New Executive Order Seeks to Limit Stock Buy Backs and Executive Compensation for Underperforming Defense Contractors (Part 2)

(This is the second of two alerts examining this issue.)
In Part 1 of this client alert, we briefed the substance of President Trump’s January 7, 2025, Executive Order (EO) titled “Prioritizing the Warfighter in Defense Contracting” and provided preliminary observations. As we detailed, the EO gives broad discretion to the U.S. Secretary of War to designate underperforming contractors and directs the Secretary, within 30 days of the EO’s issuance and on an ongoing basis thereafter, to notify defense contractors of such designations. The 30-day deadline for the Secretary to designate underperforming contracts is February 6, 2026. Contractors receiving a notice of underperformance on February 6 will only have until Saturday, February 21 to submit to the Secretary a remediation plan that has the approval of their Board of Directors. While the EO directs the Secretary to allow fifteen days for contractors to submit a Board-approved remediation plan, the EO also allows the Secretary to initiate immediate action if the contractor and Secretary reach an impasse during the 15-day negotiation window. Part 1 of this Client Alert advised defense contractors to identify issues related to delivery, quality, schedule and cost of their existing defense contracts. This second part expounds upon how organizations can best prepare to react to underperformance notices from the Secretary.

Congressional Investigations to Take Center Stage in 2026

With a narrow Republican majority in the House, a crowded election-year calendar and the midterm elections already looming, congressional leaders are leaning heavily on oversight and investigations as their tool of choice. Passing major legislation will be difficult. Investigations, by contrast, can be fast, flexible and highly visible—and they allow lawmakers to shape policy debates, apply pressure and generate headlines without moving a bill.

New Executive Order Seeks to Limit Stock Buy Backs and Executive Compensation for Underperforming Defense Contractors

On January 7, 2026, President Donald Trump issued the “Prioritizing the Warfighter in Defense Contracting” Executive Order (EO). The EO directs the U.S. Secretary of War (Secretary) to establish a process for reviewing defense contractors for critical weapons, supplies and equipment that, as determined by the Secretary, are underperforming on their contracts; have not invested sufficient capital in necessary production capacity; have not sufficiently prioritized U.S. government contracts; or maintain insufficient production speed. The EO does not provide guidance as to any specific criteria to be used in determining what constitutes underperformance, granting full discretion to the Secretary.

Revenge of the Lawn: The Fifth Circuit Supports Fund Manager Social Security Tax Planning in Sirius Solutions

In Richard Brautigan’s 1971 novella Revenge of the Lawn, an ordinary, inanimate bit of outdoor space strikes back in unforeseen and disruptive ways when mistreated. (The scenes with the geese are priceless.) A powerful analogy can be drawn from this story about the revenge of little things to the mass challenges made by the Internal Revenue Service (IRS) to limited partnership (LP) structures employed by private fund managers to mitigate the impact of 3.8% social security taxes. The LP structures were popular until the 2023 Tax Court decision in Soroban Capital Partners v. Commissioner upended such planning. While a 2024 Tax Court case supported the IRS’s challenges to LP tax planning, on January 16, 2026, in Sirius Solutions, I, LLP v. Comm’r, the Fifth Circuit Court of Appeals held that these strategies work to prevent the imposition of self-employment taxes.

Early EU and UK Responses to President Trump’s Announcement of Tariffs Linked to Greenland and Potential Paths Forward

On January 17, President Trump posted on social media that the United States would impose a 10% tariff effective February 1 on eight European countries (France, Germany, UK, Netherlands, Denmark, Norway, Sweden and Finland) until those countries accept his demand that the Danish Realm sell Greenland to the United States. The social media post indicated that the tariff rate would rise to 25% on June 1, 2026, if no “deal is reached for the Complete and Total Purchase of Greenland.” As of publication of this alert, the Trump administration has yet to publish any Executive Order or other formal announcement, and circumstances on the ground could change rapidly with contemporaneous political discussions over Greenland in Davos.

FTC Announces HSR Threshold and Filing Fee Increases for 2026 Transactions

As a result of the increase in the U.S. Gross National Product (GNP) for 2025, the Federal Trade Commission (FTC) has announced an increase in the jurisdictional filing thresholds for the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). The minimum size of transaction threshold will increase by $7.5 million, a 5.9% increase, to $133.9 million. The thresholds determine whether parties involved in proposed mergers, consolidations, or other acquisitions of voting securities, assets, or unincorporated interests must notify the FTC and the Antitrust Division of the U.S. Department of Justice of a proposed transaction and comply with a mandatory waiting period before the transaction may be consummated. The revised thresholds will take effect on February 17, 2026. Until then, the current $126.4 million threshold is still in effect.

FCC Announces Seminal Enforcement Action for Violating Team Telecom Commitments

On January 8, 2026, the U.S. Federal Communications Commission (FCC) announced the resolution of a first-of-its-kind enforcement action targeting Marlink Inc. (Marlink) for violations of its international section 214 and earth station authorizations (Authorizations), which had been conditioned on compliance with commitments and undertakings in a 2022 Letter of Agreement (LOA) with the Committee for the Assessment of Foreign Participation in the U.S. Telecommunications Service Sector (Team Telecom). Following a referral from the U.S. Department of Justice (DOJ), the FCC Enforcement Bureau uncovered a continuing failure to comply with commitments to restrict foreign employee access to U.S. customer information and communications infrastructure (U.S. Records), absent prior approval from the DOJ. The FCC and Marlink entered into a consent decree, including monetary forfeiture, compliance plan, and revision of internal controls, to resolve the violation of FCC rules.

New Year, New Benefits: Trump Accounts Offer a New Opportunity for Employer-Sponsored Benefits

On July 4, 2025, President Trump signed into law the One, Big, Beautiful Bill Act (OBBBA), which, among many other provisions, created a new type of tax-favored account for children known as a “Trump Account.” On December 29, 2025, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued Notice 2025-68, outlining their intent to issue regulations under newly enacted Section 530A of the Internal Revenue Code (IRC) and providing extensive interim guidance.

President Trump Signs Holding Foreign Insiders Accountable Act into Law

On December 18, 2025, President Trump signed the 2026 National Defense Authorization Act, which includes the Holding Foreign Insiders Accountable Act (the HFIAA), expanding the scope of beneficial ownership reporting obligations to the directors and officers of foreign private issuers (FPIs), effective on March 18, 2026. The HFIAA amends Section 16(a) of the Securities Exchange Act of 1934 (the Exchange Act) such that securities issued by FPIs will no longer be exempt from Section 16(a)’s disclosure requirements with respect to such FPI’s officers and directors.

Data Center Development at Brownfields Sites

Due to an unprecedented surge in data creation and consumption driven primarily by the rapid rise of artificial intelligence (AI) and cloud services, demand for computing power is increasing and data center development has become necessary to meet consumer, commercial and governmental needs.

FY 2026 NDAA Includes New Statutory Framework for Outbound Investment Restrictions

The Fiscal Year 2026 National Defense Authorization Act (NDAA), which was signed into law on December 18, 2025, includes the Comprehensive Outbound Investment National Security Act of 2025 (“COINS Act” or the “Act”), which establishes a statutory framework to prohibit or require notification of certain outbound investments by U.S. persons in technology sectors deemed sensitive to U.S. national security. The COINS Act largely builds on the outbound investment regime implemented towards the end of the Biden administration under Executive Order (EO) 14105 and the U.S. Department of the Treasury’s existing regulations at 31 CFR Part 850 (the “Outbound Investment Regulations”), which went into force on January 2, 2025. (Our previous coverage on the Outbound Investment Regulations implemented under EO 14105 is available here.)

Lessons from a Major Software Sunsetting: Contractual and Post-Contractual Best Practices

Imagine this: You receive a cheerful “product evolution” email from the vendor providing a critical technology that you rely on to run your business. It says that critical system is being sunset. Your sales rep calls you and assures you that a replacement platform will of course be offered … for a price. The cheery emails and promises of something better mask a stark reality: a business-critical tool is going away on someone else’s timetable. Your operations depending on that system now face disruption, unplanned costs and compressed migration timelines.

California’s AB 692 Significantly Restricts “Stay-or-Pay” and Repayment Provisions in Employment Agreements

California Assembly Bill 692 (AB 692) adds new restrictions on employment contract repayment clauses, commonly referred to as “stay-or-pay” provisions. Effective January 1, 2026, the law broadly prohibits employers from requiring employees to repay sign-on bonuses, training expenses or other employment-related benefits upon separation, except in limited circumstances.

VC Firms Face New California Reporting Mandate

This alert expands upon Pillsbury’s earlier overview of California’s diversity disclosure legislation, “California Bill Designed to Support Underrepresented Entrepreneurs Signed into Law.” Since the law’s passage, the California Department of Financial Protection and Innovation (DFPI) has assumed oversight of the Venture Capital Diversity Reporting Program from the Civil Rights Department and is now developing the survey and reporting process that venture and private investment fund managers must follow under Senate Bill 54 (SB 54), as amended by Senate Bill 164 (SB 164).

NYS LLC Transparency Act Becomes Effective

New York State is the only state to have enacted a beneficial ownership disclosure law modeled on the federal Corporate Transparency Act (the “CTA”). This law, named the “LLC Transparency Act” (the “LLC TA”), becomes effective on January 1, 2026.

FCC Implements Categorical Prohibition on All Foreign-Produced UAS and UAS Critical Components

On December 22, 2025, the U.S. Federal Communications Commission (FCC) Public Safety and Homeland Security Bureau (PSHSB) issued a Public Notice announcing the addition of nearly all “uncrewed aircraft systems (UAS) and UAS critical components produced in a foreign country” to the Covered List. The action effectively prohibits any foreign-made, including U.S.-owned but produced abroad, UAS and critical components from being imported, marketed, or sold in the United States, regardless of specific country of origin or whether the UAS is intended for commercial, military, or personal use. The action also broadly defines UAS critical components using a non-exhaustive list that includes sensors, cameras, communications devices, motors, and batteries, as well as all associated software, capturing nearly all the major components of a UAS. This marks the first time the Covered List has been employed to restrict an entire product category.

Cannabis Rescheduling Creates Tax Opportunities and Challenges

On December 18, 2025, President Trump ordered the Attorney General to reschedule cannabis from being classified as a Schedule I controlled substance to a Schedule III controlled substance. This change will reduce federal income tax burdens on cannabis companies. Under current law, such tax burdens frequently approach 70%. But one unanswered question is when the change will take effect. In the linked White Paper, Mark Leeds and Christine Tsai, both members of the Pillsbury Tax Department, explore tax planning opportunities for cannabis companies to address the possibility of delayed implementation of tax relief.

FCPA Enforcement After the Pause: What Early Cases Reveal

The U.S. Department of Justice (DOJ) has now spent several months enforcing the Foreign Corrupt Practices Act (FCPA) under the revised framework adopted after the February 10, 2025, pause mandated by Executive Order 14209. In the period following the pause, DOJ has begun to translate that framework into concrete enforcement activity, with the Smartmatic corporate indictment and the Comcel/Millicom deferred prosecution agreement (DPA) emerging as the two most significant post-pause actions to date. Post-pause directives have seemed to refocus DOJ’s attention on corporate actors, particularly those operating in sectors that intersect with national security and critical infrastructure priorities, and where companies are now expected to identify and self-disclose potential issues far earlier to receive meaningful consideration under the Department’s evolving enforcement policies. For companies, these developments show that DOJ’s new approach has immediate consequences, so it is important to reevaluate FCPA risks now and make sure compliance programs meet the Department’s changing expectations.

California’s Aggressive State Antitrust Enforcement Efforts Continue to Grow

Heightened Antitrust Enforcement Focus
California, with the fourth largest economy in the world, continues to ramp up antitrust enforcement through recent cases, a new law establishing higher criminal and civil penalties, a new algorithmic pricing law and related public statements. Companies doing business in California should take note of this trend and consider updating compliance programs and mitigating antitrust risk. Recent developments include:

DOJ–DHS Trade Fraud Task Force Debuts with Sweeping China-Related Enforcement Actions

On December 18, the U.S. Department of Justice (DOJ) and U.S. Department of Homeland Security (DHS) announced the first set of enforcement actions involving the newly formed DOJ–DHS Trade Fraud Task Force. Collectively, the settlements underscore the Task Force’s early focus on alleged customs, tariff and trade fraud involving imports from China.

Government Accountability Office Publishes Fiscal Year 2025 Bid Protest Statistics

On December 12, 2025, the Government Accountability Office (GAO) published its Bid Protest Annual Report to Congress for Fiscal Year 2025. The GAO’s report, which is mandated by the Competition in Contracting Act, lists its key statistics for FY 2025 bid protest activity. The report also includes a chart providing similar bid protest statistics for fiscal years 2021–2025. This five-year snapshot provides some valuable insight into current bid protest trends and developments at the GAO.

New Executive Order Seeks to Ensure a National Policy Framework for Artificial Intelligence

Background: Federal AI Policy and State AI Laws
Earlier this year, President Trump revoked Executive Order 14110, “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence,” issued under the prior administration, and replaced it with Executive Order 14179 (the “EO”), “Removing Barriers to American Leadership in Artificial Intelligence.” EO 14179 directs agencies to identify and roll back regulations that could act as barriers to artificial intelligence (AI) innovation and calls for the development of a national AI Action Plan focused on competitiveness and reduced regulatory burdens.

OFPP Solicits Comments on the Revolutionary FAR Overhaul

Pursuant to Executive Order 14275 – Restoring Common Sense to Federal Procurement, the Office of Federal Procurement Policy (OFPP) and the FAR Council have competed the draft rewrite of the Federal Acquisition Regulation (FAR), known as the Revolutionary FAR Overhaul (RFO). The goal of the RFO is to remove regulatory requirements that are not statutorily based, as well as to create faster acquisitions, greater competition and better results. Many federal agencies have already implemented parts of the RFO through deviations. OFPP is now using its IdeaScale crowdsourcing community to receive input from federal acquisition professionals, contractors, industry associations, academia and members of the public to guide the formal rulemaking process, which is expected to continue into early 2026.</

U.S. DOJ Rolls Back Disparate-Impact Rule

On December 9, 2025, U.S. DOJ issued a rule (the “Rule”) rescinding a portion of its Title VI regulations to eliminate disparate-impact liability, with immediate effect. Title VI prohibits discrimination based on race, color, or national origin in any program or activity receiving federal financial assistance. The Title VI regulations identify specific discriminatory actions that are prohibited. 28 CFR 42.104. These regulations prohibited practices that had the effect of subjecting individuals to discrimination because of their race, color, or national origin, even in the absence of discriminatory intent. In other words, under the prior regulations, DOJ could claim that facially neutral programs or policies were discriminatory if they had a disproportionate and adverse impact on protected groups compared to individuals of a different race, color, or national origin. A program facing allegations of disparate impact based on outcomes data could defend against liability by proffering a substantial legitimate justification for the practice. A finding of disparate- impact liability would then be made only by identifying an equally effective alternative practice that would result in a lesser disproportionate effect on the individuals in the protected class, or by establishing that the purportedly legitimate practice was a pretext for intentional discrimination. The preamble to the Rule states that although it does not preclude the use of data showing statistical disparities to prove intentional discrimination, using statistical data in such a way “materially differs from using it to impose liability for an unintentional disparate impact.”

CISA and Partners Publish “Secure Integration of AI in OT” Framework

On December 3, 2025, CISA, the NSA, the FBI and several international cyber authorities released Principles for the Secure Integration of Artificial Intelligence in Operational Technology, a joint framework aimed at helping critical infrastructure operators deploy AI safely and responsibly.

Year-End Tax Loss Harvesting Strategies Reviewed by IRS and Tax Court

Tax loss harvesting is a tool employed by both corporate and non-corporate taxpayers to mitigate the tax burden imposed on recognized gains. While certain strategies are easy to employ (sell loss positions), other transactions involve substantial tax planning. Complex strategies were the subject of IRS and Tax Court guidance this month. Mark Leeds, of the New York office of Pillsbury, analyzes these developments in the linked White Paper. Happy holidays to our clients and friends.

DoD Bid Protests Under Pressure Again: Key Takeaways from Proposed Section 875 of the FY2026 NDAA

For more than a decade, Congress has questioned whether the number of bid protests filed with the Government Accountability Office (GAO) has caused unnecessary delay and expense in U.S. Department of Defense (DoD) procurements, often calling for reforms to limit their impact. Section 875 of the proposed FY2026 NDAA represents the latest effort by Congress in that regard and what some may call yet another attempt to curtail a vital oversight mechanism.

Permissionless Innovation: The FCC’s Conceptual Shift for Space and Earth Station Licensing in the United States

In an effort to more effectively keep pace with and reduce the burdens on the rapidly evolving and expanding commercial space sector, the Federal Communications Commission (Commission) unanimously adopted a Notice of Proposed Rulemaking (NPRM) proposing a comprehensive restructuring and reform of its long-standing space and earth station licensing rules (Part 25). With its breadth of scope and potential impacts across the space ecosystem, the NPRM also serves to highlight the key role the Commission will play in advancing the Trump administration’s broader objective to enhance American greatness in space and facilitate U.S. leadership and innovation.

Court Highlights Dire Consequences for Contractors That Mishandle Inadvertently Disclosed Source Selection Information

The recent decision by the U.S. Court of Federal Claims (COFC) in Marathon Targets serves as a cautionary tale illustrating the harsh consequences contractors may face when they mishandle protected source selection information. (See Marathon Targets, Inc. v. United States, No. 25-121 (Fed. Cl. Nov. 10, 2025; reissued Nov. 21, 2025).) The post-award protest arose from a nearly $200 million U.S. Marine Corps procurement for Trackless Mobile Infantry Target system support services. After notifying offerors of its decision to make award to MVP Robotics, the contracting officer inadvertently emailed Marathon’s president a file containing protected source selection information from the awardee’s technical evaluation. Rather than immediately reporting the disclosure and quarantining the information, Marathon’s president reviewed the information, circulated it to multiple individuals—including persons outside the company—and retained it for use in Marathon’s subsequent protest filings.

China Suspends Export Controls on Certain Critical Minerals and Related Items

On October 9, 2025, China’s Ministry of Commerce (MOFCOM and General Administration of Customs (GAC) published a set of announcements (Nos. 55 to 58 and 61, 62) with a series of export control measures. These include export controls on:

UK Launches Consultation on “Back British” Defence Offset Plan

The UK Government has announced a new “Back British” defence offset initiative aimed at ensuring British businesses, workers and communities benefit when the Ministry of Defence (MoD) procures equipment or services from overseas suppliers. In an official press release published on October 23, 2025, Minister for Defence Readiness and Industry Luke Pollard unveiled a 12-week industry consultation on this proposed offset approach. The goal is to boost UK jobs, skills and innovation by requiring international defence contractors to invest in the UK economy as part of any major procurement deal.

California Imposes New Data Breach Notification Requirements

On October 3, 2025, Governor Gavin Newsom signed into law Senate Bill No. 446, which makes important changes to the California data breach notification statute. The new law, which takes effect on January 1, 2026, mandates deadlines for data breach notification to affected individuals and the state attorney general. SB 446 passed with no votes in opposition.

Federal Reserve Governor Waller Proposes “Payment Accounts”: A Potential New On-Ramp for Payments Innovators

In an October 21, 2025, address at the Federal Reserve’s inaugural Payments Innovation Conference, Gov. Christopher Waller outlined a proposal for the creation of a new class of Federal Reserve accounts—referred to as “payment accounts” or “skinny master accounts.” This proposal, though conceptual, could mark a significant operational development in how the Federal Reserve interfaces with payment-focused institutions and fintechs, while remaining within the statutory limits of current law. The idea reflects a growing acknowledgment within the Federal Reserve that the existing master account framework, which was designed for a traditional banking system, may not fully accommodate the technological evolution of the modern payments ecosystem.

Claims of a Link Between Tylenol/Acetaminophen Use and Autism Prompt Regulatory and Litigation Risks? Insurance Coverage May Offer Key Protection

In late September 2025, the Food and Drug Administration (FDA) initiated the process for a label change for acetaminophen to reflect that the use of acetaminophen by pregnant women may be associated with an increased risk of neurological conditions. The FDA also sent a letter to physicians to “consider minimizing the use of acetaminophen during pregnancy for routine low-grade fevers” while acknowledging that such consideration should be “balanced with the fact that acetaminophen is the safest over-the-counter alternative in pregnancy among all analgesics and antipyretics.” President Donald Trump—with Secretary of Health and Human Services Robert F. Kennedy, Jr. at his side—amplified the FDA’s action, noting in a White House event that his administration “has determined that acetaminophen exposure during pregnancy causes autism.” The announcement conflicts with efforts by manufacturers, health professionals and industry groups to convince the public and regulators that common, over-the-counter pain medications can be used safely during pregnancy.

USPTO Issues Notice of Proposed Rulemaking, an Open Letter and Memorandum, Impacting Value and Availability of Inter Partes Reviews

The U.S. Patent and Trademark Office’s (PTO) Notice of Proposed Rulemaking (NPRM) represents an important change in the continued evolution of inter partes review (IPR) practice. This NPRM was accompanied by an Open Letter from America’s Innovation Agency and a Memorandum from the PTO’s Director.

Implementation of Executive Order 14299 Turns Advanced Nuclear Deployment into a U.S. Army Priority

On October 14, 2025, the U.S. Department of the Army announced the launch of the Janus Program, a next-generation nuclear energy initiative intended to deliver resilient and assured power for national defense installations and critical missions.

Federal Government Shutdown: Appropriations Stalemate, Operational Slowdowns and Grant Cancellation

On October 1, 2025, the federal government entered a shutdown after Congress failed to enact any of the 12 fiscal year (FY) 2026 appropriations bills or pass a continuing resolution. Now entering its second week, the shutdown has suspended many routine agency operations and triggered widespread furloughs of federal employees. In parallel, the Administration has announced separate actions reviewing or cancelling billions of dollars in federal grants and awards.

Trump Administration Unveils the “Gold Card” Visa Program

On September 19, 2025, during a signing ceremony in the Oval Office, President Donald Trump signed Executive Order (EO) 14351, the Gold Card, and announced the formal start of the Trump Gold Card visa program. The Gold Card, in alignment with the President’s goal of realigning the U.S. immigration system, allows individuals and corporations to fast-track the U.S. residency process by making a financial contribution to the United States.

D.C. Circuit Reverses EPA, Reinstating the Title V Affirmative Defense for Emergency Emissions Events

On September 5, 2025, the U.S. Court of Appeals for the District of Columbia (D.C.) Circuit issued its opinion in SSM Litigation Group v. EPA, reinstating the “emergency” affirmative defense to liability for violations of Title V permits under the Clean Air Act. This decision provides welcome clarity for Title V permit holders, who can now place a more singular focus on mitigating harm during emergency response situations.

USGS Seeks Comment on 2025 Critical Minerals List to Guide U.S. Mineral Supply Chain Policy

On August 26, 2025, the U.S. Geological Survey (USGS) released for comment the 2025 draft List of Critical Minerals, which includes 54 mineral commodities proposed for inclusion. The list is intended to inform U.S. government policies, strategies, and tools to secure critical mineral supply chains (the Critical Minerals List). Comments are due September 25, 2025.

DOE Previews $1 Billion in Forthcoming Funding Opportunities for Critical Minerals Projects and Technologies

In recent weeks, the Department of Energy (DOE) released four notices of intent to issue notices of funding opportunities (NOFOs) in the coming months, along with other policy announcements aimed at advancing the Trump administration’s efforts to secure the critical minerals supply chain. A NOFO is how a federal agency announces available funding, such as competitive grants or cooperative agreements, by outlining program goals, eligibility and deadlines. Collectively, these forthcoming NOFOs could provide approximately $1 billion to support projects and technologies across various stages of the critical minerals value chain.

Bankruptcy Court Dismisses Case Manufactured to Cap Lease Damages

In the midst of a liquidity crisis, National Resilience determined that it had only two choices to successfully restructure—file the entire enterprise for chapter 11 or shed non-operational and/or underutilized facilities. It chose the latter. Accordingly, Bedmar LLC was formed in June 2025 through a divisional merger under the Delaware LLC Act and allocated burdensome leasehold interests and approximately $41.4 million in cash and receivables. The cash was estimated to exceed ~$33 million in capped lease-rejection claims under Bankruptcy Code § 502(b)(6). (See our previous client alert for a discussion of how this section caps landlord damage claims in bankruptcy cases.) The entity had no employees, no revenue, no creditors other than the landlords and no operational purpose other than to pursue a bankruptcy filing.

At Long Last, the Department of Defense Issues the Highly Anticipated CMMC Final DFARS Rule

After years of anticipation, the Department of Defense (DoD) has published the final Cybersecurity Maturity Model Certification (CMMC) to the Defense Federal Acquisition Regulation Supplement (DFARS) rule (the Final DFARS Rule). This rule revises the DFARS to implement the CMMC program in solicitations and contracts. As discussed in our prior alert, this rule follows the passage of the October 15, 2024, final rule establishing the requirements of the CMMC program (the Final Program Rule) and setting forth a three-year phased roll out period. The Final DFARS Rule will go into effect on November 10, 2025, kicking off this roll-out period.

Federal Court Vacates Education Department’s Dear Colleague Letter on DEI: What Schools, Colleges, and Contractors Need to Know

Last month, in American Federation of Teachers (AFT) v. U.S. Department of Education, a Maryland federal district court struck down ED’s recent efforts to curb DEI initiatives in education, vacating both the February 14, 2025, Dear Colleague Letter (DCL) and the April 3, 2025, Certification Requirement (the “Certification Requirement”). Judge Stephanie Gallagher of the U.S. District Court for the District of Maryland ruled that both the DCL and the Certification Requirement violated the Administrative Procedure Act (APA) and raised serious constitutional and procedural concerns. As a result, as of the date of this alert, both are now legally void and unenforceable across the nation. However, it is likely that the government will appeal the decision and seek a stay of the vacatur.

SEC and CFTC Chairs’ Joint Statement Raises Prospect of Competitive Onshoring of Perpetual Derivatives

The Chairs of the SEC and CFTC issued a Joint Statement on September 5, 2025 (Joint Statement), announcing a new era of cooperation, including the possibility of using “innovation exemptions” to bring perpetual contracts (perps) and other leveraged cryptocurrency products into U.S. markets. The Joint Statement builds upon—and meaningfully expands beyond—the joint statement of the SEC and CFTC staffs issued a few days earlier by moving from a restatement of current law to a policy-level invitation to explore exemptions, harmonized frameworks and cross-agency approaches to make perp-like products tradable on U.S. markets.

Fractal Logic: New IRS PLR Provides Tax Guidance for Private Credit Transactions

Fractal systems create repetitive geometric patterns at progressively minute layers. The geometry becomes clear through random immersion into arbitrary small scales. On September 5, 2025, the U.S. Internal Revenue Service (IRS) released a private letter ruling (PLR) addressing U.S. trade or business considerations for private lending transactions being undertaken by a supra-national organization (likely the United Nations). Accordingly, the PLR has been issued to a “super tax exempt.” Nonetheless, a fractal logic immersion into the PLR provides valuable insight on how to provide exposure to U.S. private credit loans to non-U.S. investors and U.S. funds with non-U.S. partners without triggering U.S. tax exposure.

Clearing Space for Launch: Trump 2.0 Proposes Regulatory Overhaul to Enhance American Leadership in Space by 2030

The first Trump administration galvanized significant and sustainable transformation of the U.S. space industry, including the reconstitution of the National Space Council, the creation of the U.S. Space Force, the formation of the Artemis Accords, and substantial regulatory reform aimed at the licensing of launch vehicles, Earth observation satellites, and next-generation broadband constellations, among others. On August 13, 2025, the second Trump administration released an ambitious Executive Order (EO), Enabling Competition in the Commercial Space Industry, to further build on the off-worldly successes of President Trump’s first term.

FAR Council Increases Acquisition-Related Thresholds for Inflation

Section 1908 of Title 41 of the United States Code requires that statutory acquisition-related thresholds be adjusted for inflation every five years, using the Consumer Price Index for All Urban Consumers (CPI). The statute excludes certain thresholds such as those under the Davis-Bacon Act, Service Contract Labor Standards, performance and payment bonds, and trade agreements. On August 27, 2025, the FAR Council—comprising the Office of Federal Procurement Policy, the Department of Defense (DoD), the General Services Administration, and the National Aeronautics and Space Administration (NASA)—issued a final rule that adjusted numerous acquisition-related thresholds for inflation as follows:

Court Declines to Halt Climate Disclosure Laws as CARB Pursues Delayed Rulemaking

California’s landmark climate disclosure laws—SB 253, the Climate Corporate Data Accountability Act, and SB 261, the Climate-Related Financial Risk Act—are moving toward enforcement, with SB 261 requiring risk reporting by January 1, 2026. On August 13, 2025, the U.S. District Court for the Central District of California declined an industry request to put the statutes on hold. That ruling leaves the laws in force while the plaintiffs’ remaining First Amendment challenge proceeds. The plaintiffs quickly appealed the ruling to the Ninth Circuit and moved for an injunction in the district court to bar enforcement of SB 253 and SB 261 during the appeal. A hearing on that motion is scheduled for September 15, 2025. In the meantime, regulated companies must continue to prepare for the quickly approaching first reporting deadlines with no regulatory guidance to date and amid continued legal uncertainty.

Following Investigation of Copper Imports, Trump Administration Takes Actions Targeting Imports and Domestic Sales

On July 30, 2025, President Trump issued Proclamation 10962 following the investigation by the Department of Commerce (Commerce) under Section 232 of the Trade Expansion Act of 1962 of imports of copper in all forms and derivative products. President Trump concurred with the Secretary of Commerce’s finding that U.S. reliance on copper imports threatens to impair national security, ordering tariffs to be imposed. In addition, in a novel use of industrial policy authorities, the President ordered certain domestic sales requirements under the allocations authority of the Defense Production Act (DPA) with the goal of preserving feedstock for domestic copper producers.