SEC Shows Leniency on Filing Deadline in Granting Whistleblower Award
On March 24, the U.S. Securities and Exchange Commission (SEC) granted a whistleblower award to an individual who voluntarily provided original information which led to four successful enforcement actions, despite the fact the whistleblower missed the award claim filing deadline for two of the actions.
Through the SEC Whistleblower Program, qualified whistleblowers are eligible to receive monetary awards of 10-30% of the sanctions collected in connection with their disclosure when their information contributes to an enforcement action where the SEC is set to collect at least $1 million. Based on the current collections, the whistleblower was only awarded $4,000 at this time.
According to the award order, the whistleblower “alerted the Commission to the misconduct which prompted the opening of the investigation and then provided ongoing assistance.”
To receive a whistleblower award, an individual must submit a completed Form WB-APP to the Office of the Whistleblower within 90 days of the posting of a Notice of Covered Action for the relevant enforcement action.
According to the SEC, the whistleblower submitted their award claim for one covered action 1 approximately three weeks after the filing deadline submitted their award claim for the second covered action one day after the filing deadline.
However, the SEC decided to exercise its general exemptive authority under Section 36(a) of the Exchange Act to waive the filing deadline. Section 36(a) provides the Commission with broad authority to exempt any person from a rule or regulation if such an exemption is “necessary or appropriate in the public interest” and “consistent with the protection of investors.”
“Specifically, for Covered Action 1, we find that the following facts warrant the exercise of our Section 36(a) discretionary authority to waive the 90-day deadline for filing award applications: (1) Claimant was on active military duty during the 90-day window for filing claims; (2) the circumstances of the Claimant’s military assignment limited his/her ability to effectively communicate with his/her counsel; (3) Claimant made reasonable efforts to submit an award application once he/she resumed normal communications; (4) Claimant would be otherwise meritorious; and (5) the Commission has not already issued a final order adjudicating claims in Covered Action 1.”
“We also believe that the exercise of our discretionary authority under Section 36(a) to waive the 90-day filing deadline with respect to Covered Action 2 is warranted under the unique facts and circumstances. Specifically, the record supports the conclusion that Claimant’s counsel attempted to fax the award application to OWB on the filing deadline calendar date, but that the fax failed to go through because of apparent technical issues with the Commission’s ability to receive faxes beyond a certain size. We further note that Claimant’s counsel promptly contacted the OWB regarding the failed attempt to fax the application and succeeded in filing the application the next calendar day.”
The SEC does warn, however, that they “do not expect to routinely exercise such exemptive authority to waive the requirements under Rules 21F-10(a) and (b) to timely file an award application. The filing deadline serves important programmatic interests and will be typically enforced absent the unique facts and circumstances presented here.”
Established in 2010 with the passage of the Dodd-Frank Act, the SEC Whistleblower Program has now awarded a total of more than $2.2 billion to 444 individuals.
In FY 2024, the SEC Whistleblower Program received a record 24,980 whistleblower tips and awarded over $255 million, the third highest annual amount. According to SEC Office of the Whistleblower’s annual report, the most common fraud areas reported by whistleblowers in FY 2024 were Manipulation (37%), Offering Fraud (21%), Initial Coin Offerings and Crypto Asset Securities (8%), and Corporate Disclosures and Financials (8%).
Whistleblowers looking to blow the whistle on securities fraud may do so anonymously, but must be represented by a whistleblower attorney.
“Whistleblowers play a valuable role in helping to protect the U.S. financial markets by bringing the Commission information about potential securities law violations,” Creola Kelly, Chief of the SEC Office of the Whistleblower, said in the office’s 2024 annual report.
Geoff Schweller also contributed to this article.
HHS Job Cuts: FDA, CDC, NIH and CMS Impacted Amidst Significant Restructurings
On March 27, 2025, the United States Department of Health and Human Services (HHS) announced a “dramatic restructuring” that will result in a reduction in agency workforce combined with significant internal restructuring.1 The department plans to cut approximately 20,000 positions, bringing its headcount in line with HHS’s pre-2002 level of around 62,000 employees. The anticipated restructuring involves consolidating 28 divisions into 15, citing prior budget and staffing increases of 38 percent and 17 percent, respectively.2
In connection with this restructuring, the Administration announced the following changes:
Creation of the Administration for a Healthy America (AHA), which will consolidate the Office of the Assistant Secretary for Health (OASH), the Health Resources and Services Administration (HRSA), the Substance Abuse and Mental Health Services Administration (SAMHSA), the Agency for Toxic Substances and Disease Registry (ATSDR) and the National Institute for Occupational Safety and Health (NIOSH);
Transfer of the Administration for Strategic Preparedness and Response (ASPR) to the Centers for Disease Control (CDC);
Creation of a new Assistant Secretary for Enforcement to oversee the Departmental Appeals Board (DAB), Office of Medicare Hearings and Appeals (OMHA) and Office for Civil Rights (OCR);
Merging the Assistant Secretary for Planning and Evaluation (ASPE) with the Agency for Healthcare Research and Quality (AHRQ) to create a new Office of Strategy to provide research enhancing HHS’s various initiatives;
Reorganizing the Administration for Community Living (ACL) programs that support older adults and people of all ages with disabilities into other parts of HHS; and
10 HHS Regional Offices will be consolidated into 5.3
These cuts and restructurings follow the February 11, 2025, Executive Order which placed much of the federal government’s human resource management under the purview of the Department of Government Efficiency (DOGE)4 and the February 12, 2025 termination of “Fork in the Road,” a deferred resignation program for government employees.5 This latest announcement adds to the growing number of federal staff reductions—62,000 jobs were cut across 17 different agencies in February alone.6 With HHS’s designation of a new Assistant Secretary of Enforcement to combat purported fraud, waste and abuse across its divisions, more job cuts could be on the horizon.
As a result of this latest announcement, the anticipated amount of job cuts and resulting reduced employee pools are as follows: the U.S. Food and Drug Administration (FDA) will cut 3,500 employees (about 20 percent of its workforce); the Centers for Disease Control and Prevention (CDC) will cut 2,400 employees; the Centers for Medicare and Medicaid Services (CMS) will cut 300 employees; and the National Institutes of Health (NIH) will cut 1,200 employees. These cuts, along with another 2,600 employees slated for dismissal, amount to a total of 10,000 HHS jobs cut. These cuts, combined with another 10,000 employees who have left the agency due to buyouts or other voluntary resignations, add up to the 20,000 total employee reduction.7
Potential Impacts
The sweeping job cuts, department re-organization and consolidation are in line with Secretary Kennedy’s vision of “doing more with less” resources, while a former HHS employee anonymously expressed concerns that “the cuts will weigh heavily on caseworkers and account management teams,” ultimately leading to a declination in “[s]ervice standards for Medicare Advantage beneficiaries,” due to both “a reduction in the people that handle their cases” and “diminished oversight of the Medicare Advantage plans.”8
Healthcare providers and other organizations that rely on regular interaction with HHS and its subagencies should be on the lookout for disruptions or delays in service as HHS implements these cuts and departmental reorganizations. For example, several senior FDA drug reviewers have already announced their resignations, and more are expected, raising the distinct possibility that the FDA’s ability to perform its public health functions will be impaired.9 The full impact of the March 27th announcements will not be known for some time, but potentially impacted stakeholders should keep a watchful eye over the coming months as HHS implements the announced changes.
[1] U.S. Dep’t of Health and Human Servs., HHS Announces Transformation to Make America Healthy Again (Mar. 27, 2025), https://www.hhs.gov/about/news/hhs-restructuring-doge.html.
[2] U.S. Dep’t of Health and Human Servs., Fact Sheet: HHS’ Transformation to Make America Healthy Again (Mar. 27, 2025), https://www.hhs.gov/about/news/hhs-restructuring-doge-fact-sheet.html.
[3] Id.
[4] Exec. Order No. 14,210, 90 Fed. Reg. 9669 (Feb. 14, 2025); see also Exec. Off. of the President, Implementing The President’s “Department of Government Efficiency” Workforce Optimization Initiative (Feb. 11, 2025), https://www.whitehouse.gov/presidential-actions/2025/02/implementing-the-presidents-department-of-government-efficiency-workforce-optimization-initiative/.
[5] U.S. Off. of Pers. Mgmt., Fork in the Road: Program Closed, https://www.opm.gov/fork/ (last visited Mar. 27, 2025).
[6] Janet Nguyen, Federal workers’ salaries represent less than 5% of federal spending and 1% of GDP, Marketplace (Mar. 6, 2025), https://www.marketplace.org/2025/03/06/federal-workers-salaries-represent-less-than-5-of-federal-spending-and-1-of-gdp/.
[7] Phil Taylor, HHS plans 10,000 more job cuts, taking target to 20,000, pharmaphorum (Mar. 27, 2025), https://pharmaphorum.com/news/hhs-plans-10000-more-job-cuts-taking-target-20000.
[8] Meg Tirrell et al., HHS cuts 10,000 employees in major overhaul of health agencies, CNN (Mar. 27, 2025, 6:46 PM), https://www.cnn.com/2025/03/27/health/hhs-rfk-job-cuts/index.html.
[9] See @steveusdin1, X (Mar. 27, 2025, 4:54 PM), https://x.com/steveusdin1/status/1905377827836624915.
What’s Changing to H-1B Cap Gap for F-1 Students?
Takeaways
The new DHS rule extends the H-1B Cap Gap period from 10.1 to 04.1.
F-1 students with pending or approved H-1B petitions benefit from this extension.
Employers must adjust their processes to comply with the new rule.
The Department of Homeland Security (DHS) has published a final rule (89 FR 10354) that significantly changes the H-1B Cap Gap period. This rule automatically extends the duration of status and any employment authorization granted under 8 CFR 274a.12(c)(3)(i)(B) or (C) for F-1 students who are beneficiaries of H-1B Change of Status petitions.
The key change is that the automatic extension end date has been moved from Oct. 1 to April 1 of the fiscal year for which H-1B status is being requested or until the validity start date of the approved petition, whichever is earlier. This adjustment aims to provide a smoother transition for F-1 students moving to H-1B status.
This change is particularly beneficial for F-1 students, who often face a gap in their employment authorization between the end of their academic program and the start of their H-1B employment. Extending the Cap Gap period to April 1 allows students to maintain their status and continue working without interruption.
This new rule aligns with the broader efforts to modernize and improve the efficiency of the H-1B program, as outlined in the DHS’s final rule published on Dec. 18, 2024.
Employers should take note of these changes and adjust their processes accordingly. It is crucial to ensure that all relevant documentation reflects the new Cap Gap period and that any necessary updates are made to employment verification systems.
For more detailed information, refer to the DHS’s final rule and the USCIS news release. These resources provide comprehensive guidance on the new regulations and their implications for both employers and F-1 students.
Illinois Federal Judge Blocks DOL From Enforcing Termination, Certification Provisions in Trump DEI-Related EOs
On March 27, 2025, a federal judge for the U.S. District Court for the Northern District of Illinois temporarily blocked the U.S. Department of Labor (DOL) from enforcing portions of two provisions in President Donald Trump’s diversity, equity, and inclusion (DEI)-related executive orders (EO).
Quick Hits
A federal judge in Illinois issued a temporary restraining order blocking the DOL from enforcing certain provisions in two executive orders aimed at eliminating “illegal” DEI programs.
The judge found certain provisions are coercive and undefined, likely violating the First Amendment.
The ruling comes amid multiple ongoing legal challenges related to DEI initiatives.
U.S. District Judge Matthew F. Kennelly issued a temporary restraining order (TRO) prohibiting the DOL from enforcing a “termination provision” that requires federal agencies to terminate grants or contracts with organizations that promote DEI and a “certification provision” that requires grant recipients to certify under the False Claims Act (FCA) that they do not have DEI or diversity, equity, inclusion, and accessibility (DEIA) programs.
The judge found that the termination and certification provisions in President Trump’s EO 14151 and EO 14173 are likely to violate the First Amendment of the U.S. Constitution and cause irreparable harm to the plaintiff, the Chicago Women in Trades (CWIT), a nonprofit group that helps prepare women to earn jobs in the trades.
Judge Kennelly said that the termination provision was “coercive” and could suppress disfavored speech because its vagueness created a chilling effect on CWIT’s activities.
“Here, the government is not selectively funding some programs, but not others; it is indicating an entire area of programming that is disfavored as ‘immoral’ (as well as illegal) and threatening the termination of funding unless grantees bring their conduct into line with the government’s policy agenda,” Judge Kennelly wrote in the decision.
The judge further found the certification provision, which requires grant recipients to certify they do not operate any DEI programs that “violate any applicable Federal antidiscrimination laws,” is problematic because the EO does not clearly define what constitutes “illegal” DEI activities and because its references to “programs promoting DEI” targets constitutionally protected speech there is a likely a First Amendment violation.
Notably, the court limited its ruling on the termination provision only to the plaintiff, CWIT, rather than issuing a nationwide injunction. However, the certification provision does apply nationwide but only to those being issued by the DOL and not all federal agencies.
The ruling comes just less than two weeks after the U.S. Court of Appeals for the Fourth Circuit, in a similar lawsuit, granted the government’s request to stay a nationwide preliminary injunction that had blocked the termination and certification provisions and a provision directing the attorney general to enforce civil rights laws against DEI programs in the private sector.
Following the Fourth Circuit’s stay of the nationwide preliminary injunction, CWIT sought an immediate TRO in its lawsuit. The group argued the stay created renewed urgency to stop the DOL from cutting its federal funding unless it “cease[s] all diversity, equity, inclusion and accessibility activities” and “scrub[s] all diversity, equity, and inclusion initiatives and related language from its programming.”
In addition to the CWIT case and the Maryland case, which is led by the National Association of Diversity Officers in Higher Education, civil rights groups led by the National Urban League have filed another legal challenge in the U.S. District Court for the District of Columbia. The groups are also seeking to block several provisions of EO 14151 and EO 14173, in addition to EO 14168, which defines sex as binary for purposes of federal policy. The D.C. court held a hearing on the group’s motion for preliminary injunction on March 19, 2025.
Next Steps
The TRO in the CWIT case is limited to the DOL, but its reasoning suggests that the judge may issue a broader preliminary injunction. The DEI-related EOs have created uncertainty for employers over what types of programs the government will consider to be “illegal” DEI programs and sparked several legal challenges. Inconsistent rulings in the federal courts have added to the uncertainty, and the possibility remains that the cases or issue of whether the DEI-related EOs are constitutional could ultimately land before the Supreme Court of the United States. The outcome of the cases will have far-reaching implications for employers and the promotion of programs meant to foster diversity in the workforce.
California Bill Proposes Expanding False Claims Act to Include Tax-Related Claims
California lawmakers are considering Senate Bill 799 (SB 799), introduced by Sen. Ben Allen, which proposes amending the California False Claims Act (CFCA) to encompass tax-related claims under the Revenue and Taxation Code.
The CFCA currently encourages employees, contractors, or agents to report false or fraudulent claims made to the state or political subdivisions, offering protection against retaliation. Under the CFCA, civil actions may be initiated by the attorney general, local prosecuting authorities, or qui tam plaintiffs on behalf of the state or political subdivisions. The statute also permits treble damages and civil penalties.
At present, tax claims are excluded from the scope of the CFCA. SB 799 aims to amend the law by explicitly allowing tax-related false claims actions under the Revenue and Taxation Code, subject to the following conditions:
1. The damages pleaded in the action exceed $200,000. 2. The taxable income, gross receipts, or total sales of the individual or entity against whom the action is brought exceed $500,000 per taxable year.
Further, SB 799 would authorize the attorney general and prosecuting authorities to access confidential tax-related records necessary to investigate or prosecute suspected violations. This information would remain confidential, and unauthorized disclosure would be subject to existing legal penalties. The bill also seeks to broaden the definition of “prosecuting authority” to include counsel retained by a political subdivision to act on its behalf.
Historically, the federal government and most states have excluded tax claims from their False Claims Act statutes due to the complexity and ambiguity of tax laws, which can result in increased litigation and strain judicial resources. Experiences in states like New York and Illinois illustrate challenges associated with expanding false claims statutes to include tax claims. For instance, a telecommunications company settled a New York False Claims Act case involving alleged under collection of sales tax for over $300 million, with the whistleblower receiving more than $60 million. Such substantial incentives have led to the rise of specialized law firms targeting ambiguous sales tax collection obligations, contributing to heightened litigation.
If enacted, SB 799 would require California taxpayers to evaluate their exposure under the CFCA for any positions or claim taken on tax returns. Importantly, the CFCA has a statute of limitations of up to 10 years from the date of violation, significantly longer than the typical three- or four-year limitations period applicable to California tax matters. Taxpayers may also need to reassess past tax positions to address potential risks stemming from this extended limitations period.
CFTC Unveils Replacement Penalty Mitigation Policy Focused on Self-Reporting, Cooperation, and Remediation
The Commodity Futures Trading Commission (CFTC), an independent U.S. government agency that regulates the U.S. derivatives markets, including futures, options, and swaps, has announced a new policy for mitigating potential penalties, potentially cutting them in half, based on the level of voluntary self-reporting, cooperation, and remediation of potential misconduct.
Quick Hits
The CFTC’s new policy allows companies to potentially reduce penalties by up to 55 percent through voluntary self-reporting, cooperation, and effective remediation of misconduct.
The policy introduces a matrix for mitigating penalties based on the level of voluntary self-reporting, ranging from “No Self-Report” to “Exemplary Self-Report,” and the level of cooperation, ranging from “No Cooperation” to “Exemplary Cooperation.”
The policy emphasizes a proactive approach, enabling companies to demonstrate good faith through cooperation and remediation efforts in enforcement actions.
On February 25, 2025, the CFTC’s Division of Enforcement issued a new advisory detailing how it will evaluate companies’ self-reporting, cooperation, and remediation and reduce penalties accordingly in enforcement actions.
The CFTC, through its Division of Enforcement, investigates violations of the Commodity Exchange Act (CEA) and the CFTC Regulations. Violations can be certain actions or behavior in connection with futures, options, and swaps and in connection for a contract of sale of any commodity in interstate commerce.
The CFTC’s new advisory replaces prior guidance with a new matrix that the Division of Enforcement will use to determine an appropriate reduction in penalties, or a “mitigation credit,” which can reach up to 55 percent of a possible penalty. The CFTC characterized the new guidance as a significant step toward transparency in enforcement actions.
“From the beginning, I have encouraged firms to self-report to proactively take ownership, ensure accountability, and prevent future violations,” Acting Chairman Caroline D. Pham said in a statement. “By making the CFTC’s expectations for self-reporting, cooperation, and remediation more clear—including a first-ever matrix for mitigation credit—this advisory creates meaningful incentives for firms to come forward and get cases resolved faster with reasonable penalties.”
Acting Chairman Pham further emphasized that the new program implements President Donald Trump’s EO 14219, “Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative,” which calls for streamlining federal government processes.
Three-Tiered Scale for Self-Reporting
The advisory outlines a three-tiered scale the CFTC Division of Enforcement will use to evaluate the “voluntariness” of self-reporting:
No Self-Report—The advisory states that this factor would apply when an organization has not self-reported in a timely manner, “no timely self-report,” or when a self-report was not “reasonably related to the potential violation or not reasonably designed to notify the Commission of the potential violation.”
Satisfactory Self-Report—This factor applies when there was notification of a potential violation to the Commission, but the notification lacked “all material information reasonably related to the potential violation that the reporting party knew at the time of the self-report.”
Exemplary Self-Report—This factor applies when a comprehensive notification includes all material information and additional information that assists with the investigation and conserves the agency’s resources.
According to the advisory, to receive full credit, disclosures must be (1) voluntary, (2) made to the Commission, (3) timely, and (4) complete. Reports can be made to the Division of Enforcement or other relevant CFTC divisions. The CFTC will provide a safe harbor for good faith self-reporting, allowing for corrections of any inaccuracies discovered post-reporting.
Cooperation and Remediation
Similarly, the advisory explains that the division will evaluate cooperation on a four-tiered scale:
No Cooperation: According to the advisory, the division will apply this factor in cases where there has been compliance with legal obligations but no substantial assistance.
Satisfactory Cooperation: This factor applies when documents, information, and witness interviews have been voluntarily provided.
Excellent Cooperation: This factor applies when there has been consistent, substantial assistance, including internal investigations and thorough analysis.
Exemplary Cooperation: This factor applies when there has been proactive engagement and significant resource allocation to assist the Division of Enforcement.
Additionally, according to the advisory, the division will consider remediation efforts as part of a company’s cooperation evaluation. Specifically, the division will assess whether substantial efforts were made to prevent future violations, including corrective actions and implementation of appropriate remediation plans. In some cases, a compliance monitor or consultant may be recommended to ensure the completion of undertakings.
Mitigation Credit Matrix
The advisory further introduces a “Mitigation Credit Matrix,” which explains a “mitigation credit” will be applied based on the levels of voluntariness and cooperation as a percentage of the initial civil monetary penalty. The matrix ranges from 0 percent for no self-report and no cooperation to 55 percent for exemplary self-report and exemplary cooperation. However, the division said it will retain discretion to deviate from the matrix based on each case’s unique facts and circumstances.
Next Steps
The advisory and Mitigation Credit Matrix provides more clarity and transparency about how the CFTC will evaluate voluntary self-reporting of potential misconduct and cooperation with subsequent CFTC enforcement actions, applying a new matrix that considers the levels of voluntariness and cooperation. Prior guidance had focused on whether an entity self-reported or not and whether cooperation “materially advanced” the division’s investigation.
Future enforcement and administration of the advisory will be necessary to clarify how the Trump administration will handle self-reporting and cooperation. Further, the CFTC has maintained discretion in applying the matrix and mitigation factors, and there is still some room for ambiguity in applying the factors. CFTC Commissioner Kristin N. Johnson dissented from the issuance of the new guidance. In a separate statement, Commissioner Johnson said that while she supports improvements to “transparency, clarity, and efficiency” processes to incentivize self-reporting, cooperation, and remediation, the CFTC “must be careful not to muddy the waters.”
The new advisory comes amid a broader push by federal enforcement agencies, including the CFTC, to encourage self-reporting and whistleblowing, at least under the Biden administration.
The advisory makes it clear it is now the division’s sole policy on self-reporting, cooperation, and remediation and explains that all previously announced policies, including those contained in six different division advisories as well as in the division’s enforcement manual, are no longer the policy of the division.
Thus far, no federal enforcement agencies have indicated their whistleblower protections will be weakened under the Trump administration.
CFTC-regulated businesses may want to review and update their compliance programs and related policies, considering the CFTC’s self-reporting, cooperation, and remediation incentive mechanisms. According to the advisory, entities must undergo an “exemplary self-report” and “exemplary cooperation” to maximize the potential for lowered penalties.
Moreover, entities regulated by other federal enforcement agencies may want to consider that the CFTC advisory could signal a revised approach generally under the Trump administration and keep a close watch on whether any modifications similar to those set forth in this advisory are adopted by other agencies.
US State AI Legislation: Virginia Vetoes, Colorado (Re)Considers, and Texas Transforms
Virginia’s Governor, Glenn Youngkin, vetoed a bill this week that would have regulated “high-risk” artificial intelligence systems. HB 2094, which narrowly passed the state legislature, aimed to implement regulatory measures akin to those established by last year’s Colorado AI Act. At the same time, Colorado’s AI Impact Task Force issued concerns about the Colorado law, which may thus undergo modifications before its February 2026 effective date. And in Texas, a proposed Texas Responsible AI Governance Act was recently modified.
The Virginia law, like the Colorado Act, would have imposed various obligations on companies involved in the creation or deployment of high-risk AI systems that influence significant decisions about individuals in areas such as employment, lending, health care, housing, and insurance. These obligations included conducting impact assessments, keeping detailed technical documentation, adopting risk management protocols, and offering individuals the chance to review negative decisions made by AI systems. Companies would have also needed to implement safeguards against algorithmic discrimination. Youngkin, like Colorado’s Governor Polis, worried that HB 2094 would stifle the AI industry and Virginia’s economic growth. He also noted that existing laws related to discrimination, privacy, data usage, and defamation could be used to protect the public from potential AI-related harms. Whereas Polis ultimately signed the Colorado law, Youngkin did not.
However, even though Polis signed the Colorado law last year, he urged in his statement for legislators to assess and provide additional clarity and revisions to the AI law. And, last month, the AI Task Force issued a report on their recommendations. The task force identified potential areas where the law could be clarified or improved. It divided them into four categories: (1) where consensus exists about changes to be made; (2) where consensus needs additional time and stakeholder engagement; (3) where consensus depends on resolving multiple interconnected issues; and (4) where there is “firm disagreement.” In the first are only a handful of relatively minor changes. In the second, for example, is clarifying the definition of what are “consequential decisions” – important because AI tools used to make them are the ones that are subject to the law. In the third, for example, is defining “algorithmic discrimination” and obligations developers and deployers should have in preventing it. And in the fourth, by way of example, is whether or not to include an opportunity to cure incidents of non-compliance.
Texas, like Colorado and Virginia, has been considering legislation that addresses high-risk AI systems that are a “substantial factor” in consequential decisions about people’s lives. That bill was recently modified to remove the concept of algorithmic discrimination, and as currently drafted prohibits AI systems that are developed or deployed with the “intent to discriminate.” It has also been modified to expressly state that disparate impact alone is not sufficient to prove that there was an intent to discriminate. The proposed Texas law is similar to Utah’s AI legislation (which went into effect on May 1, 2024), insofar as it would require notice if individuals were interaction with AI (though this obligation is only for government agencies.) Lastly, the law would also prohibit the intentional development of AI systems to “incite harm or criminality.” The law was filed on March 14 and, as of this writing was pending in the House Committee.
Putting it into Practice: The veto of HB 2094 emphasizes the complex journey towards comprehensive AI regulation at the state level. We anticipate ongoing action at a state level as legislatures, and some time before we see a consensus approach to AI governance. As a reminder, there are currently AI laws in effect focusing on various aspects of AI in New York (likenesses and employment), California (several different topics), Illinois (employment), and Tennessee (likenesses), passed AI legislation set to go into effect at different times in 2024 through 2026, and bills sitting in committee in at least 17 states.
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GSA Expansion under Executive Order “Eliminating Waste and Saving Taxpayer Dollars by Consolidating Procurement”
On March 20, 2025, President Trump issued an Executive Order (the “Order”) targeted at consolidating domestic government procurement processes. Titled “Eliminating Waste and Saving Taxpayer Dollars by Consolidating Procurement,” this Order aims to streamline Federal procurement by consolidating it under the General Services Administration (GSA) rather than continuing the current practice of allowing all executive agencies and their subcomponents to manage much of their own procurement processes. As the Federal government is the largest buyer of goods and services globally, this Order seeks to enhance efficiency and effectiveness in procurement by better aligning with the GSA’s original purpose established in 1949—to consolidate the Federal government’s resources in order to streamline administrative work. The Order proposes that by centralizing procurement functions, the Federal government can better eliminate waste and duplication, allowing for the efficient use of taxpayer dollars and allowing agencies to focus on their core missions.
To ensure consistency across Federal procurement activities, the Order defines several key terms. The term “Administrator” shall refer to the GSA Administrator—not any agencies’ independent administrators— and “Agency” shall retain its definition as per Section 3502 of Title 44, but with an emphasis on the Executive Office of the President’s exclusion from this definition. “Common goods and services” are to be those defined by the Office of Management and Budget’s (OMB) Category Management Leadership Council, while an “indefinite delivery contract vehicle” refers to agreements that allow flexible ordering over time. The intention behind laying out these definitions is to further ensure clarity and consistency across to be-consolidated Federal procurement activities.
Next Steps for Implementation
The order outlines a clear timeline for procurement consolidation. By April 19, 2025, the GSA Administrator will be designated as the executive agent for government-wide acquisition contracts (GWACs) for information technology. The GSA Administrator, in consultation with the Director of OMB, will also defer or decline the executive agent designation for GWACs for information technology, when necessary, to ensure continuity of service. Further, the GSA Administrator must, on an ongoing basis, “rationalize” Government-wide indefinite delivery contract vehicles for information technology for agencies across the Government to reduce contract duplication, redundancy, and other inefficiencies. By April 3, 2025, the OMB must issue a memorandum to agencies implementing the aforementioned requirements. By May 19, 2025, Federal agency heads must submit proposals for the GSA to handle the procurement of common goods and services. The GSA Administrator is then tasked with submitting a comprehensive plan to the OMB by June 18, 2025.
Potential Implications for Government Contractors
The Order emphasizes that so as not to impair existing legal authorities or budgetary functions, its decree must be implemented in accordance with applicable laws and available appropriations. Perhaps most importantly, this Order does not create any new enforceable rights or benefits against the U.S. government, suggesting a potentially limited ability of government contractors to protest or dispute the allocation of Federal awards.
On the same day of the Order’s release, the GSA held an all-hands meeting where the head of GSA’s Federal Acquisition Service is reported as stating, “[o]ver the coming months, we are going to ingest all domestic, commercial goods and services inside the GSA. We’re not going to do all $900 billion, but we will do about $400 billion, so we’re going to quadruple our size.”1
[1] https://www.nextgov.com/acquisition/2025/03/gsa-quadruple-size-centralize-procurement-across-government/403935/.
Nondelegation and Environmental Law
Earlier this week, the Supreme Court held oral argument in Federal Communications Commission v. Consumers’ Research.1 The case addresses the Federal Communications Commission’s Universal Service Fund programs aimed at providing funding to connect certain customers with telecommunications services. The challengers contend that Congress ran afoul of the nondelegation doctrine in authorizing the FCC to setup the Universal Service Fund programs and that these programs are therefore unlawful.
Although that issue might appear far removed from issues of environmental law, the case could have significant ramifications and could curtail Congress’s ability to authorize federal administrative agencies to issue binding regulations. That curtailment could reach to congressional enactments that authorize the Environmental Protection Agency to promulgate regulations in a variety of areas, including several major environmental statutes like the Clean Air Act, the Clean Water Act, and the Safe Drinking Water Act, to name a few.
What is the Nondelegation Doctrine and Why is it Important?
The nondelegation doctrine holds that Congress may not delegate lawmaking (i.e., legislative) authority to executive branch agencies. As some observers have put it, however, the nondelegation doctrine had only one good year, in 1935, when the Supreme Court struck down two federal laws authorizing the executive to take certain actions that were considered legislative in nature. The cases were A.L.A. Schechter Poultry Corp. and Panama Refining Co.
Besides those two cases, the Supreme Court has not struck down any other federal laws on nondelegation grounds. This is because, after 1935, the Supreme Court adopted a relatively permissive test of whether a statute runs afoul of the nondelegation doctrine. The test, referred to as the “intelligible-principle” test, looks to whether Congress has provided the administrative agency with some “intelligible principle” to follow in promulgating regulations pursuant to a congressional enactment.
Applying the intelligible-principle test, the Supreme Court has repeatedly, and over approximately eight decades, upheld congressional delegations of rulemaking power to administrative agencies.
However, in 2019, a dissenting opinion written by Justice Gorsuch in Gundy v. United States, called on the Court to abandon the intelligible-principle test and instead move toward a test where the Agency is not able to make policy decisions and instead is left to a role where it only “fills up the details” or makes factual determinations. Notably, the Gundy dissent was joined by Justices Roberts and Thomas, and Justices Alito and Kavanaugh elsewhere expressed support for the Gundy dissent’s approach. Gundy was also decided before Justice Barrett joined the Court. This has Supreme Court watchers asking whether the Supreme Court might inject more stringency in the nondelegation test in an appropriate case.
Enter Consumers Research. This is the first Supreme Court case to squarely raise nondelegation issues since Gundy. The challengers to the Universal Service Fund program argue that Congress gave the FCC unchecked authority to raise funds to be directed toward the goal of providing universal service from telecommunications services providers. The FCC (and intervenors) respond that the program “passes . . . with flying colors” and fits comfortably within past nondelegation cases because of the numerous restrictions that the statute places on the FCC. If the Supreme Court were to shift course by establishing a more stringent nondelegation test, that could significantly constrain Congress’s ability to delegate rulemaking powers to administrative agencies. Importantly, a more stringent test for nondelegation challenges could also impact numerous existing federal laws. We discuss just a sample of environmental laws that could be affected in the following section.
What Could it Mean for Environmental Law, and You?
One of the most obvious areas where a more stringent delegation test could impact environmental law is in the setting of air and water quality standards.
For example, the Clean Air Act directs the EPA to set air quality standards that apply nationwide. The Clean Air Act provides relatively loose guidance on how the EPA should go about that task, directing the EPA to promulgate standards “requisite to protect the public health” while “allowing an adequate margin of safety.” The Supreme Court upheld that delegation in Whitman v. American Trucking Associations, Inc., but if the Supreme Court were to take a more stringent approach to nondelegation like that in the Gundy dissent, the EPA may not be able to make the decision of what air standard is “requisite to protect the public health” because that could be viewed as a key policy determination and more than “fill[ing] up the details.”
Likewise, in the Clean Water Act, the EPA is also directed to review water quality standards set by individual states, again taking into account a relatively broad instruction from Congress “to protect the public health or welfare, enhance the quality of water and serve the purposes of this chapter” while also considering the waters’ “use and value for public water supplies, propagation of fish and wildlife, recreational purposes, and agricultural, industrial, and other purposes, and . . . their use and value for navigation.” Again, a more stringent nondelegation test could find that these instructions leave the EPA with too much of a policy-making role.
Finally, in the Safe Drinking Water Act, the EPA is directed to set maximum contaminant level goals “at the level at which no known or anticipated adverse effects on the health of persons occur and which allows an adequate margin of safety.” This direction to set a standard is potentially less at risk because it requires more fact finding (i.e., determining “known or anticipated adverse effects on” health), but the requirement to determine an “adequate” safety margin might be deemed to be too close to policymaking.
Although nondelegation challenges to these types of environmental regulations have been raised in the past, they have failed at least in part because of the relaxed intelligible-principle test. The outcome in Consumers’ Research could change that. The Environmental Team at Womble Bond Dickinson are well-suited to evaluate these specific questions of law with you.
Counting Noses in Consumers’ Research
For now, it appears that the current nondelegation test will live to see another day. Only Justices Thomas, Alito, and Gorsuch seemed readily willing to make the test more stringent. The Justices appointed by Democratic presidents (Sotomayor, Kagan, and Jackson) are sure “no” votes. As for the three Justices typically left in the middle, Chief Justice Roberts was unusually quiet during argument, while both Justices Kavanaugh and Barrett pushed back on counsel for Consumers’ Research in numerous instances. Given that the Universal Service Fund program enjoys continuing and broad bipartisan support, this may not be the case where any of the middle three Justices are willing to take on the nondelegation issue, especially after the Court has already issued decisions that reign in administrative agency authority through the major-questions doctrine and by overruling the Chevron deference regime.
Regardless, the Supreme Court’s opinion, which should issue by July 2025, will likely reveal where the Court is headed on nondelegation issues and could signal that a more searching nondelegation test is on the horizon.
1 Brief disclaimer: Michael Miller worked on this case in the earlier stages of litigation before it was brought before the Supreme Court. This update does not share any views on the merits of the case.
FinCEN Exempts U.S. Companies and U.S. Persons from Beneficial Ownership Reporting Requirements
An interim final rule issued by the Financial Crimes Enforcement Network (FinCEN), makes the following significant changes to beneficial ownership information reporting (BOIR) requirements:
defines a “reporting company” subject to BOIR requirements to mean only those entities previously defined as a “foreign reporting company” (created under the law of a foreign country and registered to do business in the United States, including registration with any Tribal jurisdiction, through filing a document with a secretary of state or similar office)
exempts domestic reporting companies from BOIR requirements
exempts foreign reporting companies from having to report the beneficial ownership information of any U.S. person who is a beneficial owner of such foreign reporting company
exempts U.S. persons from having to provide such beneficial ownership information to any foreign reporting company of which it is a beneficial owner
subject to certain exceptions, extends the deadlines applicable to beneficial ownership information reports required to be filed or updated by such foreign reporting companies.
Following the comment period, FinCEN intends to issue a final rule later this year.
The interim final rule follows recent announcements by FinCEN on February 27, 2025, and the U.S. Department of the Treasury on March 2, 2025, indicating that there would be a significant reduction in enforcement of BOIR requirements against U.S. citizens and domestic reporting companies. Additional information regarding these announcements can be found in our prior legal alert.
FinCEN’s full release is available here:
FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons, Sets New Deadlines for Foreign Companies
Immediate Release: 3.21.25
WASHINGTON –– Consistent with the U.S. Department of the Treasury’s March 2, 2025, announcement, the Financial Crimes Enforcement Network (FinCEN) is issuing an interim final rule that removes the requirement for U.S. companies and U.S. persons to report beneficial ownership information (BOI) to FinCEN under the Corporate Transparency Act.
In that interim final rule, FinCEN revises the definition of “reporting company” in its implementing regulations to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”). FinCEN also exempts entities previously known as “domestic reporting companies” from BOI reporting requirements.
Thus, through this interim final rule, all entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners will be exempt from the requirement to report BOI to FinCEN. Foreign entities that meet the new definition of a “reporting company” and do not qualify for an exemption from the reporting requirements must report their BOI to FinCEN under new deadlines, detailed below. These foreign entities, however, will not be required to report any U.S. persons as beneficial owners, and U.S. persons will not be required to report BOI with respect to any such entity for which they are a beneficial owner.
Upon the publication of the interim final rule, the following deadlines apply for foreign entities that are reporting companies:
Reporting companies registered to do business in the United States before the date of publication of the IFR must file BOI reports no later than 30 days from that date.
Reporting companies registered to do business in the United States on or after the date of publication of the IFR have 30 calendar days to file an initial BOI report after receiving notice that their registration is effective.
FinCEN is accepting comments on this interim final rule and intends to finalize the rule this year.
CFPB to Withdraw BNPL Interpretive Rule Amid Broader Agency Rollback
The CFPB has announced plans to withdraw its May 2024 interpretive rule that subjected buy-now, pay-later (BNPL) products to regulations applicable to credit cards under the Truth in Lending Act (TILA). The move was revealed in court filing in the CFPB’s ongoing litigation with a fintech-focused trade organization which challenged the rule as procedurally improper and ill-suited to short-term, interest-free BNPL loans.
The interpretive rule, issued under former Director Rohit Chopra, would have extended traditional credit card protections—such as dispute rights and refund guarantees—to BNPL offerings (previously discussed here). The parties jointly requested to stay the case pending revocation of the rule.
This shift comes as part of a broader reorientation of the CFPB under President Trump. Under the current administration, the Bureau has moved to pause or roll back a slew of enforcement and rulemaking efforts initiated during the Biden administration (previously discussed here, here, and here).
Putting It Into Practice: The CFPB’s withdrawal of the BNPL interpretive rule signals a lighter regulatory touch on emerging consumer credit products. While welcomed by BNPL providers, the move may prompt increased scrutiny from state regulators and consumer advocates concerned about potential protection gaps. Industry participants should prepare for a patchwork of regulatory expectations in the near term.
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European Council Greenlights First Step of Omnibus – The ‘Stop-the-clock’ Proposal
On 26 March 2025, the European Council approved its position, known as a “negotiating mandate”, on a key element of the European Commission’s proposal to streamline corporate sustainability requirements which are captured in an “Omnibus”. Specifically, they approved a delay to the current timetable of the Corporate Sustainability Reporting Directive (“CSRD”) and Corporate Sustainability Due Diligence Directive (“CSDDD”), as proposed in a “Stop-the-clock” Directive, with the substantive changes to reporting requirements to be proposed in a separate Directive.
Specifically, EU Member States at the European Council have supported the European Commission’s proposal to postpone:
by two years the application of the CSRD requirements for large companies that have not yet started reporting, as well as listed SMEs. The effect is that companies expecting to prepare the first report for the financial year 2025, would instead have to prepare the first report for the financial year 2027, and
by one year the transposition deadline and the first phase of the application (covering the largest companies) of the CSDDD. As a result, companies would phase in from July 2028 rather than July 2027.
The support from the European Council to streamline the corporate sustainability reporting requirements has generally been enthusiastic. For example, Adam Szłapka, Minister for the European Union of Poland, said of the Stop-the-clock Directive, that “today’s agreement is a first step on our decisive path to cut red tape and make the EU more competitive”.
Now that the European Council’s negotiating mandate has been approved, interinstitutional negotiations can be entered into. The European Parliament is scheduled to vote on 1 April 2025 on the Stop-the-clock Directive which is being presented to Members of the European Parliament (“MEPs”) on an urgent procedure, requiring a simple majority of MEPs present to approve it. The overall expectation is that this vote is likely to pass, however, how the separate Directive that will cover the changes to the substantive requirements will progress well be hotly debated.
For U.S. companies in particular where there is a movement under a proposed PROTECT USA Act to prevent various U.S. entities from complying with “foreign sustainability due diligence legislation”, should the Stop-the-clock Directive be approved it would at least provide a reprieve. This would allow companies time to recalibrate their approaches to sustainability in the currently fractured political landscape.