Charges Dropped Against Early Cryptocurrency Exchange Operator
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In early 2025, a federal judge dismissed charges against an Indiana businessman for failure to register his cryptocurrency exchange platform with Financial Crimes Enforcement Network (FinCEN).
In doing so, the court noted that FinCEN had not put the industry on notice that cryptocurrency businesses could be subject to the registration requirement until late 2013, after the core time period at issue in the indictment.
Although the Department of Justice (DOJ) immediately appealed the decision, it later withdrew its appeal and voluntarily dismissed all proceedings against the defendant on April 23.
This dismissal of charges against an early cryptocurrency exchange operator follows DOJ’s recent announcement of a nationwide shift in its approach to digital asset enforcement.
In late April, at the government’s request, an Indiana federal judge put a final end to the prosecution of an Indiana man for allegations that he engaged in unlicensed money transmission (and related tax offenses) in connection with his operation of a virtual currency exchange from 2009 to 2013.1 The case represents a relatively rare instance in which a court granted a pretrial motion to dismiss charges related to unlicensed money transmission, although the impact of the decision may be limited to cases from 2013 and earlier—the year that FinCEN issued key guidance on the topic. The case has also attracted attention for what it may signal about DOJ’s digital asset enforcement priorities.
United States v. Pilipis
In early 2024, federal prosecutors in Indiana charged Maximiliano Pilipis with money laundering and willful failure to file tax returns, based on allegations that, from 2009 to 2013, Pilipis operated cryptocurrency exchange platform AurumXchange that was required to, but did not, register as a money transmitting business.
The Bank Secrecy Act requires money transmitters to register with FinCEN, and 18 U.S.C. § 1960 makes it a crime, among other things, to knowingly operate an unregistered money transmitting business. In 2013 and again in 2019, FinCEN issued guidance to clarify that the definition of money transmitter includes those who make a business of accepting, exchanging, and transmitting virtual currencies such as Bitcoin. And Congress, in the Anti-Money Laundering Act of 2020, codified the extension of money transmission to any transfers of “value that substitutes for currency.”2 Notably, however, the conduct at issue in the Pilipis indictment predated that guidance and legislation.
In a motion to dismiss the indictment, Pilipis argued that the government already investigated AurumXchange 14 years ago and did not identify any wrongdoing. He also argued that at the time his business was operational, the legal framework surrounding virtual currencies was ambiguous, and prior to March 2013, it was unclear whether entities like AurumXchange were even required to register with FinCEN.
In February 2025, the court dismissed the money laundering counts to the extent they were predicated on a violation of § 1960 prior to the issuance of the 2013 FinCEN guidance, concluding that AurumXchange had no obligation to register with FinCEN prior to that guidance. The court allowed the tax charges to proceed and also indicated that there was a fact issue about whether any of the alleged money laundering conduct post-dated the 2013 FinCEN guidance and might therefore state a viable offense.
DOJ appealed the dismissal order to the Seventh Circuit in late February 2025, but later withdrew its appeal and moved to dismiss both the criminal case and a related civil forfeiture case on April 23, 2025. Judge Magnus-Stinson granted that motion and dismissed the criminal and civil cases with prejudice the same day.
The move follows an April 7, 2025, memorandum issued by U.S. Deputy Attorney General Todd Blanche, which announced that DOJ will “no longer pursue litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets while President Trump’s actual regulators do this work outside the punitive criminal justice framework.” Among other things, the memorandum directed prosecutors not to charge “regulatory violations in cases involving digital assets,” including “unlicensed money transmitting under 18 U.S.C. § 1960(b)(l)(A) and (B)… unless there is evidence that the defendant knew of the licensing or registration requirement at issue and violated such a requirement willfully.” Takeaways
Virtual currency businesses and other early adopters of emerging technologies have been subject to a certain degree of legal uncertainty for some time, as laws and regulations struggle to keep up with the pace of innovation. In this instance, the district court declined to apply regulatory guidance retroactively, and the DOJ abandoned its enforcement efforts.
Members of the digital assets community should continue to monitor developments in this space in light of the administration’s approach to digital asset regulation and enforcement. However, even if the DOJ may be limiting the types of enforcement cases it will bring against digital asset firms, it may continue to prosecute cases that reflect the administration’s priorities (e.g., fraud, money laundering, and sanctions violations). In addition, state enforcement activity is continuing to date and may increase.
1 United States v. Pilipis, Case No. 1:24-cr-00009-JMS-MKK.
2 Pub. L. No. 116–283 § 6201(d), codified at 31 U.S.C. § 5330(d)(1)(A) (eff. Jan. 1, 2021).
You Sued and Won. Now What? How To Enforce a Judgment and Turn It Into Cash
You’re elated. You just won a hard-fought trial and obtained a money judgment against a corporate defendant.
With your judgment, the defendant becomes a ‘judgment debtor,’ and you become the ‘judgment creditor.’ You believe the judgment debtor has the means to satisfy the judgment, but they refuse to pay voluntarily and are stonewalling you. When this happens, it’s time to enforce the judgment.
Most attorneys do not do collection work, which is essentially what enforcing a judgment requires. This means that whoever litigated the lawsuit is most likely not the right lawyer to turn the judgment into actual cash.
Enter stage left: the collection lawyer.
Collecting on a Commercial Judgment
Collecting on a commercial judgment is usually either pretty darn easy or pretty darn hard.
The easy scenarios typically involve healthy, profitable companies that tend to pay their debts. It’s also common to see judgments that are small enough relative to the overall size of the judgment debtor. In these cases, it’s easier for them to just pay rather than to face the consequences of not paying.
You’ll usually have an even easier time if the person in control of the judgment debtor is also a judgment debtor themselves. This would happen if you sued and obtained a judgment against that person as well.
A judgment debtor who doesn’t pay when asked nicely is subject to a panoply of post-judgment collection remedies. However, those remedies will cost you more time, and unless your collections attorney will take your matter on contingency, they will also cost you more money. If collection efforts are unsuccessful, you will be throwing good money after bad.
Collection law is governed by state law, which means that your tools (i.e., collection remedies) vary from state to state. Here’s the thing: don’t assume that just because you sued in one state, you have to use that state’s collection laws. That’s not the way it works.
After your collection attorney engages in some asset searching activities to discover where the judgment debtor’s assets are, you then have to ‘go get them.’ This means that you have to ‘domesticate’ the judgment in each state where there are assets you want to try to get to. By ‘try to get to,’ we mean that you will try to seize assets and sell them or at least freeze them, so the judgment debtor cannot use them until they pay you.
Let’s use an example: say you have a judgment entered by a state court judge in New York, and that diligence reveals the judgment debtor has significant corporate bank accounts in Illinois. Here are the steps you will need to take. Ready for some fun?
Step #1 — Domesticate the Judgment in Illinois
You will need to domesticate your judgment in Illinois before you can enforce it. ‘Domesticating’ a judgment is the process of filing it in the state court for enforcement. Illinois is among the majority of states that have adopted the Uniform Enforcement of Foreign Judgments Act (UEFJA), [i] which provides a simple, uniform, and largely clerical procedure for domesticating foreign judgments. ‘Foreign’ here means a judgment entered in a federal court or a court in another state — it does not mean a foreign country. Usually, the judgment will be domesticated in the Illinois circuit court for the county in which the judgment debtor or their principal assets are located.
The UEFJA provides that upon domestication, the judgment has the same force and effect as a judgment originally entered in Illinois. It is also subject to the same procedures and defenses for reopening, vacating, or staying as an Illinois judgment.
Tactical Consideration: Be Like Braveheart and Hold, Hold, Hold
Illinois courts may stay enforcement of a foreign judgment domesticated under the UEFJA if enforcement is stayed or an appeal is pending in the original ‘foreign’ case, or if the judgment is vacated in the original court. [ii] As such, it is usually best to hold off on domesticating in Illinois until after any stay of enforcement in the original jurisdiction has lifted and the time for appeal has passed.
If you domesticate and begin enforcement in Illinois too soon and the original judgment is stayed, appealed, or vacated, you risk having to undo any actions you have taken to enforce the judgment.
Step #2 — Record a Judgment Lien Against Real Property
This is an easy next step that you can think of as low-hanging fruit.
Here, you record an official copy of the domesticated judgment in the office of the recorder of deeds for each county in which the judgment debtor owns real estate. That will create a judgment lien on the real estate that you can foreclose. [iii]
Choose Your Weapon Based on Where You Are
Different jurisdictions have a variety of procedures to aid judgment creditors seeking to enforce their judgments. In most states, judgment creditors may conduct post-judgment discovery to locate the judgment debtor’s income and assets that can be used to satisfy the judgment.
In Florida, you might use a ‘Fact Information Sheet.’ In Louisiana, you might use a ‘Writ of Fieri Facias’ to seize and sell a judgment debtor’s property or garnish their bank account or wages. In New York, you might use a ‘Restraining Notice’ to enjoin the judgment debtor or a third party from transferring the judgment debtor’s money or property.
Citations To Discover Assets: The Tool of Choice for Enforcing a Judgment in Illinois
In Illinois, all of these procedures and more are encompassed in a single device called a ‘citation to discover assets.’ [iv] Think of it as the turducken of judgment creditor remedies.
The name here is a little deceiving. It sounds like just an information-gathering tool, but it is so much more than that. In the right hands and given the right set of facts, it can be used with great efficiency to get paid.
When a citation to discover assets is served on a judgment debtor or third party, it automatically:
Requires the citation respondent to disclose information about the judgment debtor’s assets and/or to appear for an examination under oath.
Freezes the transfer of money or property of the judgment debtor.
Imposes a lien upon the judgment debtor’s personal property in the citation respondent’s possession.
A citation thus preserves the status quo, pending a determination by the citation court of the rights of everyone who may have an interest in the income and assets that may be used to satisfy the judgment.
We also want to put a spotlight on the second point listed: that a citation freezes the transfer of money or property of the judgment debtor.
This has two major consequences for the judgment debtor. First, a third party served with a citation (such as a bank) cannot properly allow the judgment debtor to use any of the money in their bank account without an order from the citation court that says they can. Second, even if the judgment debtor is sitting on lots of cash, a third party who accepts it in payment (such as a retainer for legal services) without first getting permission from the citation court does so in violation of the asset freeze. All this can seriously weaken a company’s ability to operate.
Once the citation has been served, various proceedings can then follow. These may include:
Further post-judgment discovery of the judgment debtor and third parties.
The judgment creditor seeking penalties against a citation respondent for violation of the citation.
The judgment creditor filing a motion for turnover of income or assets or to avoid fraudulent transfers.
Third parties such as secured creditors and joint owners intervening in the citation proceeding to assert their rights to income or assets subject to judgment enforcement.
The judgment debtor asserting defenses or exemptions to enforcement.
Limited Protection for Judgment Debtors’ Property
Some states have generous exemption laws allowing judgment debtors to protect substantial portions of their assets from creditors. However, like in most states, Illinois exemptions apply only to the personal assets of individual judgment debtors (this limiting protections to actual living people).
Conclusion
The basic concepts of enforcing a judgment are the same in every state, but there is a strategy in how a collection lawyer may use various remedies to secure the money your judgment debtor owes you. Like so many things in life, finding the right ‘hired gun’ to turn your judgment into cash can make all the difference.
We think you’ll also like:
Strategic Filing: Chapter 11 Bankruptcy for Litigation Advantage?
Who Gets Paid First (and Second, Third, etc.) in Bankruptcy
Solvent Debtor? A Chapter 11 Debtor Need Not Be Broke
[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can view at your leisure, and each includes a comprehensive customer PowerPoint about the topic):
Enforcement: Post-Judgment Proceedings & Collections
Bad Debtor Owes Me Money!
The Nuts & Bolts Of Bankruptcy Law
This article was originally published here.
©2025. DailyDACTM, LLC. This article is subject to the disclaimers found here.
Georgia Enacts SB 69: Litigation Funding Now Regulated, Discoverable, and Subject to Liability
On the heels of growing national concern over third-party litigation funding, Georgia has enacted SB 69, a statute that imposes strict regulation, transparency, and liability exposure on litigation funders operating in the state. For defense-side stakeholders – including carriers, corporations, and trial counsel – this law introduces meaningful tools to uncover, scrutinize, and push back against funding practices that have long inflated risk, delayed resolution, and distorted valuation.
Following is a breakdown of what changes and why it matters.
Litigation Funding Agreements Are Now Discoverable
Effective immediately for all cases filed after enactment.
Amends O.C.G.A. § 9-11-26 to make the existence, terms, and conditions of third-party litigation funding contracts subject to discovery.
Applies to agreements with a party or for nonparties (e.g., related plaintiffs), if the funding amount is $25,000 or more.
This permits routine discovery requests into whether outside capital is backing a case, and under what terms. It also allows the defense to assess whether litigation or settlement decisions are being driven by a third party rather than by the plaintiff or counsel.
Funders Must Register and Are Subject to State Oversight
Beginning January 1, 2026, all litigation financiers must register with the Georgia Department of Banking and Finance. Disclosure requirements include:
Ownership structure
Affiliations with any foreign persons, foreign principals, or sovereign wealth funds
History of criminal convictions for leadership or owners
Whether any interest in the funder is held by a designated foreign adversary (barred entirely).
This framework is designed to curtail opaque or offshore funding sources and ensure state-level visibility into who is financing Georgia litigation.
Litigation Funders Are Prohibited from Influencing the Case
A registered funder may not:
Exercise any control over settlement decisions, strategy, or counsel selection
Charge fees that exceed the plaintiff’s net recovery after fees and costs
Retain any right to select experts or vendors
Securitize, assign, or sell the agreement (with limited exceptions)
Require signature by anyone other than the plaintiff directly.
Contracts must contain specified consumer warnings, must not be executed by counsel, and must preserve plaintiff autonomy. Agreements that violate any provision of this framework are void and unenforceable. This provides leverage in active cases where funding exists but the structure runs afoul of the law.
Funders Can Be Held Liable for Frivolous Litigation
If the amount financed is $25,000 or more, the litigation funder may be jointly and severally liable for court-ordered sanctions or cost awards arising from frivolous claims – unless the funding was fixed, non-contingent, and fully repaid. Funders also are required to indemnify plaintiffs and their attorneys for costs or sanctions – unless those were caused by intentional misconduct by the plaintiff or plaintiff’s lawyer.
This opens the door to motions that name the funder directly as a responsible party for fees or sanctions, particularly in exaggerated, manufactured, or otherwise unsupportable claims.
Admissibility Rules Remain Narrow But Discovery Is Broad
The statute does not make funding agreements admissible at trial. However, it does not preclude admissibility if relevant under general evidence law (e.g., impeachment, bias, or fraud). This preserves strategic use of funding disclosures during motion practice, expert challenges, or where funder influence is relevant to credibility or valuation.
SB 69 marks a fundamental shift in Georgia civil litigation. For the first time, litigation finance is subject to statutory regulation, transparency, and liability. Funders are no longer invisible players immune from discovery or consequence. For defense counsel and clients, this is an opportunity to reassess how third-party capital is shaping exposure and to deploy new tools to limit its reach.
Blockchain+ Bi-Weekly; Highlights of the Last Two Weeks in Web3 Law: May 8, 2025
Senate Moves Forward with “GENIUS” Stablecoin Bill: May 2, 2025
Background: A revised version of the Senate’s bipartisan stablecoin bill — the “GENIUS Act” — has been introduced, with a floor vote expected before the Memorial Day recess. Key changes include a prohibition on stablecoin issuers offering “a payment of yield or interest” on their issued payment stablecoins, along with enhanced illicit finance provisions. The bill also bars the sale of stablecoins in the U.S. by non-U.S. entities and allows for issuance under state regimes, provided the regime “meets or exceeds” federal standards, as determined by a three-member review panel consisting of the Treasury Secretary, Federal Reserve Chair and FDIC Chair.Changes aimed at addressing concerns about DeFi were also included, though they appeared only in an unpublished draft. Possibly in response to those revisions or other outstanding concerns, a group of nine Democrats — generally considered supportive of crypto — sent a letter indicating they could not support the bill in its current form.
Analysis: The GENIUS Act represents the closest Congress has come to passing meaningful legislation on crypto in the U.S. However, challenges remain. One potential obstacle is the push by some lawmakers to link the stablecoin bill to broader market structure legislation, which is advancing in Congress but is not as far along. Industry advocates have pushed back on this proposed combination, warning that tying the two together could stall momentum — and, given the limited window for congressional action this session, could result in no bill being passed at all. Another hurdle is the apparent erosion of support among key Democrats. With 60 votes needed in the Senate to overcome procedural hurdles, bipartisan support is essential. A delay — or worse, the failure — of even this relatively “vanilla” legislation risks letting political dysfunction once again derail progress in the digital asset space.
Coinbase Files Amicus to SCOTUS Over IRS John Doe Subpoenas: April 30, 2025
Background: Coinbase has filed an amicus brief in support of a petition challenging the IRS’s use of John Doe summonses — which compel platforms to disclose user data without individualized suspicion. The case was brought by a Coinbase customer over the IRS seeking to compel Coinbase to turn over a broad swath of “John Doe” customer information without any probable cause that any particular user broke the law. This follows a similar brief filed earlier by the DeFi Education Fund. If the Court agrees to hear the case, it could have broad implications for financial privacy — not just in digital assets — and may lead the Court to revisit the scope of the Third-Party Doctrine.
Analysis: In the digital age, sharing financial or location data with a third party is often not voluntary, but required for basic participation in modern life. The Third-Party Doctrine, a legal rule that allows the government to access data you’ve shared with third parties without a warrant, was developed in an era before modern financial technology and many argue it no longer fits how people transact today. With a more privacy-sensitive court, this case presents a real opportunity to revisit the boundaries of government surveillance over financial data.
Briefly Noted:
Richard Heart SEC Matter Over: The SEC has announced it will not be amending its complaint against Hex founder, Richard Heart, after the case was previously dismissed on jurisdictional grounds. Regardless of views on project, there should be broad agreement that giving a podcast interview in the U.S. and using open-source code developed here are not sufficient grounds for asserting global regulatory jurisdiction.
Federal Reserve Retracts Supervisory Guidance: The Federal Reserve Board has retracted guidance that required banks to obtain their approval before implementing any activity that involved crypto, including basic or low-risk use cases. If stablecoin legislation passes, banks are expected to become more active in digital asset custody, providing safer options for customers, which should be in everyone’s best interest.
FTC Goes After “Crypto Trading” Venture: The FTC is going after a series of multi-level-marketing businesses that sold “crypto-trading” courses. Fraud of this type has always been more appropriate within the FTC’s domain, rather than what we’ve seen over the last few years with the SEC attempting to broaden its jurisdiction by classifying crypto assets as securities simply to bring them under the purview of the SEC’s anti-fraud powers.
Stablecoin Updates: A number of relatively minor stablecoin-related developments surfaced last week in addition to the Senate updates discussed above, including SoFi exploring its own issuance, Tether posting $1 billion in Q1 profits (with a U.S. expansion in the works), an expected vote in the Senate on the GENIUS Act before Memorial Day, and Visa working with Bridge for a stablecoin-backed payment card. Although each of these updates may seem incremental on their own, collectively they underscore the central role stablecoins now play in the digital asset ecosystem and the growing attention they’re receiving from both industry and regulators.
Treasury Presentation on Digital Money: Buried on page 98 of the Department of Treasury’s update to the Treasury Borrowing Advisory Committee was a surprisingly thoughtful primer on stablecoins and their potential impact on traditional banking. The timing is notable, as this update comes on the heels of Tornado Cash securing at least a partial victory with a federal court rejecting Treasury’s attempt to dismiss the Tornado Cash lawsuit on the grounds that the case was moot following revisions to the sanctions made after the lawsuit was filed. On this topic it’s worth listening to this Miachel Mosier chat about how Tornado wasn’t a complete victory.
Solana Policy SEC Submission: One of the first big published projects from the Solana Policy Institute is its recent submission to the SEC, “Proposing the Open Platform for Equity Networks” which is worth a read. Also recommended is this industry submission to the SEC regarding staking.
SEC Chair’s First Public Remarks on Crypto: In his first public comments since taking over, Chair Atkins emphasized the need for “practical, durable” rules and a more constructive relationship with the digital asset industry. While delivered at a roundtable hosted by the SEC’s Crypto Task Force, the remarks mark a notable shift in tone from the agency’s prior enforcement-first approach.
Galaxy Digital Moves for Public Listing: Galaxy Digital has confirmed plans to go public on Nasdaq, marking a major step for the firm, which originally filed an S-1 back in 2022. The move signals renewed confidence in both the regulatory environment for digital assets and broader public market conditions.
Digital Chamber Initial SEC Submission in Response to Request for Information: As previously discussed, the SEC’s Crypto Task Force has requested industry feedback on a wide range of questions related to the regulation of digital assets. The Digital Chamber of Commerce is coordinating a major response effort in partnership with leading law firms to provide detailed answers to each question. Polsinelli Blockchain+ attorneys are involved in several of these responses. The first response, led by Sidley Austin, was published last week.
Updated FIT21 Market Structure Bill Released: House Financial Services and Agriculture Committees have published an updated discussion draft of the crypto market structure bill, previously known as the Financial Innovation and Technology for the 21st Century Act (FIT21). We will have a larger update on the proposed legislation and a failed attempt at a joint hearing on digital assets in the House in our next Bi-Weekly update.
Conclusion:
The last two weeks suggest that while momentum is building toward a more structured regulatory environment for digital assets, there’s still a real risk that this historic opportunity could be squandered. We’ll be watching closely as these developments unfold and continuing to engage where it matters. We look forward to seeing many of you at Consensus.
Regulatory Scrutiny on Potential MNPI in the Credit Markets
Over the past year, regulatory scrutiny of the credit markets has intensified, with the SEC investigating the potential use of material nonpublic information (“MNPI”) relating to credit instruments. The SEC brought a number of enforcement actions against investment advisers involving the failure to maintain and enforce written MNPI policies involving trading in distressed debt and collateralized loan obligations, even in the absence of insider trading claims. We anticipate that these investigations of trading in private credit instruments and related MNPI policies will continue, as SEC enforcement staff has increased their focus on these markets.
Although insider trading investigations typically involve equity securities, in 2024 the Commission scrutinized ad hoc creditor committee participants and took action against distressed debt managers relating to MNPI. Many fund managers investing in distressed corporate bonds collaborate with financial advisors to form ad hoc creditors’ committees, aiming to explore beneficial debt restructuring opportunities prior to bankruptcy. Managers often avoid receiving MNPI to avoid prolonged trading restrictions on company bonds. For example, a manager may wish to remain unrestricted until formally entering a non‑disclosure agreement (“NDA”) with the company and will notify external financial advisors and other committee members that it should only receive material prepared on the basis of public information. In other cases, managers will rely on information barriers, organizing their businesses into “public” and “private” sides. The SEC Staff has identified these situations as involving a heightened MNPI risk, emphasizing the need for clear written procedures to handle MNPI and mitigate risks of leakage or inadvertent receipt. While industry participants may struggle to draw specific compliance guidelines from these cases, the key takeaway is that the SEC expects heightened procedures for creditor committee participation and, more generally, consultants or advisers who may have access to MNPI.
The SEC also focused on MNPI when trading securities issued by collateralized loan obligation vehicles (“CLOs”). Last year the SEC settled a case against a New York‑based private fund and CLO manager targeting the steps it took to ensure its analysts and advisers were not themselves misusing MNPI. The fund manager traded tranches of debt and equity securities issued by CLOs it directly managed as well as those managed by third parties. The SEC alleged that as a participant in an ad hoc lender group, the fund manager had become aware of negative developments that concerned a particular borrower, and privately sold CLO equity tranches while in possession of this confidential information. The CLO manager allegedly failed to consider the materiality of the negative information to the sold tranches before trading. While the SEC did not specifically allege insider trading, in part due to the firm obtaining internal compliance approval pre‑sale, the matter led to a settlement focusing on the fund manager’s failure to establish and enforce appropriate policies on the use and misuse of MNPI. As emphasized in other distressed debt and similar MNPI cases, MNPI policies and practices should be tailored to the nature of a firm’s business. The failure to address information flow in these situations may lead to SEC scrutiny of the trading itself and the adviser’s policies under Section 204A of the Advisers Act, which requires investment advisers to establish, maintain and enforce written policies to prevent misuse of MNPI, as well as Section 206(4) and Rule 206(4)-7 (the Compliance Rule). The SEC has been investigating trading in the credit markets and shown a willingness to bring these cases even in the absence of any alleged insider trading, although the Commission recently voted to dismiss the one litigated matter. Interestingly, both Republican SEC Commissioners, despite philosophical objections to enforcement settlements under the Compliance Rule, voted to approve the Section 204A charges in the creditors committee matter, and one voted to approve such claim in the CLO matter. Even with the change in administration, the SEC staff will continue to scrutinize these issues and look at similar risks in the credit markets.
Read more of our Top Ten Regulatory and Litigation Risks for Private Funds in 2025.
Robert Pommer, Seetha Ramachandran, Nathan Schuur, Robert Sutton, Jonathan M. Weiss, William D. Dalsen, Adam L. Deming, Adam Farbiarz, and Hena M. Vora contributed to this article
DFC to Play Critical Role in New U.S.-Ukraine Minerals Deal
On April 30, 2025, the United States and Ukraine signed an agreement (the “Agreement”) establishing a framework for the creation of the United States-Ukraine Reconstruction Investment Fund (the “Partnership”). The Partnership will be a joint natural resources and infrastructure investment fund between the U.S. and Ukraine. The U.S. International Development Finance Corporation (“DFC”) will play a critical role by serving as a limited partner of the Partnership alongside Ukraine’s State Organization Agency on Support of Public-Private Partnership. The Agreement does not identify the general partner.
The Agreement, by operation of its terms, provides the Partnership with preferential rights to participate in natural resources and public-private partnership projects and DFC (or DFC’s assignee) with preferential rights to negotiate offtake arrangements with respect to critical minerals projects. The U.S. and Ukraine are still in the process of finalizing the limited partnership agreement, which is expected to further clarify the operations of the Partnership. The key provisions of the Agreement, including capital contributions, investment rights, and offtake arrangements, are summarized below.
Capital Contributions
Ukraine will contribute to the Partnership 50% of the amounts received by Ukrainian governmental authorities for licenses, permits, and production sharing agreements relating to the exploration, extraction, and processing of “Natural Resources Relevant Assets.”[1]
The U.S. capital contribution to the Partnership will be increased by the assessed value of any new military assistance the U.S. provides to Ukraine in accordance with the limited partnership agreement.
The Agreement does not indicate how the Partnership will be initially capitalized.
Investment Opportunity Rights
Ukrainian governmental authorities responsible for licenses and permits relating to Natural Resources Relevant Assets and Ukrainian governmental authorities responsible for public-private partnership agreements and concessions must include in the relevant license, permit, or agreement, a provision requiring the recipient thereof to make “relevant investment information” available to the Partnership at any time the recipient is seeking to raise capital.
When the Partnership expresses formal interest in “participating” in one of these natural resources or infrastructure projects, the relevant Ukrainian governmental authority must include in the relevant license, permit, or agreement, provisions requiring the recipient thereof to grant to the Partnership a right similar to a right of first refusal. Specifically, the recipient must engage in good faith negotiations with the Partnership and refrain from granting to any third party materially more favorable economic terms than those offered to the Partnership.
The Agreement does not specify the precise nature of the Partnership’s participation in these projects and whether such participation may extend beyond direct investment.
Market-Based Offtake Rights
The Agreement provides a critical role for DFC, allowing DFC (or DFC’s assignee) to negotiate offtake rights in respect of projects involving Natural Resources Relevant Assets.
Specifically, the Agreement requires Ukrainian governmental authorities responsible for licenses or special permits relating to Natural Resources Relevant Assets to include in the relevant license or permit: (1) provisions allowing DFC (or DFC’s assignee) to negotiate offtake rights on market-based commercial terms, and (2) prohibiting the license or permit recipient from offering to any third party materially more favorable economic terms for offtake than those provided to DFC (or DFC’s assignee).
The Agreement provides a broad framework for U.S.-Ukraine cooperation in investing in critical minerals and infrastructure projects in Ukraine. DFC will play a critical role by serving as limited partner of the Partnership and by having the right to negotiate offtake arrangements for a wide array of natural resource projects in Ukraine. Further details regarding the limited partnership agreement and implementation of the Agreement are expected in the near future.
[1] The Agreement defines “Natural Resource Relevant Assets” as the sites, reserves, and deposits in the territory of Ukraine of aluminum, antimony, arsenic, barite, beryllium, bismuth, cerium, cesium, chromium, cobalt, copper, dysprosium, erbium, europium, fluorine, fluorspar, gadolinium, gallium, germanium, gold, graphite, hafnium, holmium, indium, iridium, lanthanum, lithium, lutetium, magnesium, manganese, neodymium, nickel, niobium, palladium, platinum, potash, praseodymium, rhodium, rubidium, ruthenium, samarium, scandium, tantalum, tellurium, terbium, thulium, tin, titanium, tungsten, uranium, vanadium, ytterbium, yttrium, zinc, zirconium, oil, natural gas (including liquified natural gas), and other minerals or hydrocarbons otherwise agreed by DFC and Ukraine’s State Organization Agency on Support of Public-Private Partnership.
From Blocks to Rights: Privacy and Blockchain in the Eyes of the EU data Protection Authorities
On April 14, 2025, the European Data Protection Board (EDPB) released guidelines detailing how to process personal data using blockchain technologies in compliance with the General Data Protection Regulation (GDPR) (Guidelines 02/2025 on processing of personal data through blockchain technologies). These guidelines highlight certain privacy challenges and provide practical recommendations.
Challenges Under the GDPR
Blockchain’s immutability conflicts with rights to data rectification and deletion (Articles 16 and 17 GDPR). Its decentralized nature makes it difficult to comply with GDPR principles like data minimization, storage limitation (Article 5) and data protection by design (Article 25). International data transfers are also complicated, prompting the EDPB to recommend using standard contractual clauses for node participation to ensure Chapter V compliance.
Key Recommendations for Organizations
In order to minimize risks and ensure GDPR compliant data processing when using blockchain, the EDPB establishes certain rules for organizations to follow.
Roles and Responsibilities
Roles must be clearly defined based on service nature, governance and relationships. The EDPB makes a special mention of nodes in public permissionless blockchains. Nodes in public blockchains may be considered data controllers. A legal entity (e.g., a consortium) is encouraged when nodes jointly determine processing purposes.
Technical and Organizational Measures
Organizations should assess:
Whether personal data will be stored
If so, why is the blockchain needed
The type of blockchain to be used (public only if necessary)
The adequate technical safeguards to be implemented
Public blockchains should be avoided unless essential. Personal data should only be identifiable if necessary and justified via a Data Protection Impact Assessment (DPIA). The techniques the EDPB suggests limiting the identifiability of the personal data include:
Encryption – Protects data, but remains personal under GDPR.
Hashing – Offers security, but risks remain if keys are compromised.
Cryptographic commitments – Securely obscure data when original inputs are deleted.
GDPR Principles and Data Subject Rights
Deletion and objection – Due to blockchain’s permanence, erasure may require deleting parts of the chain or anonymizing data. Off-chain storage of personal data is preferred.
Data retention – If data isn’t needed for the blockchain’s full life, it shouldn’t be stored on-chain unless anonymized.
Security – Suggested safeguards include emergency protocols, breach notifications and protections against 51% attacks and rogue participants.
Rectification – If rectification requires deletion, standard erasure methods apply. Otherwise, new transactions must correct prior data without altering old entries.
Automated decisions – Controllers must meet Article 22 GDPR requirements even if a smart contract has executed.
Next Steps
Public consultation is open until June 9, 2025. The final version is expected to remain largely consistent with the draft, offering essential guidance for GDPR-compliant blockchain use.
This article was co-authored by Damian Perez-Taboada
FINRA Facts and Trends: May 2025
FINRA’s Modernization Pitch: New Initiatives Aimed at Updating FINRA Rules and Easing Regulatory Burdens
On April 21, 2025, FINRA unveiled FINRA Forward, a broad review of its rules and regulatory framework that is intended to modernize existing rules regarding member firms and associated persons.
As part of its initiatives, FINRA is inviting significant engagement from industry members, seeking comments and feedback from member firms, investors, trade associations and other interested parties in an effort to update and adapt FINRA’s rules and regulatory standards to better suit the modern environment and the latest technologies used by member firms.
In a blog post, FINRA’s President and CEO, Robert Cook, wrote that FINRA “must continuously improve its regulatory policies and programs to make them more effective and efficient.”
FINRA has identified three goals of its FINRA Forward initiative: (1) modernizing FINRA’s rules; (2) empowering member firm compliance; and (3) combating cybersecurity and fraud risks. FINRA’s focus on modernizing rules will seek to eliminate unnecessary burdens on member firms, and to modernize requirements and facilitate innovation. With respect to compliance, FINRA aims to better protect investors and safeguard markets by enhancing the ways in which FINRA supports its member firms’ compliance efforts. Finally, FINRA is expanding its cybersecurity and fraud prevention activities.
The FINRA Forward initiatives were first previewed in Regulatory Notice 25-04, published on March 12, 2025, which identified two areas of initial focus for FINRA’s modernization effort: capital formation and the modern workplace. At the same time, FINRA requested comments for other areas FINRA should consider as part of its review. Following on the heels of Regulatory Notice 25-04, FINRA soon afterward published a series of more detailed Notices: Regulatory Notice 25-05, regarding associated persons’ outside activities; Regulatory Notice 25-06, which addresses capital formation; and Regulatory Notice 25-07, on the modern workplace.
We focus below on FINRA’s request for comments, in Regulatory Notice 25-07, on modernizing FINRA rules, guidance and processes for the organization and operation of member workplaces. This initiative promises a “broad rule modernization review” and “significant changes” to FINRA’s rules and regulatory framework “to support the evolution of the member workplace.” This modernization effort has the potential to significantly change regulatory compliance programs for virtually every FINRA member firm.
While noting that commenters “should not be limited by the topics and questions FINRA identifies,” FINRA has highlighted the following rules, guidance and processes on which it welcomes comments from industry members.
Branch Offices and Hybrid Work
FINRA is contemplating additional updates to FINRA Rule 3110 (the Supervisory Rule) in its continued effort to account for technological advances and hybrid working arrangements.
Just last year, FINRA amended Rule 3110 in response to changes in work arrangements, allowing members to designate eligible private residences as “residential supervisory locations” (RSLs) and to be treated as non-branch locations. FINRA also launched a voluntary, three-year pilot program that permits eligible members the flexibility to satisfy their inspection obligations under Rule 3110 without requiring an on-site visit to the office or location.
Now, in response to further feedback from members, FINRA is questioning whether the branch office and office of supervisory jurisdiction (OSJs) designations remain relevant in an age of digital monitoring, cloud-based systems and virtual meetings. Additionally, FINRA is asking if there are ways the Central Registration Depository (CRD) system and Form BR can be revised to “better align FINRA, other SRO and state requirements for broker-dealers with the uniform branch office definition and registration and designation of offices and locations.”
Registration Process and Information
Associated persons and member firms submit information to SROs and state and federal regulators through Uniform Registration Forms that communicate this information to FINRA’s CRD system. Notice 25-07 is now seeking comments on proposed changes to the process and systems currently in place to address modern technologies and workplaces, as well as the substance or presentation of the information provided to the public. These contemplated changes could impact such forms as Form BD and Forms U4 and U5.
Qualifications and Continuing Education
All securities professionals seeking registration must demonstrate the necessary qualifications by passing a standardized professional examination. After they are registered, these professionals are required to maintain their qualifications by completing a Continuing Education (CE) program that is designed to ensure that registered persons stay current as industry standards and rules evolve.
From time to time, FINRA has adapted its qualification and CE requirements to account for improvements in technology, learning theory and assessment methodologies. For example, in 2022 FINRA responded to the increased frequency of job changes and member restructures by implementing the Maintaining Qualifications Program (MQP) for individuals that have decided to temporarily step out of roles that require active registration. Members have taken advantage of the MQP since its launch in 2022, with approximately 38,000 individuals participating in or having participated in the program.
Now, FINRA is seeking input on further improving the CE program and exam framework to better serve the industry. Among other things, FINRA is asking whether registered persons should be allowed to take certain qualification exams without needing firm sponsorship. More generally, FINRA is also asking whether new technologies can be leveraged to identify appropriate candidates for positions that require registration and whether it should consider any changes to the CE and MQP to ensure that it is meeting the needs of its members.
Delivery of Information to Customers
As digital communication becomes the standard in customer engagement, FINRA is examining whether its existing rules on document delivery and account transfers still make sense in an increasingly paperless world.
The current rules, based on guidance issued decades ago, require firms to obtain informed customer consent before delivering documents electronically — an approach that can be cumbersome given how digitally savvy most investors now are. At the same time, rules around account transfers — especially those using “negative consent” (where the transfer proceeds unless the customer objects) — remain narrow, even though business needs often demand flexibility. For instance, when firms exit a business line or shift clearing arrangements, obtaining affirmative consent from every affected customer may be logistically impossible, creating risk and delay.
FINRA is now asking whether more flexible, principles-based standards should replace rigid prescriptive ones, particularly regarding negative consent scenarios. FINRA is also exploring whether its rules should be better aligned with those in the investment advisory world, where digital delivery and flexible account transfer protocols are more common. These questions are particularly relevant as firms use mobile apps, dynamic disclosures and automated notifications to streamline service. At the same time, FINRA must ensure that these innovations don’t compromise privacy, security or investor understanding. By opening this discussion, FINRA aims to support a future-ready regulatory environment where efficiency and investor protection go hand in hand.
Recordkeeping and Digital Communications
With the explosion of digital communication channels, broker-dealers face growing challenges in complying with recordkeeping requirements under both SEC Rule 17a-4 and FINRA rules. From emails and instant messages to Zoom meetings, AI chatbots, and interactive websites, the range of communications that may be deemed “business-related” has expanded dramatically.
“Off-channel” communications — messages sent through unauthorized apps or platforms — remain a major concern. These communications pose compliance and enforcement risks, and can lead to gaps in supervisory oversight. Similarly, as firms adopt generative AI tools for customer engagement or internal operations, questions arise about whether those communications need to be retained and how best to do so. For example, should chatbot responses or AI-generated meeting summaries be archived the same way as emails? What about dynamic content on websites that changes based on user behavior? The goal is to ensure that recordkeeping rules remain effective and clear in a multiplatform, mobile-first environment.
Rather than creating new obstacles to innovation, FINRA wants to promote best practices and enable compliance through thoughtful modernization. Member feedback will be vital in identifying pain points, sharing successful approaches following the recent off-channel communication enforcement actions by the SEC, and recommending specific rule or guidance updates that strike the right balance between oversight and adaptability.
Compensation Arrangements
FINRA draws attention to two particular types of compensation arrangements where existing rules and regulatory frameworks may be ripe for change.
First, compensation arrangements related to personal services entities (PSEs) have recently come under scrutiny. PSEs are legal entities, such as limited liability companies, that are often formed by registered representatives as a vehicle to receive compensation for the representatives’ services, while also achieving tax benefits and other benefits. The problem with this compensation arrangement is that, under existing guidance, receipt of transaction-based compensation traditionally has been a strong indicator of broker-dealer activity. As a result, member firms often have concerns about paying transaction-based compensation directly to PSEs, because of uncertainty as to whether doing so could require the PSE to register as a broker-dealer and/or violate the member firm’s duty to maintain supervisory control over the securities-related compensation paid directly to registered representatives.
Second, there has been a recent rise in programs that pay continuing commissions to retired registered representatives or their beneficiaries. Under existing rules (in particular Rule 2040(b), however, such compensation arrangements are valid only if the registered representative contracts for such continuing commissions before an unexpected life event that renders the representative unable to work.
FINRA is seeking comments on potential regulatory or rulemaking changes that could facilitate these types of compensation arrangements, or ease the regulatory burden associated with them, while still continuing to preserve effective broker-dealer supervision.
Fraud Protection
FINRA is considering changes to existing rules designed to help prevent fraud.
In particular Rule 2165 currently allows firms to place temporary holds on account activity — in the accounts of a “specified adult” — when the firm reasonably believes that financial exploitation of that adult has occurred or is occurring. But these temporary holds are subject to time limits, which can sometimes constrain the firm’s ability to protect customer assets, such as when the firm is unable to convince the customer that financial exploitation is occurring, or when an investigation has not yet concluded. Thus, FINRA is exploring whether to expand the time limits, or to extend the application of Rule 2165 beyond “specified adults.”
FINRA is also seeking comments on ways to potentially modify or enhance Rule 4512, which requires firms to make efforts to identify a “trusted contact person” for all non-institutional accounts — i.e., a person whom the firm can contact when a customer is unavailable or becomes incapacitated.
Leveraging FINRA Systems to Support Member Compliance
Member firms can currently employ FINRA’s systems in a variety of ways to support their compliance efforts, including relying on the CRD system, FINRA’s verification process, the Financial Professional Gateway, and the newly launched Financial Learning Experience to satisfy certain of their regulatory requirements.
As part of the FINRA Forward initiatives, FINRA is seeking feedback on other ways that FINRA can use its systems to reduce costs and burdens on member firms.
FINRA is requesting that all comments be submitted by June 13, 2025, and comments will be posted publicly on FINRA’s website as they are received.
U.S. Supreme Court Denies DSH Hospitals’ Attempts to Seek Higher Medicare Payments
On April 29, 2025, the U.S. Supreme Court issued an opinion upholding the formula the U.S. Department of Health and Human Services (HHS) utilized to calculate Medicare hospitals’ disproportionate share hospital (DSH) payment adjustments, denying a challenge brought by hospitals seeking higher DSH reimbursement. In Advocate Christ Medical Center v. Kennedy, No. 23-715 (S. Ct. Apr. 29, 2025), the Court held, based on a highly technical analysis, that the DSH formula endorsed by HHS was consistent with congressional intent, and accordingly rejected an argument from the hospitals premised on how DSH adjustments are calculated arising from a hospital’s treatment of patients eligible for social security benefits.
Background on Disproportionate Share Hospital Rate Adjustments
Under Medicare, hospitals that treat a disproportionate share of low-income Medicare patients are entitled to a rate adjustment above the fixed Medicare amount for each Medicare patient treated, which is calculated by adding two fractions: the “Medicare fraction” plus the “Medicaid fraction.”
This dispute arose when over 200 hospitals claimed that HHS miscalculated the hospitals’ DSH adjustments from 2006 to 2009 due to the department’s misinterpretation of the “Medicare fraction” calculation. The numerator used to calculate the “Medicare fraction” is defined by statute as “the number of [a] hospital’s patient days’ attributable to patients ‘who (for such days) were entitled to benefits under [Medicare] Part A’ and ‘entitled to supplementary security income [SSI] benefits. . . under subchapter XVI.” HHS interpreted the phrase “entitled to [SSI] benefits” to mean patients who are entitled to receive an SSI payment during the month they were hospitalized.
Conversely, the hospitals argued that the phrase includes all patients enrolled in the SSI system at the time of their hospitalization, even if they were not entitled to an SSI payment during their month of hospitalization. The net result of the hospitals’ position would’ve been to expand the number of patients in that numerator, thus increasing the “Medicare fraction” and correspondingly increasing the DSH rate adjustment for such hospitals.
After the hospitals were repeatedly unsuccessful in administrative challenges and federal district court, the D.C. Circuit Court of Appeals held for HHS, stating that SSI benefits are “about cash payments for needy individuals” and that “it makes little sense to say that individuals are ‘entitled’ to the benefit in months when they are not even eligible for [a payment].”
Supreme Court Analysis and Holding
The Supreme Court upheld the D.C. Circuit ruling in favor of the government, rejecting the hospitals’ position. The Court clarified that the relevant text stipulates that SSI benefits are cash benefits and that eligibility for such benefits is determined monthly. Due to these eligibility requirements, an individual is considered “entitled to [SSI] benefits for purposes of the Medicare fraction when she is eligible for such benefits during the month of [their] hospitalization.”
The Court declined the hospitals’ characterization of SSI benefits as including non-cash benefits such as vocational rehabilitation services and continued Medicaid coverage. In examining the description of an SSI benefit, the Court concluded that non-cash benefits are not identified under subchapter XVI of the Social Security Act. Turning to the hospitals’ inclusion of individuals with continued Medicaid coverage during periods of ineligibility for SSI benefits, the Court determined that this also does not create an SSI benefit but rather aids in administering the Medicaid program.
Notably, two Justices dissented from the Court’s majority holding. They observed that the ultimate goal of the DSH formula is to “provide hospitals that serve the neediest among us with the appropriate level of critical funds” before concluding that the Court’s holding “arbitrarily undercounts a hospital’s low-income patients.”
Takeaways
This decision stops the hospitals’ ability to seek higher reimbursement via an enhanced DSH rate adjustment for the challenged claims. Moreover, the HHS’s methodology for calculating the DSH rate was affirmed; therefore DSH hospitals will receive a DSH rate adjustment based in part on the number of patients treated who are receiving a cash payment under an SSI program during the month of treatment, and not based on the number of such patients who are just eligible for SSI benefits.
Though the provision at issue was highly technical, the impact of this decision is potentially significant for DSH hospitals at a time of funding and reimbursement challenges, as more patients seek access to critical services often provided by such DSH hospitals.
Victoria Larson contributed to this article
Regulation Round Up: April 2025
Welcome to the UK Regulation Round Up, a regular bulletin highlighting the latest developments in UK and EU financial services regulation.
Key Developments in April 2025:
29 April
ESG: The FCA updated its webpage on its consultation paper on extending the sustainability disclosure requirements (“SDR”) and investment labelling regime to portfolio managers (CP24/8). In the light of feedback received, it has decided that it is not the right time to finalise rules on extending the regime to portfolio managers.
Cryptoassets: The European Securities and Markets Authority (“ESMA”) published its final report on guidelines relating to supervisory practices for national competent authorities to prevent and detect market abuse under Article 92(2) of the Regulation on markets in cryptoassets ((EU) 2023/1114).
24 April
Regulatory Capital: The FCA has published a consultation paper on the definition of capital for investment firms (CP25/10). CP25/10 outlines the FCA’s proposals to simplify and consolidate the rules as they relate regulatory capital.
17 April
Listing Regime: The FCA has published Primary Market Bulletin No 55 which addresses proposed changes to the listing regime.
16 April
ESG: The Omnibus I Directive (EU) 2025/794 amending Directives (EU) 2022/2464 and (EU) 2024/1760 as regards the dates from which member states are to apply certain corporate sustainability reporting and due diligence requirements was published in the Official Journal of the European Union. Please refer to our dedicated article on this topic here.
15 April
AIFMD 2.0: ESMA has published final reports setting out the final guidelines and draft technical standards on liquidity management tools under the Directive amending the Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD”) and the UCITS Directive (2009/65/EC) ((EU) 2024/927) (“AIFMD 2.0”). Please refer to our dedicated article on this topic here.
14 April
Regulatory Initiatives Grid: The Forum members (the Bank of England, the Prudential Regulatory Authority, the FCA, the Payment Systems Regulator, the Competition and Markets Authority, the Information Commissioner’s Office, the Pensions Regulator, and the Financial Reporting Council) published a joint regulatory initiatives grid relevant to the financial services sector.
11 April
FCA Regulatory Perimeter: HM Treasury has published a policy paper containing a record of the meeting between the Economic Secretary to the Treasury and the Chief Executive of the FCA. The purpose of the meeting was to discuss the FCA’s perimeter and the issues set out in its December 2024 report.
Trading Platforms: The FCA has published a webpage summarising the findings from its multi-firm review of trading apps (also more commonly known as “neo-brokers”).
10 April
ESG: ESMA has published a risk analysis report on the increased incorporation of ESG terms into fund names and its impact on investment flows.
MiFID II: ESMA has published a final report on regulatory technical standards supplementing the Markets in Financial Instruments (“MiFID II”) Directive (2014/65/EU) to specify the criteria for establishing and assessing the effectiveness of investment firms’ order execution policies.
9 April
Artificial Intelligence: The Financial Policy Committee published a report on artificial intelligence in the financial system.
ESG: ESMA has published a final report setting out its analysis and conclusions on a common supervisory action exercise conducted with the national competent authorities on ESG disclosures under the Benchmarks Regulation ((EU) 2016/1011).
8 April
MiFID II: ESMA has published a final report containing technical advice to the European Commission on amendments to the research provisions in the MiFID II Directive in the context of changes introduced by the Listing Act (ESMA35-335435667-6290).
FCA Strategy: The FCA has published it annual work programme for 2025/26, which sets out how it will deliver its four strategic priorities (to be a smarter regulator that is more efficient and effective, supporting growth, helping consumers navigate their financial lives and fighting financial crime).
7 April
UK AIFMD: The FCA has published a call for input and HM Treasury has published a consultation on the future regulation of alternative investment fund managers. Please refer to our dedicated article on this topic here.
3 April
ESG: The European Parliament plenary session formally adopted at first reading the stop-the-clock proposal for a Directive amending Directives (EU) 2022/2464 and (EU) 2024/1860 with respect to the dates from which member states are expected to align to corporate sustainability reporting and due diligence requirements.
ESG: The FCA has published a summary of the feedback it has received in relation to its discussion paper on finance for positive sustainable change (DP23/1) together with its response and next steps. Please refer to our dedicated article on this topic here.
1 April
Short Selling: The FCA published an updated version of its webpage on the notification and disclosure of net short positions.
Motor Finance: The FCA has published its written submissions to the Supreme Court in the appeal of the Court of Appeal decision in Johnson v FirstRand Bank Ltd (London Branch) t/a Motonovo Finance [2024] EWCA Civ 1282.
ESG: The EU Platform on Sustainable Finance has published a report on its first review of the Taxonomy Climate Delegated Act and the development of technical screening criteria for a list of new economic activities.
Additional Authors: Sulaiman Malik and Michael Singh
Is Your Company Prepared for the FTC’s Junk Fees Rule, Effective May 12?
On May 5, 2025, the Federal Trade Commission (FTC or “the Commission”) published FAQs aimed at providing consumers and businesses with information regarding the agency’s Rule on Unfair or Deceptive Fees (the “Junk Fees Rule” or “Rule”) banning so-called “junk fees,” which takes effect on May 12, 2025.
Covered Businesses
The FTC’s Junk Fees Rule requires any business that sells live-event tickets or short-term lodging (e.g., hotels, vacation homes, and other short-term rentals) to disclose clearly and conspicuously all mandatory fees associated with any good or service offered.
The FTC’s initial proposed rule applied to a wide range of businesses — including restaurants, food delivery services, and car rental companies, among others — but the final Junk Fees Rule narrows the scope and solely applies to any business that offers, displays, or advertises:
Live-event tickets
Live-event tickets are for concerts, sporting events, music, theater, and other live performances that audiences watch as they occur.
Generally, pre-recorded audio and visual performances and film screenings are not live events covered by the Rule.
Short-term lodging
Short-term lodging may include: temporary sleeping accommodations at a hotel, motel, inn, short-term rental, vacation rental, or other place of lodging; home shares and vacation rentals offered through platforms (e.g., Airbnb or VRBO); or discounted extended stays at a hotel.
Generally, the following would not be in scope of short-term lodging: long-term or other rental housing that involves an ongoing landlord-tenant relationship; short-term extensions to leases offered by rental housing providers; or temporary corporate housing offered by an apartment community under the same conditions as long-term leases.
The Rule doesn’t prescribe what length of stay qualifies as short-term and will depend on facts and circumstances.
Covered businesses include:
Third-party platforms
Resellers
Travel agents
According to the FAQs, the Rule is intended to protect both individual and business consumers and applies broadly, regardless of disclosure method — whether online (including through a mobile application), in physical locations, or through some other means.
General Compliance Requirements
Generally, the Rule requires that a covered business:
Must disclose “clearly and conspicuously” the “true total price inclusive of all mandatory fees” charged whenever a business “offer[s], display[s], or advertise[s] any price;”
Must display the total price “more prominently” than “most other pricing information;”
Must not misstate the cost or fees for any live-event tickets or short-term lodging; and
Must not misstate the identity of any good or service offered.
According to the FAQ, covered businesses must disclose the total price upfront and prominently and must disclose excluded charges (i.e., taxes or other government charges, shipping charges, or optional charges) before asking for payment. Further, a covered business must be transparent about how much it’s charging and why, whether a fee is refundable, and must describe what fees are for, avoiding phrases like “convenience fees,” “service fees,” or “processing fees.”
Mandatory Fees that Must Be Disclosed
Businesses must include all fees or charges that people are required to pay, cannot reasonably avoid, or are ancillary goods or services that are required to be purchased in a given transaction. Additionally, businesses must disclose fees that are automatic, such as those charged via default billing, pre-checked boxes, or opt-out provisions, and cannot treat such fees as optional.
Credit Card Surcharges and other Payment Processing Fees
Businesses may charge or pass through credit card or other payment processing fees if otherwise permitted by law. However, if a business requires payment by credit card, the credit card fee is mandatory and must be included in the total price. If there’s another viable payment method (at the same location or platform) that does not incur a fee, then using the method that incurs a fee is optional, and the business need not include the fee upfront in the total price. However, the fee must still be disclosed in the final amount of payment before asking for payment and may not misrepresent the purpose or amount of the charge.
Final Considerations
The Junk Fees Rule largely echoes California’s Honest Pricing Law, which expanded the Consumer Legal Remedies Act (California Civil Code § 1750 et seq.), prohibiting advertising prices that don’t include all mandatory fees or charges or “drip pricing.” However, California’s Honest Pricing Law applies broadly across industries.
While increased focus on price transparency is certainly trending, many other federal and state requirements have long prohibited hidden or deceptive fees. The FTC has cracked down on deceptive practices under Section 5 of the Federal Trade Commission Act (FTCA). Under Section 5 of the FTCA, the FTC may regulate material misstatements, omissions, or practices likely to mislead consumers, as well as all states long-standing consumer protection laws prohibiting unfair or deceptive acts and practices (UDAP).
Covered businesses should evaluate their current pricing practices, and any future pricing strategies, to ensure compliance with the Junk Fees Rule as well as other related federal and state requirements related to payment disclosures.
Ninth Circuit Reshapes Personal Jurisdiction Standards for E-Commerce Platforms in Briskin v. Shopify
Key Takeaways
In a recent decision by the Ninth Circuit in Briskin, the court ruled that e-commerce platform Shopify purposefully directed its conduct toward California because of its nationwide operations, rejecting the need for differential targeting of a forum state.
Notably, the court found a direct causal nexus between Shopify’s conduct and Briskin’s claims, deeming an exercise of specific jurisdiction over Shopify in California fair and reasonable.
Legal scholars are concerned that the decision could broadly expand the scope of specific personal jurisdiction and increase litigation risks for online platforms.
Companies should reassess their data practices and anticipate forum shopping by plaintiffs following Briskin.
On April 21, 2025, the United States Court of Appeals for the Ninth Circuit, sitting en banc, issued a watershed decision in Briskin v. Shopify, Inc., fundamentally altering the landscape of specific personal jurisdiction as applied to online platforms. Breaking with decades of established precedent limiting exercises of personal jurisdiction over nationally operating businesses, Briskin represents a dramatic shift for e-commerce entities. Plaintiffs are expected to aggressively push for broader assertions of jurisdiction, especially in privacy and data-collection cases involving online services. The decision has already drawn criticism for its impact on the existing framework for internet jurisdiction and lowering the threshold companies must meet to face litigation.
Background of the Case
The case arose from a dispute brought by Brandon Briskin, a California resident, who alleged that Shopify, Inc., a Canadian-based e-commerce platform, along with two of its American subsidiaries, violated his privacy rights. When Briskin used his mobile device to purchase athletic apparel from a Shopify-hosted online storefront, he alleges Shopify not only facilitated payment processing but also embedded tracking cookies onto his device. These cookies allegedly harvested detailed personal information, including his geolocation, IP address, and browser identity, which Shopify subsequently shared with its merchant partners and third parties.
Briskin contended that Shopify’s conduct, carried out with knowledge of his California location, amounted to wrongful exploitation of consumer data without informed consent. Shopify, in turn, moved to dismiss the lawsuit for lack of personal jurisdiction, arguing that it operated a nationwide platform without targeting or directing any specific conduct toward California. The district court agreed, dismissing the complaint. A three-judge panel of the Ninth Circuit affirmed, finding that under existing law, a defendant’s operation of an accessible, nationwide platform, without differential targeting of a forum state, was insufficient to establish specific jurisdiction.
But upon rehearing en banc, the Ninth Circuit reversed course, adopting a much more expansive view of how personal jurisdiction principles apply to online businesses.
The Ninth Circuit’s Analysis
In its en banc opinion, the Ninth Circuit issued three principal determinations that together mark a notable shift in internet jurisdiction doctrine.
Purposeful Direction Toward California
First, the court concluded that Shopify had purposefully directed its conduct toward California, despite its nationwide operations model. Rejecting the necessity of differential targeting (i.e., state specific targeting), the court reasoned that an interactive platform can “expressly aim” conduct at a forum state if it knowingly engages with consumers located there, even absent forum-specific marketing or outreach. The court emphasized that Shopify’s extraction, storage, and commercialization of California residents’ data were deliberate and foreseeable consequences of its business operations, not merely random or fortuitous contact.
This rejection of differential targeting represents a significant doctrinal shift. Historically, courts had been reluctant to find personal jurisdiction where a defendant’s online presence was generalized or passive. Briskin does away with that standard, and holds that deliberate operation of an interactive platform accessible in a forum, combined with the collection of sensitive user information, satisfies the minimum contacts analysis.
Nexus Between Shopify’s Conduct and Plaintiff’s Claims
Second, the Ninth Circuit found a sufficient causal nexus between Shopify’s forum-related conduct and Briskin’s claims. The court explained that the injuries alleged, arising from unauthorized data collection and distribution, directly related to Shopify’s contacts with California. Shopify’s interaction with the plaintiff’s California-based device during a transaction, and the subsequent alleged misuse of personal data, provided the necessary connection to the forum state to satisfy the “arising out of or relating to” element required for specific jurisdiction.
Reasonableness of Exercising Jurisdiction
Third, the court determined that exercising jurisdiction over Shopify in California was fair and reasonable. Shopify had argued that extending jurisdiction under these facts would expose it to litigation in all 50 states, creating an untenable risk for nationally operating platforms. The court dismissed these concerns, reasoning that if a company’s conduct similarly injures residents across multiple states, it should anticipate being subject to suit in each of those jurisdictions. Furthermore, the availability of alternative forums was deemed irrelevant to the fairness analysis.
The Ninth Circuit’s approach substantially reduces the burden for plaintiffs seeking to establish jurisdiction over online platforms and significantly raises the jurisdictional exposure for digital businesses.
Broader Implications and Emerging Concerns
Briskin is already prompting concern among legal scholars and practitioners. Without the limitations afforded to defendants under traditional differential targeting, any platform operating interactively and reaching consumers nationwide could theoretically be sued wherever users reside, regardless of whether the defendant intended to cultivate business in that jurisdiction. By deemphasizing the need for targeted conduct, the court effectively treats the mere accessibility and foreseeable use of an interactive platform as sufficient to establish jurisdiction. This expansion of scope will likely subjecting platforms to unpredictable and widespread litigation risk.
What This Means Moving Forward
Briskin significantly alters the risk calculus for businesses operating online platforms accessible to consumers in multiple states.
Companies can no longer rely on the absence of intentional forum targeting to shield themselves from exercises of jurisdiction. Operating a nationwide or globally accessible platform, or collecting consumer data as part of ordinary business operations, may now suffice to establish jurisdiction.
Moving forward, companies must carefully assess their data collection, tracking, and storage practices, particularly where those practices involve personal information of users residing in the United States.
Businesses can anticipate an increase in forum shopping by plaintiffs seeking to sue in perceived plaintiff-friendly jurisdictions, especially those operating within or adjacent to the Ninth Circuit’s reach should be especially vigilant.
In the wake of Briskin, digital businesses should consider exploring jurisdictional risk mitigation strategies, such as adjusting platform terms of service, seeking stronger user consents regarding data collection, or limiting certain platform functionalities based on user geography.
Courtland Cuevas contributed to this article