On January 8, 2026, the U.S. Army Corps of Engineers finalized 57 Nationwide Permits first proposed in June of last year. Nationwide Permits (NWPs) are streamlined federal permits for activities that affect waters of the United States, ranging from routine development and infrastructure projects to major projects. In this action, the Corps:

  • Reissues and modifies the existing suite of NWPs;
  • Adds a new permit for fish passage projects;
  • Explicitly makes data centers eligible for NWP coverage; and
  • Clarifies how several high-profile permits for pipelines and renewable energy are intended to operate.

The Corps also clarifies, for the first time, that each NWP is a separate, independent action. If a court or law invalidates one NWP — or its use in a specific project or location — that decision does not affect the validity or continued use of the other NWPs, nor the use of that NWP for other eligible activities.

The 2026 NWPs take effect March 15, 2026, and run through March 15, 2031. The current 2021/2022 NWPs expire March 14, 2026, with a limited one-year grace period for projects that have started construction — or are under contract to start — before that date. Projects that do not fit within that transition window will need to be covered under the 2026 NWPs or obtain other Corps authorization.

New Nationwide Permit 60 for Fish Passage

Nationwide Permit 60 is a new permit focused on activities that improve passage for fish and other aquatic organisms at existing infrastructure. Examples include:

  • Fishways and fish ladders;
  • Fish screens; and
  • Certain culvert and grade control modifications.

Key points about NWP 60 are that it is subject to acreage and impact limits, it does not authorize dam removal, and projects that may affect listed species or critical habitat still trigger Endangered Species Act review, meaning many fish passage projects will continue to involve close coordination with the Corps and resource agencies.

Data Centers Under Nationwide Permit 39

During the public comment period, the Corps received recommendations to clarify that data centers — including artificial intelligence and machine learning facilities — are examples of commercial developments covered by NWP 39. In response, the Corps:

  • Revises NWP 39 to include “data centers (to include for example, artificial intelligence and machine learning facilities)” in the list of commercial development examples; but
  • Does not change the underlying scope of the permit.

These types of facilities were already eligible for authorization under previous iterations of NWP 39, so long as they met applicable impact thresholds, general conditions, and regional conditions. The final action simply makes that coverage more explicit by adding “data centers” to the examples.

Pipeline and Energy Related NWPs: 12, 51, and 58

The Corps also addresses three NWPs that are central to pipeline and energy development:

NWP 12 – Oil and Natural Gas Pipelines

NWP 12 remains the primary NWP for oil and natural gas pipeline activities in waters of the United States. The Corps:

  • Retains the familiar “per crossing” approach to evaluating impacts;
  • Clarifies that its role is limited to in-water work and discharges, not upland routing decisions or pipeline safety regulation; and
  • Highlights expected coordination with NOAA and the U.S. Coast Guard where pipeline work intersects navigable waters and navigation safety concerns.

NWP 51 – Land-Based Renewable Energy

NWP 51 continues to cover discharges to waters associated with land-based renewable energy projects, such as wind and solar facilities. The Corps:

  • Confirms that battery energy storage systems can be authorized under NWP 51 when they are part of a broader renewable energy project; and
  • Maintains the basic impact limits and pre‑construction notification (PCN) framework, with more detail provided through general and regional conditions.

NWP 58 – Utility Lines for Water and Other Substances

NWP 58 governs utility line activities for water and “other substances” that are not oil or natural gas. The Corps explains that this is the primary NWP for pipelines carrying, among other things, CO₂ and hydrogen. Like NWP 12, NWP 58:

  • Is structured as a linear project permit with per‑crossing impact limits;
  • Includes navigation safety expectations for work in navigable waters; and
  • Leaves siting and safety oversight for these lines to other agencies.

For all three permits — NWPs 12, 51, and 58 — the Corps emphasizes that general conditions, regional conditions, and state/tribal approvals will continue to shape how, and where, they can be used.

Nature-Based Solutions and Restoration

The final 2026 NWP package explicitly incorporates “nature-based solutions” into the program, with the Corps emphasizing this concept in several permits, including NWP 13 for Bank Stabilization, NWP 27 for Aquatic Ecosystem Restoration, and NWP 54 for Living Shorelines. Across these permits, the Corps indicates that nature-based and bioengineered designs are generally preferred where appropriate. For restoration projects authorized under NWP 27, the Corps places particular emphasis on achieving net improvements in aquatic ecosystem functions and on using ecological reference conditions — including historically and culturally influenced ecosystems — to guide project design.

General Conditions, Regional Conditions, and Approvals

The Corps reiterates that the text of each NWP is only part of the story, as project developers must also navigate general conditions — including those related to endangered species, historic properties, critical resource waters, and Wild and Scenic Rivers — regional conditions adopted by Corps districts that can impose location-specific restrictions or notification requirements, and state and tribal actions on Clean Water Act § 401 water quality certification[1] and Coastal Zone Management Act consistency. In some cases, these external approvals can limit or effectively bar the use of particular NWPs in certain waters or jurisdictions.

PCNs, Mitigation, and Practical Implications

Most of the familiar features of the NWP program remain in place, including impact caps that limit the amount of authorized loss of waters and wetlands, pre-construction notification thresholds that determine when applicants must notify the Corps before using an NWP, and compensatory mitigation requirements for projects that exceed certain loss thresholds or affect sensitive resources. The Corps continues to rely on these mechanisms — together with general and regional conditions — to keep NWP-authorized impacts “no more than minimal.”

Practical effects of the 2026 NWP package will vary significantly by project type, location, and jurisdiction, particularly for projects considering NWPs 12, 39, 51, 58, and the new NWP 60. The real-world availability of these permits will continue to be shaped by Corps district regional conditions and by state and tribal water quality certification and coastal zone consistency decisions.

Remember that both the 2017 and 2021 versions of NWP 12 were challenged in court, and litigation over the 2021 NWP 12 remains pending in federal district court in Washington, D.C. It is also possible that environmental nongovernmental organizations will challenge the new 2026 NWP 12 — along with other NWPs — based on their ongoing assertion that the Corps was required, but failed, to undertake ESA Section 7 consultation with the Services before issuing or reissuing the NWPs. Troutman Pepper Locke continues to monitor these developments and their implications for project planning and permitting.

Nationwide Permits and General Conditions – Summary Table

Nationwide permit / General condition

Changes

NWP 12

Revised Note recommending permittee provide information to National Oceanic and Atmospheric Administration (NOAA), National Ocean Service (NOS) for charting. Added Note recommending permittee contact USCG about project.

NWP 13

Added new paragraph clarifying that this NWP authorizes nature-based solutions to provide habitat and other ecosystem functions and services with bank stabilization activities. Added a new Note to reference the Corps’ regulations about selecting bank stabilization approaches, and examples of the factors to be considered.

NWP 15

Added General Bridge Act of 1946 as an applicable statutory authority for bridges authorized by the U.S. Coast Guard.

NWP 23

Modified paragraph (a) to reference sections 106, 109, and 111(1) of NEPA. Modified text to state that any changes to approved categorical exclusions applicable to this NWP will be announced in the Federal Register.

NWP 24

Removed Florida from list of states that have assumed the Clean Water Act Section 404 permit program.

NWP 27

Changed title of NWP. Revised ecological reference requirement to include historic ecosystems, cultural ecosystems, and indigenous and local ecological knowledge. Removed list of examples. Required reports for all activities and modified report requirements. Removed PCN thresholds. Excluded dam removal activities. Added new note to address delineation requirement when NWP 27 activities require PCNs because of general conditions or regional conditions imposed by division engineers.

NWP 39

Added “data centers (to include for example, artificial intelligence and machine learning facilities), pharmaceutical manufacturing facilities,” and “storage facilities” to the list of examples of commercial facilities authorized by this NWP.

NWP 43

Replaced “green infrastructure” and “low impact development integrated management features” with “nature-based solutions” and provided additional examples of nature-based solutions related to stormwater management.

NWP 45

Modified “Notification” paragraph to extend timeframe within which the permittee must submit a PCN to the district engineer from 12 to 18 months of the date of the damage.

NWP 48

Excluded marine and estuarine waters within Washington State. Revised Note recommending permittee contact USCG about project. Added Note recommending permittee provide information to National Oceanic and Atmospheric Administration (NOAA), National Ocean Service (NOS) for charting.

NWP 52

Revised Note recommending permittee provide information to National Oceanic and Atmospheric Administration (NOAA), National Ocean Service (NOS) for charting. Added Note recommending permittee contact USCG about project.

NWP 54

Added gravel and cobble to types of substrate used for living shorelines. Clarified that small pocket beaches can be authorized. Added text to NWP to specify that it also authorizes temporary structures, fills, and work, including the use of temporary mats, necessary to construct the living shoreline activity.

NWP 55

Revised Note recommending permittee contact USCG about project. Added Note recommending permittee provide information to National Oceanic and Atmospheric Administration (NOAA), National Ocean Service (NOS) for charting.

NWP 57

Revised Note recommending permittee provide information to National Oceanic and Atmospheric Administration (NOAA), National Ocean Service (NOS) for charting. Added Note recommending permittee contact USCG about project.

NWP 58

Revised Note recommending permittee provide information to National Oceanic and Atmospheric Administration (NOAA), National Ocean Service (NOS) for charting. Added Note recommending permittee contact USCG about project. Added clarifying language to correct inconsistency in language about activities which require authorization under Section 10 of RHA.

NWP 60

Issued new NWP to authorize activities to improve passage of fish and other aquatic organisms.

General condition 9 – Management of Water Flows

Added “including tidal flows” to clarify that tidal flows should be considered as “expected high flows.”

General condition 11 – Equipment

Added a sentence requiring affected areas to be returned to pre-construction elevations, and revegetated as appropriate to rectify soil compaction that may occur from using mats.

General condition 18 – Endangered Species

Removed the reference to 50 CFR 402.17 because that section was removed by a final rule issued by the Services in 2024.

General condition 25 – Water Quality

Added “into waters of the United States” after “discharge” to make it clear that the discharge must be into waters of the United States.

General condition 28 – Use of Multiple NWPs

Modified general condition to clarify application to NWPs with different numeric limits.

General condition 30 – Compliance certifications

Modified general condition to change “successful” to “successful completion” to clarify that any required permittee-responsible mitigation has to be successfully completed by the permittee.

General condition 32 – Pre-Construction Notification

Modified paragraph (a)(2) to include species proposed for listing and critical habitat proposed for designation. Modified paragraph (b)(5) to refer to Note 2 of NWP 27 when an NWP 27 activity requires a PCN.

[1] On January 13, 2026, the EPA announced a proposed rule to revise the current Section 401 water quality certification regulations. A public comment period will begin when the proposed rule is published in the Federal Register.

On January 9, the U.S. Supreme Court granted certiorari in Ongkaruck Sripetch v. U.S. Securities and Exchange Commission (SEC). The case arises out of an SEC civil enforcement action in the Ninth Circuit and squarely presents an important remedial question that the Court left open in Liu v. SEC, i.e., what counts as a “victim” for purposes of SEC disgorgement, and does the SEC have to show that investors actually lost money before it can obtain that relief?

The answer will directly affect how much the SEC can recover in enforcement actions nationwide and will resolve a split among the First, Second, and Ninth Circuits.

Background and the Question Presented

In Liu v. SEC, the Supreme Court held that the SEC may seek equitable disgorgement in civil enforcement actions, but only within traditional equitable limits — meaning that any award must be tied to a wrongdoer’s “net profits” and “awarded for victims.” Since Liu, lower courts have wrestled with what it means to be a “victim” and what constraints that places on the SEC.

In Sripetch, the Ninth Circuit upheld a disgorgement award of approximately $2.2 million without requiring the SEC to prove that investors suffered any monetary loss. The court held that investors can be “victims” even if they did not lose money, reasoning that it was enough that their legally protected interests were compromised.

In doing so, the Ninth Circuit:

  • Explicitly rejected the Second Circuit’s contrary decision, which held that disgorgement under the same statutory provisions is unavailable unless investors suffered pecuniary harm; and  
  • Aligned itself with the First Circuit, which likewise held that pecuniary harm is not a prerequisite for disgorgement.  

The petition in Sripetch frames the conflict this way, and the Supreme Court granted review on the following question:

Whether a court may order equitable disgorgement under 15 U.S.C. § 78u(d)(5) and (d)(7) without the SEC having to show that investors suffered pecuniary harm.

Next Steps

By granting certiorari, the Supreme Court signaled that it is prepared to revisit the contours of SEC disgorgement for the third time in less than a decade. This time, the Court is poised to answer a concrete, recurring question that has now divided the circuits, i.e., must disgorgement be tied to actual investor monetary loss or is it enough that the defendant violated the securities laws and profited?

The Court’s decision will shape how the SEC structures its enforcement actions, how courts calibrate remedies, and how companies and individuals assess the risks associated with settling or litigating SEC cases. We will continue to monitor developments as briefing proceeds and the Court moves toward argument and decision.

Last month, in Hailey Boyd et al. v. The Boston Beer Co., Inc., D. Mass. 1:25-cv-13618, two former brewery representatives of the Boston Beer Company (Boston Beer) initiated a putative class action for alleged violations of the Massachusetts Noncompetition Agreement Act (MNAA or the Act). The plaintiffs contend that Boston Beer’s noncompete agreements violate the Act’s requirement that noncompetes be supported by “garden leave” payments or other “mutually agreed consideration.” The case may finally provide guidance as to what “or other mutually agreed consideration” suffices to enforce a noncompete agreement in Massachusetts.

The MNAA

Enacted in 2018, the MNAA sets forth specific requirements that noncompetes must satisfy to be valid and enforceable under Massachusetts law. Among other things, the MNAA requires employers to pay “garden leave” or some other “mutually agreed consideration” during the enforcement period of the covenant. Mass Gen. Laws ch. 149, § 24L(b)(vii). While the MNAA explicitly defines “garden leave” as payment of “at least 50 percent of the employee’s highest annualized base salary paid by the employer within the 2 years preceding the employee’s termination,” id., it is silent as to what “mutually agreed upon consideration” is sufficient to support a noncompete under the Act.

At least one Massachusetts court interpreting the “mutually agreed consideration” requirement has found stock option awards sufficient to support a noncompete under the Act. Cynosure LLC v. Reveal Lasers, LLC, Civ. No. 22-11176, 2022 WL 18033055 (D. Mass. Nov. 9, 2022). In Cynosure, the plaintiff sought a preliminary injunction to enforce noncompetes with its former employees who left to join a competitor. The noncompetes at issue were found in equity award agreements that conditioned the grant of 500 stock options on each employee’s agreement to, among other covenants, a one-year noncompete. In response, the defendants argued that the noncompetes did not comply with the MNAA because the equity agreements did not provide for garden leave. U.S. District Judge Patti B. Saris disagreed, finding stock options to be sufficient “mutually agreed consideration” under the MNAA. However, the Cynosure decision and subsequent decisions have yet to indicate just how much “mutual consideration” is valid.

Hailey Boyd et al. v. The Boston Beer Co., Inc.

In Boyd, the plaintiffs allege that, rather than provide garden leave, the company provided a one-time payment of $3,000 (less taxes) if it chose to enforce the covenant. The plaintiffs suggest this payment is not “mutually agreed consideration,” but instead a disguised, deeply discounted garden-leave payment, pointing out that $3,000 was less than 5% of their base salaries at the time of their termination. It would appear that the facts, as alleged in this case, represent a stark fact pattern from which to draw judicial review.

As of the date of this advisory, Boston Beer has not filed a pleading responsive to the plaintiffs’ complaint.

Takeaways

Employers with Massachusetts-based employees subject to noncompetes should keep a close eye on this case for two reasons. First, a ruling in this case may finally answer the question: how much “mutually agreed consideration” is enough to satisfy the MNAA? Second, if plaintiffs’ claims are successful, employers opting to support their Massachusetts noncompetes with “mutually agreed consideration” should be wary of copycat litigation from former employees.

Regardless of the outcome in Boyd, employers with Massachusetts-based employees subject to noncompetes should review their agreements for compliance with the MNAA, especially those supported by “mutually agreed consideration” instead of garden leave of at least 50% salary. If you have questions about the Massachusetts Noncompetition Agreement Act, please reach out to your Troutman Pepper Locke employment counsel.

On December 31, 2025, President Donald Trump issued a proclamation (the amendment), delaying the increase in tariffs for certain finished wood products until January 1, 2027. The amendment modifies Proclamation 10976, which imposed tariffs under Section 232 of the Trade Expansion Act on certain imports of timber, lumber, and derivative wood products (Section 232 wood tariffs). The original action established additional duties on softwood timber and lumber, upholstered wooden furniture, and kitchen cabinets and vanities, and it scheduled significant rate increases for certain finished products beginning January 1, 2026. We discuss this action in detail here. The amendment revises the earlier proclamation by delaying the increase in tariffs by one year for upholstered wooden furniture and kitchen cabinets and vanities.

In the wake of the amendment, the current Section 232 wood tariff rates — generally a 10% duty on softwood timber and lumber and 25% on covered upholstered furniture and kitchen cabinets and vanities — remain in place through the end of 2026, rather than rising to 30% for upholstered furniture and 50% for kitchen cabinets and vanities in 2026.

Negotiations With Foreign Trade Partners

The amendment cites “productive negotiations of agreements with multiple countries” on national security concerns around wood product imports as the basis for the delay, and it leaves room for future exemptions if the U.S. reaches agreements that address the perceived national security threat.

What This Means for Importers and Exporters

For importers of covered finished wood products, the amendment provides short‑term relief but not a rollback of tariffs. Companies will continue to face the existing duty rates through 2026, which may ease immediate cost pressures compared to the steeper increases that were set to take effect in 2026.

Companies should closely monitor developments related to any agreements concluded with major U.S. trading partners, which could result in differentiated tariff treatment by origin. Troutman Pepper Locke’s dedicated Tariff + Trade Task Force will continue to monitor these developments and can serve as a resource for your trade needs.

On January 7, the U.S. Department of Energy (DOE) announced a significant shift in the U.S. government’s approach to Venezuela’s oil sector, pairing targeted sanctions relief with a U.S.-directed framework for the marketing and sale of Venezuelan crude oil and petroleum products. This announcement follows the January 3 apprehension of Nicolás Maduro by U.S. authorities. See our previous advisory for a summary of these earlier developments from a sanctions perspective. No public changes to U.S. sanctions or export control regulations have yet occurred. However, the U.S. government is likely open to issuing specific licenses in select cases, and may be considering targeted public regulatory changes as well, such as the issuance of general licenses, in order to support this new policy announced by DOE. Collectively, the announced measures are framed as advancing U.S. national security interests, restoring Venezuelan oil production capacity, and ensuring that oil revenues are distributed under U.S. oversight.

Key Elements of the US-Venezuela Energy Framework

According to DOE’s January 7 fact sheet, the new framework includes the following components:

  • U.S.-Directed Crude Marketing: The U.S. government has begun marketing Venezuelan crude oil and oil products in global markets through selected commodity marketers and financial institutions.
  • Controlled Proceeds: Sale proceeds will settle into “U.S. controlled” accounts at internationally recognized banks prior to distribution “at the discretion of the U.S. government.”
  • Initial and Ongoing Sales: DOE said these oil sales are to begin “immediately,” with an anticipated initial volume of approximately 30 million to 50 million barrels, and to continue on an open-ended basis.
  • Selective Sanctions Rollbacks: The U.S. is “selectively” easing sanctions “to enable the transport and sale of Venezuelan crude and oil products” through authorized channels consistent with U.S. law.
  • Diluent and Equipment Imports: U.S. light crude (diluent) will be authorized for export to Venezuela to facilitate production and transport of heavy crude, alongside authorization for “select oil field equipment, parts, and services to immediately offset decades of production decline and drive near-term growth.”
  • Infrastructure Rehabilitation: The U.S. intends to support improvements to Venezuela’s electricity grid, which is viewed as critical to restoring oil production and broader economic activity.

Sanctions Status and Legal Reality

Despite DOE’s public statement regarding an intention to implement selective sanctions relief, the Venezuela sanctions regime remains intact, as no changes to the legal framework have yet been implemented by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).

Key points for compliance purposes include:

  • Sanctions Compliance Required: Policy announcements do not themselves modify sanctions obligations. U.S. persons remain bound by existing prohibitions absent new general licenses, specific licenses, or regulatory amendments.
  • SDN and Government Blocking Restrictions Remain Central: Dealings with blocked Venezuelan government bodies, state enterprises, private sector entities, individuals, and vessels continue to be prohibited unless explicitly authorized.

Except when operating pursuant to OFAC authorization and any other required authorization (e.g., under U.S. export controls), Venezuela-related oil, shipping, financing, and other transactions should continue to be treated as high risk.

What This Means for the Energy and Financial Services Industries

Energy Producers, Traders, and Refiners

For refiners — particularly U.S. Gulf Coast facilities configured for heavy crude — the framework signals the possible reintroduction of higher volumes of Venezuelan barrels into lawful supply chains. However, participation is expected to be tightly controlled and routed through U.S.-approved mechanisms. Companies should not assume broader market access absent explicit authorization.

Oilfield Services, Equipment, and Infrastructure Providers

The authorization of select equipment, services, and grid-related support creates potential opportunities, but these are likely to be accompanied by licensing conditions, end-use restrictions, and ongoing monitoring. Activity is expected to focus on stabilization and incremental production gains.

Commodity Trading, Shipping, and Logistics

Shipping companies, traders, and logistics providers remain exposed to sanctions risk if they engage outside approved channels. Enhanced diligence remains critical for vessel ownership, chartering arrangements, port calls, and cargo financing, particularly where Venezuelan-origin crude is involved.

Overall Industry Takeaway

The administration’s actions reflect a controlled reopening of Venezuelan oil markets rather than a broad normalization. Commercial opportunities will depend on formal OFAC implementation, not policy statements alone. Until actual regulatory change and/or guidance is issued, companies should proceed cautiously, ensure that any engagement is expressly authorized where required, and maintain enhanced compliance controls.

Looking Ahead

Market participants should closely monitor OFAC releases for new general licenses, FAQs, or regulatory amendments addressing Venezuelan oil, shipping, financing, and services. We expect further clarification to determine which market participants may engage, under what conditions, and with what compliance obligations. Still, for some companies, now is the time to begin the process of applying for specific authorization where required. We will continue to track developments and are available to advise on licensing strategies and sanctions risk assessments related to Venezuela.

Growing concerns about clinical autonomy, competition, and patient access spurred states to increasingly enact legislation targeted at private equity investment in health care last year.

The new year will likely bring more deals subject to state review, tighter regulatory guardrails, and increased scrutiny of highly leveraged transactions and serial acquisitions consolidating multiple medical practices.

Read the full article on Bloomberg Law.

U.S. Customs and Border Protection (CBP) has issued an interim final rule (the Rule) that will fundamentally change how customs refunds are paid. Effective February 6, 2026, CBP will, with limited exceptions, stop issuing paper refund checks and instead pay all refunds electronically via Automated Clearing House (ACH). The Rule implements federal law requiring electronic federal payments and aligns with Executive Order 14247, which requires that all federal payments and collections move away from paper checks and be conducted electronically. Comments on the Rule are due March 3, 2026, under docket USCBP-2025-1076.

Who Is Affected and What Is Changing

The Rule applies broadly to all CBP refund recipients, including importers, brokers, filers, sureties, service providers, facility operators, foreign trade zone operators, carriers, and any third parties designated on CBP Form 4811. Historically, most refunds (e.g., overpayments of duties, fees, taxes; refunds after liquidation/reliquidation; drawback; protest-related refunds; Harbor Maintenance Fee refunds) have been issued as paper checks by the U.S. Department of the Treasury (Treasury) and mailed to the importer or a designated agent. While ACH refunds have been available on an optional basis, under the Rule electronic refunds will now be the standard and, in most cases, required method of payment.

ACE Portal and ACH Enrollment Now Central

To receive refunds after February 6, 2026, most refund recipients must enroll in CBP’s ACH Refund program through the Automated Commercial Environment (ACE) Secure Data Portal (ACE Portal):

  • Importers who already participate in ACH Refunds will continue receiving electronic refunds without interruption, but should review and update banking information as needed via the ACH Refund Authorization tab in ACE.
  • Importers who are not yet enrolled must first obtain an ACE Portal account (if they do not already have one) and then complete the ACH Refund application in ACE, providing required banking details for a U.S. bank account.
  • Foreign importers must either establish a U.S. bank account or designate a third party (e.g., a customs broker) with a U.S. bank account to receive refunds on their behalf.

Existing CBP Form 4811 designations remain valid for identifying third-party refund recipients, but the designated third party must also enroll in ACH Refunds via ACE to receive funds electronically. If the third party does not enroll, the refund will default to the importer’s ACH Refund account. CBP emphasizes that Form 4811 must be submitted using a CBP‑approved method (including the ACE Portal “Notify Parties” functionality).

Waivers and the End of Routine Checks

Although the Rule effectively ends routine paper checks, it incorporates the waiver framework in 31 C.F.R. § 208.4. In limited hardship or other qualifying circumstances, CBP, in coordination with Treasury, may still issue a U.S. Treasury check. To seek a waiver and payment by check, an importer must contact CBP’s Revenue Division in writing and demonstrate that one of the regulatory waiver criteria applies. CBP and Treasury, however, expect these waivers to be rare, and CBP is planning and investing on the assumption that nearly all refunds will be electronic going forward.

Interest, Risk Allocation, and Compliance Responsibilities

The Rule also clarifies how interest is treated when refunds cannot be delivered because of missing or incomplete banking information. CBP remains obligated under 19 U.S.C. § 1505(b) to refund excess deposits generally within 30 days of liquidation or reliquidation, and interest under 19 U.S.C. § 1505(d) can accrue on late refunds. However, if CBP timely certifies an electronic refund but cannot complete the payment solely because the importer or designated third party failed to provide valid banking information, no interest will accrue on that refund. In other words, once CBP has done its part and the only barrier is your (or your agent’s) banking setup, the clock stops for interest purposes.

The Rule also underscores that:

  • It is the importer’s responsibility to ensure the accuracy of any third‑party designation (via Form 4811) and to notify CBP if information must be updated or revoked.
  • Importers remain responsible for providing and maintaining correct banking information in ACE; otherwise, refunds may be rejected and delayed until the ACH information is properly submitted and CBP notified.

Practical Takeaways for Importers and Other Refund Recipients

Those who receive CBP refunds should treat this as both a compliance and a cash management issue:

  • If you do not already have an ACE Portal account, plan to create one as soon as practicable and designate an account owner with appropriate internal authority.
  • Once in ACE, complete the ACH Refund Authorization using a U.S. bank account that aligns with your internal treasury controls and reconciliations.
  • Review and update any Form 4811 designations and coordinate with brokers or other third parties to ensure they also enroll in ACH Refunds if they are intended refund recipients.
  • For non‑U.S. entities, assess whether to open a U.S. bank account or rely on a trusted U.S. intermediary for refunds.
  • Consider whether you might qualify for a waiver under 31 C.F.R. § 208.4; if so, be prepared to substantiate and formally request that relief.

With the February 6, 2026, effective date approaching and comments due March 3, 2026, importers and other trade participants should begin planning now to avoid delayed or rejected refunds once paper checks are phased out.

Overview

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) recently announced an $11.5 million settlement of an enforcement action against a U.S.-based private equity and infrastructure investment firm (the firm) for violations of U.S. sanctions in connection with an investment indirectly backed by a sanctioned individual. The action provides important guidance on OFAC’s expectations regarding ownership, control, and indirect involvement by sanctioned persons, as well as the limits of relying on outside counsel when material facts are not fully disclosed. This is the latest in a series of similar enforcement actions by OFAC involving the same sanctioned individual and the complex trust structure he established to conceal his interest in U.S. investment funds, including a similar case in June involving a venture capital firm.

This latest case involved an investment in one of the firm’s funds by an offshore entity ultimately owned by the trust associated with the sanctioned individual and his family. The investment was initiated prior to the imposition of sanctions on the individual but continued afterward. The firm primarily dealt with the sanctioned individual’s nephew and representative. Outside counsel to the firm reviewed the trust arrangements and did not identify any clear role or ownership interest by the sanctioned individual, beyond being the original source of funds for the trust. The firm additionally received written confirmation from the investor entity that the sanctioned individual was “not affiliated with” it or with “any of the entities that directly or indirectly own it,” and that neither the investor entity “nor any of its Affiliates or any holder of any beneficial interest in the Interest … [nor] any Related Person, is or will be, nor will any amounts contributed by [the investor entity] to the Partnership be directly or indirectly derived from, invested for the benefit of, or related in any way to the activities of” a sanctioned person.

The matter underscores that U.S. sanctions compliance is not limited to a mechanical application of the “50 Percent Rule,” but instead requires an assessment of practical control, source of funds, and economic reality. Under OFAC’s 50 Percent Rule, any entity that is owned, directly or indirectly, 50% or more, individually or in the aggregate, by one or more blocked persons is itself considered blocked, even if the entity itself does not appear on OFAC’s Specially Designated Nationals and Blocked Persons List. However, the 50 Percent Rule does not reflect the full extent of OFAC’s reach. OFAC’s blocking rules apply to any transactions or dealings that directly or indirectly involve the property or “interests in property” of a blocked person. The term “interests in property” is defined very broadly to include, among other things, “services of any nature whatsoever, contracts of any nature whatsoever, and any other property, real, personal, or mixed, tangible or intangible, or interest or interests therein, present, future, or contingent.” In short, any involvement by a blocked person should be carefully evaluated under OFAC’s regulatory standards, whereas the firm’s analysis focused on formal ownership interests.

This case also highlights the pitfalls of overreliance on contractual representations, particularly when they are vaguely worded or otherwise not clear and complete, and when the available facts raise questions about the accuracy of the representations. OFAC found the firm “had reason to know that the attestation was inaccurate,” due to its knowledge of the previous involvement by the sanctioned person and the continuing involvement of his nephew and representative.

OFAC’s Core Findings

According to OFAC, the firm evaluated sanctions risk primarily as a formal ownership analysis, focusing on whether a sanctioned person directly or indirectly met the 50% ownership threshold. In doing so, OFAC found that the firm:

  • Failed to sufficiently assess whether a sanctioned individual exercised practical control or decision-making authority over the relevant counterparty;  
  • Relied on outside counsel for sanctions advice without providing all material facts, including facts suggesting the sanctioned individual was the true source of funds and ultimate decision-maker;  
  • Proceeded with transactions despite red flags indicating that intermediaries or proxies may have been used to obscure the sanctioned person’s involvement; and  
  • Did not adequately escalate or probe these issues internally once such red flags became apparent.  

OFAC emphasized that sanctions determinations turn on substance over form, and that reliance on formal ownership percentages alone is insufficient where facts suggest indirect involvement by a blocked person.

Substance Over Form: Practical Control and Economic Reality

A central lesson from this enforcement action is that OFAC looks beyond formal legal structures. While the 50 Percent Rule remains a critical compliance principle, OFAC indicated that:

  • Sanctions risk assessments should consider who actually controls the entity, directs its activities, and, most importantly, provides the economic backing; and  
  • The use of opaque ownership structures, intermediaries, or proxies are red flags that trigger additional due diligence expectations.  

In short, OFAC found that the firm proceeded, despite the apparent red flags, based on an incomplete or superficial analysis.

Reliance on Counsel Is Not Always a Defense

OFAC specifically addressed the firm’s reliance on outside counsel, noting that such reliance did not mitigate liability where counsel was not provided a complete and accurate factual record. In this case, the firm failed to disclose complete information suggesting indirect involvement by a sanctioned person.

OFAC reiterated that while legal advice can be a mitigating factor in some cases, it does not shield a company from enforcement if the company ignores red flags or withholds material information from its advisors. Ultimate responsibility for compliance remains with the U.S. person engaging in the transaction.

Aggravating and Mitigating Factors Considered by OFAC

Aggravating Factors

OFAC identified several factors that weighed against the firm, including:

  • Awareness of facts indicating a sanctioned person’s indirect involvement;  
  • Failure to adequately investigate or escalate those facts;  
  • Failure to voluntarily self-disclose to OFAC the apparent violations; and  
  • The sophistication of the firm and its access to compliance resources.  

Mitigating Factors

OFAC also recognized mitigating considerations, including:

  • Cooperation with OFAC during the investigation;  
  • Steps taken to enhance sanctions compliance following the identified conduct; and  
  • The absence of prior OFAC violations.  

These factors influenced OFAC’s enforcement posture and penalty determination but did not eliminate liability.

Broader Implications Across Industries

Although this matter involved a financial investor, OFAC’s guidance applies broadly. Knowledge of a counterparty’s ownership and control structure is fundamental to sanctions compliance in all industries, including manufacturing, insurance, energy, technology, logistics, and professional services.

OFAC expects parties to understand not only who they are contracting with, but also who stands behind the counterparty economically and operationally.

Key Compliance Takeaways for Companies

Enhanced Due Diligence Is Critical

Companies should implement enhanced measures where risk indicators are present, including:

  • Beneficial ownership analysis beyond formal shareholdings;  
  • Source-of-wealth and source-of-funds reviews;  
  • Assessment of governance rights and decision-making authority; and  
  • Scrutiny of intermediaries and financing arrangements.  

Escalation and Documentation Matter

When red flags arise, companies should:

  • Escalate issues to compliance and legal leadership;  
  • Document investigative steps and risk assessments; and  
  • Reassess transactions in light of evolving facts or sanctions developments.  

Provide Advisors With a Complete Factual Picture

To rely meaningfully on legal or compliance advice, companies must share all material facts, including uncomfortable or ambiguous information. Selective disclosure may undermine both the advice received and any potential mitigation credit.

Conclusion

This enforcement action reinforces that U.S. sanctions compliance is grounded in economic reality and practical control, not solely formal ownership thresholds. OFAC expects companies to identify, investigate, and respond to indicators of indirect involvement by sanctioned persons, to conduct enhanced due diligence when warranted based on risk indicators, and to ensure that advisors are provided with a full and accurate factual record. Failure to do so can result in enforcement exposure.

Make sure to visit Troutman Pepper Locke’s Regulatory Oversight blog to receive the most up-to-date information on regulatory actions and subscribe to our mailing list to receive a monthly digest.

Regulatory Oversight will provide in-depth analysis into regulatory actions by various state and federal authorities, including state attorneys general and other state administrative agencies, the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC). Contributors to the blog will include attorneys with multiple specialties, including regulatory enforcement, litigation, and compliance.

In This Issue:
Regulatory Oversight Podcast Updates

We want to thank you for your support of our Regulatory Oversight blog and podcast. We saw a strong response to the 2025 Regulatory Oversight podcast series, and we have already received helpful suggestions from many of you. We now hope to broaden that feedback to our full audience. Please take 30 seconds to complete this short survey and share your thoughts.

The 12 Days of Regulatory Insights

We were thrilled to bring you our second annual podcast series, “The 12 Days of Regulatory Insights,” this past holiday season. This 12-part series covered a variety of critical regulatory topics, offering concise and insightful discussions from members of our Regulatory Investigations, Strategy + Enforcement practice group, State Attorneys General team, and several esteemed colleagues across various areas of the firm. The full series can be found below.

Speakers: Barry Boise, Chris Carlson, Kirk Dillard, David Dove, Lauren Fincher, Clay Friedman, Bryan Haynes, David Navetta, Brian O’Reilly, Stephen Piepgrass, Ron Raether, Ghillaine Reid, Agustin Rodriguez, Ashley Taylor, Michael Yaghi, Gene Fishel, Nam Kang, Christy Matelis, Cole White, and Stephanie Kozol

Artificial Intelligence Updates

New York Enacts Laws Requiring Advertising Disclosures and NIL Consent for Artificial Intelligence
By Troutman Pepper Locke State Attorneys General Team

On December 11, 2025, New York Governor Kathy Hochul signed into law two bills governing the use of artificial intelligence (AI) in advertising. The governor’s office described the bills as “first-in-the-nation legislation to protect consumers and boost AI transparency in the film industry.” Both bills unanimously passed through the New York Legislature.

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New Jersey Adopts Disparate Impact Rules Under LAD, With Broad Reach Across Housing, Lending, Employment, And Other Fields, With Specific Guidance On AI
By Matthew Berns, Lori Sommerfield, and Chris Willis

On December 17, New Jersey announced its adoption of what its Attorney General is calling the “most comprehensive state-level disparate impact regulations in the country.” Effective December 15, 2025, the Division on Civil Rights’ (DCR) new rules under the New Jersey Law Against Discrimination (LAD) codify guidance on disparate impact discrimination across housing, lending, employment, places of public accommodation, and contracting.

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State Enforcement in the Wake of Trump Executive Order Targeting State Regulation of AI
By Troutman Pepper Locke State Attorneys General Team

On December 11, President Donald Trump signed an executive order (EO) that establishes a national artificial intelligence (AI) regulatory framework and attempts to preempt enforcement of state AI laws. Titled “Ensuring a National Policy Framework for Artificial Intelligence,” the EO states that “[i]t is the policy of the United States to sustain and enhance the United States’ global AI dominance through a minimally burdensome national policy framework for AI.” This latest effort follows bipartisan opposition in Congress and among state attorneys general (AGs) to previous legislative attempts this year to supersede state AI laws. While the order seeks to minimize a burdensome AI regulatory patchwork, compliance will remain complex given various state enforcement tools.

Read more

Health Care + Life Sciences Updates

Texas Takes Aim at Epic Systems in Sweeping Challenge to EHR Data Control
By Troutman Pepper Locke State Attorneys General Team

Texas Attorney General (AG) Ken Paxton has launched another challenge to the electronic health record (EHR) industry, filing suit against Epic Systems Corporation. At its core, the lawsuit accuses Epic of transforming patient medical records into a private gatekeeping tool — one that allegedly blocks competition, restricts lawful access to data, and undermines parental rights under Texas law.

Read more

AG Settlement Highlights Risk Around Charity Care Refunds for Washington Hospitals
By Troutman Pepper Locke State Attorneys General Team

Washington Attorney General (AG) Nick Brown announced a settlement with Central Washington Health Services Association, doing business as Confluence Health, over its handling of charity care refunds. The AG alleges that since 2021, thousands of low-income patients at Confluence’s two hospitals made payments toward their hospital bills and were later approved for charity care under Washington’s Charity Care Act, but did not receive refunds of those payments. The act, which was expanded in 2022, requires most Washington hospitals to provide free or discounted care to patients with household incomes up to 400% of the federal poverty level.

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Texas AG Secures $41.5M Settlement With Pfizer and Tris Pharma Over Allegedly Adulterated ADHD Drug: What Health Care Stakeholders Should Know
By Troutman Pepper Locke State Attorneys General Team

The Texas attorney general (AG) announced a $41.5 million settlement with Pfizer and Tris Pharma related to allegations that the companies provided adulterated pharmaceutical products to children and manipulated testing to secure Medicaid reimbursement in violation of the Texas Health Care Program Fraud Prevention Act (THFPA).

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Gaming and Prediction Markets Updates

Prediction Market Platforms Launch Coalition Focused on Federal Oversight Issues
By Stephen C. Piepgrass and Ayana Brown

Popular prediction markets platforms recently announced that they have formed the Coalition for Prediction Markets. According to the coalition’s website, it aims to unite exchanges, brokers, and advocates to expand consumer access to safe, transparent, and integrity-driven prediction markets in the U.S. The coalition contends that prediction markets currently operate under a federal framework, but that framework is being threatened by state regulators “seeking to block consumer access and extend their own authority.” This messaging signals that prediction market operators are prepared to vigorously oppose state regulation in an effort to preserve exclusive federal oversight.

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Kalshi Files New Lawsuit Challenging Enforcement Actions From Gaming Regulators in Connecticut
By Stephen C. Piepgrass and Cole White

In early December 2025, federally regulated derivatives exchange KalshiEX LLC filed suit in the U.S. District Court for the District of Connecticut challenging a cease-and-desist order issued by the Connecticut Department of Consumer Protection (DCP) directing Kalshi to halt operations in the state. The DCP contends that Kalshi, along with platforms such as Robinhood and Crypto.com, operates an unlicensed and illegal sports betting platform in violation of Connecticut law. According to the agency, Kalshi’s sports event contracts fall squarely within the state’s definition of sports wagering and expose consumers to risk because they operate outside Connecticut’s regulated gaming framework, lack required integrity controls, and are not subject to consumer protection oversight. Connecticut officials have emphasized that “a prediction market wager is not an investment,” and that Kalshi’s platform offers no recourse for consumers under state law if disputes arise.

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Nevada Judge Rules Prediction Market Firm Falls Under State Gaming Laws
By Stephen C. Piepgrass and Ayana Brown

Many prediction market firms have sought to avoid state regulation by emphasizing how their services differ from traditional sports betting. They characterize their offerings as “event contracts” or “swaps,” which are only subject to Commodity Futures Trading Commission (CFTC) oversight and note that they operate peer‑to‑peer exchanges, earning revenue from transaction fees rather than customer losses. Many state regulators have disagreed with this argument, however, asserting that event contracts cannot be distinguished from state-regulated gaming. Federal courts in various states have reached different conclusions on this issue. A Nevada federal court has now weighed in, ruling that some of these services fall under state gaming law.

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CFTC Approval Allows Polymarket to Reenter the U.S. Market
By Stephen C. Piepgrass and Zoe Schloss

The Commodity Futures Trading Commission (CFTC) approved a plan submitted by commodities futures trading platform Polymarket to resume limited U.S. operations through a registered intermediary. The approval permits the platform to offer select real money event contracts within a federally supervised structure.

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Marketing + Advertising Updates

Iowa AG Obtains Court Injunction and Civil Penalties Against Stem Cell Company in Four-Day Trial
By Troutman Pepper Locke State Attorneys General Team

After a four-day trial, Iowa Attorney General (AG) Brenna Bird obtained a ruling and judgment against Omaha-based stem cell businesses and its owner/CEO for deceptively marketing “regenerative medicine” stem cell injections to Iowans. The court ordered more than $800,000 in restitution, $180,000 in civil penalties, including enhanced civil penalties for targeting elderly persons, and permanently enjoined the company from committing acts or practices that the court deemed in violation of the Iowa Consumer Fraud Act.

Read more

HelloFresh Agrees to Oregon AVC Over Alleged Discount and ‘Free’ Claims
By Troutman Pepper Locke State Attorneys General Team

The Oregon Department of Justice and Grocery Delivery E-Service USA, Inc. d/b/a HelloFresh (HelloFresh), recently filed an Assurance of Voluntary Compliance (AVC) in Oregon Circuit Court to resolve allegations by the Department of Justice (DOJ). HelloFresh is a meal-kit company, providing meal kits, ready-to-eat meals, and other products directly to consumers.

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Tobacco Updates

Federal Court Bars Enforcement of Virginia Vapor Directory, Pending Fourth Circuit Ruling
By Bryan Haynes, Agustin Rodriguez, and Zie Alere

We recently covered this case here, in which a small manufacturer and retailer sued the Virginia attorney general (AG) and tax commissioner in the U.S. District Court for the Eastern District of Virginia, seeking to enjoin enforcement of the vapor product directory law. See Nova Distro, Inc., et al. v. Miyares et al., No. 3:25-cv-857 (E.D.V.A.). There, we also noted another ongoing case challenging a similar law in North Carolina, for which oral argument is scheduled before the U.S. Court of Appeals for the Fourth Circuit on January 29, 2026. See Vapor Technology Association, et al. v. Wooten et al., No. 25-1745 (4th Cir.).

Read more

Virginia’s Vapor Product Directory Challenged in Federal Court
By Bryan Haynes, Agustin Rodriguez, and Zie Alere

Earlier this fall, a small manufacturer and retailer (the plaintiffs) sued Virginia Attorney General (AG) Jason Miyares and Tax Commissioner James Alex (the defendants) in the U.S. District Court for the Eastern District of Virginia, seeking to enjoin their enforcement of Virginia’s vapor product directory regime, Va. Code Ann. §§ 59.1-293.14 to .21, which the General Assembly passed in 2024.

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Hemp Updates

Congress Narrows Federal Definition of ‘Hemp,’ Effectively Banning Most Intoxicating Hemp Products
By Agustin Rodriguez, Zie Alere, and Cole White

Congress has enacted H.R. 5371, the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026. Section 781 of the law substantially amends the Agricultural Marketing Act’s definition of “hemp,” tightening the THC threshold and explicitly excluding several categories of hemp-derived cannabinoid products from the definition. Because the Controlled Substances Act (CSA) excludes “hemp” by cross-reference to the Agricultural Marketing Act, narrowing the hemp definition will push many currently marketed intoxicating hemp products back into Schedule I status under the CSA once these changes take effect.

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Other State AG News

Texas Investigating Global Retail Over Labor Practices, Product Safety, and Privacy Practices
By Troutman Pepper Locke State Attorneys General Team

On December 1, Texas Attorney General (AG) Ken Paxton issued a press release announcing an investigation into Shein US Services LLC Corporate and its affiliates (Shein).

Read more

New Jersey Governor-Elect Sherrill Nominates Jennifer Davenport as New Jersey AG
By Troutman Pepper Locke State Attorneys General Team

On Monday, New Jersey Governor-elect Mikie Sherrill announced that she will nominate Jennifer Davenport to serve as the next attorney general (AG) of New Jersey. Davenport, a lifelong New Jersey resident, is currently employed at PSEG, where she serves as deputy general counsel and chief litigation counsel and previously served as senior director – compliance. Her nomination signals a continuation of strong enforcement and regulatory focus, informed by both extensive public-sector experience and recent private-sector roles.

Read more

Delaware Imposes Nearly $1M Penalty on Investment Adviser for Registration, Supervision, and Recordkeeping Failures
By Troutman Pepper Locke State Attorneys General Team

On November 21, Delaware Attorney General Kathy Jennings’s Investor Protection Unit (IPU) announced a $995,180 penalty against Kovack Advisors, Inc. (Kovack) for a series of violations of the Delaware Securities Act. The enforcement action — resolved through a consent order — highlights the IPU’s growing focus on registration accuracy, supervisory systems, and books-and-records compliance for investment advisers operating in the state.

Read more

Stephanie Kozol, Senior Government Relations Manager – State Attorneys General, also contributed to this newsletter.

Our Cannabis Practice provides advice on issues related to applicable federal and state law. Marijuana remains an illegal controlled substance under federal law.

This article was originally published on Law360 and is republished here with permission as it originally appeared on January 6, 2026.

Trump v. Slaughter, argued before the U.S. Supreme Court in December, likely will put an end to the era of independent federal regulatory agencies.

Even if the court does not formally overrule the 90-year-old precedent allowing Congress to protect some agency heads from at-will removal, and even if one or two agencies maintain their independence, Slaughter is expected to be a blockbuster decision.

Slaughter will be only the latest in a series of major cases in which the Roberts court has reshaped the separation of powers and administrative law.

In the last three years alone, the court has cast aside the Chevron doctrine that previously governed judicial review of agencies’ statutory interpretations,[1] invited district courts to enjoin ongoing agency proceedings when the respondent challenges the agency’s structure or existence,[2] and formally embraced a new “major questions doctrine” that requires clear congressional authorization for agencies to take particularly consequential actions.[3]

Meanwhile, the court’s interim docket points toward more significant changes to come — including new limits on the availability of judicial review under the Administrative Procedure Act.[4]

These pathbreaking cases are often described as part of a conservative project to rein in the federal administrative state that took shape during the Progressive and New Deal eras.

This characterization may not tell the whole story, but it is consistent with the fact that the court has reallocated government functions at the federal level, while largely ignoring their distribution in the states. That may soon change.

Although it had no immediate impact beyond the federal government, the high court’s 2024 decision in U.S. Securities and Exchange Commission v. Jarkesy laid the groundwork for the court to expand its separation-of-powers agenda to state and local government.[5]

And while Jarkesy’s latent potential to disrupt state administrative law was little noticed at the time, Justice Neil Gorsuch recently charted the likely path forward in a statement concerning a denial of certiorari.

This article identifies steps that regulated parties and state and local governments alike can take now to anticipate Jarkesy’s eventual application beyond the federal government.

SEC v. Jarkesy

Jarkesy is one of the most significant Supreme Court decisions in generations concerning the allocation of adjudicative responsibility between federal agencies and the courts, and the decision reflects a significant break with precedent.

The line of cases leading up to Jarkesy draws both on Article III’s vesting clause and on the Seventh Amendment’s civil jury trial right to determine when Congress may permissibly assign claims to a federal agency for adjudication.

Together, these provisions have been construed to permit Congress to allocate to juryless, non-Article III tribunals adjudication of claims involving public rights rather than private rights.

But the dividing line between public and private rights has never been particularly stable. In its 1985 decision in Thomas v. Union Carbide Agricultural Products Co., the court has described the public rights doctrine as an “area of frequently arcane distinctions and confusing precedents.”[6]

One thing that had seemed clear enough until Jarkesy was that Congress could create new statutory obligations, impose civil penalties for their violation, and tap a federal agency to enforce the law in administrative proceedings where the fact-finding is done by an agency official.

This was so, a unanimous court had explained in 1977’s Atlas Roofing Co. v. Occupational Safety and Health Review Commission, “even if the Seventh Amendment would have required a jury where the adjudication of those rights is assigned … to a federal court of law instead of an administrative agency.”[7]

Atlas Roofing acknowledged the public rights doctrine as a limit on the types of cases that Congress could allocate to administrative tribunals, but defined public rights broadly to include “cases in which the Government sues in its sovereign capacity to enforce public rights created by statutes within the power of Congress to enact.”[8]

The workplace safety laws at issue in Atlas Roofing fit that description, and so would many other statutes allowing agency adjudication. In Jarkesy, the court considered whether the SEC could pursue civil penalties for securities fraud through administrative proceedings.

In a 6-3 opinion by the chief justice, the court’s conservative justices concluded that the Seventh Amendment entitles targets of such SEC enforcement actions to a jury trial. The agency cannot force its targets to defend themselves before an administrative law judge or other agency official.

The court first addressed whether the SEC’s enforcement action was legal in nature, and therefore implicated the Seventh Amendment. On this point, the court’s analysis focused on the nature of the remedy sought — civil penalties — and the close relationship between securities fraud and common law fraud, rather than on the statutory nature of the SEC’s cause of action.

Next, the court rejected the SEC’s invocation of the public rights doctrine. Emphasizing that the doctrine is an exception to the default rule of Article III adjudication, the court found that the SEC’s enforcement proceeding did not fall within any historically rooted category of public rights cases — e.g., revenue collection, customs enforcement, immigration, public lands, public benefits.

The court sharply distinguished, without expressly overruling, Atlas Roofing, while characterizing Atlas Roofing’s broad formulation of the public rights doctrine as “a departure from our legal tradition.”[9]

Justice Gorsuch authored a concurring opinion, which Justice Clarence Thomas joined. The concurrence suggested that the court could just as easily have based its decision on Article III or the due process clause.

These constitutional provisions work together with the Seventh Amendment, Justice Gorsuch wrote, to guarantee that the SEC’s targets can insist upon adjudication in a forum that includes a jury, an independent judge and traditional procedural safeguards.

Justice Sonia Sotomayor, dissenting for herself and Justices Elena Kagan and Ketanji Brown Jackson, criticized the majority for upending long-standing practice and precedent, including most notably Atlas Roofing.

Congress has relied on the court’s precedents in enacting more than 200 statutes that collectively authorize dozens of federal agencies to assess civil penalties in administrative adjudications, the dissent noted, and had “no reason to anticipate the chaos [that the] majority would unleash after all these years.”[10]

Time will tell if Jarkesy disrupts federal administrative adjudication as much as the dissent predicted.

The majority’s opinion disclaimed any attempt to definitively explain the difference between public and private rights, and its decision to diverge from Atlas Roofing while declining to overrule it has led to uncertainty in the lower courts, including a circuit split that the government has petitioned the court to resolve by hearing Federal Communications Comission v. AT&T Inc.[11]

So far, lower courts generally have recognized that Jarkesy’s reach is not limited to actions seeking civil penalties for securities fraud. They have applied Jarkesy to prohibit agencies’ use of administrative proceedings to enforce consumer data privacy[12] and employment conditions,[13] and to seek back wages,[14] while further expansions of Jarkesy continue to be litigated.

Regardless of Jarkesy’s eventual scope, federal agencies now must go to court in many cases that they previously pursued administratively. And in court, the fact-finding will be done by a jury, rather than by an administrative law judge or other agency personnel.

Applying Jarkesy to the States

Much of the early commentary on Jarkesy focused on the decision’s disruption of administrative adjudication at the federal level, where its impact was immediate. Viewed this way, Jarkesy looks a lot like the court’s other recent groundbreaking separation of powers and administrative law decisions.

Yet, unlike those other decisions, Jarkesy carries the potential to disrupt state administrative law. Until recently, that possibility has been often overlooked.

Key to understanding Jarkesy’s potential impact on the states is the legal hook on which the majority hung its decision. The Constitution’s vesting clauses — which underlie many of the court’s separation of powers decisions — apply exclusively to the federal government.[15]

That is likewise true for the Administrative Procedure Act, which drove the court’s rejection of Chevron deference.[16] Supreme Court decisions applying these authorities do not bind the states, even if state courts may take cues from the Supreme Court in applying analogous provisions of state law.

The majority opinion in Jarkesy stands on different footing. Even though the concurring and dissenting opinions both suggested that the case might just as readily be understood as implicating Article III, the majority rested its decision on the Seventh Amendment alone. That framing opens the door to Jarkesy’s application to state and local government.

To be sure, the Supreme Court held more than a century ago that the Seventh Amendment’s civil jury trial right is not enforceable against the states.[17] And for as long as that precedent holds, the Seventh Amendment has no more bearing on state administrative law than do the vesting clauses and the Administrative Procedure Act.

But there is reason to think that may change.

The precedent holding that the Seventh Amendment does not apply to the states long predates the era of selective incorporation of the Bill of Rights. Beginning in the 1960s, the Supreme Court has read the Fourteenth Amendment to make many rights applicable to the states.

That process has continued into the era of the Roberts court, which has incorporated the Second Amendment’s right to bear arms, the Sixth Amendment’s requirement of juror unanimity in criminal cases and the Eighth Amendment’s excessive fines clause, overturning contrary precedent along the way.[18]

Today, the right to a civil jury trial is one of the few rights that remains unincorporated, and it is not hard to imagine the court incorporating the right in the near future. This term, however, the court passed up one opportunity to reconsider its incorporation.

The October denial of certiorari in Thomas v. Humboldt County, California, drew a statement from Justice Gorsuch, who wrote that Thomas was not the best vehicle for considering the issue, but that the court should confront the question soon.[19] Pointing to Jarkesy, he explained that nonincorporation of the Seventh Amendment creates “a two-tiered system of justice.”

He added, “When a federal agency accuses someone of fraud and seeks civil penalties, the Seventh Amendment guarantees that individual the right to have the case heard by a jury of his peers — not by other agency officials who work side by side with those bringing the charges.” Not so for the target of state and local enforcement actions.

That Justice Gorsuch would want to apply Jarkesy’s holding to state administrative enforcement is no surprise. After all, his concurrence in Jarkesy maintained that the due process clause — which already binds the states — provided an equally good doctrinal basis for deciding the case.

Whether or not a majority of the court ultimately backs incorporation of the Seventh Amendment — and with it, Jarkesy — parties to state and local regulatory proceedings continue to invoke their civil jury trial rights, and the number of possible vehicles for the court to take up the question continues to grow.

Anticipating Incorporation

While the full implications of Jarkesy for state administrative adjudication unfold, regulated parties and regulators can act now to anticipate the decision’s eventual impacts.

Particularly after Justice Gorsuch’s statement in Thomas, targets of state administrative enforcement should evaluate whether to assert their jury trial rights either as a defense to the administrative proceeding, in the context of affirmative litigation to enjoin the administrative proceeding, or merely to preserve the argument for future litigation.

And they should consider invoking those rights under both the federal constitution and the relevant state constitution, which state courts may interpret to require at the state level what Jarkesy requires for the federal government.

Meanwhile, state legislators and regulators may seek to mitigate Jarkesy’s disruptive potential by ensuring that a jury trial is available — at least as an option — for claims that are legal in nature.

Making jury trials available under state law for statutory claims that are potentially within Jarkesy’s reach will reduce the risk that an entire statutory scheme later becomes unenforceable.

Congress may have had little reason to anticipate that Jarkesy would upend federal administrative adjudications, as Justice Sotomayor noted. But no one should be surprised if the Supreme Court takes its campaign to remake administrative law to the states. And there is time to prepare.


Matthew J. Berns is counsel at Troutman Pepper Locke LLP. He previously served in senior leadership roles in the New Jersey Attorney General’s Office and as a trial attorney for the U.S. Department of Justice.

Ryan J. Strasser is a partner at the firm.

Troy C. Homesley is an associate at the firm.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Loper Bright Enters. v. Raimondo , 603 U.S. 369 (2024).

[2] Axon Enter. Inc. v. FTC , 598 U.S. 175 (2023).

[3] West Virginia v. EPA , 597 U.S. 697 (2022).

[4] See, e.g., Dep’t of State v. AIDS Vaccine Advoc. Coal. , No. 25A269, 2025 WL 2740571 (U.S. Sept. 26, 2025); Nat’l Insts. of Health v. Am. Pub. Health Ass’n , 145 S. Ct. 2658 (Aug. 21, 2025); McMahon v. New York , 145 S. Ct. 2643 (July 14, 2025).

[5] 603 U.S. 109 (2024).

[6] Thomas v. Union Carbide Agric. Prods. Co. , 473 U.S. 568, 583 (1985).

[7] 430 U.S. 442, 455 (1977).

[8] Id. at 450.

[9] Jarkesy, 603 U.S. at 138 n.4.

[10] Id. at 167-68 (Sotomayor, J., dissenting).

[11] Compare AT&T Inc. v. FCC , 149 F.4th 491, 503 (5th Cir. 2025), with Verizon Comms. Inc. v. FCC , 156 F.4th 86, 105-08 (2d Cir. 2025), and Sprint Corp. v. FCC , 151 F.4th 347, 359 n.2 (D.C. Cir. 2025).

[12] AT&T Inc. v. FCC, 149 F.4th 491 (5th Cir. 2025).

[13] Sun Valley Orchards LLC v. U.S. Dep’t of Labor , 148 F.4th 121 (3d Cir. 2025).

[14] Id.

[15] See, e.g., Mayor of Philadelphia v. Educ. Equal. League , 415 U.S. 605, 615 n.13 (1974); Sweezy v. New Hampshire , 354 U.S. 234, 255 (1957).

[16] See 5 U.S.C. § 551(1).

[17] Minneapolis & St. Louis R.R. Co. v. Bombolis , 241 U.S. 211 (1916).

[18] Ramos v. Louisiana , 590 U.S. 83 (2020); Timbs v. Indiana , 586 U.S. 146 (2019); McDonald v. City of Chicago , 561 U.S. 742 (2010).

[19] No. 24-1180, 2025 WL 2906470 (U.S. Oct. 14, 2025).