ALERT: Trump Administration Issues “Pause” on Federal Grant Spending Effective January 28
On January 27, 2025, the White House Office of Management and Budget (“OMB”) released a memorandum regarding “Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs” (OMB Memorandum M-25-13; hereinafter the “OMB Memo”)). The OMB Memo directs Federal agencies, inter alia, to: (1) identify and review all Federal financial assistance programs consistent with President Trump’s recent policies and Executive Orders (“EO”); and (2) “temporarily pause all activities related to obligation or disbursement of all Federal financial assistance, and other relevant agency activities that may be implicated by the executive orders” cited in the OMB Memo. The OMB Memo is effective January 28, 2025, at 5:00PM EST – though the breadth of its reach remains to be seen.
The OMB Memo’s first mandate undoubtedly applies to all Federal financial assistance and grant programs currently being managed by the Federal Government. This includes everything from NTIA’s Broadband Equity Access and Deployment Program (“BEAD”), to Commerce’s/NIST’s CHIPS for America Programs, and the billions of dollars Congress has appropriated under the Infrastructure Investment and Jobs Act (“IIJA”) and the Inflation Reduction Act (“IRA”) to numerous other federally funded programs. All programs will be reviewed to ensure they align with President Trump’s various Executive Orders, including those on foreign aid, DEI, and energy.
The real question, though, is the ultimate scope of the OMB Memo’s second mandate, to pause all obligations and disbursements of Federal grant funding. As written, the OMB Memo suggests the pause relates only to Federal programs “that may be impacted by the executive orders,”[1] included in the OMB Memo. Therefore, absent additional guidance to the contrary, we do not read the OMB Memo as expanding beyond this limitation to technically cover all Federal programs, such as semiconductor manufacturing, that may not be directly impacted or covered by the listed EOs.
We recognize though that different interpretations may result from reviewing OMB’s direction. For example, OMB also directs agencies to “complete a comprehensive analysis of all of their Federal financial assistance programs,” to “pause all activities associated with open NOFOs, such as conducting merit review panels,” and suggests the disbursement pause is to allow the Administration time to “review agency programs and determine the best uses of the funding for those programs consistent with the law and the President’s priorities.” Particularly where almost every Federal program will be impacted in some way by President Trump’s EO on “Ending Radical and Wasteful Government DEI Programs and Preferencing,” we can see where the OMB Memo could result in a pause to all Federal grant programs as agencies review their agreements to ensure they align with the Administration’s new policies.
We expect additional guidance and announcement from agencies imminently – and are aware that some grant recipients have already received written notice of “pause” from their Federal Awarding Agencies.
In the meantime, if you are a federal grant recipient or subrecipient, absent a challenge on constitutional bases, the Federal government likely will not be paying your invoices after today, and significant changes to the terms of your agreements (possibly even termination) may be on the horizon.
Update: On January 28, 2025, a group of nonprofit organizations filed suit against the OMB in the U.S. District Court for the District of Columbia requesting a temporary restraining order against the OMB Memo. The Complaint alleges the OMB Memo violates the Administrative Procedures Act in several regards, including that the Memo is arbitrary and capricious, contrary to the First Amendment, and in excess of Statutory authority. National Council of Nonprofits et al v. Office of Management and Budget et al, No. 1:25-cv-00239 (D.D.C.).
Additionally, a document titled “Instructions for Federal Financial Assistance Program Analysis in Support of M-25-13,” was released, providing Federal agencies with guidance on the review each listed Federal grant program must undergo pursuant to OMB’s directive.
FOOTNOTES
[1] Protecting the American People Against Invasion (Jan. 20, 2025), Reevaluating and Realigning United States Foreign Aid (Jan. 20, 2025), Putting America First in International Environmental Agreements (Jan. 20, 2025), Unleashing American Energy (Jan. 20, 2025), Ending Radical and Wasteful Government DEI Programs and Preferencing (Jan. 20, 2025), Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government (Jan. 20, 2025), and Enforcing the Hyde Amendment (Jan. 24, 2025).
Analyzing President Trump’s Latest Executive Order Titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”
On January 21, 2025, President Trump signed an Executive Order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity.” This Executive Order is a major pivot in federal policy regarding affirmative action and diversity initiatives, which have been in place for decades, particularly within federal contracting. The implications of this Executive Order are far-reaching, affecting both federal contractors and private employers across the United States.
Key Aspects of the Executive Order
A significant component of the Executive Order is the revocation of Executive Order 11246. Enacted in 1965 by President Lyndon B. Johnson, Executive Order 11246 mandated that federal contractors and subcontractors implement affirmative action programs to ensure equal employment opportunities for women and minorities. According to the Department of Labor, this requirement has become deeply embedded in the operational frameworks of approximately 25,000 firms and 120,000 establishments, impacting nearly 20% of the U.S. workforce. By revoking this order, President Trump’s Executive Order effectively dismantles the federal mandate for race and gender-based affirmative action.
The Executive Order further instructs all federal agencies to eliminate any programs, policies, or mandates that are deemed discriminatory or illegal under what the Executive Order characterizes as the guise of DEI (Diversity, Equity & Inclusion). This encompasses the cessation of activities such as promoting diversity initiatives and holding contractors accountable for affirmative action measures. Contractors “may” continue complying with the existing affirmative action requirements under Executive Order 11246 until April 20, 2025. Additionally, the Office of Federal Contract Compliance Programs (OFCCP) is specifically directed to stop engaging in workforce balancing based on race, color, sex, sexual preference, religion, or national origin. The overarching goal, as stated in the Executive Order, is to promote individual initiative, excellence, and hard work, aligning employment practices more closely with merit-based principles.
Despite these sweeping changes, it is crucial for federal contractors and subcontractors to remain compliant with existing anti-discrimination laws, such as Title VII of the Civil Rights Act, the Equal Pay Act, the Age Discrimination in Employment Act and the Americans with Disabilities Act. Moreover, the obligations under the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA) and Section 503 of the Rehabilitation Act remain intact. These statutes continue to require affirmative action and non-discriminatory practices specific to employees who are veterans or are disabled, underscoring the nuanced landscape of compliance that employers must navigate.
Additionally, the Executive Order calls for the development of a new contract term, likely replacing the current Equal Employment Opportunity clause, for inclusion in federal contracts. This term will require contractors to agree that compliance with all applicable federal anti-discrimination laws is essential to the government’s payment decisions. Contractors must certify that they do not operate any programs promoting DEI that violate federal anti-discrimination laws. The White House Fact Sheet on the Executive Order describes this certification as a clear statement that contractors will not engage in illegal discrimination, including any DEI practices the order characterizes as illegal. This certification is expected to be published in the upcoming weeks.
Employers should carefully review their current employment practices to ensure compliance with nondiscrimination statutes, such as Title VII of the Civil Rights Act of 1964. Any policies or practices that might be inconsistent with existing law should be revised to ensure compliance. Additionally, employers should review their Equal Employment Opportunity policies and communications to assess potential risks of enforcement agency investigations.
Employers should also stay informed about potential challenges to the Executive Order and look for additional information about sectors, industries, and organizations that federal agencies may identify for investigation. Guidance from the Attorney General, Secretary of Education, and other federal agencies will be essential as these changes unfold.
The Executive Order “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” represents a pivotal shift in federal policy, reshaping the landscape of affirmative action and DEI initiatives. As the ramifications of this order unfold, it is imperative for employers to remain vigilant and proactive in adjusting their compliance strategies. Staying informed about these developments and seeking guidance from legal advisors will be crucial in navigating this new era of employment practices.
State of Play: Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs
On Monday evening, the Office of Management and Budget (OMB) ordered all federal agencies to temporarily suspend grant and loan payments, with the exception of Social Security, Medicare, and “assistance provided directly to individuals.” In the internal memo, OMB’s Acting Director, Matthew Vaeth, calls for each agency to undertake a comprehensive analysis to ensure all grant and loan programs comply with the Administration’s Executive Orders. The pause applies to an estimated 2,600 accounts across the federal government, and details are still being worked out on federal funding that is statutorily obligated.
While intended to be temporary, the duration of the pause may vary by Department and program. Each federal department and agency are likely to interpret its scope and requirements differently and prioritize review of certain programs before others. This pause may have a profound effect on clients who were expecting to receive federal funds within the next two to six weeks. While the pause has the potential to affect any business or entity receiving federal grants or loans, clients receiving such funds as part of programs related to DEI initiatives, foreign aid, or federal clean energy investments, specifically electric vehicles, may be most impacted.
Some of the questions agencies must answer in the report for OMB include whether or not the program supports illegal immigrants, if the program supports abortion, gender ideology or DEI initiatives, or if the program supports activities that impose an undue burden on the identification, development, or use of domestic energy resources. It’s important to note, only a handful of President Trump’s cabinet secretaries and agency heads have been confirmed, making this process all the more complicated.
Key Facts
All federal assistance – with the exceptions listed above – will be paused starting today, January 28, at 5:00 pm ET.
This affects ALL federal agencies.
The government-wide freeze is temporary and is intended to allow each agency to conduct a comprehensive analysis of all federal financial assistance programs to identify programs, projects, and activities that may be implicated by any of the President’s Executive Orders.
Agencies have until February 10, 2025, to submit to OMB detailed information on each program subject to this pause.
The freeze will include:
Issuance of new awards;
Disbursement of Federal funds under all open awards; and
Other relevant agency actions that may be implicated by Trump’s Executive Orders until OMB has reviewed and provided guidance based on what is received.
Could this Affect You?
Yes, if your business receives federal grants or loans, the pause will almost certainly affect you until at least February 10th and potentially beyond. If your company is concerned about the funding pause, or you are impacted by any of the recent Executive Orders, it is critical to determine the risk posed by the pause or Executive Order and to develop a response that evaluates both their legal and political options.
Trump Fires NLRB General Counsel
In a much-anticipated move, President Donald Trump has fired Jennifer Abruzzo, the general counsel of the National Labor Relations Board (“NLRB”). Trump’s action follows a precedent set by former President Joe Biden. On his first day in office four years ago, Biden ousted Peter Robb, the NLRB’s general counsel during the first Trump administration. During her tenure, Abruzzo aggressively sought to expand workers’ rights under the National Labor Relations Act, empower unions, and protect those seeking to organize workers.
The removal of Abruzzo opens the door for President Trump to appoint a new general counsel for the Board. The White House has yet to announce Abruzzo’s replacement, but the President’s transition team for the NLRB was led by Robb and his former deputy, Alice Stock. The new U.S. Labor Board’s prosecutor is expected to adopt a more pro-business stance. It remains to be seen, however, if that agenda will be influenced by Trump’s campaign rhetoric and promises in support of workers and union members. Many have noted that Trump’s choice to lead the Department of Labor, Representative Lori Chavez-DeRemer, is an unusually pro-union Republican whose candidacy was backed by the International Brotherhood of Teamsters in part because she had backed the Protecting the Right to Organize Act as a Congresswoman.
The dismissal of Abruzzo will undoubtedly bring a shift towards employer-friendly priorities under a Trump-appointed NLRB general counsel. Over the past decade and a half, the labor law pendulum has swung back and forth with increasing momentum under each presidency since Obama. In addition to seeking to roll back many of the labor law changes championed by Abruzzo, whoever Trump appoints as the new general counsel will be taking over at a critical juncture for the future of the NLRB. In 2024, a number of companies filed constitutional challenges to the NLRB’s authority to be prosecutor, judge, and jury violating due process, the Board and its administrative law judges being shielded from removal by the president, and the agency’s administrative proceedings violating employer’s Seventh Amendment right to a jury trial. Companies and unions alike will be closely watching to see how a new NLRB general counsel handles these cases as several of them move to appeals courts in 2025. The outcomes could have far-reaching implications for labor law and the future of the NLRB.
What Every Multinational Company Should Know About … Managing Import Risks Under the New Trump Administration (Part III): A 12-Step Plan for Coping with Tariff and Supply Chain Uncertainties
Our previous article on What Every Multinational Company Should Know About … Managing Import Risks Under the New Trump Administration (Part I) identified the 12 main import-related risks (and opportunities) likely to arise in the new Trump administration. Part II laid out the likely roadmap to the international trade priorities of the Trump Administration in The Implications of President Trump’s “America First Trade Memorandum.” We now complete the series on “Managing Import Risks Under the New Trump Administration” with Part III, which provides practical advice regarding how to navigate these potential major changes in the international trade environment.
With potential tariff increases and USMCA renegotiations on the horizon, and with Customs already devoting considerable resources to blocking goods at the border that are the product of forced labor or human trafficking or that violate the Uyghur Forced Labor Prevention Act (UFLPA), we have put together a 12-step guide to preparing for and adapting to the rapidly shifting importing environment. It focuses on the following areas:
Understanding your company’s importing patterns;
Ensuring that your current import efforts comport with Customs requirements and are not leaving your organization at risk for detentions or penalties;
Evaluating the status of your current USMCA compliance efforts;
Risk planning for potential rapid changes in the tariff environment; and
Ensuring your organization is preparing for the likely focus of the new administration on supply chain integrity.
Working through these factors should help most multinational companies with significant international supply chains address the three main risks as we move into the new administration: (1) risks relating to customs underpayments, (2) risks relating to potential tariff hikes, and (3) risks relating to supply chain integrity issues. Because these areas are interrelated, a holistic focus on all five areas listed above is likely to yield the best and most flexible posture to manage a changing international trade landscape.
Understand Your Importing Patterns
Step 1: Identify All Importing Avenues at Your Company. Managing import-related risks begins with a comprehensive understanding of your company’s importing activities. The first step, accordingly, is to get a good handle on your importing patterns by doing the following:
Identify all importer-of-record (IOR) numbers associated with your company at all divisions and subsidiaries.
Identify all customs brokers used by your organization over the last five years, and determine which ones are still active. Determine which types, which product lines, or which divisions each broker is handling.
Pull, or have your customs broker pull, the Automated Commercial Environment (ACE) data with all your company’s identified IORs to gather the data needed to analyze import trends and the accuracy of information submitted to Customs at the time of entry.
Collaborate with procurement teams to anticipate future orders, including for new products, suppliers, and sourcing regions under consideration.
Document all touchpoints in your supply chain, including warehouses, distribution centers, and logistics providers. When paired with importing data, logistics data provides a clear picture of importing patterns, enabling better risk management and modeling.
Ensure Your Imports Are Being Handled with Reasonable Care
Step 2: Ensure Customs Compliance Is Robust. Customs compliance is always important. But in a high-tariff environment, the stakes for missteps are considerably greater, increasing potential penalties and interest for underpayments. For the same reason, the advantages of identifying tariff-saving opportunities are much greater. Some key areas to consider for ongoing customs compliance include:
Ensure Your Company Maintains a Thorough Classification Index to Ensure Proper and Consistent Tariff Coding: Inaccurate classifications can result in incorrect duties or penalties, so confirm your company has procedures to correctly classify goods using the correct Harmonized Tariff Schedule (HTS) codes and maintains a regularly updated import classification index to reflect new products or changes in tariff codes.
Ensure Your Company Maintains a Customs Manual for Consistent Procedures in Importing: Ensure your organization maintains a detailed customs compliance manual that outlines procedures for classification, valuation, origin determination, recordkeeping, interactions with brokers and Customs authorities, and other relevant matters that impact the accuracy of information reported to Customs. A clear, documented import process ensures consistency and reduces the risk of errors.
Ensure Your Company Tracks and Attributes Assists Using a Consistent Methodology: Review and ensure there are procedures to track and properly report assists, royalties, or other costs that might affect the declared value of imported goods. Misreporting these costs could lead to underpayments of duties and penalties.
Ensure Your Company Conducts Regular Post-Entry Audits to Identify Errors in Importation:Ensure there are procedures to regularly review entries after clearance to identify potential errors in valuation, origin declarations, classification, or other entry-specific items that impact how much duties are owed. Do not forget to include areas of tariff savings like duty drawbacks, post-summary corrections, or reconciliation filings to identify and address discrepancies.
Ensure Your Company Maintains Procedures for Overseeing Customs Brokers and Freight Forwarders: Ensure there are written protocols that are consistently followed to ensure there is proper oversight of customs brokers and freight forwarders. Confirm that someone at the company is playing point on this coordination and also has been given ACE access to monitor communications to and from Customs.
Ensure Your Company Maintains Procedures to Monitor Changing Regulations and Importing Requirements: It is important to stay informed about regulatory updates, especially in times when import-related requirements might quickly change. Use tools like ACE data to proactively adjust compliance practices to evolving rules.
Step 3: Address USMCA Compliance. As detailed in Part I, the USMCA is coming up on the deadline for a three-country review, to begin in 2026 (although it is likely that the process will begin earlier). Even in advance of that, we expect Customs to continue prioritizing its review of claims for USMCA preferential treatment, which has been a point of emphasis for CBP over the last few years. Thus, the starting point for USMCA risk planning is to ensure your organization is properly managing its current USMCA posture. Key areas to review include:
Proper Certificates of Origin at Importation: Importers must have a valid certificate of origin to claim duty-free treatment in hand at the time of importation. Lack of documentation at the time of importation may result in denied preferences and cannot be remedied after the fact. This is one of the most common importing errors that we see (along with failure to track assists and misclassifications). Avoid this problem by ensuring certificates are available, complete, and maintained for at least five years. Collaborate with suppliers to provide accurate certificates before shipment.
Compliance with Regional Content Requirements: Products like automobiles must meet specific regional value content thresholds. Conduct a detailed analysis of your supply chain to confirm sourcing meets required content levels.
Proactively Engage with Suppliers: Communicate with suppliers to verify their understanding of regional content requirements and to confirm they are accurately reporting the same to your company. Work with them to resolve discrepancies and improve compliance practices.
Proper Declaration of Country of Origin: Incorrect origin declarations may trigger penalties or loss of USMCA benefits; misclassifications can result in the application of the wrong USMCA classification requirements and also increase scrutiny from CBP. Validate claims of USMCA origin using clear supplier documentation and other supporting information. Ensure employees managing import declarations are trained on proper classification and country of origin rules, which often differ from the normal Customs substantial transformation rules, such as when the USMCA requires a tariff-shift analysis or product-specific requirements.
Step 4: Consider Conducting a Customs Audit. A comprehensive customs audit can be essential for identifying compliance gaps and mitigating risks in an increasingly complex trade environment. Regular audits ensure that your organization adheres to import regulations, minimizes the risk of penalties, and maximizes efficiency in import operations. A well-conducted compliance audit can identify inconsistencies in tariff classifications, valuation, or country-of-origin claims and can streamline processes to avoid unnecessary delays and errors in filings, verify that declared values include all dutiable costs, such as assists and royalties, and ensure your company is maintaining proper documentation. A customs audit also should evaluate the robustness of the importer’s procedures for identifying errors after entry and correcting them using post-entry corrections and protests against liquidation.
Evaluate Tariff-Related Risks
Step 5: Conduct a Comprehensive Risk Assessment. A thorough risk assessment is critical to navigating tariff challenges, geopolitical uncertainties, and supply chain vulnerabilities. This step ensures your business understands where risks lie and enables strategic mitigation measures. Key areas to assess include the following:
Regional Risk: Analyze regions prone to instability, trade disputes, or changing trade agreements. Consider the impact of regional disruptions such as natural disasters or labor unrest.
Political Risk: Evaluate the vulnerability of goods facing political headwinds, especially those from China, Canada, or Mexico.
Product-Related Risk: Identify goods facing high tariff rates or subject to frequent trade policy changes, such as steel and aluminum. Evaluate whether certain products have complex classification issues or are affected by partner agency rules.
USMCA Risk: Evaluate goods from Canada and Mexico that are subject to special rules such as content requirements for automotive goods and heightened rules of origin standards.
Supply-Related Risk: Assess the concentration of suppliers in high-risk regions or for key products. Evaluate supplier compliance with trade regulations and their ability to adapt to policy changes.
Once the data is in place, begin to analyze risk factors. Create risk matrices for products, regions, and suppliers to quantify and prioritize exposures. Also use supply chain mapping to identify the sourcing of key goods, from raw materials to finished products, that the company may not be sourcing directly. Use all data sources to fully understand company sourcing, how goods work through the supply chain, and hidden sources of risk.
Step 6: Model Different Risk Scenarios. The next step is scenario planning. Risk scenario modeling equips your company to anticipate and navigate potential challenges by evaluating various “what if” situations. Risk scenario modeling will help provide visibility into which areas need immediate attention; can provide informed decision making for supplier diversification, tariff mitigation strategies, and contract negotiations; and enhances preparedness to manage disruptions and to maintain compliance while safeguarding profitability. Areas to consider include:
Rising Tariffs on Specific Countries or Goods: Be aware of tariff increases on specific countries or goods such as electronics or steel. Watch for escalation of trade disputes affecting major trading partners like China, Mexico, or the EU.
Adjustments to USMCA Provisions: Track changes to USMCA rules, such as stricter regional content requirements. Be prepared for renegotiations or withdrawal from agreements impacting duty-free access.
Currency and Geo-Political Risks: Currency fluctuations impact the landed cost of goods. Consider the impact of inflationary pressures and potential currency movements on raw materials or finished goods, taking into account the currency used in contractual arrangements.
Long-Term Supply Chain Disruptions: Consider likely increased scrutiny of imports due to UFLPA, forced labor and human trafficking, and other supply chain integrity measures. Evaluate potential long-term disruptions due to geopolitical instability, natural disasters, or pandemics as well as how your company would weather supplier shutdowns due to failure to meet trade or labor standards or for other reasons.
Partner Agency Regulations: Customs acts as the gatekeeper regarding the import-related obligations imposed by several dozen other federal agencies such as the Food & Drug Administration and the Department of Transportation. Failure to meet the requirements of these partner agencies can lead to penalties or detentions of goods at the border. Evaluate whether your organization has identified all potentially applicable partner agency import-related requirements and has taken steps not only to meet these requirements but to document compliance, to allow for a quick response to any detention.
Next, move to modeling scenarios:
Define Scenarios: Collaborate across Procurement, Compliance, and Finance to identify plausible high-impact scenarios such as rising tariffs on key imports, potential filing of antidumping or countervailing duty actions, or revisions to important USMCA preferences. Incorporate external data on policy trends, trade disputes, and economic forecasts.
Quantify Impacts: Calculate financial exposure for each scenario, including additional duties, delays, or penalties. Assess operational impacts such as delays in sourcing or increased compliance burdens.
Develop Response Plans: Create contingency strategies such as diversifying suppliers or renegotiating contracts. Identify alternative sourcing regions with favorable tariff structures, and model how flexibility in supply chains can minimize unexpected international trade developments.
Step 7: Model USMCA Changes. By thoroughly reviewing and modeling current compliance with USMCA, companies can mitigate risks from CBP enforcement. To risk plan for the future and the potential impact of USMCA renegotiations, USMCA modeling should cover the following areas:
Assess Risk of Stricter Rules of Origin: Model scenarios where rules of origin might tighten such as requiring higher percentages of North American content for products like automobiles, machinery, or textiles. Evaluate likely risk points for increased regional content or special rules such as those affecting steel and aluminum. Evaluate whether your existing suppliers and manufacturing processes can meet potential increases in regional content thresholds or how supply chains could adapt.
Anticipate Changes in Sector-Specific Provisions: Monitor developments in sectors like automotive, agriculture, and pharmaceuticals as well as steel, aluminum, and derivative products, which may see targeted updates. Evaluate whether stricter labor or environmental standards could alter sourcing costs and require supplier realignment.
Conduct Supply Chain Reviews: Analyze your supply chain for dependencies on non-USMCA countries that are used as sources of parts and components for USMCA regional production. If rules of origin become more stringent, reliance on these sources might disqualify products from duty-free treatment, thereby increasing costs, so model areas where alternative or secondary suppliers would be prudent.
Prepare for Cost Impact Modeling: Assess how potential changes could affect tariffs, transportation costs, and pricing. Consider consulting trade specialists to evaluate the financial implications of a shift in USMCA provisions.
Implement Tariff-Mitigation Strategies
Step 8: Implement Practical Commercial Strategies. To effectively navigate trade risks and disruptions, companies must adopt pragmatic commercial strategies. These steps aim to strengthen supply chains, ensure continuity, and reduce tariff exposure:
Supplier Diversification: Identify and engage alternative suppliers across various regions to reduce dependency on high-risk countries. Assess supplier capabilities, including production capacity, quality standards, and compliance with trade and labor regulations.
Secondary Sourcing: Establish relationships with secondary suppliers to facilitate rapid transitions if primary sources are disrupted. Prequalify secondary suppliers to ensure readiness for rapid transitions. Develop a database of approved suppliers for critical products to facilitate quick decision making during disruptions.
Proactive Vetting: Use trade fairs, government networks, and supplier databases to vet potential partners. Conduct due diligence on potential suppliers, including labor standards, certifications, and production practices. Consider initiating qualification procedures and measures to ensure potential secondary or alternative suppliers can meet qualification standards.
Safety Stock: Increase inventory for high-priority or tariff-sensitive goods to buffer against supply chain delays or sudden cost spikes. Balance inventory costs with the need for operational flexibility.
Collaboration with Existing Suppliers: Engage in transparent discussions with current suppliers about risks and mitigation strategies. Encourage suppliers to diversify their sourcing of raw materials to prevent cascading disruptions.
Step 9: Review and Update Contracts. Supply chain contracts are pivotal in managing risks associated with tariff volatility and trade disruptions. Regularly revisiting and revising these agreements can provide the flexibility needed to adapt to evolving trade environments. Proactively addressing tariff risks in supply chain contracts reduces financial uncertainty, supports operational continuity, and strengthens relationships with suppliers by fostering transparency and preparedness. Consider the following steps:
Avoid Over-reliance on Force Majeure or Commercial Impracticability Clauses: These legal defenses are often difficult to invoke and generally will not cover tariff-related disputes. Instead, create specific terms addressing trade policy risks, including tariff hikes or supply chain interruptions. Define clear terms to share or distribute the financial impact of tariff increases between the buyer and supplier.
Renegotiate Supply Agreements with Built-in Flexibility for Tariff Increases: Consider implementing proactive contractual arrangements to share in potential increases in tariffs. Where possible, include provisions allowing adjustments for changes in tariff rates. Build in clauses enabling renegotiation or termination in cases of significant trade policy shifts.
Incorporate Alternative Sourcing Requirements: Require suppliers to maintain backup production capabilities or secondary sources to mitigate disruptions. Consider incorporating these requirements into contractual arrangements and establishing penalties or incentives to ensure compliance with these requirements.
Look for Contractual Leverage Points: Suppliers often will be reluctant to renegotiate contracts, particularly if it involves potential price increases or sharing of tariff-related risks. Look for contractual leverage points relating to contract renewals or potential expansion of purchasing patterns. Consider moving up contract renewals to combine term extensions with tariff-related risk sharing.
Look for Tariff-Saving Possibilities
Step 10: Maximize Duty Savings Opportunities. A well-structured strategy to minimize duty costs can significantly offset the financial burden of potentially increasing tariffs and improve overall cost efficiency in import operations. By leveraging available tools and programs, companies can enhance cash flow, lower landed costs, and reduce their tariff liabilities while ensuring compliance with Customs regulations. Key duty saving measures to consider using include:
Customs Bonded Warehouses: Customs bonded warehouses allow importers to defer duties by storing imported goods until they are needed. This approach provides cash flow advantages, particularly for products that may be reexported without duty payment.
Foreign Trade Zones (FTZs): FTZs allow companies to store, assemble, or process goods with deferred or reduced tariffs. Goods within FTZs can be reexported duty-free or entered into the U.S. market with reduced duties based on final product classification.
Duty Drawback Programs: Duty drawback programs allow importers to recover up to 99% of duties paid on goods that are later exported. This is especially beneficial for businesses with significant reexport activities or defective goods returns.
Temporary Importation Bonds (TIBs): TIBs allow the importation of goods temporarily without paying duties, provided the goods are reexported within a specified timeframe. TIBs are useful for items like trade show samples, prototypes, or tools of the trade.
Free Trade Agreements (FTAs) and Special Trade Programs: FTAs, such as the USMCA, provide potential access to preferential duty rates. Importers should investigate eligibility for programs such as the Generalized System of Preferences (GSP) for duty-free treatment on qualifying imports.
Apply Tariff Engineering: Importers can legally reduce tariffs by modifying supply chains or the manufacturing steps of products. Tariff engineering can include adjusting production processes to qualify goods under preferential trade agreements, shifting sourcing to countries with lower tariff rates, and implementing minor product changes that result in more favorable classifications. Ensure all changes comply with U.S. Customs and partner agency regulations.
Take Care of Your Supply Chain
Step 11: Identify Your Complete Supply Chain and Map It Out. Supply chain mapping is the process of documenting all suppliers and the flow of goods and products in a supply network. A clear picture of one’s supply chain allows importers to identify efficiency-enhancing opportunities and mitigate the risk of supply chain disruptions. It is possible to create a visual representation of your supply chain using diagrams or software tools, to easily identify connections and pressure points and ensure full knowledge of sub-suppliers, which often is the key compliance risk point for many multinational companies. Some best practices for supply chain mapping include:
Define Your Product: Clearly identify the products you are mapping, as different products may have different supply chains.
Identify Stakeholders: Identify all individuals, suppliers, and contractors who contribute to the production, storage, or distribution of your product.
Understand Supplier Relationships: Get your first-tier suppliers involved in the mapping process and ask them to bring forward knowledge regarding second-tier and third-tier suppliers. Have each entity detail what they sell and what they buy next in the chain from others. As the map expands, you will get a better view of potential risks, bottlenecks, and dangers of relying on single suppliers or businesses with long lead times.
Document the Flow of Materials and Information: Trace the movement of raw materials through each stage of production, including processing, transportation, and storage, while also documenting the flow of information between stakeholders.
Evaluate Supplier Capabilities: Assess each supplier’s production capacity, quality control measures, and compliance with relevant regulations.
Step 12. Conduct a Supply Chain Integrity Check. Compliance with labor and transparency requirements is integral to tariff management. After mapping your supply chain, conducting integrity checks or audits of your suppliers can help your company stay abreast of new developments and comply with laws — especially in the areas of forced labor, human trafficking, modern slavery, and environmental regulations — thus avoiding potential fines or blockages of goods at the border.
Risk Assessment: Once your supply chain map from Step 11 is complete, conduct evaluations of your suppliers and analyze potential risks at each stage of the supply chain, considering factors like geographical location, political instability, regulatory compliance, labor practices, cybersecurity, and financial stability.
Update All Terms and Conditions: Make sure your contracts are up to date, and clearly define expectations of your suppliers regarding quality control, documentation responsibilities, labor practices, and environmental impact.
Incorporate Third-party Audits to Verify Supplier Practices: Use third-party audits, including onsite audits, to help evaluate your suppliers and to assess their compliance with environmental and labor laws and the company’s standards regarding product quality, safety, ethical practices.
Build and Maintain Supplier Relationships: Foster open communication with suppliers and encourage them to disclose any potential issues before they become significant issues. Offer to help address concerns and implement improvements proactively throughout the supply chain system.
Continuous Monitoring: Implement systems and regularly monitor your suppliers’ performance and compliance. Evaluate your supply chain for new potential risks that might arise.
The issuance of President Trump’s “America First Trade Policy” underscores just how far ranging the potential changes to the international trade environment may be. The triple pressures of rising tariffs, likely changes to USMCA requirements, and an increasing focus on supply chain integrity underscore the need for importers to adopt a proactive, multifaceted approach to managing import-related risks. By focusing on risk assessment, supplier diversification, compliance audits, and duty savings, importers can not only weather upcoming challenges but also turn them into opportunities for operational resilience and competitive advantage. Under the Trump administration’s trade agenda, businesses should expect heightened scrutiny of imports and expanded enforcement of customs and labor practices. Preparing now ensures resilience and competitiveness in the face of uncertainty.
Will History Repeat Itself? Peering Into the Past to Predict the Next Four Years of CFTC Enforcement Actions
During every presidential transition, the futures industry looks for clues regarding what changes may be coming. History has shown that when administrations transition, far more stays the same than changes and that the direction of new Commodity Futures Trading Commission (CFTC) Commissioners and Directors can be surprising. But this year, the industry may have more clues than normal. This article assembles some of the available information to illuminate, to the degree possible, potential changes in the enforcement activity of the CFTC. Two significant factors aid that exercise. First, President Donald Trump is the second US president to serve nonconsecutive terms and the only one to do so recently. Accordingly, four years of activity by the Division of Enforcement (DOE) under the Trump administration are available for examination and comparison to the intervening four years under a different administration. Second, during the prior four years, CFTC Commissioners have been unusually outspoken regarding their views on enforcement actions in the form of dissents and separate opinions. Presuming the Commissioners transitioning from the minority to the majority of the Commission will be more likely to shape the enforcement regime to reflect those views, prior statements of the soon-to-be-majority party Commissioners provide additional guidance on the potential coming priorities at the CFTC.
Of course, a number of important variables could confound this guidance. In particular, a new Chairman and Director of the DOE could have the greatest influence on the path ahead, and at this point, neither seat is filled. Still, as set forth below, the available record suggests that (1) Enforcement will remain active; (2) fraud and manipulation will remain priorities; (3) technical violations, such as data reporting, may decline; and (4) enforcement priorities related to cryptocurrencies and decentralized finance (DeFi) will likely be different.
CFTC Enforcement Reviews
Generally, the DOE publishes the results of its enforcement activity annually. From 2018 through 2020, this took the form of an Annual Report of the Division of Enforcement.1 In 2017, 2022, 2023, and 2024, it released its “Annual Enforcement Results” as a press release with an addendum of statistics.2 Although no comprehensive summary of the enforcement cases brought was published for 2021, the CFTC published an Agency Financial Report, which provided extensive financial data and included some summary enforcement statistics.3 The absence of data from 2021 is noted below where relevant. These annual summaries tend to describe the accomplishments of the year’s enforcement activity, statistics regarding the categories of cases resolved and total fines and total financial penalties imposed. Although the format and method of presentation change among the styles of documents and their form, they provide a reasonable basis to compare activity in the Division across years.
Separate Commissioner Statements
The DOE most often resolves cases through settled agency actions approved by the Commission. Less frequently, cases are brought in federal court and either litigated to judgment or resolved with a consent order entered by the court. Although the Commission speaks as a whole through the language of the administrative order, Commissioners are free to publish their own views on the matter resolved.4 The publication of such separate statements has increased dramatically over the years covered in this article. In 2017, only 10 such statements were published.5 Moving forward eight years, in 2024, Commissioners published 103.6 That increase in activity provides a unique opportunity to understand the different views of the Commissioners and to potentially gain insight into the views that will be advanced by the majority party in the new administration.
Substantive Conclusions
Below are a handful of conclusions that are discernable for market participants attempting to anticipate what is likely to change and what is more likely to stay the same.
Although it may change focus, there is no reason to believe the DOE will be less active
Although the Trump administration has made broad statements that it intended to “dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures and restructure Federal Agencies,”7 there is reason to doubt that such a policy will take the form of less activity by the CFTC Division of Enforcement. When comparing the Enforcement results of the first four years of the Trump administration to the four years under President Joe Biden, the CFTC brought, on average, seven more cases per year under the Trump administration than under the Biden administration. The following table sets forth the raw numbers.
Notably, the 2024 results were largely driven by the FTX matter, which resulted in $12.7 billion in monetary relief. If the FTX matter is excluded, the monetary relief for 2023 would be $4.5 billion, which brings the total closer to the 2023 figures. Additionally, the level of monetary relief increased in size; however, that increase appears far more likely to be driven by a nearly unbroken rise in monetary relief for many years:
Although there are certainly reasons outside of the administration that explain the magnitude of fines and the number of cases under both administrations, it remains true that the DOE resolved fewer cases during the Biden administration than during the four years when Trump was first president. That observation is amplified by the fact that 27 of the 291, or more than 9 percent, of enforcement cases since 2021 have involved alleged violations related to the use of unapproved methods of communication.8
Although the government may attempt to relieve the regulatory burden on market participants in other ways, historical enforcement activity does not provide evidence that the DOE is likely to be less active.
Enforcement activity could shift from reporting and recordkeeping to fraud and market abuse
A second potential observation supported by both the historical activity of the DOE and the statements of Commissioners is a shift in emphasis away from reporting and recordkeeping cases and a shift toward fraud and market abuse.
During the first Trump administration, the DOE made its priorities clear and articulated fraud and manipulation as significant areas of focus. Every Annual Review released during that time noted that the Commission prioritized “protecting customers in commodity and derivatives markets from fraud and other abuse.”9 Of course, the Division has always described stopping fraud market abuse as a priority, and those categories, combined, make up the majority of the settled docket in both periods under review. Nonetheless, the following charts, which reflect the allocation of cases by subject matter, as identified by the DOE in its reporting of activity, make a sustained reallocation of priorities evident.
Under the first Trump administration, fraud and manipulative conduct made up 64 percent of the resolved cases, with reporting cases comprising only 5 percent. Under the Biden administration, those combined cases of fraud and manipulative conduct fell to 50 percent of total enforcement matters and reporting cases grew by 12 percent. There are, of course, explanations outside the DOE that are relevant. The Department of Justice actively pursued spoofing cases during the Trump period, a pattern of misconduct that has declined in recent years. The SEC led a sweep of financial firms relating to cases involving off-channel communications during the Biden period, joined by the CFTC, which resulted in 27 actions during the prior four years.
Commissioners’ comments in the prior four years make clear that they support focusing DOE resources “on cases that will bring justice for victims, protect those that cannot protect themselves, and root out misconduct and wrongdoing — this is our core mission and core strength.”10 As Commissioner Summer Mersinger stated in a Dissent from a case involving DeFi, “The decision to devote resources to this case also raises concerns about the Commission’s enforcement priorities . . . For every case we bring against a DeFi protocol where there are no allegations of fraud or complaints of customers losing money, we risk taking resources from a case where innocent victims suffer actual financial harm at the hands of a real fraudster.”11
A reversal in the increase in actions relating to data reporting, in particular, seems highly likely. These actions include, primarily, cases brought based on errors in swap data reporting, but also include recordkeeping requirements for introducing brokers.12 During the four years of Trump’s first term, such actions were rare and a much smaller portion of the case activity. Of the 314 actions brought during the first Trump administration, only 16 (5.1 percent) involved reporting or recordkeeping violations. By contrast, under the Biden administration, of the 236 cases brought from 2021 to 2024, the Commission filed 41 cases (17.3 percent) involving reporting or recordkeeping violations.13
But even if the data on the increase in reporting and recordkeeping cases can be explained by the sweep related to off-channel communications, a reversion to the prior, lighter emphasis on enforcement cases for resolving reporting violations is also supported by the comments of Commissioners. Commissioner Caroline Pham has raised concerns regarding “the CFTC’s aggressive enforcement posture towards pursuing reporting violations with a strict liability standard and no materiality threshold, resulting in seven-figure penalties for anything less than 100% perfection.”14 That lack of tolerance for errors that underlie many of the data reporting cases came under particular scrutiny, with Commissioner Pham noting that, “It is fantastical for the Commission to expect perfection — 100% compliance for 100% of the time — when it comes to operations and technology systems and processes. That is impossible.”15
In a case in which a registrant settled a matter relating to a failure to record certain phone calls based on a lapse during the COVID-19 pandemic by the vendor retained to manage those recordings,16 Commissioner Pham stated that the order and settlement reflected “the Commission’s disturbing trend of ‘examination by enforcement’ — where the Division of Enforcement imposes a disproportionately high civil monetary penalty for one-off, non-material operational or technical issues with no misconduct, harm to clients, or financial losses, and that every other major regulatory authority addresses through an examination program conducted by supervisory staff (i.e., examiners).”17
Given the clear balance of resources focused on fraud and market misconduct cases in the first Trump administration and the expressions of frustration from sitting Commissioners regarding pursuing enforcement matters or issues that are better suited to resolution through the examination process, there is a strong possibility that enforcement priorities will be realigned away from data reporting cases in the second Trump administration.
Enforcement actions based on novel theories are likely to decline
Going forward, the Commission is likely to avoid enforcement matters perceived as applying new standards to historic conduct without the benefit of notice to the public prior to the change, so-called “regulation by enforcement.” Several cases brought in the last two years that have been perceived by Commissioners as applying new standards without fair notice have been highlighted by dissenting statements.
For example, in her dissent on the Commission’s off-channel communication enforcement action against Piper Sandler Hedging Services, LLC (Piper Sandler), Commissioner Mersinger emphasized that “regulation through enforcement is the antithesis of regulatory clarity and transparency.”18 In that case, the CFTC charged Piper Sandler, an Introducing Broker, with failing to retain required records.19 Commissioner Mersinger criticized the DOE for failing to apply the particular record retention rules unique to introducing brokers, instead effectively taking the view that, “everything is a business record, even if such a conclusion has no foundation in the Commodity Exchange Act or CFTC regulations.”20 Mersinger concluded: “I cannot support further settlements with IBs concerning offline communications violations until such time as the Commission as a whole, not just the Division of Enforcement, uses the actual words of the statute and the implementing regulation to clarify how an IB can properly comply with recordkeeping requirements.”21
Commissioner Pham has expressed similar suspicions of the CFTC’s use of “regulation by enforcement” and has even characterized the Commission’s actions as going beyond regulation by enforcement and becoming increasingly pernicious. In CFTC v. Cartu (Masten et al.), the Commission charged Ryan Masten and Bareit Media LLC (Bareit Media) with violating the Commodity Exchange Act for failing to register as a commodity trading advisor (CTA).22 The parties’ Consent Order noted that Bareit Media, which is controlled by Masten, offered customers the ability to obtain trade signals and automate trading on binary options platforms using those signals. In her dissent, Commissioner Pham admonished the CFTC for “once again changing its interpretation of the definition of a CTA in an enforcement action without sufficient explanation and without the opportunity for the public to comment.”23 Commissioner Pham noted that for 10 years, the Commission stated that “a technology provider that aggregates (but does not originate) trade signals and submits orders to an exchange is not likely required to register as a CTA.”24 Yet, the Commission arbitrarily changed its interpretation of the definition of a CTA to require technology providers that do not originate trade signals to register as CTAs, which Commissioner Pham claimed was “not merely regulation by enforcement.”25
Going forward, the DOE’s comments suggest that the Commission is less likely to support a foray into untested waters, bringing cases to establish standards or define conduct that was not clear from prior regulatory guidance. For many areas, notably cryptocurrencies, that limitation could be meaningful.
Cryptocurrency enforcement is likely to change
Likely changes in enforcement trends related to cryptocurrency are not necessarily dependent on the views of sitting Republican Commissioners and not illuminated by prior enforcement activity; instead, the strongest indication of the direction of cryptocurrency stems from the contrast between the Biden administration’s actions and Trump administration’s recent statements regarding cryptocurrency regulation.
It is certainly true that cryptocurrency cases are now a material part of the Enforcement docket, despite being virtually absent in the prior administration, as the number of cryptocurrency cases grew dramatically under the Biden administration. The CFTC under the Trump administration in 2020 brought just seven cryptocurrency cases; under the Biden administration, the number of cases increased to twenty in 2021, eighteen in 2022, and forty-seven in 2023. This increased attention towards cryptocurrency is not unique to the CFTC. For instance, under the Biden administration, the Federal Deposit Insurance Corporation (FDIC) issued “pause” letters to banks between March 2020 and May 2023, asking them to “pause, or not expand, planned or ongoing crypto-related activities and provide additional information.”26 Meanwhile, the SEC has also seen a steady increase in cryptocurrency enforcement actions under Biden.27
In stark contrast, the Trump administration’s campaign promised: it would be a “pro-crypto” administration; SEC Chairman Gary Gensler would be removed from his position to drive the SEC towards a friendlier stance with the cryptocurrency industry; cryptocurrency rules and regulations would be “written by people who love [the cryptocurrency] industry, not hate [the] industry”; the United States will create a strategic bitcoin reserve28; and America will become the “crypto capital of the world.”29 Notably, during his first term, the Trump administration approached block chain and decentralized finance by fostering discussions of the new technologies in the LabCFTC and other forums.30
In the case of the SEC, the new administration clearly selected an individual who publicly supported the potential for innovation in that space. Prior to his nomination, Paul Atkins was a co-chair of Token Alliance, an industry-led initiative of the Chamber of Digital Commerce whose “mission is to promote the acceptance and use of digital assets and blockchain-based technologies,”31 and has attended various podcasts and other public appearances discussing his support for cryptocurrencies. President Trump toted Paul Atkins as a “proven leader” who “recognizes that digital assets & other innovations are crucial to Making America Greater than Ever Before.”32
Such a focus on allowing “innovation” may decrease the efforts to use enforcement actions to shape the regulation of decentralized finance and blockchain matters. Some matters have been charged as straightforward registration failures, alleging that the activity allowed on the DeFi platform required registration as a futures commission merchant (FCM) or execution on a regulated platform. In CFTC v. Ooki DAO (formerly d/b/a bZeroX, LLC), the Commission obtained a default judgment against a decentralized autonomous organization (“DAO”) for engaging in unlawful off-exchange leveraged and margined commodity transactions; engaging in activities that can only be performed by a registered futures commission merchant; and failing to implement know your customer (KYC) and anti-money laundering (AML) procedures.33 Following CFTC v. Ooki Dao, the CFTC has also imposed fines on three DeFi protocols for illegally offering leveraged and margined retail commodity transactions in digital assets, failing to register as a swap execution facility, failing to register as a designated contract maker, and/or failing to register as a futures commission merchant.34 In doing so, Director Ian McGinley of the DOE stressed that the DOE will “aggressively pursue those who operate unregistered platforms that allow U.S. persons to trade digital assets themselves.” Notably, Commissioner Mersinger favored the application of the Commodity Exchange Act and CFTC rules to novel circumstances, but she dissented because the cases gave “no indication that customer funds have been misappropriated or that any market participants have been victimized by the DeFi protocols on which the Commission has unleashed its enforcement powers.”35 Commissioner Mersinger again noted that the CFTC engages in regulation by enforcement rather than inviting the public to help solve novel DeFi issues.
Finally, in In re Universal Navigation Inc., the Commission settled charges against Universal Navigation Inc. d/b/a Uniswap Labs (Uniswap), finding that Uniswap “illegally offered leveraged or margined retail commodity transactions in digital assets via a decentralized digital asset trading protocol.”36 The settlement order found that Uniswap provided users leveraged exposure to Ether and Bitcoin, which could be offered to non-Eligible Contract Participants only on a board of trade that was registered by the CFTC as a contract market because the leveraged tokens did not result in actual delivery within 28 days. Commissioner Mersinger dissented and stated the case has “all the hallmarks” of regulation through enforcement: “A settlement with a de minimis penalty that bears little relationship to the conduct alleged, sweeping statements about the broader industry that are not germane to the case at hand, and legal theories that have not been tested in court.”37 Commissioner Pham echoed this sentiment, arguing that the Commission’s actions violated the Administrative Procedure Act and noting the CFTC’s approach was “legally simplistic and conveniently cuts corners to create a pretext for enforcement.”38 If the newly constituted Commission focuses on fostering innovation, relying on the rulemaking process instead of enforcement actions to provide guidance on unsettled matters, and shifts its emphasis to the examination process from the enforcement process, such controversial extensions of jurisdiction may take a different form going forward. Accordingly, we anticipate that future enforcement actions involving cryptocurrency may be limited to fraud or manipulation cases.
Conclusion
Obviously, many factors will determine the shape of the DOE agenda, most of which are difficult to predict. Nonetheless, to the extent the sources identified herein provide some guidance, market participants can expect a DOE that continues a robust docket and seeks significant fines but focuses more on core matters of protecting investors from fraud and non-technical misconduct.
1 CFTC, “CFTC Division of Enforcement Issues Report on FY 2018 Results,” Release No. 7841-18 (Nov. 15, 2018), https://www.cftc.gov/PressRoom/PressReleases/7841-18; CFTC, “CFTC Division of Enforcement Issues Annual Report for FY 2019,” Release No. 8085-19 (Nov. 25, 2019), https://www.cftc.gov/PressRoom/PressReleases/8085-19; CFTC, “CFTC Division of Enforcement Issues Annual Report,” Release No. 8323-20 (Dec. 1, 2020), https://www.cftc.gov/PressRoom/PressReleases/8323-20.
2 CFTC, “CFTC Releases Annual Enforcement Results for Fiscal Year 2017,” Release No. 7650-17 (Nov. 22, 2017), https://www.cftc.gov/PressRoom/PressReleases/7650-17; CFTC, “CFTC Releases Annual Enforcement Results,” Release No. 8613-22 (Oct. 20, 2022), https://www.cftc.gov/PressRoom/PressReleases/8613-22; CFTC, “CFTC Releases FY 2023 Enforcement Results,” Release No. 8822-23 (Nov. 7, 2023), https://www.cftc.gov/PressRoom/PressReleases/8822-23; CFTC, “CFTC Releases FY 2024 Enforcement Results,” Release No. 9011-24 (Dec. 4, 2024), https://www.cftc.gov/PressRoom/PressReleases/9011-24.
3 CFTC, “FY 2021 Agency Financial Report,” (Nov. 15, 2021), https://www.cftc.gov/node/238691.
4 “Whenever the Commission issues for official publication any opinion, release, rule, order, interpretation, or other determination on a matter, the Commission shall provide that any dissenting, concurring, or separate opinion by any Commissioner on the matter be published in full along with the Commission opinion, release, rule, order, interpretation, or determination.” 7 U.S.C. § 2(a)(10)(C).
5 CFTC, Public Statements & Remarks, https://www.cftc.gov/PressRoom/SpeechesTestimony/index.htm?combine=&tid=All&field_speeches_testimony_type_value=Statements&year=2017 (last accessed Dec. 30, 2024).
6 CFTC, Public Statements & Remarks, https://www.cftc.gov/PressRoom/SpeechesTestimony/index.htm?combine=&tid=All&field_speeches_testimony_type_value=Statements&year=2024 (last accessed Dec. 30, 2024).
7 Andrea Hsu, ‘Apprehensive and fearful’: Federal workers await a dismantling under Trump, NPR (Nov. 13, 2024), https://www.npr.org/2024/11/13/nx-s1-5188566/government-efficiency-federal-workers-elon-musk-trump; see also, Marco Quiroz-Gutieerez, Trump Vowed to Oust SEC Chairman Gary Gensler, and These Crypto Advocates Could Take His Place (Nov. 10, 2024), https://fortune.com/2024/11/10/who-could-trump-name-to-replace-sec-chair-gary-gensler-crypto-policy-advocates/ (noting that Trump promised to oust Gary Gensler as SEC Chairman).
8 CFTC, “CFTC Orders Canadian Imperial Bank of Commerce to Pay $30 Million for Recordkeeping and Supervision Failures for Firm-Wide Use of Unapproved Communication Methods,” (Sept. 24, 2024) https://www.cftc.gov/PressRoom/PressReleases/8975-24.
9 See, e.g., CFTC, FY 2019 DOE Annual Report (Nov. 25, 2019), https://www.cftc.gov/media/3081/ENFAnnualReport112519/download.
10 Caroline D. Pham, CFTC, “Dissenting Statement of Commissioner Caroline D. Pham on Examination by Enforcement” (Aug. 19, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement082923b; Caroline D. Pham, CFTC, “Dissenting Statement of Commissioner Caroline D. Pham on DeFi Enforcement Action Involving Uniswap Protocol” (Sept. 4, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement090424 (“I believe the CFTC can and should vigorously pursue fraud and manipulation in our markets and bring bad actors to justice.”).
11 Summer K. Mersinger, “Dissenting Statement of Commissioner Summer K. Mersinger Regarding Settlement with Uniswap Labs” (Sept. 4, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement090424.
12 Summer K. Mersinger, CFTC, “Dissenting Statement of Commissioner Summer K. Mersinger Regarding Settlement With Piper Sandler Hedging Services, LLC” (Sept.23, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement092324.
13 See, footnote 3.
14 Caroline E. Pham, CFTC, “Dissenting Statement of Commissioner Caroline D. Pham on Large Trader Reporting Rule” (April 30, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement043024b.
15 Caroline E. Pham, CFTC, “Dissenting Statement of Commissioner Caroline D. Pham on Examination by Enforcement” (Aug. 29, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement082923b.
16 CFTC, “CFTC Orders Goldman Sachs to Pay $5.5 Million for Recordkeeping Violations and Violating a Prior Commission Order,” Release No. 8769-23 (Aug. 29, 2023), https://www.cftc.gov/PressRoom/PressReleases/8769-23.
17 See also, Caroline D. Pham, CFTC, “Dissenting Statement of Commissioner Caroline D. Pham on Examination by Enforcement” (Aug. 29, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement082923b (“Examination by enforcement is inherently ad hoc, not applied consistently across market participants, and does not provide a horizontal view to inform the Commission of potential systemic risk.”).
18 Summer K. Mersinger, CFTC “Dissenting Statement of Commissioner Summer K. Mersinger Regarding Settlement With Piper Sandler Hedging Services, LLC” (Sept. 23, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement092324.
19 CFTC, “CFTC Orders Piper Sandler to Pay $2 Million for Recordkeeping and Supervision Failures for Firm-Wide Use of Unapproved Communication Methods,” Release No. 8972-24 (Sept. 23, 2024), https://www.cftc.gov/PressRoom/PressReleases/8972-24.
20 Summer K. Mersinger, CFTC “Dissenting Statement of Commissioner Summer K. Mersinger Regarding Settlement With Piper Sandler Hedging Services, LLC” (Sept. 23, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement092324 (emphasis in original).
21 Id. See also, Summer K. Mersinger, “Dissenting Statement of Commissioner Summer K. Mersinger Regarding Enforcement Actions Against: 1) bZeroX,LLC, Tom Bean, and Kyle Kistner; and 2) Ooki DAO (Sept. 22, 2022), https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement092222 (“While I do not condone individuals or entities blatantly violating the CEA or our rules, we cannot arbitrarily decide who is accountable for those violations based on an unsupported legal theory amounting to regulation by enforcement while federal and state policy is developing.”); Summer K. Mersinger, “Dissenting Statement of Commissioner Summer K. Mersinger Regarding Settlement with Uniswap Labs” (Sept. 4, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement090424 (“Regulation through enforcement is at best a band-aid. At some point, the Commission must engage in a rulemaking process around DeFi and consider our role in promoting responsible innovation for the future of the U.S. derivatives markets.”); Summer K. Mersinger, “Concurring Statement of Commissioner Summer K. Mersinger Regarding Settlement with Trafigura Trading LLC” (June 17, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement061724 (“For the past seven years, neither the Commission nor its staff has issued any advisory, guidance, frequently asked questions (“FAQs”), or any other statement informing the public of how it interprets Regulation 165.19(b). By failing to do so, and instead enforcing Regulation 165.19(b) beyond its textual bounds, the Commission engages in a textbook case of “regulation by enforcement,” which I have repeatedly opposed.”).
22 Consent Order for Permanent Injunction, CFTC v. Cartu et al., 20-CV-908-RP (W.D. Tex. Aug. 29, 2023).
23 See, Caroline D. Pham, CFTC, “Dissenting Statement of Commissioner Caroline D. Pham on CTA Interpretation in an Enforcement Action” (Aug. 29, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement092324 (“The CEA and CFTC regulations do not require every record of every business activity to be preserved.”).
24 Id.
25 Id. (“Such a broad proclamation is the act of kings, not of a free democracy.”). See also, Caroline D. Pham, “Statement of Commissioner Caroline D. Pham on SEC v. Wahi” (July 21, 2022), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement072122 (“The case SEC v. Wahi is a striking example of ‘regulation by enforcement’ . . . Regulatory clarity comes from being out in the open, not in the dark.”); Caroline D. Pham, “Statement of Commissioner Caroline D. Pham on Self-Reporting and Cooperation Credit in Enforcement Actions” (Aug. 19, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement081924 (“It has been my observation that most of the CFTC’s improper changes in the interpretation of decades-old CFTC regulations in violation of the Administrative Procedure Act due to the lack of a rational basis, reasoned decision-making, and public notice-and-comment—namely, regulation by enforcement—is because of unclear roles and responsibilities among CFTC divisions.”).
26 Brady Dale, The Big Moments in Biden’s Crypto Crackdown, AXIOS (Nov. 5, 2024), https://www.axios.com/2024/11/05/crypto-crackdown-biden-fdic (suggesting that the Biden administration has “been using its powers to stymie” the cryptocurrency industry).
27 Jay Dubow, et al., SEC Continues to regulate Cryptocurrency through Record-High Enforcement Efforts, Law.com (Nov. 13, 2024), https://www.law.com/thelegalintelligencer/2024/02/26/sec-continues-to-regulate-cryptocurrency-through-record-high-enforcement-efforts/ (“SEC ramped up its cryptocurrency enforcement efforts in 2023 to a record high.”).
28 MacKenzie Sigalos, Here’s What Trump Promised the Crypto Industry Ahead of the Election, CNBC (Nov. 6, 2024), https://www.cnbc.com/2024/11/06/trump-claims-presidential-win-here-is-what-he-promised-the-crypto-industry-ahead-of-the-election.html.
29 Maruicio Di Bartolomeo, Trump’s Top 3 Bitcoin Promises and Their Implications, Forbes (Nov. 7, 2024), https://www.forbes.com/sites/mauriciodibartolomeo/2024/11/07/trumps-top-3-bitcoin-promises-and-their-implications/.
30 See, e.g., CFTC, 2018 Annual Report at 5, (Nov. 2018) (“The story of virtual currency is also one about new technology. And it is a story about the need for robust enforcement to ensure technological development isn’t undermined by the few who might seek to capitalize on this development for an unlawful gain . . . through work across the Commission, as exemplified by the work of LabCFTC, our Commission has demonstrated its continued commitment to facilitating market enhancing innovation in the financial technology space.”). See also, CFTC, CFTC 2.0, https://www.cftc.gov/LabCFTC/CFTC2_0/index.htm (last accessed Dec. 28, 2024) (“CFTC 2.0 is intended to provide the agency opportunities to engage with new technologies to discover ideas and technologies that have the potential to improve the effectiveness and efficiency of the agency in carrying out its day-to-day activities. At the same time, CFTC 2.0 provides an opportunity for outreach to fintech innovators.”).
31 Token Alliance, Understanding Digital Tokens: Market Overviews and Proposed Guidelines for Policy Makers and Practitioners, GitHub, Aug. 21, 2018, at 2, 4 https://github.com/ChamberDigital/Token-Guidelines/blob/master/media/Token-Alliance-Whitepaper.pdf (“The Token Alliance is an industry-led initiative of the Chamber of Digital Commerce, developed to be a key resource for the emerging industry surrounding the generation and distribution of tokens using blockchain technology.”).
32 Donald J. Trump, Truth Social (Dec. 4, 2024), https://truthsocial.com/@realDonaldTrump/113595807734621827.
33 CFTC, “CFTC Imposes $250,000 Penalty Against bZeroX, LLC and Its Founders and Charges Successor Ooki DAO for Offering Illegal, Off-Exchange Digital-Asset Trading, Registration Violations, and Failing to Comply with Bank Secrecy Act,” Release No. 8590-22 (Sept. 22, 2022), https://www.cftc.gov/PressRoom/PressReleases/8590-22.
34 CFTC, “CFTC Issues Orders Against Operators of Three DeFi Protocols for Offering Illegal Digital Asset Derivatives Trading,” Release No. 8774-23 (Sept. 7, 2023), https://www.cftc.gov/PressRoom/PressReleases/8774-23.
35 Summer K. Mersinger, “Dissenting Statement of Commissioner Summer K. Mersinger Regarding Enforcement Actions Against: 1) Opyn, Inc.; 2) Deridex, Inc.; and 3) ZeroEx, Inc.” (Sept. 7, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement090723.
36 CFTC, “CFTC Issues Order Against Uniswap Labs for Offering Illegal Digital Asset Derivatives Trading”, Release No. 8961-24 (Sept. 4, 2024), https://www.cftc.gov/PressRoom/PressReleases/8961-24.
37 Summer K. Mersinger, “Dissenting Statement of Commissioner Summer K. Mersinger Regarding Settlement with Uniswap Labs” (Sept. 4, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/mersingerstatement090424 (“Through this settlement, the Commission appears to be taking the position that any DeFi platform could be liable for any and all conduct occurring on its protocol. The practical effect of this approach is to severely chill the launching of any DeFi protocol within the United States and to significantly increase the odds that all DeFi innovation and economic activity will occur elsewhere.”).
38 Caroline D. Pham, CFTC, “Dissenting Statement of Commissioner Caroline D. Pham on DeFi Enforcement Action Involving Uniswap Protocol” (Sept. 4, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement090424.
New Wave of Executive Orders Seek to Redirect EPA’s Focus
Within hours of taking office, President Trump issued a flurry of Executive Orders (EO), including several that will undoubtedly affect a wide range of environmental policies nationwide. While the full implications of these EOs, as well as potential additional actions, are far from clear at this early stage, there are several takeaways for those who are in the environmental-regulated community to consider.
While reviewing the summary below of a limited sampling of recent EOs touching on environmental policy, it is important to remember that a significant portion of environmental policy, regulation, and enforcement occurs at the state level and impacts from federal policies and approaches can take many years to be felt, if at all. In fact, in some instances, the policies and strategies at the federal level can produce the opposite approach at the state level. Therefore, it is crucial for any regulated entity to have a strong comprehension of the federal and state landscape as it may apply or interact with its operations, permits, and compliance.
Environmental Justice
With just one EO—Initial Recission of Harmful Executive Orders and Actions—nearly 80 EOs from the prior administration were revoked. The list included several EOs related to environmental justice, such as the “whole of government” approach and the “Justice40” initiative. Environmental justice was also singled out in “Ending Radical and Wasteful Government DEI Programs and Preferencing,” which ordered federal agencies to terminate all environmental justice offices and positions.
Greenhouse Gases and Energy Resources
An EO entitled “Unleashing American Energy” directs the Environmental Protection Agency (EPA) and other agencies to review actions “that impose an undue burden on the identification, development, or use of domestic energy resources — with particular attention to oil, natural gas, coal, hydropower, biofuels, critical mineral, and nuclear energy.” The apparent purpose here is to reverse course on greenhouse gas and other federal rules on various energy sources. Furthermore, EPA has been directed, within 30 days, to provide recommendations on the “legality and continuing applicability” of EPA’s 2009 GHG risk finding, which is the underpinning of EPA’s climate rules. Similarly, this EO does away with the “social cost of carbon” metric that was intended to monetize the benefits of policies that curb emissions.
Hiring Freeze and Return to Office
While not EOs, two executive memoranda will surely influence EPA through workforce impacts, resources, and management of priorities. The first, entitled “Return to In-Person Work,” directs all federal agencies, including the EPA, to terminate remote work arrangements and require employees to return to work in person on a full-time basis. The second, entitled “Hiring Freeze,” freezes federal civilian employee hiring, including EPA staff. The Office of Management and Budget is tasked with delivering a plan within 90 days to further shrink the federal workforce “through efficiency improvements and attrition.” It is very likely that staffing levels at the EPA will be reduced significantly, which could impact the EPA’s capacity to keep up with permitting and enforcement matters.
Healthcare Preview for the Week of: January 27, 2025 [Podcast]
RFK Nomination Hearing Week
Robert F. Kennedy Jr. (RFK), nominated for Secretary of Health and Human Services (HHS), has a busy week with two Senate nomination hearings. He will testify in front of the Senate Finance Committee on Wednesday and the Senate Health, Education, Labor, and Pensions (HELP) Committee on Thursday. Both hearings are likely to be highly charged. Some Republican senators, including Senate HELP Chair Cassidy (R-LA), have raised questions about RFK’s previous positions and may raise those questions to him directly during the hearings. With back-to-back hearings, members who sit on both committees (Sens. Cassidy (R-LA), Crapo (R-ID), Scott (R-SC), Blackburn (R-TN), Marshall (R-KS), Hassan (D-NH), and Sanders (I-VT)) have an opportunity to ask follow-up questions the next day.
Only the Senate Finance Committee will vote on RFK’s nomination, before it heads to the full Senate floor. RFK can only lose three Republicans and still be confirmed. On Friday, Secretary of Defense Pete Hegseth was confirmed by a vote of 51 – 50, with Vice President JD Vance breaking the tie. Sen. McConnell (R-KY) surprised some by joining moderate Sens. Collins (R-ME) and Murkowski (R-AK) to vote against Hegseth’s nomination.
While the House is out of session, eyes are on House Republicans who are convening in Miami, Florida, to discuss their plans on reconciliation. They aim to refine which policies to include in their budget reconciliation. Healthcare policies, such as 340B reform, Medicaid per capita caps, and a Medicare site neutral policy, are eyed as savers to fund Republican priorities of tax cuts and immigration policies. Read our latest +Insight for more on this topic.
On the administrative front, late Friday evening, President Trump took much-anticipated actions on abortion, including:
Issuing an executive order (EO) that revoked two Biden-era reproductive health executive orders. The EO directs the Office of Management and Budget to issue guidance ensuring agencies comply with the Hyde Amendment, which is passed by Congress annually and prohibits federal funding for abortion.
Issuing a memorandum to HHS and the US Department of State that reinstates the Mexico City Policy. This policy prohibits foreign organizations that receive US federal funding from providing or promoting abortions. The policy has consistently been revoked by democratic presidents and reinstated by republican presidents.
Today’s Podcast
In this week’s Healthcare Preview, Debbie Curtis and Rodney Whitlock join Maddie News to discuss the nomination hearing process and what could be in store for Robert F. Kennedy Jr.’s HHS Secretary hearings this week.
Trump Administration’s Initial Round of Executive Orders Signal Wide-Ranging Impact on Business Immigration
Since taking office on January 20, 2025, President Donald Trump has issued dozens of Executive Orders (EOs), several of which, if implemented, will impact employers and sponsored employees who utilize legal temporary and permanent visa programs. EOs direct government agencies to implement policies and carry out directives that are within the authority of the President of the United States but cannot conflict with laws or regulations. Because of limited legislation and issuance of regulations in recent decades, EOs have become an increasingly effective tool by which Presidents can dramatically reshape immigration agency actions, leading to significant changes in how immigration applications and petitions are adjudicated and the admission of foreign workers into the United States.
President Trump’s first round of EOs would affect the processing of immigration petitions and applications before the US Citizenship and Immigration Services (USCIS), visa processing by the US Department of State (DOS), employers who rely on employee populations currently authorized to work under humanitarian programs such as Temporary Protected Status (TPS), and employers with employee populations comprised of undocumented individuals – regardless of whether or not employers are aware of their legal status.
Legal challenges to many of these EOs are underway or will occur in the coming days and weeks, which could delay or completely halt their implementation. We will continue updating our blog as developments occur and new EOs are issued.
President Trump’s EOs can be seen here. Below is a summary of the potential impact on business immigration.
Revocation of President Biden’s Orders Facilitating Processing of Petitions and Applications
President Trump immediately revoked Biden-era policies to streamline and facilitate USCIS’s adjudication of petitions and applications, resulting in:
Restrictive criteria for expedited processing of petitions and applications;
No longer issuing Requests for Evidence (RFEs) and Notices of Intent to Deny (NOIDs) in all cases before denying a petition or application;
Removing special consideration of STEM and AI qualifications when adjudicating petitions such as O-1s and National Interest Waivers;
Reinstatement of administrative barriers to processing of petitions and applications; and
Return to Trump-era Public Charge standards for Adjustment of Status and Immigrant Visas through a rulemaking process.
President Trump’s order will lead to slower processing of petitions and applications by USCIS and an increase in RFEs, NOIDs, and denials.
Border Enforcement
A significant focus of President Trump’s campaign was to halt the entry of undocumented immigrants along the southern U.S. border and remove undocumented immigrants from the country. Several EOs direct government agencies to carry out these objectives, including more restrictive use of humanitarian programs, including TPS country designations, ultimately reducing the number of workers performing many essential jobs inside the United States. Employers will likely find it more challenging to meet labor needs as the population of low-skilled foreign workers decreases. Employers will increasingly experience disruptions to operations resulting from Immigration and Customs Enforcement (ICE) worksite raids and I-9 audits.
Birthright Citizenship
The Fourteenth Amendment to the Constitution guarantees citizenship to all persons born inside the United States, with limited exceptions carved out for children of diplomats. One of President Trump’s most controversial EOs seeks to limit birthright citizenship beginning on February 19, 2025, to children born to at least one parent who is a US Citizen or Lawful Permanent Resident. It is unclear what status children born to nonimmigrant visa holders in F-1, H-1B, L-1, TN, and other legal statuses would hold at birth. The order was immediately subject to numerous legal challenges by State Attorney Generals and others, and on January 23, 2025, this EO was blocked from implementation by a federal judge in Seattle who called the order “blatantly unconstitutional” after a Justice Department lawyer was unable to articulate a legal argument in court. This issue is anticipated to ultimately go to the U.S. Supreme Court for resolution.
America First Trade Policies
President Trump ordered an “America First” review of trade agreements between the United States and other nations, including the U.S.-Mexico-Canada Agreement (USMCA, formerly known as NAFTA), potentially increasing the standards and criteria for TN status, E visas, and H-1B1 and E-3 visas.
Reshaping the Federal Workforce
President Trump directed federal agencies to cancel remote work arrangements and order employees to return to in-office employment. He also ordered a hiring freeze among the federal administrative workforce. Because many USCIS adjudicators work remotely, some could leave the workforce instead of returning to the office. With a hiring freeze in place, this situation will likely lead to fewer adjudicators processing USCIS petitions and applications, leading to longer processing times and other delays.
Increased Vetting and Travel Bans
President Trump ordered the DOS and other agencies to implement enhanced vetting of all visa applications and those seeking immigration benefits to identify those who pose a national security risk to the United States and to identify, within 60 days, countries whose citizens pose special security risks. This order sets the stage for travel bans for certain countries that avoid the legal hurdles President Trump’s 2017 “Muslim Ban” encountered. We anticipate country-specific travel bans and increased use of Administrative Processing for all visa applicants, causing delays in visa issuance at US consulates. Additionally, travel and visa bans could be used against countries that do not cooperate fully with U.S. efforts to repatriate their citizens as part of President Trump’s large scale deportation programs.
Gender Identity on Government-Issued Documents
President Trump ordered the federal government to recognize only two genders, male and female. This order has a wide-ranging impact on those who are transgender or non-binary and will likely result in increased scrutiny of applicants for visas and other benefits of these populations. US passports and visas will list the sex as shown on the applicant’s birth certificate.
What To Expect Next
President Trump made clear on the campaign trail that immigration enforcement and border security will be the top priorities for his administration. It is very likely he will continue to use the executive branch powers to the maximum extent possible to accomplish these goals. We will continue to monitor these orders and any subsequent litigation.
Trump’s Executive Orders Considered: Implications for Private Employers
During his first week in office, President Trump issued an unprecedented number of executive orders, including orders to eliminate diversity, equity, and inclusion (“DEI”) programs within federal agencies and government contracting. He also adopted a policy recognizing two unalterable sexes (rather than self-designated gender identity) in the enforcement of federal laws regarding sex-based rights, protections, opportunities, and accommodations. Several of President Trump’s executive orders, such as the order limiting birthright citizenship, have already been challenged on constitutional and other grounds. However, we anticipate that more orders will be issued as the new administration moves swiftly to implement its plans and policies.
The Impact on the Private Sector
The executive orders issued last week are focused primarily on the operations of the federal government and its agencies. However, some contain policy statements, directives, and enforcement priorities that are expressly directed at DEI efforts in the private sector. Additionally, the recent appointment of Andrea Lucas, a vocal critic of corporate DEI efforts and the Biden administration’s interpretation of civil rights laws, as Acting Chair of the U.S. Equal Employment Opportunity Commission (“EEOC”), will have an impact on policies and enforcement trends going forward.
In short, it is reasonable to anticipate that this administration’s enforcement priorities will bear little resemblance to anything that has come before (even under the first Trump administration). Nevertheless, the law currently remains unchanged: it is unlawful to discriminate against anyone based on their membership in a protected class. Employers whose policies and practices do not discriminate against applicants or employees need not amend their policies and practices in response to the recent flurry of executive action.
1. Executive Order on DEI Initiatives
The executive order titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” directs federal agencies (which include the EEOC) to “enforce our longstanding civil-rights laws and to combat illegal private sector DEI preferences, mandates, policies, programs, and activities.” (Emphasis added.) It further directs government agencies, with the assistance of the Attorney General, to make recommendations and strategic enforcement proposals designed to “encourage the private sector to end” what the order describes as “illegal discrimination and preferences, including DEI.” (Emphasis added.) The order also rescinds prior executive orders on affirmative action and nondiscrimination in federal contracting.
The broad language of this order has prompted concern among private employers about the legitimacy and sustainability of their DEI programs—likely an intended result of the order. Yet, the order does not and cannot make lawful programs unlawful. Well-conceived DEI programs do not discriminate by virtue of those programs. Instead, those programs operate to create a more fulsome collection of qualified job candidates and to build professional communities focused on collective success and individual opportunity. Such programs do not (and indeed may not) create “illegal preferences.” The Civil Rights Act of 1964 makes it unlawful to discriminate against anyone (including white people) on the basis of their race or other protected characteristics; this has been the law throughout the growth of DEI initiatives. Job decisions must be made for legitimate, non-discriminatory reasons. As long as an employer does that, it may continue its DEI efforts.
2. Executive Order on “Gender Ideology”
The executive order titled “Defending Women from Gender Ideology and Extremism and Restoring Biological Truth to the Federal Government” establishes a federal policy of recognizing two unalterable sexes (male or female) and instructs agencies to enforce federal laws in a manner consistent with this policy. However, it also contains directives that impact the private sector.
For example, the order:
(1) directs the Attorney General to “issue guidance to ensure the freedom to express the binary nature of sex and the right to single-sex spaces in workplaces and federally funded entities covered by the Civil Rights Act of 1964”;
(2) directs agencies with enforcement responsibilities under the Civil Rights Act (which includes the EEOC) to “prioritize investigations and litigation to enforce the rights and freedoms identified”;
(3) seeks to limit the application of the decision the U.S. Supreme Court issued in Bostock v. Clayton County, which extended protections against sex discrimination under Title VII of the Civil Rights Act of 1964 (the federal law prohibiting employment discrimination) to discrimination based on gender identity and sexual orientation; and
(4) orders agencies to rescind guidance documents inconsistent with the order, including the EEOC’s April 2024 Enforcement Guidance on Harassment in the Workplace.
The order depends on a false premise. The President may not, by executive order or otherwise, modify a statute or declare the meaning of a Supreme Court opinion. Under governing law, Title VII protects against discrimination on the basis of gender identity, transgender status, and sexual orientation. Unless and until Congress amends the Civil Rights Act or the Supreme Court reconsiders Bostock, the law is immutable. While federal agencies may be required to follow the dictates of this order, private employers remain governed by the law, which protects against exactly the kind of mandates the executive order contemplates. This will assuredly lead to litigation. In the meantime, unless and until the Court or Congress acts, private employers should continue to comport themselves in a manner consistent with existing law.
The guidance in this Advisory is cemented by the reality of parallel state protections that will be unaffected by any change to federal law. State anti-discrimination laws have historically offered broader protections than federal law. Even if federal law narrows, employers must be careful to comply with the laws of the states in which they do business.
Next Steps
The flurry of executive orders issued by President Trump created a great deal of noise, fueled by incomplete headlines, politics and pronouncements. But law is about statutes, regulations, and language. Before making any changes based on news reports or public discourse, employers should consult legal counsel to ensure compliance with the law and informed decision-making.
FinCEN Confirms that CTA Filings Remain Optional Despite Supreme Court Ruling
On January 23, 2025, in McHenry v. Texas Top Cop Shop, Inc (formerly captioned Garland v. Texas Top Cop Shop, Inc.), No. 24A653, 2025 WL 272062 (U.S. Jan. 23, 2025), the United States Supreme Court issued an opinion once again staying the injunction from the United States District Court for the Eastern District of Texas of the Corporate Transparency Act (“CTA”). The injunction had previously halted enforcement of the CTA’s reporting requirement that all “reporting companies” disclose information about their beneficial owners to the U.S. Department of the Treasury Financial Crimes Enforcement Network (“FinCEN”). For background information about the CTA and its reporting requirements, please refer to our previous blog post, dated November 5, 2024. For more information about the history of this litigation, please refer to our blog post, dated January 3, 2025.
In granting the federal government’s request for a stay of the district court’s injunction, the Supreme Court sent the matter back down to the United States Court of Appeals for the Fifth Circuit, where it will rule on the merits of the case. The Fifth Circuit is currently scheduled to hear oral argument on March 25, 2025.
However, despite the Supreme Court’s ruling on the injunction in Texas Top Cop Shop, FinCEN, in a statement dated January 24, 2024, announced that the CTA’s reporting rule will remain voluntary for now. This is because the CTA and its reporting rule were preliminarily enjoined by a federal court, again in Texas, on January 3, 2025, in Smith v. U.S. Department of the Treasury, No. 6:24-cv-336-JDK, 2025 WL 41924 (E.D. Tex. Jan. 3, 2025). In its statement, FinCEN explicitly stated that reporting companies would not be subject to liability if they fail to file beneficial ownership information while the Smith order remains in force. The U.S. Department of the Treasury has not yet filed a notice of appeal in the Smith case. If it does appeal, the Fifth Circuit will once again have a chance to weigh in.
Changes Ahead for NEPA Implementation Under President Trump’s Energy Dominance Executive Order
On President Trump’s first day in office he issued the Unleashing American Energy Executive Order (“Energy Dominance EO” or “EO”) with far-reaching consequences for implementation of the National Environmental Policy Act (“NEPA”). President Trump also signed a number of other executive orders, including the Declaring a National Energy Emergency Executive Order (“Energy Emergency EO”), that will impact environmental reviews and authorizations for projects. One critical outcome of the Energy Dominance EO is that it sets in motion the rescission of the Council on Environmental Quality (“CEQ”) NEPA regulations and a shift to reliance on agency-level regulations for NEPA implementation. Further, an interagency working group will be formed to ensure consistency within agency-specific NEPA implementing regulations and procedures.
The need for NEPA reform has long-been recognized across the political aisle and the role of CEQ’s NEPA regulations has already been placed into question. However, the immediate change in a 40+ year-old regulatory framework creates the potential for confusion that could inadvertently delay the very projects the EO is meant to benefit. The development of new guidance for this new regulatory paradigm as well as action by the interagency working group that ensures consistent application of NEPA reviews across federal agencies will be critically important.
Rescission of CEQ Regulations and Reliance Upon Agency-Level Implementing Regulations
The EO requires CEQ to propose rescinding its NEPA regulations by February 19, 2025 (30 days after EO issuance). The rescission is applicable to all CEQ NEPA regulations (40 CFR 1500 et seq.), not just those amended by the Biden Administration CEQ NEPA rulemakings. The CEQ implementing regulations had been relatively unchanged for over 40 years until a series of amendments under the first Trump Administration and then the Biden Administration. This proposed rescission further unsettles ongoing and new NEPA reviews.
By February 19, CEQ also is required to issue NEPA implementing guidance. The EO does not prescribe a specific scope or individual elements of this new guidance.
After the proposal to rescind the regulations and guidance issuance, CEQ is to “convene a working group to coordinate the revision of agency-level implementing regulations for consistency.” The EO does not dictate a particular outcome for the working group to ensure consistency across agency-level NEPA regulations.
In the time between the rescission of the CEQ NEPA regulations and any revised or new agency-level implementing regulations, agencies must rely on the NEPA statute and their own, existing NEPA implementing regulations and policies. Agencies, of course, continue to have an obligation to comply with NEPA as amended by the Fiscal Responsibility Act of 2023. Those statutory changes included presumptive deadlines and page limits for environmental impact statements and environmental assessments and the authorization for agencies to adopt a categorical exclusion established by another agency.
Additional EO Impacts on NEPA Implementation
Other provisions of the Energy Dominance EO also may impact NEPA implementation. These include:
Directing heads of relevant agencies to undertake “all available efforts to eliminate all delays within their respective permitting processes,” which could include maximizing the use of NEPA categorical exclusions and taking further steps to streamline the preparation of environmental assessments and environmental impact statements;
Requiring the submission of recommendations for legislative changes supporting “greater certainty” in federal permitting and “streamlining” judicial review of NEPA challenges; and
Terminating current Interagency Working Group Social Cost of Carbon related guidance and directing EPA to issue new guidance on changes to the social cost of carbon for federal permitting and regulatory decisions.
Impacts on Pending Litigation
The EO directs agencies to notify the Attorney General of any pending litigation where a stay or other action may be appropriate due to the policy changes and agency actions required by the EO. This notification requirement may trigger requests for a stay or other action in the pending lawsuit challenging the most recent Biden Administration amendments to CEQ’s NEPA regulations in Iowa v. CEQ, Case 1:24-cv- 0089 (D.N.D.). Further, the EO-directed change in CEQ’s NEPA responsibilities as well as the directed rescission of its NEPA implementing regulations could result in termination, due to mootness, of the currently pending request for en banc review in Marin Audubon Society v. FAA, 121 F.4th 902 (D.C. Cir. 2024). That pending request for review challenges a December 2024 circuit court panel decision holding that CEQ did not have the requisite rulemaking authority to implement and enforce its NEPA regulations. On January 23, 2025, the Department of Justice filed a notice with the D.C. Court of Appeals that the Administration is reviewing the effect of the EO directive to rescind CEQ’s NEPA implementing rules on the Administration’s position in the pending en banc review.
Additional Executive Order Provisions Impacting Projects
The Energy Dominance EO is one of several executive orders that will affect projects with a federal nexus through regulation, funding, or permitting. Further, these executive orders can intersect. For example, both the Energy Dominance EO and the Energy Emergency EO address use of permitting authorities and advancement of energy projects. In addition, these executive orders set aggressive deadlines, which may not be met in all cases.