing the ongoing risks of illicit finance and exploitation of the U.S. financial system.

During the postponement period, FinCEN plans to revisit the substance of the IA AML Rule through a future rulemaking process. In addition, FinCEN, in coordination with the Securities and Exchange Commission, intends to reconsider the joint proposed rule regarding customer identification program requirements for investment advisers.

Had the IA AML Rule become effective on January 1, 2026, private fund sponsors registered or required to register with the SEC as investment advisers or filing reports as exempt reporting advisers[2] would have faced significant new compliance obligations, including a formal requirement to establish and maintain a risk-based AML/CFT Program that includes, at a minimum: (i) written policies, procedures, and controls reasonably designed to prevent the adviser from being used for illicit finance purposes and to ensure compliance with the Bank Secrecy Act’s (BSA) requirements; (ii) ongoing AML/CFT training for appropriate personnel; (iii) independent testing of the AML Program; (iv) ongoing risk-based due diligence of customers; and (v) the appointment of a designated individual responsible for day-to-day compliance with the AML/CFT Program and BSA. While many investment advisers already maintain AML Programs, these BSA obligations would require additional compliance measures for much of the industry and would subject covered advisers to examination for BSA compliance and civil and criminal exposure for non-compliance. Additionally, advisers would have been obligated to monitor for and report suspicious activities through the filing of Suspicious Activity Reports (SARs) with FinCEN and to comply with other BSA currency reporting, information sharing, and recordkeeping obligations, processes that many private fund sponsors have not previously undertaken.

While FinCEN must go through the rulemaking process to formally extend the effective date of the IA AML Rule, Treasury indicated that to provide regulatory certainty to advisers in the interim, FinCEN intends to issue appropriate exemptive relief recognizing the delayed effective date. Advisers should monitor further developments as FinCEN undertakes its review and prepares for future rulemaking in this area.

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

[2] The Final Rule includes some narrow exemptions to coverage for certain types of advisers, including RIAs that only register with the SEC because they are Mid-Sized Advisers, Multi-State Advisers, or Pension Consultants and RIAs that do not report any Assets Under Management on Form ADV. For investment advisers based outside of the United States, the IA AML Rule only applies to advisory activities that (i) take place within the United States, including through the involvement of U.S. personnel or (ii) provide advisory services to a U.S. person or a foreign-located private fund with an investor that is a U.S. person. FinCEN, Fact Sheet: FinCEN Issues Final Rule to Combat Illicit Finance and National Security Threats in the Investment Adviser Sector (Aug. 28, 2024), https://www.fincen.gov/sites/default/files/shared/IAFinalRuleFactSheet-FINAL-508.pdf; IA AML Rule, 89 Fed. Reg. 72156 (Sept. 4, 2024), https://www.govinfo.gov/content/pkg/FR-2024-09-04/pdf/2024-19260.pdf.

The following Gibson Dunn lawyers prepared this update: Kevin Bettsteller, Stephanie Brooker, M. Kendall Day, Ella Alves Capone, Shannon Errico, Greg Merz, and Sam Raymond.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding the issues and considerations discussed above. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any of the leaders or members of the firm’s Investment Funds and Anti-Money Laundering practice groups:

Investment Funds:

Carolyn Abram – Dubai (+971 4 318 4647, cabram@gibsondunn.com)
Kevin Bettsteller – Los Angeles (+1 310.552.8566, kbettsteller@gibsondunn.com)
Albert S. Cho – Hong Kong (+852 2214 3811, acho@gibsondunn.com)
Candice S. Choh – Los Angeles (+1 310.552.8658, cchoh@gibsondunn.com)
Shannon Errico – New York (+1 212.351.2448, serrico@gibsondunn.com)
John Fadely – Singapore (+65 6507 3688, jfadely@gibsondunn.com)
A.J. Frey – Washington, D.C./New York (+1 202.887.3793, afrey@gibsondunn.com)
Shukie Grossman – New York (+1 212.351.2369, sgrossman@gibsondunn.com)
James M. Hays – Houston (+1 346.718.6642, jhays@gibsondunn.com)
Kira Idoko – New York (+1 212.351.3951, kidoko@gibsondunn.com)
Gregory Merz – Washington, D.C. (+1 202.887.3637, gmerz@gibsondunn.com)
Eve Mrozek – New York (+1 212.351.4053, emrozek@gibsondunn.com)
James O’Donnell – London (+44 20 7071 4261, jodonnell@gibsondunn.com)
Roger D. Singer – New York (+1 212.351.3888, rsinger@gibsondunn.com)
Edward D. Sopher – New York (+1 212.351.3918, esopher@gibsondunn.com)
C. William Thomas, Jr. – Washington, D.C. (+1 202.887.3735, wthomas@gibsondunn.com)
Kate Timmerman – New York (+1 212.351.2628, ktimmerman@gibsondunn.com)

Anti-Money Laundering:

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

Writing for Law360, of counsel Sam Raymond and associate Roxana Akbari detail how the initial applications of U.S. Deputy Attorney General Todd Blanche’s memorandum on digital assets are critical for digital asset companies and their executives.

The article outlines the Blanche memo’s legal and policy background and explores emerging patterns in the Department of Justice’s crypto enforcement strategy. It also provides a series of key takeaways for digital asset companies, including the continuing importance of sanctions and national security implications in prosecutions, as well as the ongoing need for formal compliance programs.

In an article for Insights: The Corporate & Securities Law Advisor, partner Andrew Kaplan, of counsel Mark Mixon, and associate Justine Drohan examine a recent Delaware Court of Chancery decision in which the court upheld a board’s rejection of an activist group’s non-compliant director nomination notice, but still allowed a rare second chance to meet the company’s advance notice bylaw.

Partner Charline Yim and associate Marryum Kahloon are the authors of the USA chapter of Lexology Panoramic: Investment Treaty Arbitration.

The chapter covers international legal obligations, the regulation of inbound investment, the enforcement of awards against the state, and key developments over the past year.

EpicentRx, Inc. v. Superior Court, S282521 – Decided July 21, 2025

The California Supreme Court unanimously reaffirmed that forum-selection clauses are presumptively enforceable and rejected the argument that courts may refuse to enforce them when they would deprive plaintiffs of the right to a jury trial.

“Forum selection clauses serve vital commercial purposes and should generally be enforced.… A forum selection clause is not unenforceable simply because it requires the parties to litigate in a jurisdiction that does not afford civil litigants the same right to trial by jury as litigants in California courts enjoy.”

Chief Justice Guerrero, writing for the Court

Background:

A shareholder sued a biotech company and its agents in California superior court. The company moved to dismiss on the ground of forum non conveniens. Because the company’s corporate charter and bylaws include mandatory forum-selection clauses requiring shareholder claims against it to be brought in Delaware’s Court of Chancery, the company argued that the shareholder’s claims could not be heard in California.

The trial court denied the company’s motion to dismiss. It reasoned that at least some of the shareholder’s claims were legal and would be tried to a jury in California, but because there are no jury trials in the Delaware Court of Chancery, the forum-selection clauses would effectively deprive the plaintiff of that jury-trial right. The Court of Appeal denied the company’s petition for writ of mandate.

Issue Presented:

Is a forum-selection clause enforceable when a party that would have a right to a jury trial in a California court would not have the same right in the forum chosen by the parties?

Court’s Holding:

Yes. Even where enforcing a forum-selection clause may effectively deprive a plaintiff of the right to trial by jury, that alone is no basis to refuse enforcement. California does not have a compelling public policy against forum-selection clauses that select a forum that does not recognize a jury-trial right.

What It Means:

The Court explained that forum-selection clauses are presumptively enforceable, but made clear that there can be reasons of public policy to refuse to enforce them. The Court left for another day the question what those public-policy grounds for refusing enforcement might be; it decided only that the loss of a jury-trial right alone is not enough to invalidate a forum-selection clause.
The Court suggested that the fundamental nature of a policy may be revealed by the Legislature’s inclusion of an antiwaiver provision in a statute. If a statute itself makes clear that the rights it conveys cannot be contracted away, the forum-selection clause may not be enforceable.
The combination of forum-selection clauses and the perception that California law is more favorable to plaintiffs in certain types of cases has often resulted in parallel litigation, with one party suing in the forum chosen in an agreement and the other party suing in California. The Court’s decision may discourage the filing of California complaints where the only policy supposedly standing in the way of enforcing a forum-selection clause is the potential loss of the right to a jury trial.
In cases where plaintiffs continue to sue in California notwithstanding a forum-selection clause pointing to another state, defendants may continue (1) filing motions to dismiss on grounds of forum non conveniens and (if unsuccessful) petitions for a writ of mandate challenging orders refusing to enforce forum-selection clauses; and (2) filing and litigating responsive suits in the forum chosen by the parties. In those cases, the parties will race in different jurisdictions to a final judgment that may have preclusive effect in the other case.

Gibson Dunn lawyer Russell H. Falconer argued on behalf of amici curiae that also petitioned for review in the California Supreme Court over the enforceability of forum-selection clauses. Mr. Falconer was joined on the amicus brief by Angelique Kaounis, Daniel R. Adler, Aaron Smith, and James Tsouvalas.

The Court’s opinion is available here.

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

Appellate and Constitutional Law

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

Related Practice: Labor and Employment

Jason C. Schwartz
+1 202.955.8242
jschwartz@gibsondunn.com

Katherine V.A. Smith
+1 213.229.7107
ksmith@gibsondunn.com

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

The Executive Order describes seabed mineral resources as “a core national security and economic interest” for the US and aims to establish the US as a global leader in seabed mineral exploration and development.

On 24 April 2025, President Trump issued an Executive Order—“Unleashing America’s Offshore Critical Minerals and Resources” (Executive Order)—intending to significantly advance the United States’s (US) deep-sea mining capabilities in the Pacific Ocean.[1] The Executive Order—which describes seabed mineral resources as “a core national security and economic interest” for the US—aims to establish the US as a global leader in seabed mineral exploration and development. On 25 June 2025, the US Department of the Interior announced new policy steps “to speed up the search and development of critical minerals offshore”, advancing the Executive Order. Several companies have already applied (or are reported to be in negotiations) for commercial licenses to mine in international waters. These moves have been met with criticism, including from the European Union (EU) and China as violating the framework for exploitation under international agreements—and many States have called for a moratorium or precautionary pause raising concerns regarding the potential harm to the marine environment.

The Executive Order has changed—and will continue to shape—the course of the international debate on deep-sea mining. Whilst the US is forging ahead with its plans to issue licenses by setting its own standards, this move could prompt other countries to do the same. Investors should therefore carefully assess the risks involved—whether that is uncertainty around licensing and regulatory environment, increased costs, litigation risk and/or concerns with respect to environmental impacts of deep-sea mining. In circumstances where deep-sea mining in international waters is considered to be a violation of international law, investors also need to carefully assess how their investments may be impacted, and consider available options to protect them.

We explore the international legal framework applicable to deep-sea mining, and further consider implications of the Executive Order, States’ responses and issues that need to be considered by investors and companies interested in exploring the opportunities in further detail below.

The International Framework

Deep-sea mining may take place in waters within a country’s jurisdiction, known as exclusive economic zones (EEZs). EEZs are areas extending 200 nautical miles from a State’s coast and, subject to their domestic laws, States have jurisdiction to undertake deep-sea mining (and otherwise control, explore and conserve natural resources) within these zones. States such as Norway, the Cook Islands, and Sweden have actively explored deep-sea mining operations in their respective EEZs. Several other States—including Brazil and China—are supportive of deep-sea mining in the EEZ too.

For deep-sea mining in international waters beyond the EEZs, known as the “Area”, the UN Convention on the Law of the Sea (UNCLOS) has established the applicable legal and regulatory framework.[2] UNCLOS is designed to ensure equitable access to resources, protect the environment, and facilitate responsible exploitation of the seabed.[3]

Under UNCLOS, the Area and its resources are described as the “common heritage of mankind” and the Area’s minerals are only to be “alienated” in accordance with Part XI of UNCLOS and the “rules, regulations and procedures of the [International Seabed Authority]”.[4] The International Seabed Authority (ISA) is an intergovernmental agency and comprises 168 member States and the EU. Whilst the US is not a full member of the ISA (as it has not ratified UNCLOS), it has historically participated as an observer at the ISA. Further, much of UNCLOS is recognized by the US as reflecting customary international law.

The ISA is mandated under UNCLOS to issue rules, regulations and procedures with respect to the exploration and exploitation of minerals in the Area.[5] At present, pursuant to regulations issued by the ISA, 31 exploration contracts have been approved, which largely concern the “Clarion-Clipperton Zone”—a 6 million km² area in the Pacific, between Hawaii and Mexico. With respect to exploitation, however, no regulations have yet been issued (and, accordingly, no contracts approved)—therefore deep-sea mining in international waters remains forbidden under UNCLOS.

In recent years, however, the ISA has faced increasing pressure to finalise regulation on deep-sea mining. On 25 June 2021, the island nation of Nauru notified the ISA of its plans to begin deep-sea mining in international waters and triggered an UNCLOS treaty provision known as the “two-year rule”. This rule requires the ISA to “nonetheless consider and provisionally approve” a plan for exploitation of deep-sea minerals in circumstances where ISA exploitation regulations have not yet been issued. On 21 July 2023 (i.e., the end of the two-year period), ISA delegates agreed to extend the deadline for the finalisation of the plan for exploitation to July 2025 (a further two-year extension). The ISA’s 30th session is currently in progress—though it is unlikely that regulations will be finalized during that meeting.

The Executive Order

As the Executive Order recognizes, critical minerals (such as nickel, cobalt, copper, manganese and titanium) and rare earth elements are crucial to a range of sectors—including energy, infrastructure and defence. China dominates both the production and processing of minerals—accounting for 61% of global mined rare earth production and controlling over 90% of the processing.[6] For the US, therefore, deep-sea mining presents an opportunity to reduce dependence on foreign suppliers such as China, creating its own supply chain.

The Executive Order requires, within 60 days of its issuance, the Secretary of Commerce to: (i) expedite the process for reviewing and issuing seabed mineral exploration licenses and commercial recovery permits in areas beyond national jurisdiction under the Deep Seabed Hard Mineral Resources Act 1980; and (ii) in coordination with the Secretary of the Interior and the Secretary of Energy and others, provide a report identifying private sector interest and opportunities. The National Oceanic and Atmospheric Administration under the Department of Commerce (which is responsible for issuing licenses for exploration and permits for commercial recovery under the Deep Seabed Hard Mineral Resources Act) has recently proposed rules that outline the licensing process. It has also started a consultation process, set to end by September 2025.[7]

Additionally, the Secretary of the Interior is required to establish an expedited process for reviewing and approving permits for prospecting and granting leases for the exploration, development, and production of seabed mineral resources within the United States Outer Continental Shelf. The Secretary of the Interior is also required to identify which critical minerals may be derived from seabed resources, so that it can indicate the critical minerals that are essential for applications, such as defense infrastructure, manufacturing and energy.

Responses to the Executive Order and Deep-Sea Mining

Both China and the EU have questioned the legality of the Executive Order, arguing that it circumvents cross-nation negotiations and the approval processes under international law, for deep-sea mining in international waters, which must involve the ISA under UNCLOS. Following the Executive Order, at the UN Ocean Conference in June 2025 (previously reported on here), a number of States—including France, Spain and the United Kingdom—joined a group of (now) 37 States calling for an outright ban, moratorium or precautionary pause on deep-sea mining. Concerns expressed by those States include environmental impacts (such as the release of toxins into the ocean, noise pollution and the loss of biodiversity), risks to global food security and the acceleration of rising temperatures.

Notably, commercial appetite for deep-sea mining remains relatively low—with some major financial institutions having announced that they would not fund deep-sea mining projects, including due to uncertainties around costs and the concerns around environmental impacts, with others committing to avoid ocean-minded minerals in their products.

What the Future Holds for Deep-Sea Mining

The Executive Order has changed—and will continue to shape—the course of the international debate on deep-sea mining. Although serious concerns remain about its environmental effects, for those States that consider deep-sea mining as an opportunity to unlock critical resources as a matter of national security, and to reduce dependence on foreign suppliers, the Executive Order may set a precedent for other States to follow suit. By setting its own standards, the US could prompt other countries to do the same, undermining long-standing international cooperation and desire to build a global regulatory regime that will protect the fishing industry, the ocean ecosystem and responsible mining standards.

Investors should therefore carefully assess the risks involved—whether that is uncertainty around licensing and the regulatory environment, increased costs and/or concerns with respect to environmental impacts of deep-sea mining. In circumstances where deep-sea mining in the Area is considered to be a violation of international law, investors need to carefully assess how their investments may be impacted.

Alongside domestic and contract-based remedies, it is possible that investor-State arbitration may offer a mechanism for deep-sea mining investors to protect their investments, to the extent their operations and exploration licenses are impacted by UNCLOS-based challenges emanating from international law or environmental considerations. Investors will need to think carefully about claims that involve investments and operations in the Area potentially outside a sovereign State’s national jurisdiction.

Moreover, there are also, potentially, ESG and environmental litigation related risks for investors, where they are subject to due diligence obligations under domestic laws and there arises—as a result of mining operations—harm to the marine environment. ESG litigation with an environmental nexus has rapidly increased over recent years across the globe.

Finally, State-to-State disputes may ensue under the UNCLOS regime in relation to inter alia maritime boundaries, resource ownership, subsea cables and fishing rights which could have a direct and / or an indirect impact on the viability of a mining project and should be considered carefully.

Gibson Dunn’s Geopolitical Strategy and International Law team—together with our International Arbitration, and ESG Risk Advisory teams—can help investors understand and navigate these multi-dimensional risks.

Should you wish to discuss the contents of this alert, do not hesitate to reach out to Patrick Pearsall, Lindsey Schmidt, Ceyda Knoebel and Stephanie Collins.

[1] See ‘Unleashing America’s Offshore Critical Minerals and Resources’, The White House, 24 April 2025, <https://www.whitehouse.gov/presidential-actions/2025/04/unleashing-americas-offshore-critical-minerals-and-resources/>, last accessed 18 July 2025.

[2] See UNCLOS, Art. 1.

[3] See UNCLOS, Preamble.

[4] UNCLOS, Arts. 136-37.

[5] See UNCLOS, Arts. 162, 164-65.

[6] See ‘Global Critical Minerals Outlook 2024’, International Energy Agency, May 2024, <https://www.iea.org/reports/global-critical-minerals-outlook-2024>, last accessed 18 July 2025.

[7] https://www.federalregister.gov/documents/2025/07/07/2025-12513/deep-seabed-mining-revisions-to-regulations-for-exploration-license-and-commercial-recovery-permit.

The following Gibson Dunn lawyers prepared this update: Patrick Pearsall, Lindsey Schmidt, Ceyda Knoebel, and Stephanie Collins.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s Geopolitical Strategy & International Law or International Arbitration practice groups:

Patrick W. Pearsall – Co-Chair, Geopolitical Strategy & International Law Group,
Washington, D.C. (+1 202.955.8516, ppearsall@gibsondunn.com)

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

Lindsey D. Schmidt – New York (+1 212.351.5395, lschmidt@gibsondunn.com)

Ceyda Knoebel – London (+44 20 7071 4243, cknoebel@gibsondunn.com)

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

From the Derivatives Practice Group: This week, the European Supervisory Authorities published a guide on oversight activities under the Digital Operational Resilience Act.

New Developments

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

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

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

New Developments Outside the U.S.

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

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

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

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

European Supervisory Authorities Sign Memorandum of Understanding with AMLA for Effective Cooperation and Information Exchange. On July 3, ESMA concluded a multilateral Memorandum of Understanding (“MoU”) with the EU’s new Authority for Anti-Money Laundering and Countering the Financing of Terrorism (“AMLA”). The multilateral MoU outlines how the European Supervisory Authorities and AMLA will exchange information with one another and cooperate in practice to perform their respective tasks in an efficient, effective and timely manner. According to ESMA, the MoU aims to promote supervisory convergence throughout the EU’s financial sector, enable the exchange of necessary information, and foster cross-sectoral learning and capacity building among supervisors in areas of mutual interest.

ESMA Finds Convergence Opportunities for Pre-trade Controls. On July 2, ESMA concluded a common supervisory action (“CSA”) on pre-trade controls under the Markets in Financial Instruments Directive II. According to ESMA, the CSA was launched with the goal of gathering further detailed insights on how investment firms are using pre-trade controls across the EU. ESMA said that the results highlighted that most investment firms have integrated pre-trade controls in their trading activity and in their risk management framework but, nevertheless, it appears that practices related to the implementation and governance are often divergent and not always robust.

ESMA Promotes Clarity in Sustainability-related Communications. On July 1, ESMA published a thematic note on sustainability-related claims used in non-regulatory communications. This publication outlined four guiding principles on making sustainability claims, and offered practical do’s and don’ts, illustrated through concrete examples of good and poor practices, based on observed market practices.

New Industry-Led Developments

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

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

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

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

ISDA and Ant International Lead New Industry Report on use of Tokenized Bank Liabilities for FX Settlement and Cross-Border Payments under Project Guardian. On July 3, ISDA announced that ISDA and Ant International led the Project Guardian FX industry group to develop a new report for implementing tokenized bank liabilities and shared ledger in cross-border payments and foreign exchange (“FX”) settlement. According to ISDA, the report, available on the Monetary Authority of Singapore’s website, draws on the partners’ technology expertise, FX payment experience and extensive industry partnerships to propose principles for leveraging tokenized bank liabilities and shared ledgers in transaction banking services.

ISDA Published Report on Key Trends in the Size and Composition of OTC Derivatives Markets in the Second Half of 2024. On July 3, ISDA published a research note using the latest data from the Bank for International Settlements OTC derivatives statistics that shows a modest increase in notional outstanding during the second half of 2024 compared to the same period in 2023. According to ISDA, notional outstanding for interest rate, foreign exchange, equity and commodity derivatives all rose year-on-year.

ISDA Presents Credit Derivatives Proposal to Address Lock-Up Agreements for CDS Auctions. On July 3, ISDA presented a proposed Lock-Up Agreements and CDS – Proposed Auction Solution. According to ISDA, the CDS industry represented by ISDA’s Credit Steering Committee, aims to have a consistent and uniform approach in relation to Locked Up Debt and CDS auctions that addresses the relevant issues. ISDA noted that the proposal is a framework and ISDA is seeking market feedback on the proposal, indicating that additional detail will be developed if there is support for the proposal to ensure the proposal works operationally with respect to the auctions.

ISDA and the UK Publishes Joint Paper on UK EMIR Reform. On July 1, ISDA and UK Finance published a paper, which recommended a set of reforms for the UK European Market Infrastructure Regulation (“UK EMIR”), carefully considering each EU EMIR 3.0 reform and asking whether ISDA would wish to adopt each measure, adopt with modifications, or not at all, in the UK. The recommendations also lead with proposals on burden reduction and simplification, both topics high on the government’s agenda.

ISDA Publishes Paper on Credit Derivatives Trading Activity Reported in EU, UK and US Markets: First Quarter of 2025. On July 1, ISDA published a report that analyzes credit derivatives trading activity reported in Europe. The analysis shows European credit derivatives transactions based on the location of reporting venues (EU versus UK) and product type. The report also compares European-reported credit derivatives trading activity to what is reported in the US.

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)

The Act is the most significant United States law affecting the digital assets industry to date and reflects the Administration’s and Congress’ priorities of establishing a comprehensive framework for the United States’ approach to digital assets and related activities.

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

The Act is described as a consumer protection bill that establishes Federal safeguards to protect stablecoin holders and enhance consumer confidence in the payment stablecoin market. To achieve these ends, the Act establishes a clear Federal regulatory framework for the issuance of “payment stablecoins,” while preserving a pathway for certain State-regulated entities to issue payment stablecoins. The Act also provides restrictions on “digital asset services providers” (e.g., cryptocurrency exchanges) with respect to the offer and sale of certain payment stablecoins. Given its broad scope, both within the United States and extraterritorially, the GENIUS Act is expected to have significant impacts on the global cryptocurrency markets, market participants, and the broader financial system.

The Act takes effect on the earlier of (i) the date that is 18 months after the enactment of the Act or (ii) the date that is 120 days after the date on which the primary Federal payment stablecoin regulators issue any final regulations implementing the Act. In that regard, the Act directs the Secretary of the Treasury (the Secretary), primary Federal payment stablecoin regulators, and State payment stablecoin regulators to issue regulations intended to establish a process and framework for the licensing, regulation, examination, and supervision of permitted payment stablecoin issuers and the issuance of payment stablecoins. Appendix 1 to this Client Alert highlights rulemakings and reports required to be issued by the relevant regulators following the Act’s passage into law.

This Client Alert, which includes a Q&A below, covers some of the key questions and answers regarding the provisions and implications of the Act and contains a discussion of the Act’s impacts on State law preemption. A detailed section-by-section summary of the Act is provided in Appendix 2 to this Client Alert.

Key Questions and Answers

What stablecoins are covered?

The GENIUS Act establishes a new regulatory framework for “payment stablecoins” which are defined as any digital asset that:

is, or is designed to be, used as a means of payment or settlement, and
the issuer of which:
1. is obligated to convert, redeem, or repurchase for a fixed amount of monetary value, not including a digital asset denominated in a fixed amount of monetary value; and
2. represents that such issuer will maintain, or create the reasonable expectation that it will maintain, a stable value tied to a fixed amount of monetary value.

The definition of “payment stablecoin” does not include a digital asset that is (i) a national currency; (ii) a deposit (including deposits recorded using distributed ledger technology); or (iii) a security. The Act further clarifies that payment stablecoins are not securities (under the jurisdiction of the U.S. Securities and Exchange Commission (the SEC)) or commodities (under the jurisdiction of the Commodity Futures Trading Commission (the CFTC)) and are not permitted to pay holders yield or interest solely in connection with the holding, use, or retention of such payment stablecoins.[1]

Who can issue payment stablecoins?

The GENIUS Act makes it unlawful for any person other than a “permitted payment stablecoin issuer” to issue payment stablecoins in the United States. A permitted payment stablecoin issuer means a U.S. entity that is any of the following:

a subsidiary of insured depository institutions (IDIs), whether national or state-chartered, that is approved the parent IDI’s primary Federal regulator (e.g., the Board of Governors of the Federal Reserve System (the Federal Reserve), the Office of the Comptroller of the Currency (the OCC), the National Credit Union Administration or the Federal Deposit Insurance Corporation (the FDIC)).[2]
Federal qualified payment stablecoin issuers, which include the following entities that are approved by the OCC to issue payment stablecoins:
1. non-bank entities, other than State-qualified payment stablecoin issuers;
2. uninsured national banks; and
3. Federal branches of foreign banks.

State qualified payment stablecoin issuers, which are entities established under the laws of the relevant State with a consolidated total outstanding payment stablecoin issuance of less than $10 billion (unless a waiver is obtained) that is not an IDI, subsidiary of an IDI, an uninsured national bank, or a Federal branch of a foreign bank; provided that the relevant State’s oversight framework aligns with the certification requirements under the Act.

The Act sets forth secondary Federal oversight with regard to the State regulatory framework and State qualified payment stablecoin issuers. The SCRC (as defined below) is responsible for approving certifications from State regulators that their State’s regime is substantially similar to the Federal regime. The SCRC must unanimously approve or deny such certifications within 30 days after the State payment stablecoin regulator submits the certification. In addition, the Federal Reserve and the OCC have authority to take enforcement action against certain State qualified payment stablecoin issuer in unusual and exigent circumstances (which will be defined in a future rulemaking).

A public company (and its wholly or majority-owned subsidiaries) that is not predominantly engaged in one or more “financial” activities (as defined and interpreted under Section 4(k) of the Bank Holding Company Act of 1956 and including those activities permitted for permitted payment stablecoin issuers and digital asset service providers under the Act) is generally prohibited from issuing a payment stablecoin unless the public company receives a unanimous vote from the SCRC making certain specified findings.

What are payment stablecoins issuers permitted to do?

The GENIUS Act limits the activities in which a permitted payment stablecoin issuer may engage to the following:

issuing payment stablecoins;
redeeming payment stablecoins;
managing related reserves, including purchasing, selling, and holding reserve assets or providing custodial services for reserve assets (consistent with State and Federal law);
providing custodial or safekeeping services for payment stablecoins, required reserves, or private keys of payment stablecoins; and
undertaking other activities that directly support any of the activities set forth above.

In addition, the Act provides that permitted payment stablecoin issuers are not prohibited from engaging in payment stablecoin activities or digital asset service provider activities specified by this Act, and “activities incidental thereto,” that are authorized by the primary Federal payment stablecoin regulator or the State payment stablecoin regulator, as applicable.

What are the requirements for payment stablecoin issuers?

Although more specificity on the requirements for payment stablecoin issuers is expected to be implemented through regulation (see Appendix 1 for more detail), the Act provides certain key requirements, including the following:

permitted payment stablecoin issuers must hold reserves of U.S. dollars or high-quality liquid assets at least equal to the total value of outstanding payment stablecoins (i.e., on at least a 1:1 backing). The reserves must be held in segregated accounts and cannot be commingled with assets of the custodian.
reserves are limited to cash, bank deposits and short-term, low-risk securities (e.g., U.S. Treasuries). Other types of assets such as cryptocurrencies and other securities are prohibited from being used as reserves.
reserves cannot be rehypothecated or reused for any other purpose—except for satisfying certain margin obligations, obligations associated with custodial services, or creating liquidity to redeem payment stablecoins in narrow cases.
permitted payment stablecoin issuers are expected to file monthly reports of the composition of reserves that must be examined by third-party auditors. If a permitted payment stablecoin issuer has more than $50 billion in consolidated total outstanding issuance (and is not a public company), then it must provide annual audited financial statements that are filed with regulators and are publicly available.

Payment stablecoin issuers are designated as “financial institutions” under the Bank Secrecy Act therefore subjecting them to robust anti-money laundering, customer due diligence (i.e., know your customer checks), and transaction monitoring requirements. Payment stablecoin issuers also will be required to provide suspicious activity reports to the Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Asset Controls sanctions compliance.

Finally, the Act sets forth certain risk management requirements for payment stablecoin issuers, including requirements around the diversification of the reserve portfolio, capital and liquidity requirements, and stress testing.

Are foreign entities permitted to issue payment stablecoins in the United States?

No. The GENIUS Act makes it unlawful for any person other than a permitted payment stablecoin issuer to issue a payment stablecoin in the United States. However, the Act permits a foreign payment stablecoin issuer to offer or sell payment stablecoins using a digital asset service provider if the foreign payment stablecoin issuer:

is subject to a comparable non-U.S. regulatory and supervisory regime, as determined by the Secretary upon recommendation of the members of SCRC;
registers with the OCC;
holds reserves in the United States sufficient to meet U.S. customer liquidity demands (unless otherwise permitted under a reciprocity arrangement);
is not domiciled or regulated in a jurisdiction that is subject to comprehensive United States sanctions or is determined by the Secretary to be a jurisdiction of primary money laundering concern; and
complies with lawful orders to seize, freeze, burn, or prevent the transfer of outstanding stablecoins.

The standards for comparability determinations are not defined in the Act and the Secretary can make such determination upon a recommendation from the other members of the SCRC. The Secretary can also enter into reciprocal agreements and other agreements with jurisdictions that are deemed to have comparable payment stablecoin regulatory regimes.

In addition, the Act does not expressly prohibit a foreign payment stablecoin issuer from establishing a permitted payment stablecoin issuer in the United States to issue a payment stablecoin in the United States.

What happens if payment stablecoins are not issued by permitted payment stablecoin issuers?

If a payment stablecoin is not issued by a permitted payment stablecoin issuer, then it cannot be (i) treated as cash or cash equivalent for accounting purposes; (ii) eligible as cash or cash equivalent margin or collateral for broker-dealers, swap dealers, and other CFTC and SEC intermediaries; or (iii) accepted as a settlement asset to facilitate wholesale payments between banking organizations.

Does the Act place any limitations on the offer or sale of payment stablecoins in the secondary market?

Yes. The Act provides that, unless a safe harbor is available, beginning on the date that is three years after the enactment of the Act, it shall be unlawful for a digital asset service provider to offer or sell payment stablecoins to a person in the United States unless the payment stablecoin is issued by a permitted payment stablecoin issuer. Additionally, digital asset service providers are prohibited from offering, selling, or otherwise making available a payment stablecoin issued by a foreign payment stablecoin issuer unless the foreign payment stablecoin issuer has the technological capability to comply, and will comply, with the terms of any lawful order and reciprocal agreement (as described above).

Under the Act, the Secretary may also provide safe harbors from the prohibition on any person other than a permitted payment stablecoin issuer to issue a payment stablecoin in the U.S.; those safe harbors would then permit digital asset service providers to offer or sell that issuer’s payment stablecoins to a person in the United States.

Can permitted payment stablecoin issuers pay interest on stablecoins?

No. The GENIUS Act prohibits permitted payment stablecoin issuers and foreign payment stable issuers from paying the holder of any payment stablecoin any form of interest or yield solely in connection with the holding, use, or retention of such payment stablecoin.

Are decentralized protocols prohibited from offering certain payment stablecoins?

No. Distributed ledger protocols, the operators of distributed ledger protocols, and other decentralized finance activities are explicitly excluded from the definition of “digital asset service provider.” However, the Act requires a study to be conducted by the Secretary that includes legislative recommendations on the scope of the term “digital asset service provider” and the application to decentralized finance.

Does the Act regulate peer-to-peer transfers or self-custody of payment stablecoins?

No. The Act does not regulate “the direct transfer of digital assets between 2 individuals acting on their own behalf and for lawful purposes, without the involvement of an intermediary” or “to any transaction by means of software or hardware wallet that facilitates an individual’s own custody of digital assets.”

What is the Stablecoin Certification Review Committee?

The GENIUS Act establishes the “Stablecoin Certification Review Committee” (the SCRC) which is comprised of (i) the Secretary (who serves as the Chair); (ii) the Chair of the Federal Reserve (or the Vice Chair for Supervision) and (iii) the Chair of the FDIC. Decisions by the SCRC require a two-thirds vote at any meeting or by unanimous written consent. The SCRC is tasked with the following:

reviewing certifications from the States that State-level regulatory regimes meet the criteria for substantial similarity;
granting approval for a non-financial services public company to issue payment stablecoins; and
providing additional guidance, such as interpretive rules addressing the prohibition against non-financial public companies and the form of initial and annual State-level regulatory regime certifications.

Each other member of the SCRC also must make a recommendation to the Secretary regarding whether a foreign country has a regulatory and supervisory regime that is comparable to the requirements established under the Act.

Does the Act direct any Federal agencies to engage in rulemaking, issue reports, or conduct further studies?

Yes. The Act directs the Secretary and the primary Federal payment stablecoin regulators, among others, to promulgate a series of rules and guidance and to study or report on numerous topics. Collectively, these provisions ensure that the regulatory landscape will continue to evolve after the opportunity for further input from market participants. Appendix 1 below details the various provisions authorizing or requiring rulemaking and directing Federal agencies to conduct studies or issue reports.

Do permitted payment stablecoin issuers benefit from preemption of State licensing laws?

In short, yes, permitted payment stablecoin issuers, whether a subsidiary of an IDI, a Federal qualified payment stablecoin issuer, or a State qualified payment stablecoin issuer, would benefit from preemption of State licensing laws, including those applicable to money transmitters.

A subsidiary of an IDI’s or a Federal qualified payment stablecoin issuer’s approval to issue payment stablecoins (i.e., subject to the Federal pathway) expressly supersedes and preempts all State licensing requirements.

A State qualified payment stablecoin issuer’s approval to issue payment stablecoins (i.e., subject to the State pathway) would also expressly supersede and preempt State licensing requirements, with the exception of the State qualified payment stablecoin issuer’s home State laws. The home State’s laws regarding a charter, license, or other authorization to do business still apply to the State qualified payment stablecoin issuer. However, due to the certification process, we would expect that the home State law applicable to a payment stablecoin issuer operating under a State pathway would look substantially similar to the requirements applicable to Federal qualified stablecoin issuers.

Regardless of the path to become a permitted payment stablecoin issuer, the preemption of State licensing laws is a distinct feature of the framework established by the GENIUS Act and, depending on the scope of activity that may be undertaken by permitted payment stablecoin issuers, could be quite far-reaching with respect to certain State licensing requirements.

Do permitted payment stablecoin issuers benefit from preemption of State consumer protection laws?

No. State consumer protection laws are not broadly preempted by the GENIUS Act.

There is, however, one notable exception: host State laws relating to consumer protection are only applicable to out-of-State State qualified payment stablecoin issuers to the same extent the host State laws would apply to out-of-State Federal qualified payment stablecoin issuers. Therefore, to the extent that host State consumer protection law is preempted under other law with respect to an out-of-State Federal qualified payment stablecoin issuer, the host State consumer protection law would also be preempted with respect to the out-of-State State qualified payment stablecoin issuer.

What Comes Next

As noted above, the GENIUS Act does not have immediate effectiveness. Instead, the Act takes effect on the earlier of (i) the date that is 18 months after the enactment of the Act or (ii) the date that is 120 days after the date on which the primary Federal payment stablecoin regulators issue any final regulations implementing the Act. The Act also includes a three-year safe harbor for digital asset service providers from the prohibition on offering or selling payment stablecoins to U.S. persons “unless the payment stablecoin is a permitted payment stablecoin.”

The Act directs the Secretary, primary Federal payment stablecoin regulators, and State payment stablecoin regulators to issue, through notice and comment rulemaking, additional regulations intended to establish a process and framework for the licensing, regulation, examination, and supervision of permitted payment stablecoin issuers and the issuance of payment stablecoins, including the licensing and application process; process to authorize foreign payment stablecoin issuers; capital, liquidity, and risk management requirements; reserve asset standards; custody standards; and BSA/AML and sanctions compliance, among other things. In most instances, regulations are required to be promulgated by July 18, 2026, one year following the GENIUS Act’s enactment. Indeed, the Act directs the Federal banking agencies to submit to the Senate Banking Committee and House Financial Services Committee “a report that confirms and describes the regulations promulgated to carry out this Act” within 180 days after enactment of the Act.

Nonetheless, the industry should anticipate a lengthy rulemaking process before final regulations are fully phased in (and some rulemakings, like capital and liquidity requirements, may include transition periods before full effectiveness). It is critical for all market participants to consider the implications of the Act and potential rulemakings on their business models because there will be meaningful opportunities for market participants to participate in advocacy efforts and the rulemaking process with both Federal and State regulators and other Federal and State policymakers in shaping the substance of the final rules designed to implement the dual Federal-State stablecoin issuance framework in the United States.

APPENDIX 1

This Appendix 1 provides an overview of the various provisions authorizing or directing further rulemaking, reporting, or study. With respect to rulemaking, Section 13 of the GENIUS Act directs each primary Federal payment stablecoin regulator, the Secretary of the Treasury, and each State payment stablecoin regulator to, within a year from the date of enactment of the Act, promulgate regulations through appropriate notice and comment rulemaking to “carry out this Act.” The one-year timeline for rulemaking applies to each topic listed below unless otherwise indicated. Section 13 further states that Federal payment stablecoin regulators, the Secretary of the Treasury, and State payment stablecoin regulators should coordinate, as appropriate.

Rulemaking Authorities

By the Secretary:

Section	Topic	Details
3(c)	Limited safe harbor	May provide for limited safe harbor for issuance of a de minimis transaction volume of payment stablecoin.
3(d)	Implement issuance and treatment provisions	Shall issue regulations to implement Section 3 of the Act, including to define terms.
4(a)(5)	BSA/sanctions	Shall adopt rules, tailored to the size and complexity of issuers, to implement application of the BSA and U.S. sanctions laws to issuers.
4(c)	State-level regulatory regime standards	Shall through notice and comment, establish broad-based principles for assessing whether a State-level regulatory regime is substantially similar.
8(b)(3)(B)	Foreign Issuer Compliance	Shall specify the criteria that a noncompliant foreign issuer must meet to become compliant.
18(b)(6)	Reciprocity for foreign payment stablecoin issuers	Shall issue such rules as may be required to exempt foreign payment stablecoin issuers from Section 3’s prohibition on issuance, offers or sales.

By all of the primary Federal payment stablecoin regulators:

Section	Topic	Details
4(a)(4)	Capital, liquidity, and risk management requirements	Shall issue rules addressing capital, liquidity, and risk management and amend existing capital rules.
4(h)	Standards for the issuance of payment stablecoins	Shall issue such regulations relating to permitted payment stablecoin issuers as may be necessary to administer Section 4, which sets forth the standards to become a permitted payment stablecoin issuer.
5(a)(2)	Issuer application	Shall issue such regulations addressing the review and consideration of applications from any IDI or other entity applying to become a permitted payment stablecoin issuer.
5(g)	General authority	Shall issue rules necessary for the regulation of the issuance of payment stablecoins provided such rules do not impose requirements in addition to those in Section 4.
10(c)(2)(C)	Commingling of funds	May prescribe rules, regulations or orders to permit stablecoin reserves, payment stablecoins, cash and other property to be commingled provided that it is separately accounted for, treated as, and dealt with as belonging to a permitted payment stablecoin issuer or customer.
12	Interoperability	In consultation with standard-setting organizations and other regulators, may prescribe standards for permitted payment stablecoin issuers to promote compatibility and interoperability with other permitted payment stablecoin issuers and the broader digital finance ecosystem.
16(b)	Regulated Entity Activities	Shall review all existing guidance and regulations, and if necessary, amend or promulgate new regulations and guidance to clarify that regulated entities are authorized to engage in the payment stablecoin activities and investments contemplated by the Act, including acting as a principal or agent with respect to any payment stablecoin and payment of fees to facilitate customer transactions.

Additional Federal rulemaking:

Section	Topic	Details
4(a)(8)	Anti-tying	The Federal Reserve may issue regulations as are necessary to prohibit a permitted payment stablecoin issuer from providing services to a customer on the condition that the customer obtain an additional paid product or service or agree not to obtain from a competitor.
4(a)(12)(D)	Non-financial companies	The SCRC shall issue an interpretive rule clarifying application of the prohibition of domestic public companies and foreign companies not engaged in financial activities from issuing payment stablecoins.
4(b)	Standards for the issuance of payment stablecoins	The OCC shall have authority to issue regulations and order as necessary to ensure financial stability and implement standards for the issuance of payment stablecoins in coordination with the other relevant regulators.
7(e)	Enforcement Authority	The Federal Reserve and OCC shall issue rules to set forth the unusual and exigent circumstances under which the Federal Reserve and OCC, as applicable, may take enforcement action against a State qualified payment stablecoin issuer for violations of the Act.
9(d)	Anti-money laundering innovation	Within three years, FinCEN shall issue public guidance and notice and comment rulemaking, based on research and risk assessments, relating to (1) implementation of innovative or novel means to detect illicit activity involving digital assets; (2) standards for payment stablecoin issuers to identify and report illicit activity involving the payment stablecoin of a permitted payment stablecoin issuer; (3) Standards for monitoring transactions on blockchains, digital asset mixing services, tumblers, or other similar services; and (4) tailored risk management standards for financial institutions interacting with decentralized finance protocols.
18(c)(1)(E)	Foreign payment stablecoin issuers	The OCC shall issue rules relating to the standards for approval of registration requests from foreign payment stablecoin issuers and the process for appealing denials.

By the State payment stablecoin regulators:

Section	Topic	Details
4(a)(4); 7(d)	Capital, liquidity, and risk management requirements	Shall issue rules addressing capital, liquidity, and risk management, and amend existing rules. A State payment stablecoin regulator may issue orders and rules under Section 4 applicable to State qualified payment stablecoin issuers to the same extent as the primary Federal payment stablecoin regulators.
4(h); 7(d)	Standards for the issuance of payment stablecoins	May issue such regulations relating to permitted payment stablecoin issuers as may be necessary to administer Section 4, which sets forth the standards to become a permitted payment stablecoin issuer. A State payment stablecoin regulator may issue orders and rules under Section 4 applicable to State qualified payment stablecoin issuers to the same extent as the primary Federal payment stablecoin regulators.

Reports and Studies

By the Secretary:

Section	Topic	Details
4(a)(6)(C)	National security	Within a year and with the Attorney General, report on coordination with permitted payment stablecoin issuers with respect to blocking and prohibiting transactions.
8(c)(4)	Prohibition Waivers	Within seven days, report and provide a briefing on any issuance of a waiver or license.
9	Anti-money laundering innovation	Following comment period and research, and within 180 days, report on (A) legislative and regulatory proposals to develop and implement novel and innovative means to detect illicit activity; (B) results of the research and risk assessments conducted pursuant to Section 9 of the Act; (C) efforts to support financial institutions using novel and innovative means to detect illicit activity; (D) the extent to which distributed ledgers, mixing services, tumblers and similar services may facilitate illicit activity; (E) legislative recommendations on the scope of the term “digital asset service provider,” including with respect to decentralized finance.
14(a)	Non-payment stablecoins	Following study in consultation with the Fed, OCC, FDIC, SEC and CFTC and no later than 365 days following passage, report on (A) benefits and risks of categories non-payment stablecoins; (B) non-payment stablecoin market participants; (C) use cases for non-payment stablecoins; (D) the nature of reserve compositions; (E) types of algorithms being employed; (F) governance structure and decentralization; (G) nature of public promotion and advertising; and (H) the clarity and availability of consumer disclosures.

By the primary Federal payment stablecoin regulators:

Section	Topic	Details
5(e)(2)	Issuer applications	Annually report on pending issuer applications that are at least 180 days old.
11(h)	Bankruptcy	Study and report within three years regarding the application of bankruptcy and insolvency administration regimes to permitted payment stablecoin issuers and any legislative recommendations.
13(c)	Rulemaking	Within 180 days, report on the regulations promulgated to carry out the Act.
15	Trends	In consultation with the States, annually report on trends in payment stablecoin activity, applications for approval as permitted payment stablecoin issuers, and a description of the potential financial stability risks posed. The Financial Stability Oversight Council will incorporate this report into its annual report.

APPENDIX 2

This Appendix 2 provides a summary of each section of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the GENIUS Act or the Act). The review and analysis that follows each section hereto tracks the section titles in the Act, in order, but includes certain headings and sub-headings that we prepared to highlight topics of interest more quickly and provide an understanding of the context of the provision in the legislation.

Section 1. Short Title

Section 2. Definitions

Payment Stablecoin
Permitted Payment Stablecoin Issuer

Section 3. Issuance and Treatment of Payment Stablecoins

Limitation on Issuers
Prohibitions on Offers or Sales
Extraterritorial Effect
Penalties
Treatment
Exempt Transactions

Section 4. Requirements for Issuing Payment Stablecoins

Reserves
Redemption Policy
Published Reserves
Capital, Liquidity, and Risk Management Requirements
Treatment Under the Bank Secrecy Act and Sanctions Laws
Limitation on Payment Stablecoin Activities
Audits and Reports
Public Companies and Foreign Companies
State-Level Regulatory Regimes
State Certification
Transition to Federal Oversight
Misrepresentation of Insured Status
Officers or Directors Convicted of Certain Felonies

Section 5. Approval of Subsidiaries of IDIs and Federal Qualified Payment Stablecoin Issuers

Notification
Denied Applications
Opportunity for Hearing
Safe Harbor for Pending Applications
Certification Required

Section 6. Supervision and Enforcement With Respect to Federal Qualified Payment Stablecoin Issuers and Subsidiaries of IDIs

Supervision
Penalties
Procedures and Penalties

Section 7. State Qualified Payment Stablecoin Issuers

Relationship with the Federal Reserve
Relationship with the OCC
Effect on State Law

Section 8. Anti-Money Laundering Protections

Payment Stablecoins Issue by Foreign Payment Stablecoin Issuers
Penalties
Waivers for Secondary Trading

Section 9. Anti-Money Laundering Innovation

Public Comment
Post-Comment Research
Post-Enactment Recommendations to Congress

Section 10. Custody of Payment Stablecoin Reserve and Collateral

Customer Priority
Regulatory Requirements
Prohibition on Commingling
Exclusion

Section 11. Treatment of Payment Stablecoin Issuers in Insolvency Proceedings

Priority in Bankruptcy Proceedings
Intervention
Application of Existing Insolvency Law
Study by Primary Federal Payment Stablecoin Regulators

Section 12. Interoperability Standards

Section 13. Rulemaking

Coordination
Report Required

Section 14. Study on Non-Payment Stablecoins

Study by Treasury
Report

Section 15. Reports

Annual Reporting Requirement

Section 16. Authority of Banking Institutions

Treatment of Custody Activities
State-Chartered Depository Institutions

Section 17. Amendments to Clarify that Payment Stablecoins Are Not Securities or Commodities and Permitted Payment Stablecoin Issuers Are Not Investment Companies

Amendments to Existing Legislation

Section 18. Exception for Foreign Payment Stablecoin Issuers and Reciprocity for Payment Stablecoins Issued in Overseas Jurisdictions

Treasury Determination
Rescission of Determination
Public Notice and Rulemaking
Registration
Ongoing Monitoring
Reciprocity
Publication and Completion

Section 19. Disclosure Relating to Payment Stablecoins

Section 20. Effective Date

Section 1. Short Title.

Section 1 of the GENIUS Act establishes that the Act is called the “Guiding and Establishing National Innovation for U.S. Stablecoins Act” or the “GENIUS Act.”

Section 2. Definitions.

The GENIUS Act most notably defines “payment stablecoin” and “permitted payment stablecoin issuer.”

Payment Stablecoin

Under the Act, a “payment stablecoin” is a digital asset (as defined in Section 2 of the Act) that is, or is designed to be, used as a means of payment or settlement and the issuer of which (i) is obligated to convert, redeem, or repurchase for a fixed amount of monetary value, not including a digital asset denominated in a fixed amount of monetary value; and (ii) represents that such issuer will maintain, or create the reasonable expectation that it will maintain, a stable value relative to the value of a fixed amount of monetary value. Payment stablecoins do not include a digital asset that (a) is a national currency; (b) is a deposit (as defined in section 3 of the Federal Deposit Insurance Act), including a deposit recorded using distributed ledger (as defined in Section 2 of the Act) technology; or (c) is a security (as defined in section 2 of the Securities Act of 1933, section 3 of the Securities Exchange Act of 1934, or section 2 of the Investment Company Act of 1940), except that no bond, note, evidence of indebtedness, or investment contract that was issued by a permitted payment stablecoin issuer shall qualify as a security solely by virtue of its satisfying the conditions described in (i) and (ii) above.

Permitted Payment Stablecoin Issuer

“Permitted payment stablecoin issuer” is defined as a person that is formed in the United States that is (i) a subsidiary of an insured depository institution (IDI) (as defined in Section 2 of the Act) that has been approved to issue payment stablecoins; (ii) a Federal qualified payment stablecoin issuer (as defined in Section 2 of the Act); or (iii) a State qualified payment stablecoin issuer (as defined in Section 2 of the Act).

Section 3. Issuance and Treatment of Payment Stablecoins.

Limitation on Issuers

The GENIUS Act prohibits any person other than a permitted payment stablecoin issuer from issuing a payment stablecoin in the United States (the PPSI Limitation).

Prohibitions on Offers or Sales

Beginning three years after the date of enactment of the GENIUS Act (i.e., July 18, 2028), the Act will prohibit any digital asset service provider (as defined below) from offering or selling a payment stablecoin to a person in the United States unless that payment stablecoin is issued by a permitted payment stablecoin issuer. There are two exceptions to this prohibition:

The Secretary of the Treasury (the Secretary) may issue regulations providing safe harbors from the PPSI Limitation provided under Section 3(a) of the Act. Any such safe harbor must be (i) consistent with the purposes of the Act, (ii) limited in scope and (iii) apply to a de minimis volume of transactions, as determined by the Secretary. Alternatively, the Act authorizes the Secretary to issue a limited safe harbor from the PPSI Limitation where the Secretary determines there exist “unusual and exigent circumstances.”
The GENIUS Act enables a digital asset service provider to offer or sell a payment stablecoin issued by a foreign payment stablecoin issuer (as defined below) if the foreign payment stablecoin issuer has the technological capability to comply with the terms of any order and any reciprocal arrangement pursuant to Section 18 of the Act (described below).
1. Section 2 of the Act defines a “digital asset service provider” as a person that engages in the following business activities in the United States for compensation or profit:
  1. exchanging digital assets for monetary value;
  2. exchanging digital assets for other digital assets;
  3. transferring digital assets to a third party;
  4. acting as a digital asset custodian; or
  5. participating in financial services relating to digital asset issuance.

Notably, a digital asset service provider does not include any of the following:

1. 1. a distributed ledger protocol (as defined in Section 2 of the Act);
  2. developing, operating, or engaging in the business of developing distributed ledger protocols or self-custodial software interfaces;
  3. an immutable and self-custodial software interface;
  4. developing, operating, or engaging in the business of validating transactions or operating a distributed ledger; or
  5. participating in a liquidity pool or other similar mechanism for the provisioning of liquidity for peer-to-peer transactions.
2. Section 2 of the Act also defines “foreign payment stablecoin issuer” as an issuer of a payment stablecoin that is both (1) organized under the laws of or domiciled in a foreign country, a territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands and (2) not a permitted payment stablecoin issuer.

Extraterritorial Effect

Under the GENIUS Act, if conduct involves the offer or sale of a payment stablecoin to a person located in the United States, the provisions of Section 3 of the Act would apply.

Penalties

The GENIUS Act provides for a penalty for knowingly participating in a violation of the PPSI Limitation of not more than $1 million for each such violation and/or imprisonment for not more than five years. In addition, a primary Federal payment stablecoin regulator (as defined in Section 2 of the Act) may refer a matter to the Attorney General if the primary Federal payment stablecoin regulator has reason to believe that any person has knowingly violated the PPSI Limitation.

Treatment

If a payment stablecoin is not issued by a permitted payment stablecoin issuer, it may not be (i) treated as cash or as a cash equivalent for accounting purposes; (ii) eligible as cash or as a cash equivalent margin and collateral for futures commission merchants, derivative clearing organizations, broker-dealers, registered clearing agencies and swap dealers; or (iii) acceptable as a settlement asset to facilitate wholesale payments between banking organizations or by a payment infrastructure to facilitate exchange and settlement among banking organizations.

Exempt Transactions

Section 3 of the GENIUS Act does not apply to the following transactions:

the direct transfer of digital assets between two individuals acting on their own behalf without an intermediary;
any transaction involving the receipt of digital assets by an individual between an account owned by the individual in the United States and an account owned by the individual abroad that are offered by the same parent company; or
any transaction by means of a software or hardware wallet that facilitates an individual’s own custody of digital assets.

Section 4. Requirements for Issuing Payment Stablecoins.

A permitted payment stablecoin issuer must do the following:

maintain reserves on at least a 1:1 basis;
publicly disclose the issuer’s redemption policy; and
publish the monthly composition of the issuer’s reserves on its website.

A more detailed description of each of these requirements is set forth below.

Reserves

A permitted payment stablecoin issuer’s reserves may be comprised of any of the following:

United States currency;
funds held as demand deposits (or other deposits that may be withdrawn upon request at any time) or insured shares at an IDI, subject to certain limitations to address safety and soundness risks of such IDI;
Treasury bills, notes, or bonds with a remaining maturity of 93 days or less or issued with a maturity of 93 days or less;
money received under repurchase agreements, with the permitted payment stablecoin issuer acting as a seller of securities and with an overnight maturity, that are backed by Treasury bills with a maturity of 93 days or less;
reverse repurchase agreements, with the permitted payment stablecoin issuer acting as a purchaser of securities and with an overnight maturity, that are collateralized by Treasury notes, bills, or bonds on an overnight basis, subject to overcollateralization in line with standard market terms that are tri-party, centrally cleared through a clearing agency registered with the United States Securities and Exchange Commission (the SEC), or bilateral with a counterparty that the issuer has determined to be adequately creditworthy even in the event of severe market stress;
securities issued by an investment company or other registered Government money market fund and that are invested solely in underlying assets described in (i)–(v) above;
any other similarly liquid Federal Government-issued asset approved by the primary Federal payment stablecoin regulator, in consultation with the State payment stablecoin regulator (as defined in Section 2 of the Act), if applicable, of the permitted payment stablecoin issuer; or
any reserve described in (i)–(iii) or (vi)–(vii) in tokenized form.

Reserves may not be pledged, rehypothecated, or reused by the permitted payment stablecoin issuer except to (a) satisfy margin obligations in connection with investments in permitted reserves identified in (iv)–(v) above; (b) satisfy obligations associated with standard custodial services; or (c) create liquidity to meet reasonable expectations of requests to redeem payment stablecoins, such that reserves in the form of Treasury bills may be sold as purchased securities for repurchase agreements with a maturity of 93 days or less, provided that (1) the repurchase agreements are cleared by a clearing agency that is registered with the SEC or (2) the permitted payment stablecoin issuer receives the prior approval of its primary Federal payment stablecoin regulator or State payment stablecoin regulator, as applicable.

Redemption Policy

A permitted payment stablecoin issuer’s redemption policy must establish clear procedures for timely redemption of outstanding payment stablecoins and publicly and clearly disclose in plain language all fees associated with purchasing or redeeming the payment stablecoins. Any such fees may only be changed with at least seven days’ prior notice to consumers.

Published Reserves

When a permitted payment stablecoin issuer publishes the monthly composition of reserves on its website, it must include the total number of outstanding payment stablecoins issued and the amount and composition of the reserves, including the average tenor and geographic location of custody of each category of reserve instrument. Each monthly report must be examined by a registered public accounting firm, and the chief executive officer and chief financial officer of each permitted payment stablecoin issuer must submit a certification as to the accuracy of each such report to either the primary Federal payment stablecoin regulator or the State payment stablecoin regulator, as applicable.

Capital, Liquidity, and Risk Management Requirements

Primary Federal payment stablecoin regulators and State qualified payment stablecoin regulators are responsible for issuing regulations regarding capital requirements, liquidity, reserve asset diversification and interest rate risk management standards.

Treatment Under the Bank Secrecy Act and Sanctions Laws

A permitted payment stablecoin issuer is treated as a financial institution under the Bank Secrecy Act. As a result, it is subject to all Federal laws applicable to financial institutions located in the United States relating to economic sanctions, prevention of money laundering, customer identification, and due diligence. Such laws include the following:

an effective anti-money laundering program;
record retention;

monitoring and reporting suspicious transactions;

technical capabilities, policies, and procedures to block, freeze, and reject specific or impermissible transactions that violate Federal or State laws, rules, or regulations;
an effective customer identification program, including identification and verification of account holders, high-value transactions, and appropriate enhanced due diligence; and
an effective economic sanctions compliance program.

Limitation on Payment Stablecoin Activities

The GENIUS Act limits permitted payment stablecoin issuers to undertaking the following activities:

issuing payment stablecoins;
redeeming payment stablecoins;
managing related reserves;
providing custodial or safekeeping services; and
other activities that directly support any of the activities described in (i)–(iv) above.

Additionally, a permitted payment stablecoin issuer may not provide services to a customer on the condition that such customer obtain an additional paid product or service for such permitted payment stablecoin issuer or any of its subsidiaries. Similarly, a permitted payment stablecoin issuer may not condition its services on a customer’s agreement not to obtain an additional product or service from a competitor (collectively, the Tying Prohibitions).

A permitted payment stablecoin issuer is also prohibited from both using any terms relating to the United States government in the name of a payment stablecoin or marketing payment stablecoins in a way that would cause a reasonable person to believe that the payment stablecoins are legal tender, issued by the United States, or guaranteed or approved by the United States government. However, abbreviations directly relating to the currency to which a payment stablecoin is pegged (e.g., USD) are not prohibited.

The GENIUS Act further limits the activities of permitted payment stablecoin issuers and foreign payment stable issuers by preventing such issuers from paying the holder of any payment stablecoin any form of interest or yield solely in connection with the holding, use, or retention of such payment stablecoin.

Audits and Reports

A permitted payment stablecoin issuer that has over $50 billion in consolidated total outstanding issuance and is not subject to reporting requirements under section 13(a) or 15(d) of the Exchange Act must prepare an annual audited financial statement in accordance with GAAP, which must include the disclosure of any related party transactions.

Public Companies and Foreign Companies

Public companies and companies not domiciled in the United States or its territories that are not predominantly engaged in one or more financial activities (as defined in section 4(k) of the Bank Holding Company Act of 1956), and their wholly or majority owned subsidiaries or affiliates, may not issue a payment stablecoin unless such company obtains a unanimous vote of the Stablecoin Certification Review Committee (the SCRC) finding that:

it will not pose a material risk to the safety and soundness of the United States banking system, the financial stability of the United States, or the Deposit Insurance Fund;
it will comply with data use limitations regarding nonpublic personal information obtained from stablecoin transactions; and
it and its affiliates will comply with the Tying Prohibitions under the Act.

The Secretary, the Chair of the Board of Governors of the Federal Reserve System (the Federal Reserve) or the Vice Chair for Supervision (as delegated by the Chair of the Federal Reserve), and the Chair of the FDIC each serve on the SCRC, and the Secretary serves as the Chair.

State-Level Regulatory Regimes

A State qualified payment stablecoin issuer with a consolidated total outstanding issuance of $10 billion or less may choose to be regulated under a State-level regulatory regime if such State-level regulatory regime is substantially similar to the Federal regulatory framework under this Act.

State Certification

Within one year of the effective date of the GENIUS Act, a State payment stablecoin regulator must submit to the SCRC an initial certification that the State-level regulatory regime meets the criteria for substantial similarity to the Federal regulatory framework. Such certification must be renewed annually. The SCRC will have 30 days to approve or deny the certification. In the event a certification is denied, the State payment stablecoin regulator will have an opportunity to make any necessary changes and resubmit the initial certification or recertification. If the State payment stablecoin regulatory is denied by the SCRC again, such regulator may appeal to the United States Court of Appeals for the District of Columbia Circuit.

The Secretary will publish and maintain a list of States that have submitted initial certifications and recertifications.

Transition to Federal Oversight

A State qualified payment stablecoin issuer, including a State chartered depository institution that is a State qualified payment stablecoin issuer, with a payment stablecoin with a consolidated total outstanding issuance of more than $10 billion must either:

transition to the Federal regulatory framework of the primary Federal payment stablecoin regulator of the State payment stablecoin regulator or State chartered depository institution within 360 days after the payment stablecoin reaches such threshold; or
beginning on the date the payment stablecoin reaches such threshold, cease issuing new payment stablecoins until the payment stablecoin falls under the threshold.

However, the applicable primary Federal payment stablecoin regulator may grant a waiver allowing a State qualified payment stablecoin issuer with a payment stablecoin that exceeds the $10 billion threshold in total outstanding issuance to remain solely supervised by a State payment stablecoin regulator. The primary Federal payment stablecoin regulator will consider the following criteria of the State qualified payment stablecoin issuer when determining whether to grant such a waiver:

capital maintained;
past operations and examination history;
experience supervising payment stablecoin and digital asset activities; and
supervisory framework with respect to payment stablecoins and digital assets.

A State qualified payment stablecoin issuer subject to Federal oversight that does not receive a waiver will continue to be supervised by the State payment stablecoin regulator of the State qualified payment stablecoin issuer jointly with the primary Federal payment stablecoin regulator.

Misrepresentation of Insured Status

The following activities are unlawful under the GENIUS Act:

representing that payment stablecoins are backed by the full faith and credit of the United States, guaranteed by the United States government, or subject to Federal deposit insurance or Federal share insurance; and
marketing a product in the United States as a payment stablecoin unless the product is issued pursuant to the Act.

Any violations of (ii) above carry up to a $500,000 fine for each violation.

Officers or Directors Convicted of Certain Felonies

Any individual who has been convicted of a felony offense involving insider trading, embezzlement, cybercrime, money laundering, financing of terrorism, or financial fraud may not serve as an officer or director of a payment stablecoin issuer. A violation of this prohibition can carry up to a $1,000,000 fine for each such violation and/or imprisonment for up to five years.

Section 5. Approval of Subsidiaries of IDIs and Federal Qualified Payment Stablecoin Issuers.

Under the GENIUS Act, each primary Federal payment stablecoin regulator will receive, review, and consider for approval applications from any IDI that seeks to issue payment stablecoins through a subsidiary and any nonbank entity (as defined in Section 2 of the Act), Federal branch, or uninsured national bank that is chartered by the Office of the Comptroller of the Currency (the OCC), and that seeks to issue payment stablecoins as a Federal qualified payment stablecoin issuer. A primary Federal payment stablecoin regulator will consider the following factors when evaluating such applications:

the ability of the applicant (or, in the case of an applicant that is an IDI, the subsidiary of the applicant), based on financial condition and resources, to meet the requirements set forth under Section 4 of the Act;
whether an individual who has been convicted of a felony offense involving insider trading, embezzlement, cybercrime, money laundering, financing of terrorism, or financial fraud is serving as an officer or director of the applicant;
the competence, experience, and integrity of the officers, directors, and principal shareholders of the applicant, its subsidiaries, and parent company;
whether the redemption policy of the applicant meets the standards under Section 4(a)(1)(B) of the Act; and
any other factors established by the primary Federal payment stablecoin regulator that are necessary to ensure the safety and soundness of the permitted payment stablecoin issuer.

Notification

A primary Federal payment stablecoin regulator must notify an applicant within 30 days after receiving an application as to whether such application is deemed substantially complete or, if not, what additional information the applicant must provide. An application under this section will remain substantially complete unless there is a material change in circumstances requiring the primary Federal payment stablecoin regulator to treat the application as new. A primary Federal payment stablecoin regulator must render a decision on an application within 120 days after receiving a substantially complete application. If a primary Federal payment stablecoin regulator does not render a decision on a complete application within this timeframe, such application will be deemed approved.

Denied Applications

If a primary Federal payment stablecoin regulator denies a complete application, the regulator must provide the applicant with a written explanation within 30 days of the date of the denial, identifying all material shortcomings in the applicant’s application and recommendations as to how such shortcomings could be addressed. The denial of an application does not preclude the applicant from filing a subsequent application.

Opportunity for Hearing

Within 30 days after receipt of a notice of denial of an application, the applicant may make a written request to the primary Federal payment stablecoin regulator for a written or oral hearing to appeal the denial. A primary Federal payment stablecoin regulator must schedule a time within 30 days after the date of receipt of such a timely request. The primary Federal payment stablecoin regulator will notify the applicant within 60 days after a hearing of a final determination.

Safe Harbor for Pending Applications

A primary Federal payment stablecoin regulator may waive the application requirements for up to 12 months from the effective date of the GENIUS Act with respect to (i) a subsidiary of an IDI, if the IDI has an application pending for the subsidiary to become a permitted payment stablecoin issuer on that effective date; or (ii) a Federal qualified payment stablecoin issuer with a pending application on that effective date.

Certification Required

Within 180 days after an application is approved and on an annual basis thereafter, each permitted payment stablecoin issuer must provide its primary Federal payment stablecoin regulator, or a State payment stablecoin regulator in the case of a State qualified payment stablecoin issuer, a certification that the permitted payment stablecoin issuer has implemented anti-money laundering and economic sanctions compliance programs. The primary Federal payment stablecoin regulator or State payment stablecoin regulator of a permitted payment stablecoin issuer that does not provide the required certification may revoke the approval of such payment stablecoin issuer. The Act also provides for criminal penalties in the event that any person knowingly submits a false certification or otherwise violates the certification requirement.

Section 6. Supervision and Enforcement With Respect to Federal Qualified Payment Stablecoin Issuers and Subsidiaries of IDIs

Supervision

Permitted payment stablecoin issuers—other than State qualified payment stablecoin issuers—with a consolidated total outstanding balance of less than $10 billion are subject to supervision by the appropriate primary Federal payment stablecoin regulator. Each of these permitted payment stablecoin issuers must, upon request, submit reports to the applicable regulator, detailing their financial condition, risk monitoring systems, compliance with the Act, and compliance with the Bank Secrecy Act and sanctions laws.

The primary Federal payment stablecoin regulator is required to examine permitted payment stablecoin issuers to assess their operations, financial condition, and risk management systems. The regulator, however, must meet the Act’s requirements for efficiency by using existing reports and supervisory information to avoid duplication in its examinations and only request examinations and reports at a cadence and in a format that is comparable to similarly situated entities.

Penalties

The primary Federal payment stablecoin regulator can suspend or revoke the registration of permitted payment stablecoin issuers if they are found to be willfully or recklessly violating the Act or any regulation or order issued under the Act. Cease-and-desist proceedings can also be initiated if there is reasonable cause to believe that such violations are occurring or have occurred. The primary Federal payment stablecoin regulator also has authority to remove an institution-affiliated party (as defined in Section 2 of the Act) of the stablecoin issuer from his or her position or office if he or she commits a knowing violation of (i) the Act and its regulations or (ii) certain record and reporting provisions of the Bank Secrecy Act.

Procedures and Penalties

The GENIUS Act outlines specific procedures for enforcement actions, including providing opportunities for judicial review and temporary cease-and-desist orders, if necessary. The Act also authorizes civil penalties of up to $100,000 per day for certain infractions. The Federal payment stablecoin regulator’s jurisdiction to issue notice and orders against institution-affiliated parties is limited to within six years of such party’s departure from the permitted payment stablecoin issuer.

Section 7. State Qualified Payment Stablecoin Issuers

The Act provides State payment stablecoin regulators with supervisory, examination, and enforcement authority over all State qualified stablecoin issuers within their jurisdiction.

Relationship with the Federal Reserve

State payment stablecoin regulators may enter into a memorandum of understanding with the Federal Reserve, which allows the Federal Reserve to participate in the supervision, examination, and enforcement of the Act with respect to State qualified stablecoin issuers. In fact, both the Federal Reserve and State payment stablecoin regulator are required to share information, including a permitted payment stablecoin issuer’s initial application and any accompanying documents. Moreover, the Federal Reserve is permitted to take enforcement action in unusual and exigent circumstances against State qualified payment stablecoin issuers. If such circumstances exist, the Federal Reserve may impose restrictions, including limitations on redemptions of payment stablecoins if the Federal Reserve determines that a State qualified payment stablecoin issuer poses a serious risk to the financial safety, soundness, or stability of the issuer. The State qualified payment stablecoin issuer may object to the Federal Reserve’s restrictions in writing. If the Federal Reserve does not affirm, modify, or rescind its directive within 10 days of the issuer’s response, the Federal Reserve’s directive automatically lapses. The Federal Reserve’s determinations also remain subject to administrative and judicial review.

Relationship with the OCC

The OCC has similar authority to the Federal Reserve in taking enforcement action against a State qualified payment stablecoin issuer under unusual and exigent circumstances. The OCC must issue rules to define these circumstances.

Effect on State Law

The Act provides that the laws of a host State apply to the activities in the host State by out-of-state qualified payment stablecoin issuers to the extent such laws apply to the activities conducted in the host State by an out-of-state Federal qualified payment stablecoin issuer. If the laws of the host State do not apply, the laws of the home State of the State qualified payment stablecoin issuer govern. Generally, this provision only applies to out-of-state State qualified payment stablecoin issuers chartered or licensed by a State with a certification in place under the Act. See Section 4. Requirements for Issuing Payment Stablecoins—State Certification to this Appendix 2 for a more detailed discussion of State certification.

Section 8. Anti-Money Laundering Protections

Payment Stablecoins Issue by Foreign Payment Stablecoin Issuers

The GENIUS Act provides that any stablecoin issued by a foreign issuer may not be publicly offered or made available in the United States unless the foreign issuer has the technological capability to comply with any lawful order (as defined in Section 2 of the Act). The Secretary has the authority to designate foreign issuers as noncompliant after providing notice to the issuer of its noncompliant designation in writing. This determination of noncompliance is then subject to judicial review in the United States Court of Appeals for the District of Columbia Circuit.

If the foreign issuer does not comply with the Secretary’s order within 30 days of notification of its violation, the Secretary must publish its determination of noncompliance in the Federal Register and issue a notice prohibiting digital asset providers from facilitating secondary trading of the issuer’s stablecoins in the United States. This prohibition is effective 30 days after the notice of the prohibition is posted in the Federal Register, and this prohibition on trading expires once the Secretary determines the issuer is compliant. Criteria for foreign issuer compliance will be specified in future rulemakings.

Penalties

Digital asset service providers that knowingly violate prohibitions on secondary trading of foreign issued stablecoins described above are subject to penalties of up to $100,000 per day. Noncompliant foreign issuers that knowingly continue to offer stablecoins after being deemed noncompliant are subject to penalties of up to $1 million per day and injunctions. The Secretary may also commence civil actions against foreign payment stablecoin issuers to recover these civil penalties or seek an injunction.

Waivers for Secondary Trading

The Secretary may issue a waiver or general or specific license to United States persons engaging in otherwise prohibited secondary trading of foreign issuer stablecoins if the Secretary determines that (i) the prohibition would adversely affect the United States financial system or (ii) the foreign payment stablecoin issuer is taking steps to remedy its noncompliance. Waivers can also be granted in consultation with the Director of National Intelligence and the Secretary of State in cases involving national security and for intelligence and law enforcement activities.

Section 9. Anti-Money Laundering Innovation

Public Comment

Public comments will be sought starting 30 days after enactment of Act and will stay open for 60 days thereafter to identify innovative methods, techniques, and strategies that regulated financial institutions use, or have the potential to use, to detect illicit activity and money laundering involving digital assets. Comments are encouraged to address the use of blockchain technology and monitoring, digital identity verification, artificial intelligence, and application program interfaces.

Post-Comment Research

Following completion of the public comment period, the Secretary will conduct research on the methods and matters outlined in the comments. The Financial Crimes Enforcement Network (FinCEN) will also evaluate and consider the following factors when evaluating the novel methods published in the comments and researched by the Secretary:

improvements in the ability of the financial institution to detect illicit activity involving digital assets;
costs to regulated financial institutions;
the amount and sensitivity of information collected and reviewed;privacy and cybersecurity risks;
operational challenges; and
effectiveness at mitigating illicit finance.

The Secretary must also assess risks related to money laundering and illicit activity with respect to its national strategy for combating terrorist activity and other illicit financing under sections 261 and 262 of the Countering America’s Adversaries Through Sanctions Act.

Within three years of the Act’s enactment, FinCEN will also issue guidance and rules based on the research and risk assessments completed by Treasury and outlined in the public comments. This guidance will address (a) implementation of innovative techniques by regulated financial institutions to detect illicit activity involving digital assets, (b) standards for payment stablecoin issuers to identify and report illicit activity, money laundering, sanctions evasion, and insider trading, (c) standards for payment stablecoin issuers to monitor the blockchain, digital asset mixing, and tumbler services, and (d) risk management standards for financial institutions and decentralized finance protocols.

Post-Enactment Recommendations to Congress

By January 14, 2026 (180 days after enactment of the Act), the Secretary must submit a report to Congress detailing (i) legislative and regulatory proposals to support financial institutions in developing innovative methods to detect illicit activities, (ii) results of research and risk assessments, (iii) efforts to support financial institutions to detect illicit activity, (iv) the extent that blockchain and mixing services facilitate illicit activity, and (v) legislative recommendations related to the decentralized finance definition of “digital asset service provider.”

Section 10. Custody of Payment Stablecoin Reserve and Collateral

Section 10 provides that a person may only provide custodial or safekeeping services for payment stablecoin reserves, payment stablecoins used as collateral, or private keys used to issue payment stablecoins if they are subject to certain supervision. This includes (i) supervision or regulation by a primary Federal payment stablecoin regulatory or a primary financial regulatory agency described in section 2(12)(B) or (C) of the Dodd-Frank Act or (ii) supervision by a State bank supervisor (as defined under section 3 of the Federal Deposit Insurance Act) or a State credit union supervisor (as defined under section 6003 of the Anti-Money Laundering Act).

Persons are not, however, subject to this supervision if they hold such property in accordance with similar requirements set by a primary Federal payment stablecoin regulator, the SEC, or the Commodity Futures Trading Commission (the CFTC).

Any person providing such custodial or safekeeping services must further treat and deal with a customer’s stablecoins, private keys, property, and cash as belonging to the customer and take steps to protect the customer’s property from the claims of the person’s creditors. The Act does, however, allow the property of the permitted payment stablecoin issuer or customer to be withdrawn as necessary to transfer, adjust, or settle a transaction or transfer of assets such as payment of commissions, taxes, storage, and other lawful charges in connection with the custodial provider’s services.

Customer Priority

The claims of a customer against such person with respect to payment stablecoins have priority over the claims of any other person—other than the claims of another customer with respect to the payment stablecoins—unless the customer consents to the priority of such other claim.

Regulatory Requirements

A person providing custodial or safekeeping services must submit information about their business operations and processes to protect customer assets to the applicable primary Federal payment stablecoin regulator.

Prohibition on Commingling

All payment stablecoin reserves, payment stablecoins, cash, and other property of a permitted payment stablecoin issuer or customer must be separately accounted for and not commingled with the assets of the person providing custodial services. The Act contains two exceptions that allow commingling:

The property of a permitted payment stablecoin issuer or customer can be commingled if it is deposited in an omnibus account at a State chartered depository institution, an IDI, national bank, or trust company. Any payment stablecoin reserves in the form of cash held in the form of a deposit liability at a depository institution is not required to be separated from the cash or property of the depository institution.
Commingling and depositing of property in permitted payment stablecoin issuer or customer accounts are allowed, subject to the terms and conditions, rules, and regulations prescribed by a primary Federal payment stablecoin regulator.

IDIs that provide custodial or safekeeping services for payment stablecoin reservices may hold such reserves in the form of cash on deposit, provided such treatment is consistent with Federal law.

Exclusion

The requirements in Section 10 of the Act do not apply to persons solely in the business of providing hardware for customers to self-custody their payment stablecoins or private keys.

Section 11. Treatment of Payment Stablecoin Issuers in Insolvency Proceedings

Priority in Bankruptcy Proceedings

In insolvency proceedings of stablecoin issuers, the claims of those holding stablecoins will have priority over the issuers themselves. Under the Act, any persons holding a payment stablecoin issued by the permitted stablecoin issuer is deemed to hold such a claim. However, the priority identified above will not apply to claims other than those arising directly from the holding of payment stablecoins.

Intervention

The OCC or State payment stablecoin regulator may raise and be heard on any issue in which the debtor is a permitted payment stablecoin issuer.

Application of Existing Insolvency Law

Under the GENIUS Act, insolvency proceedings are to be resolved by the Federal Deposit Insurance Corporation (the FDIC), National Credit Union Administration (NCUA), or State payment stablecoin regulator.

Study by Primary Federal Payment Stablecoin Regulators

Under the GENIUS Act, primary Federal stablecoin regulators are required to perform a study of the potential insolvency proceedings of permitted payment stablecoin issuers. This study must address, but is not limited to addressing, the following:

gaps in bankruptcy laws that govern stablecoin issuers;
whether stablecoin holders can be paid in full following an insolvency event by a stablecoin issuer; and
whether additional authorities are needed to assist in implementing insolvency regimes.

Within three years following the GENIUS Act’s enactment, the primary Federal stablecoin regulators identified above must submit a report containing their findings to the Senate Committee on Banking, Housing, and Urban Affairs as well as the House Committee on Financial Services.

Section 12. Interoperability Standards

In consultation with the National Institute of Standards and Technology, primary Federal payment stablecoin regulators—alongside other relevant standard-setting authorities at the State and Federal levels—will prescribe standards for permitted payment stablecoin issuers that are designed to promote compatibility and interoperability with other actors in the stablecoin space. Here, the GENIUS Act focuses on compatibility and interoperability across other permitted payment stablecoin issuers and actors across the broader digital finance ecosystem.

Section 13. Rulemaking

Within one year following the GENIUS Act’s enactment, the Secretary, primary Federal payment stablecoin regulators, and State payment stablecoin regulators will promulgate additional regulations intended to carry out the provisions of this Act through notice and comment rulemaking.

Coordination

The Act also recommends that the authorities listed above coordinate on their regulations to carry out the Act.

Report Required

The GENIUS Act contains a 180-day reporting requirement, whereby the Federal banking agencies identified above will submit their report to the Senate Committee on Banking, Housing, and Urban Affairs as well as the House Committee on Financial Services.

Section 14. Study on Non-Payment Stablecoins

Study by Treasury

Further, the GENIUS Act requires the Secretary, the OCC, the FDIC, the SEC, and the CFTC to conduct a study of non-payment stablecoins. This study must address, but is not limited to addressing, the following:
categories of non-payment stablecoins, including the benefits and risks of technological design features;
participants in non-payment stablecoin arrangements;
utilization and potential utilization of non-payment stablecoins;
nature of reserve compositions;
types of algorithms being employed;
governance structure, including aspects of decentralization;
nature of public promotion and advertising; and
clarity and availability of consumer notices disclosures.

The GENIUS Act requires the study to address endogenously collateralized payment stablecoins, which refers to any digital asset where (a) the originator of which has represented will be converted, redeemed, or repurchased for a fixed amount of monetary value; and (b) that relies solely on the value of another digital asset created or maintained by the same originator to maintain the fixed price.

Report

Within one year of the GENIUS Act’s enactment, the Secretary must publish these findings in a report to the Senate Committee on Banking, Housing, and Urban Affairs as well as the House Committee on Financial Services.

Section 15. Reports

Annual Reporting Requirement

On July 18, 2025 (one year following the GENIUS Act’s enactment) and annually thereafter, primary Federal payment stablecoin regulators, in consultation with State payment stablecoin regulators, as necessary, must submit a report to the Senate Committee on Banking, Housing, and Urban Affairs, the House Committee on Financial Services, and the Director of the Office of Financial Research that addresses the status of the payment stablecoin industry. This study should address, but is not limited to addressing, the following:

a summary of trends in stablecoin activities;
a summary of the number of applications for approval as a permitted payment stablecoin issuer under section 5, including aggregate approvals and rejections of applications; and
a description of the potential financial stability risks posed to the safety and soundness of the broader financial system by payment stablecoin activities.

The Financial Stability Oversight Council will then incorporate these findings into their annual report to the Council under the Financial Stability Act of 2010.

Section 16. Authority of Banking Institutions

The GENIUS Act further clarifies the authority of banking institutions—including depository institutions, Federal and State credit unions, national banks, and trust companies—to issue digital assets representing deposits or shares, utilize distributed ledgers for books and records, and provide custodial services for payment stablecoins.

Treatment of Custody Activities

At the same time, the Act also limits the authority of Federal agencies to require banking institutions to include digital assets on their financial statement or balance sheet, and to hold or safekeep regulatory capital against such digital assets. The only exception is when doing so is necessary to mitigate against operational risks inherent with the custody or safekeeping services, as determined by the appropriate Federal banking agency, NCUA, State bank supervisor, or State credit union supervisor.

State-Chartered Depository Institutions

The Act further clarified the authority of State-chartered depository institutions to engage in money transmissions or provide custodial services through permitted stablecoin issuers within the State. State-chartered depository institutions may do so if they are required by the laws or regulations of the home State to establish and maintain liquidity and are required by the laws or regulations of the home State to establish and maintain adequate capital.

Further, the GENIUS Act notes that this section is not intended to limit the authority of State bank regulators to perform examinations of a depository institution’s subsidiary permitted payment stablecoin issuer or activities conducted through the permitted payment stablecoin issuer to ensure they are in compliance with State-level consumer protection laws.

Section 17. Amendments to Clarify that Payment Stablecoins Are Not Securities or Commodities and Permitted Payment Stablecoin Issuers Are Not Investment Companies

Amendments to Existing Legislation

The Act amends the definition of “security” in each of the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Securities Act of 1933, the Securities Exchange Act of 1934, and the Securities Investor Protection Act of 1970, and the definition of “commodity” in the Commodity Exchange Act, to carve out a payment stablecoin issued by a permitted payment stablecoin issuer.

Section 18. Exception for Foreign Payment Stablecoin Issuers and Reciprocity for Payment Stablecoins Issued in Overseas Jurisdictions

The GENIUS Act identifies exemptions to the prohibitions under Section 3 of the Act. Under the Act, such prohibitions will not apply to foreign payment stablecoin issuers if the foreign payment stablecoin issuer is subject to regulation and supervision by a foreign payment stablecoin regulator that is comparable to the regulatory and supervisory regime established under the GENIUS Act, is registered with the OCC, holds reserves in United States financial institutions sufficient to meet the liquidity demands of United States customers, and is domiciled and regulated in a country not subject to comprehensive sanctions by the United States or in a jurisdiction that the Secretary had determined to be a jurisdiction of primary money laundering concern.

Treasury Determination

Furthermore, the Secretary may determine whether a foreign country’s regulatory regime is comparable to that established under the GENIUS Act. In making this determination, the Secretary must account for recommendations made by other members of the SCRC.

Foreign payment stablecoin issuers or regulators may request such determinations from the Treasury Secretary, which the Secretary must render a decision on no later than 210 days after receiving the determination request.

Rescission of Determination

The Secretary may revoke its determinations if the Secretary concludes that the regulatory regime of the foreign county is no longer comparable to the regulatory or supervisory regime established under the GENIUS Act. Following such rescission, the digital asset service provider will have a 90-day safe harbor before it is in violation of Section 3 of the Act.

Public Notice and Rulemaking

The Secretary will make public a list of foreign counties for which the above determinations were made. Further, within one year after the GENIUS Act’s enactment, the Secretary may issue rules required to carry out these provisions.

Registration

Under the Act, a foreign payment stablecoins issuer may sell payment stablecoins using a digital asset service provider if the foreign payment stablecoin issuer is registered with the OCC. In assessing whether to reject a foreign payment stablecoin issuer’s registration, the OCC will consider the following factors:

final determination by the Treasury Secretary;
financial and managerial resources of the United States operations of the foreign payment stablecoin issuer;

whether the foreign payment stablecoin issuer will provide sufficient information to the OCC to determine compliance with the Act;

whether the foreign payment stablecoin is a risk to the financial stability of the United States; and
whether the foreign payment stablecoin issuer presents illicit finance risks to the United States.

If the foreign payment stablecoin issuer wishes to challenge the OCC’s designation, the issuer must file an appeal within 30 days following receipt of the rejection.

The OCC will maintain a publicly available list of registered foreign payment stablecoin issuers.

Ongoing Monitoring

Foreign payment stablecoin issuers must consent to United States jurisdiction relating to the enforcement of the GENIUS Act and will be to subject to reporting, supervision, and examination requirements as determined by the OCC. If a foreign payment stablecoin issuer fails to comply with the GENIUS Act, the OCC may rescind such issuer’s registration. Additionally, the Secretary may revoke the registration of a foreign payment stablecoin issuer if the Secretary reasonably determines that the foreign payment stablecoin issuer presents economic sanctions evasion, money laundering, or other illicit finance risks or violations, or is facilitating violations thereof.

Reciprocity

Under the Act, the Secretary may create reciprocal arrangements and other bilateral agreements between the United States and foreign jurisdictions with payment stablecoin regulatory regimes comparable to that established by the Act. The Secretary will consider whether such foreign jurisdictions have (i) similar requirements to those under Section 4(a) of the Act for issuing payment stablecoins, (ii) an adequate anti-money laundering program and counter-financing of terrorism program, and adequate sanction compliance standards, and (iii) adequate supervisory and enforcement capacity to facilitate international transactions and interoperability with United States dollar-denominated payment stablecoins issued overseas..

Publication and Completion

The Secretary will publish any agreements or arrangements discussed in this section within 90 days of their entering into force. The Secretary will also complete the arrangements under Section 18 of the Act within two years following the Act’s enactment.

Section 19. Disclosure Relating to Payment Stablecoins

Under the GENIUS Act, stablecoin deposits over $5,000 issued by permitted payment stablecoin issuers will be subject to Federal financial disclosure requirements.

Section 20. Effective Date

The GENIUS Act, as well as subsequent amendments to the Act, will become effective on the earlier of (i) 18 months following the Act’s enactment or (ii) 120 days after the primary Federal payment stablecoin regulator issues final regulations implementing this Act.

[1] Although the Act does not regulate non-payment stablecoins, it directs the Secretary of the Treasury to conduct a study of non-payment stablecoins and submit the report to the Senate Banking Committee and the House Financial Services Committee within one year of enactment.

[2] State-chartered banks would also be required to comply with State law requirements, which may require prior approval of the bank’s home State regulator to establish a new subsidiary as a permitted payment stablecoin issuer.

The following Gibson Dunn lawyers prepared this update: Jeffrey Steiner, Jason Cabral, Ro Spaziani, Sara Weed, Rachel Jackson, Alexis Levine, Paul Yu, Karin Thrasher, Simon Moskovitz, Alice Wang*, and Akila Bhargava.

Gibson Dunn’s lawyers are available to assist with any questions you may have regarding these developments. To learn more, please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Fintech & Digital Assets practice group, or the authors:

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

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

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

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

Paul Yu – San Francisco (+1 415.393.8205, pyu@gibsondunn.com)

Akila S. Bhargava – Washington, D.C. (+1 202.887.3662, abhargava@gibsondunn.com)

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

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

Alexis Levine – Dallas (+1 214.698.3194, alevine@gibsondunn.com)

Simon Moskovitz – Washington, D.C. (+1 202.777.9532, smoskovitz@gibsondunn.com)

Alice Wang* – Washington, D.C. (+1 202.777.9587, awang@gibsondunn.com)

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

The ICtHR found that there exists an independent right to a healthy climate, derived from the right to a healthy environment, and discusses at length States’ obligations in the context of the climate emergency.

On 3 July 2025, the InterAmerican Court of Human Rights (ICtHR or Court) issued its advisory opinion regarding the obligations of States to take measures to mitigate and adapt to the effects of climate change (Opinion).[1] In the Opinion, the ICtHR found that there exists an independent right to a healthy climate, derived from the right to a healthy environment. It also recognized “Nature” and its components as subjects of rights and the prohibition arising from the obligation not to cause irreversible damage to the climate and the environment as a jus cogens norm—the first time an international court has done so. The Court further discussed at length States’ obligations to mitigate climate change, including through the regulation of corporate behaviour. The Opinion is also significant as it was issued after the most participatory proceeding for an advisory opinion in ICtHR history with more than 260 amicus briefs submitted and over 180 delegations taking part in the hearings.

The Opinion is one of a trio of advisory opinions on State obligations in the context of climate change. The International Tribunal on the Law of the Sea issued its advisory opinion considering State obligations under the UN Convention on the Law of the Sea last year (see our alert here) (ITLOS Advisory Opinion). The International Court of Justice’s (ICJ) advisory opinion will be issued next week. The Opinion is also part of a growing body of international and domestic jurisprudence linking human rights and climate change.

The Court’s advisory opinions are influential as regards the interpretation of the American Convention on Human Rights (American Convention) on the 23 States which have ratified the American Convention[2]—and upon which the American Convention is binding as a matter of international law.[3]

Our Key Takeaways

Our key takeaways from the Opinion are as follows:

In domestic fora, the finding of an autonomous right to a healthy climate will likely be relied on by claimants in domestic proceedings before the courts of States which have ratified the American Convention, and in other jurisdictions, particularly where there exists a right to a healthy environment.

On the international plane, the Opinion has been issued just three weeks before the ICJ’s advisory opinion, expected on 23 July 2025, which may take into account the Opinion’s conclusions. The Opinion will no doubt be considered by the African Court on Human and People’s Rights (ACtHR) in its advisory opinion too, the request for which was submitted in May 2025.

As we reported with respect to the ITLOS Advisory Opinion, the Opinion may prompt a regulatory response from States subject to the Court’s jurisdiction. This could include, for example, measures to mitigate greenhouse gas (GHG) emissions, including the regulation of corporate behaviour, which was emphasized by the Court. It could also prompt the enactment of procedural rules facilitating collective claims in the climate context. As such, private actors should monitor changes to the regulatory landscape that may impact their operations.

The Opinion may impact investment arbitration. Indeed, the Court requested States to “review their existing trade and investment agreements” as well as “investor-State dispute settlement mechanisms” (ISDS) to “ensure that they do not limit or restrict efforts on climate change and human rights”, referring to a 2023 UN Working Group Report.[4] Whether or not Member States to the American Convention follow that request remains to be seen, but the Court’s findings may prove to be relevant in investment arbitration—for example, in cases where States consider an investor’s claim to be inconsistent with their right to regulate to achieve their climate objectives.

Background

On 9 January 2023, Colombia and Chile submitted a request to the Court—given the “close relationship between human rights and a healthy environment”—to “defin[e] the scope of the relevant obligations established in the American Convention and other inter-American treaties to confront the situations arising from the climate emergency” in a “equitable, just and sustainable manner” (Request).[5] While the ICtHR is primarily responsible for interpreting the rights and obligations guaranteed by the American Convention, the ICtHR is also competent to interpret other regional and international human rights treaties insofar as they shape human rights norms within the region.

The Request posed six sets of questions concerning State obligations to mitigate and adapt to climate change, as imposed by the: (i) American Convention; (ii) American Convention and the Regional Agreement on Access to Information, Public Participation and Justice in Environmental Matters in Latin America and the Caribbean; (iii) Convention on the Rights of the Child; (iv) Additional Protocol to the American Convention in the Area of Economic, Social and Cultural Rights (San Salvador Protocol); (v) Stockholm Declaration and Action Plan for the Human Environment (Stockholm Declaration); and (vi) Rio Declaration on Environment and Development, among other instruments.

The first five sets of questions[6] concerned State obligations, in light of the climate emergency, to:

prevent human rights violations caused by climate change and to guarantee human rights;

preserve the right to life and survival;

implement specific measures to protect the rights of children;

provide forums for public participation and judicial recourse; and

protect the rights of environmental activists, women, indigenous groups, and Afro-descendent communities.

The final set of questions requested clarity on collective and cross-border obligations—particularly when considering the principle of “shared but differentiated responsibilities”.[7]

For context, the ICtHR is one of three regional human rights tribunals that provides authoritative judgments and advisory opinions concerning the observance of human rights by States within their respective regional jurisdictions. The Grand Chamber of the European Court of Human Rights (ECtHR) delivered its judgment concerning State-obligations in the context of climate change under the European Convention on Human Rights last year in KlimaSeniorinnen v. Switzerland (KlimaSeniorinnen) (see our alert on the judgment here). The ACtHR is considering the obligations of African States under the African Charter on Human and People’s Rights (African Charter) in the climate change context, as well as other regional human rights instruments.

The Court’s Opinion On The Obligations Of States

1. The Scope Of Human Rights Obligations In The Context Of Climate Change

The Court first provided an overview of the scope of the five general obligations as derived from the American Convention and the Protocol of San Salvador placed in the context of the climate emergency, namely:

The obligation to respect rights: States must refrain from adopting regressive measures, including “preventing both formal and substantive discriminatory practices, that may arise in the design, implementation or assessment of public policies relating to climate mitigation and adaptation”.[8]

The obligation to guarantee rights: Applying the precautionary principle (which the Court recognized is now an established principle of environmental law), this obligation includes adopting all necessary measures to prevent serious or irreversible damage to the environment, and extends to the State’s duty to prevent “in the private sphere, third parties from violating the protected rights” (i.e., protected legal interests), including by regulating, supervising and overseeing the activities of private parties. This obligation is one of conduct and, in light of the extremity and urgency of the climate crisis, requires that States act with enhanced due diligence, including the “adoption of proactive and ambitious preventive measures” using the best available science, and “strict compliance” with procedural rights.[9]

The obligation to adopt measures to ensure the progressive development of economic, social and cultural rights (ESCR): In line with the American Convention’s emphasis on ESCR, the Court noted that the climate emergency disproportionately affects the most vulnerable, who are those with an insufficient level of ESCR, including, inter alia, health, work, social security and housing. As such, there is a need to allocate the maximum available resources to people and groups in those vulnerable situations.

The obligation to adapt provisions of domestic law: This extends to regulating in a manner that establishes legal obligations for individuals, including companies, “whose activities may have significant effects on the environment, leading to legal consequences in cases of non-compliance”.[10]

The obligation to cooperate in good faith: The Court derived an obligation on States to cooperate in good faith for the protection against environmental damage (taking into account differentiated responsibilities in the face of historical contributions to GHG emissions, and States’ respective capacities and needs to achieve sustainable development). This obligation implies, for example, financing least developed countries to contribute to the just transition.

2. Obligations Arising From Substantive Rights

A. The Right To A Healthy Environment

The Court discussed at length the right to a healthy environment, which is expressly recognized in the San Salvador Protocol. The Court explained that the right has “individual and collective dimensions”[11]: (i) the right constitutes a universal interest, owed to present and future generations (collective); and (ii) its violation can have direct or indirect repercussions on individuals due to its connection with other rights (including rights to life, health and personal integrity) (individual).

B. “Nature” As A Subject Of Rights

The Court described “Nature” (such as forests, rivers, seas, etc.) as a subject of rights, which it explained is fully consistent with the progressive development of international human rights laws. In the Court’s view, moving towards a paradigm that recognizes the rights of ecosystems is “fundamental for the protection of their long-term integrity and functionality”.[12] Indeed, the protection of Nature provides an “appropriate framework for States – and other relevant stakeholders” to “advance towards building a global legal system for sustainable development”.[13] The Court opined that States must not only refrain from acting in ways that cause significant environmental harm but have a positive obligation to adopt measures to ensure the protection, restoration and regeneration of ecosystems.

C. Jus Cogens Nature Of The Obligation Not To Create Irreversible Damage To The Climate And The Environment

The Court recognized the obligation not to cause irreversible damage to the climate and the environment as a jus cogens norm—the first time any international court has made such a finding. The Court found (albeit with three judges dissenting) that: “pursuant to the principle of effectiveness, the peremptory prohibition of anthropogenic conducts that could irreversibly harm the interdependence and vital equilibrium of the common ecosystem that makes the life of the species possible constitutes a norm of jus cogens”.[14] The implications of jus cogens norms are that any international agreement which conflicts with that norm are void. Further, States cannot disregard these obligations, and violations thereof are against the international community, which means that all States—not just the injured State—can require compliance. The legal basis of this part of the Opinion is likely to prove controversial.

D. The Right To A Healthy Climate

The Court relied on the right to a healthy environment to derive—as an independent right—the “right to a healthy climate”, which the Court explained allows for the clear delimitation of specific State obligations in the face of the climate crisis. The right is one that “derives from a climate system free from anthropogenic interferences that are dangerous for human beings and Nature as a whole”.[15] It has a collective dimension (protecting the interests of present and future generations (i.e., inter-generational equity) and Nature), and an individual dimension (protecting the possibility of each individual to develop in a climate system free from dangerous interference—in this sense, the right acts as a “precondition” for the exercise of other human rights).

E. Obligations Arising From The Right To A Healthy Climate

The Court considered that the “right to a healthy climate” places on States an obligation to: (i) address the causes of climate change and, in particular, the mitigation of GHG emissions; as well as (ii) protect Nature and its components; and (iii) progress towards sustainable development.

With regards to the obligation to mitigate, this entails different duties—to regulate and monitor:

(i) Climate Mitigation Regulation

Define a mitigation target: This must be set with the objective of preventing climate damage as a condition for respecting and guaranteeing the right to a healthy environment, and “applies to all OAS Member States without exception”.[16] The target must be calculated by the best available science based on a temperature increase of no more than 1.5 degrees, through tools such as carbon budgets. States should have regard to considerations of justice, such as the principles of common but differentiated responsibility and intra- and inter-generational equity (indeed, States which have emitted the most GHGs historically should bear the greatest responsibility for mitigation).

Define and keep up to date a human rights-based strategy to achieve it: In doing so, the Court noted its agreement with the position taken by the ECtHR in KlimaSeniorinnen, which emphasized the need to take immediate and intermediate measures while carbon neutrality is being achieved; and stated that measures should be set out in a “binding regulatory framework”.[17] The strategy must be conducted “in accordance with a standard of enhanced due diligence”.[18] Mitigation strategies must also contemplate measures to protect biodiversity and ecosystems—as well as ensure a “just transition”, for example, protecting against human rights violations in the extraction of rare and critical minerals required for energy transition.

Regulate the behavior of companies: In the Court’s view “business enterprises are called upon to play an essential role”; therefore (flowing from the American Convention and Protocol of San Salvador) States must adopt legislative and other measures to “prevent human rights violations by . . . private enterprises. . ., investigate them, punish them, and guarantee redress for their consequences”.[19] There exists a duty on States to establish corporate obligations with regard to climate change in the domestic regulatory framework. Thus, States must:
- call upon all companies domiciled or operating in their territory and jurisdiction to take effective measures to combat climate change and related human rights impacts;
- enact legislation obliging companies to conduct human rights and climate change due diligence along the entire value chain;
- require companies, state-owned and private, to disclose in an accessible manner the GHG emissions of their value chain;
- require companies to take measures to reduce such emissions, and to address their contribution to climate change and climate mitigation goals, throughout their operations; and
- adopt a set of standards to discourage greenwashing and undue influence by companies in the political and regulatory sphere in this area and support the actions of human rights defenders.

(ii) Climate Mitigation Monitoring

The obligation to prevent environmental harm also entails effective monitoring. Considering the enhanced due diligence standard, States are obliged to strictly monitor and control activities—both public and private—that generate GHG emissions, as foreseen in their mitigation strategy. While the activities monitored will vary from State to State, it is the State’s duty to monitor and control (at a minimum), the exploration, extraction, transport and processing of fossil fuels, cement manufacturing, agro-industrial activities, and any other inputs used in such activities.

States must have in place robust and independent judicial (or quasi-judicial or administrative) mechanisms, that are well-resourced. These mechanisms should monitor progress towards the national mitigation target.

Monitoring should include “the possibility of investigating, prosecuting and sanctioning those who fail to comply. . ., including business enterprises”. The State should further establish consequences, including the possibility of ordering the cessation of activities carried out, and effective compensation for the impacts caused to the climate system.

(iii) Determining Climate Impact

The Court explained that environmental impact assessments (EIAs) are mandatory whenever it is determined that a project carries risk of significant environmental damage, and such assessments must review the potential effects on the climate system. EIAs must be carried out where projects are undertaken by the State or by natural or legal persons. In compliance with the standard of enhanced due diligence, States must then carefully consider whether to approve a project.

F. Obligations Arising From Other Substantive Rights Affected By Climate Impacts

The Court considered that climate impacts will “generate[], and will increasingly continue to generate, an ever-greater threat to the full and effective enjoyment of various human rights enshrined in the American Convention and the Protocol of San Salvador”, including the rights to life, human dignity, health, private and family life, private property and housing, freedom of residence and movement, water and food, labour and social security, culture and education.[20]

The Court noted an obligation on States to keep their UNFCCC National Adaptation Plans updated[21]—based on the best available science—and in a manner that is designed to mitigate human rights impacts generated by climate change to the extent possible (including implementing short, medium and long-term measures). In this respect, the Court found that the iterative cycle established by the Paris Agreement (assessment of impacts, planning, implementation, and monitoring, evaluation and learning) could be a “useful guide” for States in designing their adaptation plans.

The Court also addressed “specific measures that must be adopted in order to protect each of the principal substantive rights violated as a consequence of climate impacts” and noted extensive obligations on States specific to each right, such as the obligation to: (i) ensure an adequate water supply in times of drought; (ii) implement strategies to address phenomena such as heat waves, droughts and floods; and (iii) guarantee housing to those displaced by such events.[22]

3. Obligations Arising From Procedural Rights

The Court further articulated a number of procedural guarantees and obligations arising in the context of climate change, including, by way of example:

in the context of the right to science and the recognition of local, traditional and indigenous knowledge, an obligation, to provide education in science and to protect local, traditional and indigenous knowledge through appropriate mechanisms;

in the context of the right to access of information, a guarantee of access to climate information;

in the context of the right to political participation, an obligation to ensure meaningful participation of the people under their jurisdiction in decision-making and policies that may affect the climate system; and

in the context of the right to defend human rights and the protection of environmental defenders, an obligation to investigate, prosecute and punish crimes committed against environmental defenders.

In light of the right to an effective remedy, States are also “obliged to establish effective administrative and judicial mechanisms that allow victims access to comprehensive redress”.[23]

On the right of access to justice, the Court declared that, in the climate change context, the conduct of judicial proceedings should be guided by the application of the pro actione principle (i.e., procedural rules should be interpreted in a way most favourable to access to justice). In line with that principle, States should adopt measures that facilitate collective claims with broad legal standing and should avoid the strict application of evidentiary provisions which could otherwise be an obstacle to justice (including by accounting for difficulties in proving the causal relationship between the damage and its origin specific to climate change cases).

4. Obligations Arising From The Principle Of Equality And Non-Discrimination

The Court noted the diversity of vulnerability of population groups to climate change-related effects, influenced by various structural and intersectional factors of discrimination, among them, most notably, poverty, but also the disproportionate impact of climate change on children, indigenous and Afro-descendant communities, fishermen, women, and the elderly. The Court emphasized States’ obligations to account for diverging levels of vulnerability in determining appropriate measures to guarantee their full enjoyment to rights in the context of climate change.

[1] The Opinion can be found here (in English): https://www.corteidh.or.cr/docs/opiniones/seriea_32_en.pdf; and here (in Spanish:) https://www.corteidh.or.cr/docs/opiniones/seriea_32_esp.pdf.

[2] Argentina, Barbados, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, and Uruguay (Venezuela and Trinidad and Tobago having denunciating the American Convention). Only 20 of those States have recognised the jurisdiction of the ICtHR within the meaning of Article 62 of the American Convention (Dominica, Grenada and Jamaica being those States which have ratified the American Convention but have not recognised the jurisdiction of the ICtHR).

[3] Pursuant to Article 1 of the American Convention, “The States Parties to this Convention undertake to respect the rights and freedoms recognized herein and to ensure to all persons subject to their jurisdiction the free and full exercise of those rights and freedoms, without any discrimination for reasons of race, color, sex, language, religion, political or other opinion, national or social origin, economic status, birth, or any other social condition”. Article 2 requires that “Where the exercise of any of the rights or freedoms referred to in Article 1 is not already ensured by legislative or other provisions, the States Parties undertake to adopt, in accordance with their constitutional processes and the provisions of this Convention, such legislative or other measures as may be necessary to give effect to those rights or freedoms”.

[4] UN Working Group on the issue of human rights and transnational corporations and other business enterprises, “Information Note on Climate Change and the Guiding Principles on Business and Human Rights”, United Nations Human Rights Special Procedures, 2023 (see paras. 9 to 15).

[5] “Request for an advisory opinion on the Climate Emergency and Human Rights submitted to the Inter-American Court of Human Rights by the Republic of Colombia and the Republic of Chile”, 9 January 2023, p. 2, <https://www.corteidh.or.cr/docs/opiniones/soc_1_2023_en.pdf>, last accessed 18 July 2025.

[6] Ibid., pp. 8-12.

[7] Ibid., p. 13.

[8] Supra. n. 1, p. 81.

[9] Supra. n. 1, pp. 84-85.

[10] Supra n. 1, p. 88.

[11] Supra n. 1, p. 104.

[12] Supra n. 1, p. 97.

[13] Supra n. 1, p. 97.

[14] Supra n. 1, p. 215 (emphasis in the source).

[15] Supra n. 1, p. 104.

[16] Supra n. 1, p. 111.

[17] Supra n. 1, p. 113.

[18] Supra n. 1, p. 113.

[19] Supra n. 1, p. 116.

[20] Supra n. 1, p. 125.

[21] See the following link for more information on adaptation plans: https://unfccc.int/national-adaptation-plans.

[22] Supra n. 1, p. 125.

[23] Supra n. 1, p. 188.

The following Gibson Dunn lawyers prepared this update: Robert Spano, Ceyda Knoebel, Stephanie Collins, Alexa Romanelli, and Nicole Martinez.

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

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

Ceyda Knoebel – London (+44 20 7071 4243, cknoebel@gibsondunn.com)

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

Alexa Romanelli – London (+44 20 7071 4269, aromanelli@gibsondunn.com)

The Trustees of Welfare & Pension Funds of Local 464A – Pension Fund v. Medtronic PLC, 726 F. Supp. 3d 938 (D. Minn. 2024).

Case Highlights

On March 28, 2024, a federal district court held that positive statements about the prospect of U.S. Food and Drug Administration (FDA) approval of a company’s latest product were not sufficiently alleged to be false or misleading even though the company did not disclose that it had received a Form 483—a form issued by the FDA following an inspection that lists objectionable conditions an investigator believes violate the Food, Drug, and Cosmetic Act and other related acts. The plaintiffs in The Trustees of Welfare & Pension Funds of Local 464A – Pension Fund v. Medtronic PLC (“Medtronic”), 726 F. Supp. 3d 938 (D. Minn. 2024), filed a lawsuit alleging that Medtronic misled investors when it disclosed that the application process for FDA approval for its next generation insulin pump designed to manage type 1 diabetes—the MiniMed 780G (780G)—was “on track.” The plaintiffs alleged that this statement led investors to believe that FDA approval was likely when, in fact, Medtronic had received a Form 483 following the FDA’s inspection of a Medtronic facility, which ultimately led to an FDA warning letter and a decision to delay approval. Medtronic’s stock price dropped when it announced that it could no longer include FDA approval of 780G in its guidance for fiscal year 2023. The plaintiffs claimed that the defendants had a duty to disclose Medtronic’s receipt of Form 483—which it had received approximately six months before the warning letter was disclosed—given Medtronic’s disclosures that its submission for FDA approval of 780G was “on track.” While the court acknowledged that this was a “close[ ] question,” it found that the complaint did not allege that the “on track” statement was false or misleading. The court distinguished Public Pension Fund Group v. KV Pharmaceutical Company (“KV Pharmaceutical”), 679 F. 3d 972 (8th Cir. 2012), where the Eighth Circuit held that defendants in that case had a duty to disclose the receipt of Form 483 when they told shareholders that the company was compliant with FDA regulations given “numerous, severe, and pervasive objectionable conditions” covering “the entire range of the defendants’ operations and products.” Here, unlike KV Pharmaceutical, the Medtronic complaint did not allege how the issues raised in Form 483 would necessarily doom or impact the timeline for FDA approval and the defendants never represented that Medtronic was in compliance with all FDA regulations.

The Medtronic court has since allowed the plaintiffs to file an amended complaint, observing that it “allege[d] more clearly” the defendants’ interactions with the FDA and the Form 483’s potential connection to approval of the 780G. The defendants’ motion to dismiss the amended complaint is pending. The ultimate destiny of the plaintiffs’ claim remains to be seen.

Key Takeaways

The court’s decision in Medtronic offers helpful guidance as to when a duty may arise to disclose a company’s receipt of potentially or partially negative feedback from FDA. The Supreme Court recently affirmed that there is no affirmative duty to disclose material facts under the antifraud provision of the federal securities laws unless the omission makes another statement misleading, Macquarie Infrastructure Corp. v. Moab Partners, L. P., 601 U.S. 257 (2024), and this applies equally to receipt of FDA feedback. Medtronic and KV Pharmaceutical suggest that companies need to disclose their receipt of FDA feedback if they have made any affirmative representations about being in compliance with FDA regulations or if the regulatory issues may ultimately affect timing or possibility of receiving FDA approval. The question of whether and when companies may need to disclose certain FDA communications is fact specific and depends on the other disclosures the company has made, the overall context of the communications, and even market and investor expectations. Given the fact-specific nature of such inquiry, companies should consult with experienced securities litigation counsel in making these determinations.

This newsletter has been prepared by the Life Sciences and Securities Litigation teams of Gibson Dunn. For further information, please contact the Gibson Dunn lawyer with whom you usually work, or any of us by email:

Life Sciences:
Ryan Murr – Partner, San Francisco (rmurr@gibsondunn.com)
Branden Berns – Partner, San Francisco (bberns@gibsondunn.com)
Melanie Neary – Partner, San Francisco (mneary@gibsondunn.com)

Securities Litigation:
Jessica Valenzuela – Partner, Palo Alto (jvalenzuela@gibsondunn.com)
Jeff Lombard – Of Counsel, Palo Alto (jlombard@gibsondunn.com)
Monica Loseman – Partner, Denver, New York (mloseman@gibsondunn.com)
Brian Lutz – Partner, San Francisco (blutz@gibsondunn.com)
Jason J. Mendro – Partner, Washington, D.C. (jmendro@gibsondunn.com)
Craig Varnen – Partner, Los Angeles (cvarnen@gibsondunn.com)

Gibson Dunn associates Zaneta Kim and Shri Dayanandan also contributed to this update.

This significant step forward in the modernization of Germany’s civil justice system seeks to position Frankfurt as a globally competitive forum for international commercial litigation.

A. Introduction

Effective July 1, 2025, Frankfurt established a Commercial Court at its Higher Regional Court (Oberlandesgericht) and Commercial Chambers at its Regional Court (Landgericht). These new permanent judicial bodies offer proceedings in English, are staffed by experienced commercial judges, and are specifically designed to handle complex, high-value, and cross-border disputes. This development marks a significant step forward in the modernization of Germany’s civil justice system and seeks to position Frankfurt as a globally competitive forum for international commercial litigation.

B. The New Commercial Courts and Chambers in Frankfurt: Structure, Role, and Innovations

Frankfurt’s new Commercial Court and Commercial Chambers form a specialized track within the German court system, distinct from general civil divisions. These adjudicatory panels are unlimited in duration and independent of internal court staffing rotations.

The judicial bodies at the Commercial Court (Senates) will normally comprise three professional judges. The Commercial Chambers, on the other hand, may be either staffed with one professional judge and two honorary judges (usually businesspeople or other individuals with comparable commercial expertise) if situated at the commercial division, or with three professional judges if situated at a civil division.

The Commercial Court’s and Commercial Chambers’ exclusive focus is on commercial litigation – particularly cases involving international parties and substantial claims. The aim is to provide a streamlined, business-oriented forum that promotes procedural efficiency within the public judicial system.

The Commercial Chambers, located at the Regional Court level, serve as courts of first instance for commercial disputes that fall within their territorial and subject-matter jurisdiction.
The Commercial Court may also serve as a court of first instance, provided the parties have expressly agreed to this in advance. This option allows parties to eliminate one level of proceedings, thereby expediting the ability to achieve a final and binding decision. Alternatively, the Commercial Court functions as the appellate body, reviewing decisions rendered by the Commercial Chamber.

I. Jurisdiction and Scope

To establish jurisdiction of the Commercial Courts or Chambers, the amount in dispute must exceed EUR 500,000 and relate to the following subject matters that will, in particular, cover post-M&A disputes:

Disputes between businesses/business people arising from commercial transactions
Conflicts related to corporate acquisitions or share purchases
Disputes between companies and their management or supervisory boards

Excluded subject matters are:

Capital investment law
Construction and architectural contracts
Medical treatment and insurance disputes
Media, inheritance, and insolvency law

II. Appeals

Appeals from the Commercial Chambers in Frankfurt are heard by the Frankfurt Commercial Court. This arrangement allows parties to benefit from the expertise and procedural advantages of the specialized adjudicatory system even at the appellate level.

As a final review, appeals to the Federal Court of Justice (BGH) are available. Notably, no prior leave to appeal is required if the Commercial Court served as the court of first instance.

Appellate proceedings before the BGH may also be conducted in English, provided this is requested in the notice of appeal and the request is granted by the BGH. In the remaining cases, the BGH will conduct proceedings in German. In practice, however, this has limited impact. The BGH’s review is confined strictly to questions of law — factual findings are not revisited — and submissions must be made by specially admitted BGH attorneys, who customarily argue in German. Given the narrow scope of review and the availability of high-quality translation support, the use of German at this stage is unlikely to pose a significant obstacle for international parties.

III. Key Features and Innovations

The Commercial Courts and Chambers introduce several procedural and institutional enhancements aimed at aligning German litigation with international best practices:

1. English-Language Proceedings

With the introduction of English-language proceedings, Germany is aligning itself with a well-established international trend. Jurisdictions such as Singapore, the Netherlands, Cyprus, Hong Kong, and Bahrain have all established specialized courts for international commercial litigation that offer proceedings in English. Germany now joins this group of modern, business-oriented forums, aiming to enhance its appeal for cross-border commercial disputes and ensure compatibility with global best practices.

2. Judicial Expertise and Specialization

Commercial matters are assigned to the Commercial Chambers and Commercial Courts to ensure they are handled by judges with relevant subject-matter expertise. These judges are selected for their background in commercial law and will continue to deepen their specialization through regular exposure to complex business disputes. This structure is designed to enhance consistency, procedural efficiency, and the overall quality of judicial decision-making.

3. Case Management Conferences

Several procedural enhancements introduced with the new Commercial Courts and Chambers are inspired by international arbitration: the implementation of Case Management Conferences is expected to facilitate early procedural planning, thereby assisting in a structured and efficient progression of the proceedings.

In addition, the implementation of verbatim transcripts will enhance transparency and precise documentation of hearings, thereby improving the traceability and accountability of the proceedings.

4. Bypassing the Regional Court Level

Parties may agree to initiate proceedings directly at the Commercial Court, skipping the Commercial Chambers at the Regional Court level. This streamlining will prevent lengthy proceedings, for example by avoiding a re-examination of the facts at the appellate level.

5. Videoconferences, enhanced Safeguards for Protection of Trade Secrets

In the context of the newly established Commercial Courts and Commercial Chambers, several additional developments in German civil procedure are worth noting:

Court proceedings may be held via video conference, offering greater flexibility and accessibility
Confidentiality: parties may exclude the public from negotiations on trade secrets and place the opposing party under a greater obligation to maintain confidentiality regarding the knowledge obtained during the proceeding.

IV. Practical Implications

To benefit from the procedural efficiencies and international accessibility of the new Commercial Courts and Chambers, parties would need to proactively reflect these options in their contracts. Specifically, forum selection clauses should designate the Frankfurt courts as the competent venue, particularly for high-value or cross-border commercial disputes. Where appropriate, it is also advisable to specify that the Commercial Court shall serve as the court of first instance to expedite proceedings. Additionally, to ensure that proceedings are conducted in English, contracts should include a clear agreement on English as the language of litigation.

V. Conclusion and Outlook

With the recent introduction of its Commercial Court and Commercial Chambers, Frankfurt seeks to reinforce its position as a premier venue for international commercial dispute resolution. These specialized courts seek to offer a modern, expert-led forum that combines the strengths of German procedural rigor with the expectations of international business actors.

With their dual-level structure, English-language capability, and business-focused approach, these courts should allow Frankfurt to compete with leading global litigation hubs. Businesses involved in complex or cross-border disputes should evaluate whether these new procedural options align with their litigation strategies and consider referencing them in future dispute resolution clauses.

The following Gibson Dunn lawyers prepared this update: Dirk Oberbracht, Finn Zeidler, Annekathrin Schmoll, Charlotte Popp, and Simon Stöhlker.

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, any leader or member of the firm’s International Arbitration or Litigation practice groups, or the authors in Frankfurt:

Dirk Oberbracht (+49 69 247 411 510, doberbracht@gibsondunn.com)

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

Annekathrin Schmoll (+49 69 247 411 533, aschmoll@gibsondunn.com)

Charlotte Popp (+49 69 247 411 532, cpopp@gibsondunn.com)

Simon Stöhlker (+49 69 247 411 517, sstoehlker@gibsondunn.com)

Europe

06/26/2025

ENISA | Guidance | NIS 2 Support Documents

ENISA has released two guidance documents to assist companies in complying with the NIS 2 Directive.

The first document provides non-binding guidance to relevant entities on how to implement the requirements for the cybersecurity risk management measures by providing examples. The second document clarifies the organizational steps to take (including what roles and skills are needed internally) to implement NIS 2 obligations, such as cybersecurity risk measures, post-incident response and reporting.

For more information: ENISA Website link and link

06/26/2025

European Data Protection Board (EDPB) | Opinion | Draft Guidelines on Minors Under DSA

The EDPB provided preliminary comments on the European Commission’s draft guidelines under Article 28 of the Digital Services Act (DSA), that aim at enhancing online protection for minors.

The Board welcomed the initiative, noted the draft provides clear and practical recommendations on what measures to take to improve minor safety (including privacy) but also called for clarification of the material scope of Article 28. It also mentioned that it intends to provide additional guidance on data protection compliance in the context of its “Children’s guidelines” and reiterated its readiness to advise on age assurance and related data protection issues within the Digital Services Board’s Working Group 6.

For more information: EDPB Website

06/24/2025

European Commission | Adequacy Decision | UK

The European Commission has extended the UK’s adequacy decision under the GDPR until December 27, 2025.

As a reminder, the UK Government introduced on October 23, 2024, the Data (Use and Access Bill) which amends the UK GDPR and Data Protection Act 2018. The extension allows the European Commission to assess whether the UK continues to provide an adequate level of protection, pending the outcome of the legislative process.

For more information: European Commission Website

06/16/2025

Council of the EU/European Parliament | Agreement | Cross-Border GDPR Enforcement

The Council of the European Union and the European Parliament reached a provisional agreement on a new legislative proposal aimed at improving cooperation among national data protection authorities in cross-border enforcement of the GDPR.

The proposed regulation includes clearer procedural rules for handling cross-border cases, with the goal of streamlining investigations and enhancing the efficiency of cooperation mechanisms between supervisory authorities.

For further information: European Council Website

06/05/2025

European Data Protection Board | Guidelines | Data Transfers

The European Data Protection Board (“EDPB”) published the final version of its guidelines regarding data transfers to third country authorities.

The new guidelines aim to provide clarification on Article 48 of the GDPR, outlining how organizations should assess whether and under what conditions they may lawfully respond to requests for the transfer of personal data from authorities in third countries.

For more information: EDPB Website

06/05/2025

European Data Protection Board | Report | AI and Data Protection

The European Data Protection Board (“EDPB”) published two reports providing training material on AI and data protection.

The first report, “Law & Compliance in AI Security & Data Protection”, is tailored for privacy and data protection professionals, such as DPOs, while the second report, “Fundamentals of Secure AI Systems with Personal Data”, is designed for technically oriented professionals, including cybersecurity experts and developers.

For more information: EDPB Website

06/04/2025

European Union Agency for Cybersecurity | Update | National Cybersecurity Strategies

The European Union Agency for Cybersecurity (“ENISA”) updated its National Cybersecurity Strategies (“NCSS”) Interactive Map.

The NCSS Map serves as a platform offering insights on how EU Member States implement their cybersecurity strategies, highlighting their objectives, actions and best practices.

For more information: ENISA Website

Belgium

06/26/2025

Belgian Supervisory Authority | Procedural Decision | Dismissal of NOYB Complaints

The Belgian Supervisory Authority (“APD”) dismissed 16 complaints across 5 cases filed by NOYB, citing the prohibition of abuse of rights under GDPR.

The APD found that NOYB had instructed complainants on how to grant mandates for filing complaints, without properly representing the individual data subjects. The ADP recalled that in the European Union, including Belgium, associations cannot file complaints in their own name, but only as representative acting on the basis of a mandate from the data subject.

For more information: APD Press release [FR]

France

06/19/2025

French Supervisory Authority | Recommendations | AI and Legitimate Interest

The French Supervisory Authority (“CNIL”) published new recommendations on the use of legitimate interest in the development of AI systems.

The CNIL outlines the conditions which legitimate interest may be relied upon, in particular in the context of web scraping. These recommendations are intended to help stakeholders assess when legitimate interest can be used as a legal basis. The recommendations also provide concrete examples of data processing activities that may be justified on the grounds of legitimate interest.

For more information: CNIL Website [FR]

06/12/2025

French Supervisory Authority | Public consultation | Tracking Pixels

The French Supervisory Authority (“CNIL”) launched a public consultation on a draft recommendation on tracking pixels, aimed at clarifying the legal framework for their use in emails and on websites.

The draft recommendation outlines requirements related to user consent, information obligations, and data sharing with third parties. Stakeholders can submit feedback until 24 July 2025.

For more information: CNIL Website [FR]

06/10/2025

French Supervisory Authority | Recommendations | Workplace Diversity Surveys

The French Supervisory Authority (“CNIL”) published recommendations on the conduct of internal diversity surveys in the workplace.

These non-binding guidelines aim to help organizations collect sensitive personal data securely and in a way that respects individuals’ privacy rights and the GDPR through measures such as voluntariness, clear information, data minimization, and strong safeguards like anonymization or pseudonymization.

For more information: CNIL Website [FR]

06/06/2025

French Supervisory Authority | Guidance | Roles of Controllers and Processors

The French Supervisory Authority (“CNIL”) published a guidance on the roles of data controllers and data processors.

This guidance stresses that all parties in data processing must clearly define and document their roles based on actual responsibilities as misclassification can jeopardize GDPR compliance and lead the CNIL to reclassify roles during audits, possibly resulting in sanctions.

For more information: CNIL Website [FR]

Germany

06/17/2025

Data Protection Conference | Guidance | AI Systems and Data Protection

The Data Protection Conference of the German Supervisory Authorities (DSK) published an orientation guide outlining key data protection requirements for the development and use of AI systems, in particular regarding the required technical and organizational measures.

The guidance highlights the need for appropriate technical and organizational measures (TOMs) to mitigate risks, especially in high-risk processing scenarios. The document is intended to support both public and private sector actors in aligning AI deployment with fundamental rights and data protection standards.

For more information: DSK Website [DE]

06/16/2025

Data Protection Conference | Resolution | Confidential Cloud Computing

The Data Protection Conference of the German Supervisory Authorities (DSK) published a resolution on “confidential cloud computing”.

The resolution acknowledges that various diverse definitions of “confidential cloud computing” exist. It emphasizes, that confidential cloud computing may significantly enhance overall protection levels – especially against other cloud users and certain insider threats. As part of a “defense-in-depth” strategy, it provides valuable additional layers of security, even if absolute confidentiality from the cloud provider cannot be guaranteed. Clear attacker models and transparent documentation of implemented measures are essential prerequisites.

For more information: DSK Website [DE]

06/16/2025

Data Protection Conference | Guideline | Procedure on Fines of Data Protection Supervisory Authorities

The German Data Protection Conference (DSK) has adopted model guidelines for the conduct of administrative fine proceedings by data protection supervisory authorities.

The DSK aims to establish nationwide standards for supervisory authorities and how to handle fining procedures under the GDPR. The guidelines define procedural principles, responsibilities, cooperation obligations of the parties involved, and the methodology for calculating and assessing fines. They are intended to enhance transparency and legal certainty for both organizations and individuals, while also promoting consistency in enforcement practices.

For more information: DSK Website [DE]

06/10/2025

German Federal Supervisory Authority | Sanctions | Telecommunication Company

The German Federal Supervisory Authority has fined a telecommunication company a total of €45 million following investigations into its partner agencies and online service portal.

More specifically, a €15 million fine was imposed for insufficient supervision and auditing of partner agencies processing customer data. A €30 million fine was imposed for weak authentication procedures that could allow misuse of eSIMs via the hotline when used in combination with the Company’s online portal. A reprimand was also issued in relation to identified IT system vulnerabilities.

For more information: EDPB Website

06/10/2025

North Rhine-Westphalia Supervisory Authority | Activity Report

The North Rhine-Westphalia Supervisory Authority (LDI NRW) published their annual activity report.

The North Rhine-Westphalia Supervisory Authority has voiced opposition to the government’s plan to centralize data protection at the federal level, highlighting the importance of regional data protection authorities.

For more information: LDI NRW Website [DE]

Greece

06/11/2025

Hellenic Supervisory Authority | Decision | EU Representative

The Hellenic Supervisory Authority published a decision of May 2025 ordering a Chinese-based provider of a large language model (LLM) to appoint an EU representative, pursuant to Article 27 of the GDPR.

The Authority considered that the company targets EU data subjects, notably in Greece, through web and mobile services available in Greek, and failed to provide a compliant privacy policy or lawful basis for processing.

For more information: Hellenic Authority Website

Slovenia

06/04/2025

Slovenian Government | Publication | NIS II

The Information Security Act (“ZInfV-1”) transposing the NIS II Regulation was published in the official gazette of the Republic of Slovenia.

The Information Security Act will enter into effect on June 19, 2025.

For more information: Slovenian Government Website [SI]

United Kingdom

06/19/2025

Royal Assent | Data Use and Access Act | GDPR & PECR Update

The Data (Use and Access) Act (“DUUA”) received Royal Assent.

The DUUA updates certain aspects of data protection and e-privacy law, aiming to facilitate the safe and effective use of data, encourage innovation, simplify data protection compliance requirements for organisations and align the PECR enforcement regime to that under UK GDPR. The Act amends and supplements the UK GDPR, the DPA 2018 and PECR.

For more information: ICO Website

06/17/2025

Information Commissioner’s Office | Fine | Genetic Data

ICO fines 23andMe £2.31 million for failing to have appropriate security measures in place and to protect UK users’ genetic data.

The penalty results from a joint investigation conducted by the ICO and Canada Privacy Commissioner (“CPC”), after 23andMe failed to protect UK users’ personal data during a major 2023 cyber-attack. In particular, 23andMe did not have mandatory MFA, secure password protocols, unpredictable usernames, and effective systems in place to monitor, detect, or respond to cyber threats. It also failed to have adequate controls over access to raw genetic data.

For more information: ICO Website

06/16/2025

Information Commissioner’s Office | Guidance | IoT

ICO publishes draft guidance on Internet of Things (“IoT”) products.

The ICO’s draft guidance is intended to support IoT developers (e.g. of smart home appliances and wearable tech) with their data protection compliance. The guidance sets clear expectations on how to do so, addressing for instance how to request informed consent or provide transparent privacy information.

For more information: ICO Website

06/05/2025

Information Commissioner’s Office | Guidance | AI and Biometrics Strategy

The Information Commissioner’s Office (“ICO”) published its AI and biometrics strategy.

This new AI and biometrics strategy aims at ensuring organisations are developing new technologies lawfully, while supporting innovation.

For more information: ICO Website

06/04/2025

National Cyber Security Centre | Guidance | Cyber Security Culture Principles

The National Cyber Security Centre (“NCSC”) launched its Cyber security culture principles.

The guidance aims at helping professionals in supporting a cyber secure organization.

For more information: NCSC Website

The following Gibson Dunn lawyers prepared this update: Ahmed Baladi, Vera Lukic, Kai Gesing, Joel Harrison; Thomas Baculard, Ioana Burtea, Billur Cinar, Hermine Hubert, Christoph Jacob, Yannick Oberacker, Clémence Pugnet, and Phoebe Rowson-Stevens.

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

Privacy, Cybersecurity, and Data Innovation:

United States:
Abbey A. Barrera – San Francisco (+1 415.393.8262, abarrera@gibsondunn.com)
Ashlie Beringer – Palo Alto (+1 650.849.5327, aberinger@gibsondunn.com)
Ryan T. Bergsieker – Denver (+1 303.298.5774, rbergsieker@gibsondunn.com)
Keith Enright – Palo Alto (+1 650.849.5386, kenright@gibsondunn.com)
Gustav W. Eyler – Washington, D.C. (+1 202.955.8610, geyler@gibsondunn.com)
Cassandra L. Gaedt-Sheckter – Palo Alto (+1 650.849.5203, cgaedt-sheckter@gibsondunn.com)
Svetlana S. Gans – Washington, D.C. (+1 202.955.8657, sgans@gibsondunn.com)
Lauren R. Goldman – New York (+1 212.351.2375, lgoldman@gibsondunn.com)
Stephenie Gosnell Handler – Washington, D.C. (+1 202.955.8510, shandler@gibsondunn.com)
Natalie J. Hausknecht – Denver (+1 303.298.5783, nhausknecht@gibsondunn.com)
Jane C. Horvath – Washington, D.C. (+1 202.955.8505, jhorvath@gibsondunn.com)
Martie Kutscher Clark – Palo Alto (+1 650.849.5348, mkutscherclark@gibsondunn.com)
Kristin A. Linsley – San Francisco (+1 415.393.8395, klinsley@gibsondunn.com)
Timothy W. Loose – Los Angeles (+1 213.229.7746, tloose@gibsondunn.com)
Vivek Mohan – Palo Alto (+1 650.849.5345, vmohan@gibsondunn.com)
Rosemarie T. Ring – San Francisco (+1 415.393.8247, rring@gibsondunn.com)
Ashley Rogers – Dallas (+1 214.698.3316, arogers@gibsondunn.com)
Sophie C. Rohnke – Dallas (+1 214.698.3344, srohnke@gibsondunn.com)
Eric D. Vandevelde – Los Angeles (+1 213.229.7186, evandevelde@gibsondunn.com)
Benjamin B. Wagner – Palo Alto (+1 650.849.5395, bwagner@gibsondunn.com)
Frances A. Waldmann – Los Angeles (+1 213.229.7914,fwaldmann@gibsondunn.com)
Debra Wong Yang – Los Angeles (+1 213.229.7472, dwongyang@gibsondunn.com)

Europe:
Ahmed Baladi – Paris (+33 1 56 43 13 00, abaladi@gibsondunn.com)
Patrick Doris – London (+44 20 7071 4276, pdoris@gibsondunn.com)
Kai Gesing – Munich (+49 89 189 33-180, kgesing@gibsondunn.com)
Joel Harrison – London (+44 20 7071 4289, jharrison@gibsondunn.com)
Lore Leitner – London (+44 20 7071 4987, lleitner@gibsondunn.com)
Vera Lukic – Paris (+33 1 56 43 13 00, vlukic@gibsondunn.com)
Lars Petersen – Frankfurt/Riyadh (+49 69 247 411 525, lpetersen@gibsondunn.com)
Christian Riis-Madsen – Brussels (+32 2 554 72 05, criis@gibsondunn.com)
Robert Spano – London/Paris (+44 20 7071 4000, rspano@gibsondunn.com)

Asia:
Connell O’Neill – Hong Kong (+852 2214 3812, coneill@gibsondunn.com)
Jai S. Pathak – Singapore (+65 6507 3683, jpathak@gibsondunn.com)

Partner Perlette Michèle Jura, of counsel Miguel Loza, Jr., and senior associate Maria L. Banda are the authors of the latest edition of Lexology Panoramic: Business & Human Rights 2025 (USA) guide.

The chapter offers a comprehensive overview of the key statutory and voluntary frameworks governing business and human rights in the United States, including federal and state disclosure and due diligence regimes and accountability mechanisms, and maps out the fast-developing rules in this area.

Lexology Panoramic is a leading cross-jurisdictional comparison tool on how laws and regulations across different sectors vary across jurisdictions.

A quarterly update of high-quality education opportunities for Boards of Directors.

Gibson Dunn’s summary of director education opportunities has been updated as of July 2025. A copy is available at this link. Boards of Directors of public and private companies find this a useful resource as they look for high quality education opportunities.

This quarter’s update to the summary of director education opportunities includes a number of new opportunities as well as updates to the programs offered by organizations that have been included in our prior updates. Some of the new opportunities are available for both public and private companies’ boards.

Read More

The following Gibson Dunn attorneys assisted in preparing this update: Hillary Holmes, Lori Zyskowski, Elizabeth Ising, Thomas Kim, Ronald Mueller, Jason Ferrari, and To Nhu Huynh.

Please view this and additional information on Gibson Dunn’s Securities Regulation and Corporate Governance Monitor Blog.

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

Hillary H. Holmes – Houston (+1 346.718.6602, hholmes@gibsondunn.com)
Elizabeth Ising – Washington, D.C. (+1 202.955.8287, eising@gibsondunn.com)
Thomas J. Kim – Washington, D.C. (+1 202.887.3550, tkim@gibsondunn.com)
Ronald O. Mueller – Washington, D.C. (+1 202.955.8671, rmueller@gibsondunn.com)
Lori Zyskowski – New York (+1 212.351.2309, lzyskowski@gibsondunn.com)

This update details key changes the Act makes to section 1202, significantly expanding the tax benefits available for investments in qualified small business stock (QSBS).

The One Big Beautiful Bill Act (the OBBBA or the Act)[1] significantly expanded the tax benefits available for investments in qualified small business stock (QSBS) under section 1202.[2] This alert discusses the key changes the Act makes to section 1202. For a discussion of the broader changes to federal income tax law introduced under the Act, please read our Tax Highlights of the One Big Beautiful Bill Act.

Background

Under pre-OBBBA law, section 1202 allowed taxpayers to exclude from their gross income up to 100 percent of gain from the sale of QSBS held for at least five years, provided that certain other requirements were satisfied.

QSBS is stock issued by a qualified small business (QSB) in exchange for money or other property or as compensation for services provided to the QSB. A business was a QSB if, among other requirements, its aggregate assets did not exceed $50 million at all times before and immediately after the issuance date of the relevant stock.

The amount of gain that a taxpayer may exclude from their gross income with respect to the sale of QSBS is capped at the greater of a lifetime dollar-based limitation ($10 million under pre-OBBBA law) or ten times the taxpayer’s tax basis in the QSBS (the per-issuer limitation).

OBBBA Changes

First, the Act shortens the holding period required to qualify for QSBS benefits by introducing a 50-percent exclusion for gain recognized on the sale of QSBS held for at least three years but less than four years, and a 75-percent exclusion for gain recognized on the sale of QSBS held for at least four years but less than five years. The Act retains the 100-percent exclusion under current law if the stock is held for five years or more. If a taxpayer takes advantage of the new 50-percent or 75-percent exclusion, the recognized portion of the resulting gain would be taxed at a 28-percent rate. The new holding period rules apply to QSBS acquired after July 4, 2025.

Second, effective for QSBS issued after July 4, 2025, the Act increases the aggregate gross asset value cap for QSBS issuers from $50 million to $75 million (adjusted for inflation for taxable years beginning after 2026). Therefore, issuers that previously did not qualify for QSBS (because their aggregate gross assets exceeded $50,000,000) may become immediately eligible to issue QSBS.

Lastly, the Act amends the formula for the per-issuer limitation by increasing the lifetime dollar-based limitation from $10 million to $15 million (also adjusted for inflation for taxable years beginning after 2026). As a result, taxpayers will be able to exclude (at least) an additional $5 million of taxable gain with respect to QSBS acquired after July 4, 2025; however, upon a taxpayer exceeding the new $15 million cap once (as adjusted for inflation), the taxpayer is not able to exclude any further gain simply by reason of the per-issuer limit increasing for inflation in subsequent periods. The new $15 million cap applies only with respect to stock acquired by the taxpayer after July 4, 2025.

[1] The actual name for the Act is “an Act to provide for reconciliation pursuant to title II of H. Con. Res. 14.”

[2] The text of the Act can be found here. Unless indicated otherwise, all section references are to the Internal Revenue Code of 1986, as amended (the Code), and all Treas. Reg. § references are to the regulations promulgated by the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (the IRS) under the Code, in each case as in effect as of the date of this alert.

The following Gibson Dunn lawyers prepared this update: Matt Donnelly, Bree Gong, and Kamia Williams.

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.

Gibson Dunn announces release of “Lexology Panoramic: Anti-Money Laundering 2025 (USA).”

Gibson Dunn is pleased to announce with Lexology the release of Lexology Panoramic: Anti-Money Laundering 2025 (USA). The publication is the U.S. chapter of Lexology Panoramic’s Anti-Money Laundering guide, which is comprised of 14 jurisdictional chapters. The chapter covers U.S. anti-money laundering criminal laws applicable to all U.S. persons under 18 U.S.C. §§ 1956-57 and regulatory requirements for financial institutions under the Bank Secrecy Act. It discusses the elements of these laws and regulations, enforcement authorities and priorities, and compliance program trends.

Gibson Dunn partners Stephanie L. Brooker and M. Kendall Day and of counsel Ella Alves Capone and Sam Raymond authored the chapter.

The chapter is live and FREE for a limited time to access HERE.

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

Gibson Dunn’s Anti-Money Laundering (AML) practice is renowned for its expertise in advising financial institutions and businesses on compliance with AML and economic sanctions laws and regulations, and defending clients from AML and sanctions enforcement investigations.

About the Authors:

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

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

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

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

Contact Information:

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

This update details changes made by the Act to the tax benefits for clean energy projects, including the new limitations on certain energy-related tax credits enacted in the Inflation Reduction Act of 2022 (the IRA).

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the OBBBA or the Act),[1] which enacts significant changes to the U.S. federal income tax benefits available to clean energy projects. The text of the Act can be found here. Our prior alert on the tax highlights of the Act can be found here.

This alert provides further details regarding the changes made by the OBBBA to the tax benefits for clean energy projects, including the new limitations on certain energy-related tax credits enacted in the Inflation Reduction Act of 2022 (the IRA).[2]

Wind and Solar Energy (Sections 45Y and 48E)

Background

Before the OBBBA, qualifying wind and solar projects were eligible for a production tax credit (PTC) under section 45Y or an investment tax credit (ITC) under section 48E. Under the IRA, the section 45Y PTC and section 48E ITC were subject to phase-out following the later of 2032 or the year the Treasury Secretary determined that the annual greenhouse gas emissions (GGEs) from the production of electricity in the United States was equal to or less than 25 percent of a 2022 baseline. Our prior alert on the section 45Y and 48E credits can be found here.

Under pre-OBBBA IRS guidance (first issued in 2014), a wind or solar project that began construction would qualify for ITCs or PTCs if it was placed in service by the end of the fourth calendar year after the year in which construction began (assuming other applicable requirements are met).[3] Construction of a project was deemed to “begin” by the performance of physical work of a significant nature or by satisfying a safe harbor through payment or incurrence of at least five percent of certain project costs.[4] That pre-OBBBA IRS guidance contains rules governing the type of “physical work” that qualifies but specifically provides that “there is no fixed minimum amount of work or monetary or percentage threshold required to satisfy” the physical work standard.[5]

Projects that begin construction after July 4, 2026

Under the Act, qualifying wind and solar projects that begin construction after July 4, 2026 must be placed in service by December 31, 2027 to be eligible for ITCs and PTCs.

Projects that begin construction on or before July 4, 2026[6]

As of the date of this alert (July 14, 2025), the section 48E ITC and section 45Y PTC placement-in-service deadline is uncertain for qualifying wind and solar projects that began construction before July 4, 2026 and thus are exempt from the December 31, 2027 placement-in-service deadline.

This uncertainty stems from President Trump’s July 7, 2025 Executive Order that directed the Treasury Secretary, by August 18, 2025, to “strictly enforce the termination of the [section 48E ITC and section 45Y PTC] for wind and solar facilities,” which includes

issuing new and revised guidance as the Secretary of the Treasury deems appropriate and consistent with applicable law to ensure that policies concerning the ‘beginning of construction’ are not circumvented, including by preventing the artificial acceleration or manipulation of eligibility and by restricting the use of broad safe harbors unless a substantial portion of a subject facility has been built.

Both the scope of the Executive Order and the manner in which it will be interpreted are unclear, and we will publish another alert once this guidance is issued.

Certain Leasing Arrangements

For taxable years beginning after July 4, 2025, the OBBBA prohibits the section 48E ITC for qualified investments in certain small wind facilities (used in connection with a residential dwelling unit by the lessee) if the taxpayer rents or leases the facilities to a third party, and disallows the section 45Y PTC with respect to electricity produced by such facilities during those taxable years.

Application of the prohibition is uncertain with respect to facilities generating electricity from solar energy. The heading of the provision states that it applies to “solar leasing arrangements,” but the prohibition by its terms (and a potentially errant cross-reference) applies to solar water heating property, which is not eligible for either the section 48E ITC or section 45Y PTC in the first instance.

Foreign Entity of Concern Rules (FEOC)

The OBBBA also introduces new section 48E ITC and section 45Y PTC eligibility requirements that target certain foreign (e.g., China) ownership or influence with respect to benefited projects and participation in supply chains (collectively, “Foreign Restrictions”).[7] As discussed below, some or all of the restrictions also apply to various other credits.

More specifically, the section 45Y PTC and section 48E ITC are not allowed to a “specified foreign entity” (SFE) or a “foreign-influenced entity” (FIE), nor are they allowed with respect to a facility the construction of which receives “material assistance” from an SFE or an FIE. These three concepts are discussed in more detail below.

SFE: An SFE is defined to include the governments (including agencies and instrumentalities) of China, Iran, Russia, and North Korea; citizens or nationals of any of those countries;[8] entities or branches formed in or having their principal place of business in any of those countries; and controlled entities and subsidiaries of any of the above (determined on a more-than-50 percent equity ownership basis and regardless of jurisdiction of organization).[9] SFE status is generally determined as of the last day of the taxable year.[10]
FIE: An FIE is defined as an entity that meets any of the following tests: (i) an SFE has direct authority to appoint certain officers, (ii) an SFE has at least 25 percent equity ownership or, taken together with other SFEs, at least 40 percent equity ownership, (iii) one or more SFEs has issued at least 15 percent of the entity’s debt, or (iv) the entity made an “effective control” payment to an SFE during the previous year (discussed below). FIE status is determined as of the last day of the taxable year.
- Effective Control: An entity makes an “effective control” payment if, during the previous taxable year, the entity made a payment to an SFE pursuant to a contract, agreement, or other arrangement that entitles the SFE (or a related party) to exercise “specific authority over key aspects” of the energy generation of the entity’s (or a related person’s) facility that are “not included in the measures of control through authority, ownership, or debt” that otherwise would determine FIE status. The OBBBA goes on to provide a broad list of contractual provisions (relating to amount and timing of electricity production, offtake arrangements, access to data, and facility maintenance and repair) that convey impermissible authority to a counterparty. The OBBBA is especially scrutinous of intellectual property licenses (other than qualifying bona fide sales)—for example, any such arrangement (relating to a facility) that is entered into after July 4, 2025 is deemed to convey effective control to the SFE.[11]
Material Assistance: A facility receives “material assistance” from an SFE or FIE if an impermissible amount of the total direct costs of the manufactured products (including components) incorporated into the facility upon completion of construction are mined, produced, or manufactured by an SFE or an FIE. Pending receipt of Treasury guidance contemplated by the Act, taxpayers may rely on certifications from suppliers of manufactured products to determine if those products (or components) were manufactured by an SFE or FIE; new penalties apply to false or inaccurate supplier certifications.[12] Stricter penalties (and an extended statute of limitations) apply to assessments in respect of credits disallowed for “material assistance” violations.

Special rules allow publicly traded entities to rely on publicly reported information to determine their SFE and FIE status.[13]

The SFE ownership, FIE, and “effective control” rules apply to credits claimed for taxable years beginning after July 4, 2025, and the “material assistance” rules apply to projects that begin construction after December 31, 2025.

The “effective control” payment rules are also backed up by a new section 48E ITC recapture rule, effective for taxable years beginning after July 4, 2025. Under this rule, for the 10 years after a qualifying facility is placed in service, a section 48E ITC is subject to 100-percent recapture (i.e., no vesting) if the taxpayer (i) is allowed a section 48E ITC for any taxable year beginning after July 4, 2027 and (ii) makes a payment to an SFE (“with respect to a taxable year”) pursuant to a contract that entitles the SFE (or a related person) to “effective control” over any facility of the taxpayer or a related person.[14] The recapture tax is due in the year the “effective control” payment is made.

The OBBBA did not include a controversial proposed excise tax included in prior versions of the legislation that would have applied to wind and solar facilities (regardless of whether ITCs or PTCs were claimed) that incorporated certain components sourced from prohibited foreign sources.

Domestic Content Clarification

The Act aligns the thresholds for the domestic content bonus credit under the section 48E ITC with the domestic content thresholds under the section 45Y PTC by increasing the section 48E thresholds to match the section 45Y requirements. In an apparent drafting glitch made by Congress in the IRA, the domestic content thresholds were lower under section 48E as compared to the domestic content thresholds under section 45Y.[15] This change is effective for facilities the construction of which begins on or after June 16, 2025.

Depreciation

The Act does not affect the eligibility of solar or wind projects to claim preferential five-year accelerated depreciation.

Battery Storage (Section 48E)

Background

Before the OBBBA, qualifying energy storage projects were eligible for the section 48E ITC, subject to phase-out on the same timeline as wind and solar projects (discussed above).

OBBBA Changes

The OBBBA did not change the section 48E ITC eligibility timeline for battery storage projects.

The OBBBA subjects storage projects seeking the section 48E ITC to the Foreign Restrictions applicable to wind and solar projects (discussed above), albeit with stricter “material assistance” provisions.

Fuel Cells (Section 45V and 48E)

Background

Under prior law, fuel cells were eligible for credits under Section 48E only if those cells met the emissions requirements of that section. Because feedstocks for fuel cell projects typically produce GGEs, this often made eligibility for the section 48E ITC challenging.

OBBBA Changes

Qualifying fuel cell projects that begin construction after December 31, 2025 are now eligible for a new 30-percent ITC that exempts the projects from the IRA’s prevailing wage and apprenticeship requirements and GGE requirements. The new ITC is not eligible for the domestic content and energy community bonuses made available under the IRA.[16]

The Act also moves up the commencement-of-construction deadline for the IRA’s 10-year credit under section 45V for the production of clean hydrogen (a fuel cell feedstock) from January 1, 2033 to January 1, 2028. The Foreign Restrictions do not apply to the clean hydrogen PTC. Our prior alert on the section 45V credit can be found here.

Clean Fuels (Section 45Z)

Background

Before the OBBBA, section 45Z provided a PTC for clean transportation fuel, including a higher credit rate for sustainable aviation fuel. This credit was not available for fuel sold after December 31, 2027

OBBBA Changes

The Act extends the clean fuel production credit by two years, with the result that eligible fuel sold until December 31, 2029 is eligible for this credit.

The Act also relaxes the lifecycle GGE rules for credit-eligible fuel produced after 2025 by excluding the effects of indirect land use changes from the lifecycle GGE calculation.

In an apparent negative reaction to Treasury and IRS guidance released earlier this year, the OBBBA also authorizes the Treasury Secretary to confirm that sales by a taxpayer to an intermediary are permitted if the taxpayer has reason to believe that the fuel ultimately will be sold to an unrelated person.[17]

The Act effectively introduces a new cap on the credit. As background, the credit’s rate is the product of a formula that reduces the credit by reference to a specific fuel’s GGE rate; before the Act, however, fuels with a negative GGE rate could have seen their credit rate increase over the headline statutory rate under the Code’s formula.[18] The Act prospectively limits the fuels for which negative GGE rates that can be taken into account to fuels from specific animal manure feedstocks (e.g., dairy, swine, poultry).

The Act also provides that, for fuel produced after 2025, the credit is available only for fuel derived exclusively from feedstocks produced or grown in the United States, Mexico, or Canada. The Act also eliminates the enhanced credit rate for sustainable aviation fuel effective for fuel produced after December 31, 2025.

Certain of the Foreign Restrictions also apply to clean fuel PTCs. The SFE ownership prohibition applies to taxable years beginning after July 4, 2025, and the FIE prohibition (other than the “effective control” payment rules) applies to taxable years beginning after July 4, 2027.

Nuclear (Section 45Y and 48E)

Background

Under current law, qualifying nuclear projects are eligible for PTCs under section 45Y or ITCs under section 48E.

OBBBA Changes

Under the Act, a bonus amount was added to the section 45Y PTC for certain nuclear facilities placed in service in metropolitan statistical areas that have (or, at any time after December 31, 2009, has had) at least 0.17 percent direct employment in nuclear-related sectors.[19] The bonus amount is available for qualifying projects that begin construction in taxable years beginning after July 4, 2025.

The Foreign Restrictions apply to ITCs or PTCs for new nuclear projects on the same timeline as wind and solar projects. For nuclear facilities placed in service before the IRA and claiming the section 45U PTC, the SFE prohibition applies to taxable years beginning after July 4, 2025, and the FIE prohibition (other than the “effective control” payment rules) applies to taxable years beginning after July 4, 2027.

Carbon Capture, Utilization, and Sequestration (CCUS) (Section 45Q)

Background

Prior to the OBBBA, section 45Q provided a tax credit of $60 per metric ton for qualified CCUS facilities that captured qualified carbon oxides (QCOs) and either “utilized” (e.g., used in a commercial process) the QCOs or used the QCOs for enhanced oil and gas recovery. Qualified CCUS facilities that stored QCOs in secure geological formations were eligible for a higher credit of $85 per metric ton.[20]

OBBBA Changes

The OBBBA increases the section 45Q credit for QCOs that are “utilized” or used in enhanced oil or natural gas recovery to equal the credit rate for QCOs that are stored in secure geological formations. The credit rate increase applies to equipment placed in service after July 4, 2025

The SFE ownership prohibition and the FIE prohibition (other than the “effective control” payment rules) apply to CCUS projects for taxable years beginning after July 4, 2025.

Advanced Manufacturing Production Credit (Section 45X)

Background

The IRA made available a tax credit for the production and sale of certain eligible solar, wind, and energy storage components manufactured in the United States, as well as the production of certain critical minerals. The credits (other than the credits for critical minerals) were subject to a phaseout beginning in 2030.

OBBBA Changes

The Act introduces a new category of credit-eligible critical minerals—metallurgical coal suitable for use in the production of steel, regardless of where produced. The metallurgical coal credit is 2.5 percent of qualifying production costs (as compared to the 10 percent credit for other critical minerals).

The credit for wind components is terminated for components produced and sold after December 31, 2027. The Act phases out the credit for critical minerals (other than metallurgical coal) starting in 2031 and terminates the new credit for metallurgical coal produced after December 31, 2029.

The Act also revises the definition of credit-eligible battery module production to require inclusion of all essential equipment necessary for battery functionality.

The Foreign Restrictions are made applicable to section 45X but are generally applied to the production of components (rather the construction of the facility) and are subject to separate “material assistance” thresholds.

These changes are effective for taxable years beginning after July 4, 2025.

The OBBA did not adopt an earlier Senate proposal to prohibit claiming multiple credits (or “stacking”) for the production of components that are integrated into and sold as a single product but did add new requirements to qualify for such stacking. To be eligible for stacking, the components must be produced at the same facility, the end product must be sold to an unrelated person, and at least 65 percent of the direct material costs of the underlying components must be attributable to United States mining, production, or manufacturing. This change is effective for components sold during taxable years beginning after December 31, 2026.

Tax Credit Transfers (Section 6418)

Background

The IRA made certain tax credits (including the section 45Y PTC and 48E ITC) transferable for cash on a one-time basis, subject to certain limitations. Please see our prior client alert on the IRA tax credit transfer regime here.

OBBBA Changes

The Act largely leaves intact the tax credit transfer regime introduced by the IRA; for taxable years beginning after July 4, 2025, however, an SFE cannot buy section 45Q, 45U, 45X, 45Y, 45Z, or 48E credits.[21]

New Classes of Qualified Income for Publicly Traded Partnerships (Section 7704)

Background

Publicly traded partnerships are generally taxed as corporations unless they derive at least 90 percent of their income from certain qualifying sources. Prior to the OBBBA, qualifying sources were limited to passive income and income from certain fossil fuel-related energy or transportation activities.

OBBBA Changes

The Act expands the definition of “qualifying income” to include income derived from qualifying hydrogen storage and transportation; electricity production from qualifying nuclear, hydropower, and geothermal facilities; carbon capture facilities, including electricity production from qualifying facilities with sufficient carbon capture; and thermal energy from hydropower and geothermal facilities.

The amendment is effective for taxable years beginning after December 31, 2025.

[1] The technical name for the Act is “an Act to provide for reconciliation pursuant to title II of H. Con. Res. 14.”

[2] Unless indicated otherwise, all “section” references are to the Internal Revenue Code of 1986, as amended (the “Code”), and all “Treas. Reg. §” are to the regulations promulgated by the U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) under the Code, in each case as in effect as of the date of this alert.

[3] Notices 2014-46, 2014-35 I.R.B. 520, 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.

[4] Notice 2022-61, 2022-52 I.R.B. 560.

[5] Notices 2014-46, 2014-35 I.R.B. 520, 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] The cut-off applies “to facilities the construction of which begins after the date which is 12 months after the date of enactment of this Act.” This alert presumes that July 4, 2026 is the date which is 12 months after July 4, 2025.

[7] The rules also apply to Russia, Iran, and North Korea, but we understand that China is their principal focus.

[8] The definition excludes citizens, nationals, or lawful permanent residents of the United States.

[9] For purposes of this rule, section 318(a)(2) attribution (i.e., attribution from entities to owners) applies.

[10] For the first taxable year beginning after July 4, 2025, SFE status (other than for entities that are SFEs by reason of being controlled by another SFE) is determined as of the first day of the taxable year.

[11] The OBBBA’s list of impermissible contractual arrangements applies pending Treasury and IRS guidance, but presumably any such guidance will not be more permissive than the OBBBA.

[12] This rule applies pending Treasury and IRS guidance. Treasury is also directed to issue safe harbor tables to determine the percentages of total direct costs of manufactured products (and taxpayers may rely on domestic content safe harbors until such guidance is issued).

[13] The favorable reliance rules do not apply if the relevant exchange or market is in China, Russia, Iran, or North Korea.

[14] The heading states the rule applies to payments to SFEs or FIEs (“Prohibited Foreign Entities”), but the operative rule applies only to payments to SFEs.

[15] Joint Committee on Tax’n, Description of Energy Tax Law Changes Made by Public Law 117-169, JCX 5-23 (April 7, 2023), at n. 201.

[16] The property must have electricity-only generation efficiency greater than 30 percent. For descriptions of certain of those bonus amounts made available under the IRA, please see our prior client alerts here, here, and here.

[17] In Notice 2025-10, 2025-6 I.R.B. 682, App’x (including “forthcoming” Prop. Treas. Reg. § 1.45Z-1(b)(25)(ii)), Treasury and the IRS previewed proposed regulations that would not have allowed the clean fuel PTC for certain common intermediary sales.

[18] Joint Committee on Tax’n, Description of Energy Tax Law Changes Made by Public Law 117-169, JCX 5-23 (April 17, 2023), at n. 201.

[19] The bonus is not available for the section 48E ITC.

[20] Our prior alert on section 45Q can be found here. These rates assume satisfaction of all prevailing wage and apprenticeship requirements.

[21] The section 45V clean hydrogen production credit, the section 45 PTC, and the section 48 ITC are not subject to these restrictions.

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

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

APPENDIX 1

APPENDIX 2

Table of Contents

Section 1. Short Title.

Section 2. Definitions.

Payment Stablecoin

Permitted Payment Stablecoin Issuer

Section 3. Issuance and Treatment of Payment Stablecoins.

Limitation on Issuers

Prohibitions on Offers or Sales

Extraterritorial Effect

Penalties

Treatment

Exempt Transactions

Section 4. Requirements for Issuing Payment Stablecoins.

Reserves

Redemption Policy

Published Reserves

Capital, Liquidity, and Risk Management Requirements

Treatment Under the Bank Secrecy Act and Sanctions Laws

Limitation on Payment Stablecoin Activities

Audits and Reports

Public Companies and Foreign Companies

State-Level Regulatory Regimes

State Certification

Transition to Federal Oversight

Misrepresentation of Insured Status

Officers or Directors Convicted of Certain Felonies

Section 5. Approval of Subsidiaries of IDIs and Federal Qualified Payment Stablecoin Issuers.

Notification

Denied Applications

Opportunity for Hearing

Safe Harbor for Pending Applications

Certification Required

Section 6. Supervision and Enforcement With Respect to Federal Qualified Payment Stablecoin Issuers and Subsidiaries of IDIs

Supervision

Penalties

Procedures and Penalties

Section 7. State Qualified Payment Stablecoin Issuers

Relationship with the Federal Reserve

Relationship with the OCC

Effect on State Law

Section 8. Anti-Money Laundering Protections

Payment Stablecoins Issue by Foreign Payment Stablecoin Issuers

Penalties

Waivers for Secondary Trading

Section 9. Anti-Money Laundering Innovation

Public Comment

Post-Comment Research

Post-Enactment Recommendations to Congress

Section 10. Custody of Payment Stablecoin Reserve and Collateral

Customer Priority

Regulatory Requirements

Prohibition on Commingling

Exclusion

Section 11. Treatment of Payment Stablecoin Issuers in Insolvency Proceedings

Priority in Bankruptcy Proceedings

Intervention

Application of Existing Insolvency Law

Study by Primary Federal Payment Stablecoin Regulators

Section 12. Interoperability Standards

Section 13. Rulemaking

Coordination

Report Required

Section 14. Study on Non-Payment Stablecoins

Study by Treasury

Report

Section 15. Reports

Annual Reporting Requirement

Section 16. Authority of Banking Institutions

Treatment of Custody Activities

State-Chartered Depository Institutions

Section 17. Amendments to Clarify that Payment Stablecoins Are Not Securities or Commodities and Permitted Payment Stablecoin Issuers Are Not Investment Companies

Amendments to Existing Legislation

Section 18. Exception for Foreign Payment Stablecoin Issuers and Reciprocity for Payment Stablecoins Issued in Overseas Jurisdictions

Treasury Determination

Rescission of Determination

Public Notice and Rulemaking

Registration

Ongoing Monitoring