On January 6, 2026, Judge Noël Wise of the U.S. District Court for the Northern District of California denied a motion to dismiss securities fraud claims against Block, Inc.—the parent company of Square and Cash App— and senior executives Jack Dorsey and Amrita Ahuja, allowing investors’ claims that Block misled the market about Cash App’s compliance practices and user metrics to proceed.

Judge Wise held that plaintiffs sufficiently alleged that Block misled shareholders about the strength of its compliance program and the size of Cash App’s user base. As lead counsel, Cohen Milstein represents lead plaintiffs, a group of New York City pension funds, on behalf of investors who purchased Block stock between February 26, 2020, and May 1, 2025.

The lawsuit focuses on alleged misstatements and omissions about Cash App, Block’s flagship mobile payments platform and a central driver of the company’s growth and valuation. Cash App allows users to send and receive money, invest, and access financial services through a single mobile phone app.

Plaintiffs allege that Block intentionally underinvested in anti[1]money-laundering, know-your-customer, and sanctions compliance to make Cash App easy to join and use and to fuel rapid growth, all the while assuring investors that its compliance program was robust and highly effective. According to the complaint, this approach led to large backlogs of unreviewed alerts and allowed many known bad actors to create large numbers of accounts used to facilitate illicit activities.

Plaintiffs also allege that Block overstated Cash App’s user growth by failing to disclose the extent of duplicate, fraudulent, and illicit accounts. When increased regulatory scrutiny later forced Block to tighten its compliance controls, the company allegedly changed how it calculated user metrics without fully informing investors, leading investors to make misleading comparisons between earlier and later figures and to overestimate Cash App’s growth rate.

Block, Dorsey, and Ahuja moved to dismiss the complaint. Judge Wise denied the motion, emphasizing that even statements that are literally true can be misleading if they omit material facts. Based on detailed allegations of chronic underinvestment in compliance, large alert backlogs, and the ease with which prohibited users could rejoin the platform, Judge Wise found it plausible that Block’s repeated claims about proactive anti-fraud efforts misled investors.

The court also upheld plaintiffs’ allegations that Block’s statements about Cash App’s user metrics were misleading. Judge Wise found that failing to disclose the prevalence of multiple accounts per user plausibly obscured the true size of Cash App’s user base. The court further rejected defendants’ argument that these statements were mere puffery, concluding they were specific enough for reasonable investors to rely on.

The court also found that plaintiffs adequately alleged scienter as to Jack Dorsey and Amrita Ahuja. According to the order, the complaint plausibly alleges that the executives had access to detailed internal information through board reports, compliance meetings, and employee feedback about duplicate accounts and fraud levels. Those allegations support the inference that Dorsey and Ahuja either knew their public statements were misleading or acted with deliberate recklessness in making them.

Finally, the court held that plaintiffs adequately pleaded loss causation. The complaint alleges that misleading statements about Block’s compliance program allowed bad actors to create multiple accounts, inflating reported user metrics and Block’s stock price. In March 2023, the alleged truth began to emerge with a report by Hindenburg Research, followed by investigations by multiple states and the Consumer Financial Protection Bureau. As these developments unfolded, Block’s stock price fell by 84 percent, from $289 to $46 per share. The court found the connection between the alleged misrepresentations and investors’ losses to be plausible.

The decision reinforces that technology companies’ statements about their compliance practices and user metrics must be grounded in reality. The ruling marks an important step toward accountability and transparency in the fintech and technology sectors, where user growth narratives often play a central role in valuation and market confidence.

The Defendants must now answer the amended complaint and the case moves into discovery, where investors will gain a clearer picture of whether Block’s public disclosures matched internal measurements of growth and compliance.

The practice of buying and selling contracts based on the outcome of future events has undergone a recent, remarkable transformation in the United States. What was once an activity conducted almost exclusively through offshore platforms (or “exchanges”) under the Commodity Futures Trading Commission’s (“CFTC”) regulatory regime for “event contracts” or were limited academic experiments, has exploded into a multi-billion-dollar industry reshaping how Americans engage with speculation on everything from elections to sports. This growth has coincided with the dramatic expansion of legal sports betting across America, creating a landscape where the boundaries between commodity derivatives and gambling have become increasingly blurred. As this market continues its rapid expansion, it raises profound questions about fairness, investor protection, regulatory oversight, and whether our government will establish a protective framework before, rather than after, significant consumer harm occurs.

The Explosive Growth of Prediction Markets

Super Bowl LX: A Case Study in Convergence

The transformation of American betting was on full display during Super Bowl LX when the Seattle Seahawks defeated the New England Patriots. The game served as a flashpoint for the collision between traditional sports betting and the new world of prediction markets—and illustrated both the scale of the phenomenon and the regulatory questions it raises.

Total Super Bowl LX betting wagers (the “handle”) approached approximately $1.7 billion. But the real story is the emergence of prediction markets as a genuine alternative to traditional sports betting. Traders on Kalshi and Polymarket (two major prediction market trading platforms) swapped more than $800 million in contracts tied to the Super Bowl.

The timing of the increase in predictive market betting was not coincidental. Just days before the Super Bowl, which is historically one of the most heavily wagered sporting events in the country, new CFTC Chairman Michael Selig withdrew a 2024 proposed rule that would have banned sports and politics-related wagers on prediction markets, signaling the federal government’s embrace of the industry.

The growth since platforms like Kalshi and Polymarket launched in 2020 has been extraordinary. In 2025, total prediction market trading volume reached approximately $44 billion across major platforms, split between $21.5 billion on Polymarket and $17.1 billion on Kalshi. This represents a nearly 130% increase for Polymarket alone, who had a total trading volume of $9 billion in 2024. This explosive growth has even led to major trading firms like Susquehanna International Group and Jump Trading becoming big players in prediction markets, along with familiar names in the retail space, such as Robinhood.

From Foreign Shores to American Mainstream

For decades, prediction markets operated primarily outside U.S. marketplaces, or in narrow, academic contexts. Intrade, founded in Ireland in 2001, became the most prominent early example of a commercial prediction market. The platform offered peer-to-peer binary contracts on event outcomes and gained widespread media attention for its accuracy in predicting the 2008 and 2012 U.S. presidential elections.

The limited academic alternative, the Iowa Electronic Markets launched in 1988 and operated under a CFTC “no-action” letter.

The landscape changed dramatically in 2020, with the founding of Kalshi and Polymarket, which would become the dominant platforms.

What Can People Bet On?

The range of contracts available on prediction markets has expanded dramatically. While political events remain significant, the universe of tradeable outcomes now encompasses virtually every category of measurable future events, such as elections, sports outcomes, and award shows. More specifically, people can bet on more nuanced events such as specific legislative or political decisions, individual sports match outcomes, top streaming musical artists, the length of the Super Bowl halftime show and even the likelihood of specific celebrities attending it

The Parallel Rise of Legal Sports Betting

The growth of prediction markets has coincided with (and been accelerated by) the dramatic expansion of legal sports betting in the United States. On May 14, 2018, the Supreme Court struck down the Professional and Amateur Sports Protection Act in Murphy v. NCAA, freeing individual states to regulate sports wagering. The transformation has been remarkable since. In 2018, legal sports betting generated only $4.6 billion in handle nationwide (almost entirely in Nevada). By 2024, Americans legally wagered approximately $149 billion; a more than 3000% increase in just six years.

The growth in prediction markets has been similar to the growth of sports wagering, and prediction market trading in sports now accounts for 85% of trading volume on Kalshi. The convergence between sports betting and prediction markets is stark: prediction markets have evolved to closely mirror traditional sports wagers, offering spreads, totals, player props, and even same-game parlays

Regulatory Issues, Fairness, and Market Integrity

Federal vs. State: A Jurisdictional Battle

The central regulatory question facing prediction markets is whether they are federally regulated and thus exempt from state gambling laws, or whether they fall under the arm of state enforcement. This battle is playing out in courts across the country, where prediction market platforms, traditional sports platforms, and state attorneys general are engaged in a series of lawsuits to resolve this question.

In a recent op-ed, Chairman Selig stated that the CFTC has overseen prediction markets for decades because event contracts qualify as derivative instruments but that recently states have increasingly launched legal challenges arguing these contracts constitute gambling under state law, with nearly 50 active cases pending against CFTC-registered exchanges, including Kalshi, Polymarket, Coinbase, and Crypto.com. He also noted that the number of prediction market users has quadrupled to 15 million over the last two years and that these markets are subject to the CFTC’s rules requiring market surveillance, anti-money-laundering compliance, and customer information collection to prevent fraud and insider trading. Chairman Selig concluded his thoughts with a warning: “Any erosion of the CFTC’s ability to regulate transactions in commodity derivatives is a direct threat to the markets and investors Congress intended the agency to oversee.”

The Missing Regulatory Infrastructure

Traditional equities and bond markets operate under extensive regulation designed to protect participants against some of the same concerns raised by prediction markets, such as insider trading, market manipulation, dissipation of customer funds, and lack of disclosures, among other traditional concerns.

For example, concern over insider trading on prediction markets was highlighted when a Polymarket user made approximately $400,000 in profit by betting that Venezuelan President Nicolás Maduro would be removed from office—a bet placed just hours before U.S. military forces captured him in a secretive operation. The prescient timing raised immediate allegations that the trader possessed inside information about the military operation that was unknown to other market participants, a typical insider trading scenario.

In addition, concerns have been raised in a class action lawsuit that Kalshi’s affiliate participates as a bettor on its own platform and may be betting against ordinary participants, which the suit alleges misleads consumers who are unaware of this practice. And unlike in stock markets where securities are held in regulated accounts, the funds used for bets on prediction markets may be held in less secure environments, including on blockchains.  

What the Future May Hold

Scenario 1: Federal Regulation Akin to Other Markets

The most orderly path forward would involve the CFTC establishing comprehensive regulations specifically designed for event contracts. Chairman Selig has directed staff to begin this rulemaking process. The federal government has also signaled interest in enforcement. Manhattan U.S. Attorney Jay Clayton stated that his office is “thinking about how the current laws apply to prediction markets” and expects fraud cases to be brought. “Because it’s a prediction market doesn’t insulate you from fraud,” Clayton emphasized, using the example of conspiring to fix a golf game through prediction markets.

As prediction markets grow to resemble traditional financial markets, pressure may build to impose securities or commodity-style regulation. This could include registration requirements for large traders, position limits to prevent market manipulation, and mandatory disclosure of level of risk.

Scenario 2: State-by-State Patchwork

If federal courts ultimately reject broad federal preemption arguments, prediction markets could face the same state-by-state licensing regime that governs sportsbooks. This would mean different rules and availability in each state with state gaming commission oversight and consumer protections varying by jurisdiction.

Scenario 3: The Wild West Until Crisis Hits

History suggests comprehensive financial regulation often follows a crisis rather than preceding or preventing one. The pattern is well-established:

• The stock market crash and Great Depression led to the creation of the SEC in 1934
• The Enron scandal produced the Sarbanes-Oxley Act in 2002
• The 2008 financial crisis resulted in Dodd-Frank in 2010

Will prediction markets follow this pattern? The documented concerns—manipulation, insider trading, conflicts of interest—suggest the potential for significant consumer harm.

As a concerned observer might ask: Will we have to burn our hand to find out that the stove is hot?

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This promotional piece is intended for informational purposes only and does not constitute legal advice. The regulatory landscape for prediction markets is evolving rapidly, and readers should consult appropriate counsel regarding specific questions.

The last few months have seen rapid and dramatic policy change at the Securities and Exchange Commission (SEC) that institutional investors, including pension funds, should pay attention to.

The SEC has stated that the goal of these changes is to promote capital formation by increasing flexibility for public companies, but critics say the changes may significantly limit investors’ access to information and their ability to hold the companies in which they invest accountable.

This blog will look at three recent changes implemented or in progress at the SEC and discuss the implications for multiemployer pensions and their fiduciaries.

Arbitration of Shareholder Claims

On September 17, 2025, the SEC issued a policy statement stating that it would no longer delay approval of registrations with provisions that make arbitration of shareholder claims mandatory.

Background

One of investors’ main tools for holding public companies accountable is the ability to bring class action lawsuits for violations of federal securities laws. The Private Securities Litigation Reform Act (PSLRA) requires a highly structured and efficient process to try and recover investors’ losses if they believe that a public company has misled investors or manipulated the stock market. In a class action suit, a single investor or small group of investors takes leadership of the case; all other investors are passive class members who can recover a portion of losses if the case is successful, without the burden of participating in litigation.

In arbitration, a dispute is resolved in a private, confidential forum, without the procedural safeguards of a traditional court proceeding. Arbitrators are not required to follow legal precedent or rules of evidence, which can create a highly unpredictable environment where two shareholders bringing the same lawsuit may reach wholly different outcomes. While there are some scenarios where arbitrations proceed as a class or collective action, those proceedings are increasingly rare. Many companies that favor forced arbitration try to preclude class or collective arbitrations, meaning that every investor or fund that wanted to bring a claim to recover for securities fraud would have to proceed alone. Supporters of arbitration of shareholder claims argue that it saves companies significant time and money; opponents note the loss of the deterrent impact of large class actions and the sunlight that comes from public court proceedings.

Historically, the SEC has upheld the class action process and pushed back on corporate efforts to force mandatory arbitration of shareholder claims. In the past, the SEC has expressed concern that mandatory arbitration of shareholder claims violates state law and may violate federal law. Specifically, if a company was trying to go public and included a mandatory arbitration provision in its registration materials, the SEC would have essentially delayed approval. As a result, companies either did not include those provisions or eventually dropped them.

Fiduciary Considerations

The SEC’s new policy statement has sparked significant concern from institutional investors. They claim that without an efficient, centralized method to challenge securities fraud, every pension fund will need to conduct its own investigations and litigate its own cases or give up the ability to recover any funds lost to fraud. Because they no longer have the concern of having to face a single, major class action that can achieve a major recovery, some companies may be emboldened to engage in misstatements, omissions or fraudulent activity, knowing that they face less risk of consequence, contend critics.

Fiduciaries may benefit from periodic updates from counsel or a knowledgeable advisor on whether any companies are trying to impose mandatory arbitration of shareholder claims; as of the time of this article, only one small company has taken that step. If this becomes a trend—or a more prominent and heavily traded company takes this step—fiduciaries may wish to consider a process for identifying whether companies in which they invest are utilizing mandatory arbitration and, if so, whether any steps need to be taken to monitor for or pursue potential securities claims.

Shareholder Proxy Proposals

Typically, spring is the start of proxy season, where the majority of public companies hold their annual shareholder meetings and file their DEF 14A proxy statements with the SEC. The proxy is a key opportunity for shareholders to vote and express their views on issues such as executive compensation, board member elections and shareholder proposals. On November 17, 2025, the SEC announced that it would no longer provide its views or a substantive response to no-action requests for the upcoming proxy season, with a limited exception for no actions based on certain state law issues.

Background

In addition to litigation, shareholders can express concerns and their priorities to the companies in which they invest by making nonbinding proposals. Frequent topics for proposals include opposition to executive pay packages; requests to separate the board chair and CEO positions or eliminate dual-class voting; and requests for the company to provide disclosures on issues like political lobbying, human capital management or plans for navigating environmental issues. If the proposal meets certain criteria, including that it was filed timely and relates to an appropriate topic, the company must include the proposal on its proxy for a vote by all shareholders. Historically, if a company received a shareholder proposal that it thought was improper and did not want to include on the proxy, it would go to the SEC for an advisory opinion that it could take no action on the proposal—hence, referred to as the “no-action” process. The no-action process allowed the SEC to referee these disputes, which many viewed as a way to ensure that companies and shareholders alike had a fair process.

In its November announcement, the SEC stated that if a company submitted a no-action letter and stated that it had a reasonable basis to exclude the proposal based on the applicable regulation, prior published guidance or judicial decisions, the SEC would confirm in writing that it could exclude the proposal based on that representation. Critics say this essentially gives blanket approval to what are typically complex, debatable questions of law and policy.

Fiduciary Considerations

Investors and many companies alike have expressed concern about the change. Investors have heightened concerns about their proposals being improperly omitted. Public companies and their advisors are concerned that the unpredictable environment may lead to burdensome litigation. The SEC stated that its abandonment of the no-action process is for the current proxy season due to “current resource and timing considerations.” It is not clear whether the SEC will extend this practice in future years or revert to the past protocol.

Fiduciaries of institutional funds that are typically engaged in making shareholder proposals may wish to pay particular attention this year to how companies respond. In addition, as fiduciaries consider how to vote their proxy and any policies or guidance they provide proxy advisors or related consultants, they may wish to consider how companies have reacted to this situation. For instance, a fund may wish to discuss with its advisors whether—for those companies in which the fund has significant holdings or a particular concern about long-term value—the fund should create a process to determine whether proper proposals have been omitted and how (if at all) that bears on the fund’s view of the company’s leadership and its vote on issues like executive compensation and director elections.

A federal judge granted preliminary approval to a $34 million settlement of an investor lawsuit accusing Deloitte of issuing misleading audit reports about the progress of a massive South Carolina nuclear energy expansion, ignoring red flags about fraudulent numbers that would doom the project.

Reached on behalf of shareholders in SCANA Corp., a regulated South Carolina utility that was sold in 2018 after exposure of the fraud left the company in shambles, the settlement marked a rare victory for investors seeking to hold independent auditors accountable under the heightened liability standards of federal securities laws. If approved, the settlement will be among the top five auditor settlements of the last decade. Deloitte had been SCANA’s auditor for more than 70 years.

Cohen Milstein represents lead plaintiff International Brotherhood of Electrical Workers Local 98 Pension Fund as sole lead counsel in the lawsuit, which stems from a planned $9 billion expansion of the Virgil C. Summer Nuclear Station in Jenkinsville, South Carolina. In what is considered the largest fraud in South Carolina history, SCANA and its corporate executives deceived shareholders, regulators, and ratepayers about mounting costs and delays that disqualified the company from vital tax credits. In issuing false and misleading clean audit reports on SCANA’s financial statements, investors alleged, Deloitte breached its duties as SCANA’s independent auditor under Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.

Specifically, investors claimed that Deloitte failed in its role of gatekeeper, deceiving investors about SCANA’s accounting for the project. Investors claimed that Deloitte gave unqualified, “clean” audit reports on SCANA’s financial statements and internal controls over financial reporting, that misled investors into believing that SCANA would complete the nuclear project in time to obtain $1.4 billion in nuclear tax credits. Deloitte allegedly did so despite possessing voluminous evidence that SCANA could not possibly achieve this goal. Investors also alleged that had it not been for Deloitte’s signoff on SCANA’s materially false and misleading financial statements, Lead Plaintiff and the Class would not have purchased their SCANA shares, and certainly not at the prices they paid.

The original suit was filed in 2019, and is pending in the U.S. District Court for the District of South Carolina on behalf of investors who acquired SCANA stock between February 26, 2016 through December 20, 2017, and were damaged by the alleged fraud. In November 2020, the Court denied Deloitte’s motion to dismiss, holding that “even under the heightened standards applicable” in auditor cases, the shareholders plausibly alleged that Deloitte “helped conceal the fraud from investors by blessing” SCANA’s financial statements, which misrepresented the true status of the project and “continued to reassure investors that the project would be completed in time, even though they knew this information was false.”

The Court certified the class in November 2024 and cross-motions for summary judgment were pending at the time the settlement was reached. The case is International Brotherhood of Electrical Workers Local 98 Pension Fund et al. v. Deloitte & Touche, LLP and Deloitte LLP, 19cv03304 (D.S.C.).

Chairman Selig’s Initial Thoughts on Direction for the CFTC in 2026

On Thursday, Jan. 29, Chair of the Commodity Futures Trading Commission, Michael S. Selig, outlined CFTC priorities for 2026 and beyond. With Securities Exchange Commission Chair Paul Atkins at his side, Selig discussed how the CFTC would partner with the SEC on Project Crypto. He also noted that he has already directed CFTC staff to begin upgrading CFTC regulations and that he looked forward to leading the CFTC into a new era of modernization, harmonization, and future-proofing regulations.

Such regulations should bring important clarity and guideposts for CFTC enforcement efforts, including the Commission’s Whistleblower Program.

Below are a few takeaways directly from Chairman Selig’s speech:

A Tradition of Market Innovation

Today, commodity markets are experiencing a period of rapid transformation. Blockchains, crypto assets, and smart contracts are introducing new methods for trading, clearing, settling, margining, and collateralizing commodity price exposures. These innovations have the potential to reduce operational frictions by enhancing liquidity and streamlining post-trade processes. At the same time, new products such as prediction markets, “mini” contracts, and perpetual futures have experienced rapid adoption.

• Direction: The CFTC is positioning itself to build on its historic role as a forward-looking regulator. By applying clear rules, principles-based oversight, and harmonizing with fellow regulators, like the SEC, the Commission’s objective is to help ensure that the next generation of commodity markets develop onshore—continuing a legacy that stretches from the grain pits of Chicago to the digital markets of the future.

The Crypto Capital of the World

America is home to the most transparent and well-regulated financial markets in the world. With thoughtful engagement and a commitment to principled innovation, the U.S. is uniquely positioned to extend its preeminence into the crypto era.

The GENIUS Act is law and Congress is on the cusp of passing market structure legislation.

Therefore, America’s financial regulators, like the CFTC, must modernize and harmonize their approach to regulation to future-proof our markets for the innovations of tomorrow.

• Direction: CFTC staff will make full use of the agency’s existing authorities to begin upgrading our regulations for America’s Golden Age.

Project Crypto: Modernizing and Harmonizing Financial Regulation

The CFTC is partnering with the SEC on Project Crypto—bringing coordination, coherence, and a unified approach to the federal oversight of crypto asset markets.

Project Crypto recognizes that crypto markets span across agencies’ respective regulatory boundaries. Therefore, the agencies will collaborate on developing clear, durable, rules that will:

• Advance a clear crypto asset taxonomy
• Clarify jurisdictional lines
• Remove duplicative compliance requirements
• Reduce regulatory fragmentation

Ensuring that innovation takes root on American soil, under American law, and in service of American investors, customers, and businesses.

New Accord: Delivering Clarity and Certainty to Crypto Asset Markets

With a wide range of new crypto assets and on-chain financial markets, we’re due for a new cross-agency agreement to govern these markets.

SEC Chairman Atkins recently laid out a common-sense crypto asset taxonomy that will make clear that digital commodities, digital collectibles, and digital tools are not “securities”—even when they are sold as part of an investment contract. 

• Direction: CFTC staff will work with SEC staff to consider joint codification of this framework as an interim measure while Congress finalizes legislation.

Expanding Eligible Tokenized Collateral 

With a clearer taxonomy in place, the next question becomes how blockchain technologies can be harnessed to strengthen market resilience and market functions.

In certain markets, 24/7 trading offers meaningful advantages, particularly where global participation is essential to market efficiency.

• Direction: CFTC staff will develop rules to enable the responsible deployment of additional forms of eligible tokenized collateral.

Onshoring True Perpetual Derivatives

The pace of innovation with crypto assets has also led to experimentation with novel types of derivatives, such as “perpetual contracts,” i.e., derivatives with no fixed maturity date.

• Direction: The CFTC will use the tools at its disposal to onshore perpetual and other novel derivative products so that they can flourish across both centralized and decentralized markets, subject to appropriate safeguards.

Safe Harbors for Software Developers and Users

Digital wallets, decentralized finance protocols, layer-2 networks, and other on-chain software systems are now part of everyday finance. However, uncertainty persists regarding the appropriate regulatory treatment of these technologies under the CFTC’s existing framework.

• Direction: The CFTC will explore ways in which the agency can encourage innovation in software development and support builders as they work toward product market fit, including by assessing whether an innovation exemption may be appropriate in certain circumstances. 

At every step, the CFTC’s actions will reflect a commitment to establish clear and unambiguous safe harbors for software developers to ensure that the crypto innovations of today and tomorrow are Made in America.

Leveraged Crypto Asset Trading

Intermediated trading will continue to play an important role in crypto markets. That includes trading conducted both on- and off-exchange with leverage, margin, or financing. The CFTC is taking concrete steps to foster these trading activities, including:

1. CFTC staff will begin drafting rules clarifying when leveraged, margined, or financed retail commodity transactions in crypto may be offered off-exchange under an “actual delivery” exception.
2. CFTC staff will begin drafting rules codifying requirements for “designated contract markets” (DCMs) that choose to offer these transactions on their current platforms. Codification should promote consistency, transparency, and a uniform application of core protections across venues—hallmarks of the CFTC’s regulatory regime.
3. CFTC staff will explore the creation of a new category of DCM registration that is tailored specifically to retail leveraged, margined, or financed crypto asset trading. These venues would perform functions similar to traditional DCMs but operate under a purpose-fit regulatory framework.

Facilitating Substituted Compliance and Super-Apps

The CFTC will work closely with the SEC to identify opportunities to better align regulatory requirements across markets. 

• Objective: The objective is to reduce unnecessary duplication that does not improve market integrity. Within the bounds of the law and where appropriate, market participants should be able to offer multiple products through a single platform without navigating an inefficient patchwork of registrations and overlapping regulatory regimes.

Prediction Markets

The CFTC supports lawful innovation of prediction markets, otherwise known as event contracts, and the important role they play in the broader financial system. Here’s how we will be moving forward to give them more certainty.

1. CFTC staff will withdraw the 2024 event contracts rule proposal that would prohibit political and sports-related event contracts and the 2025 staff advisory (No. 25 – 36), which cautioned registrants about offering access to sports-related event contracts due to ongoing litigation.
2. CFTC staff will move forward with drafting an event contracts rulemaking.
3. CFTC staff will reassess the Commission’s participation in matters currently pending before the federal district and circuit courts.

CFTC staff will work with counterparts at the SEC to develop a joint interpretation on definitions of the Title VII Dodd-Frank Wall Street Reform and Consumer Protection Act. This effort would draw clearer lines between certain commodity and security options, CFTC-regulated swaps, and SEC-regulated security-based swaps.

About the Author

Christina McGlosson, special counsel in our Whistleblower practice, focuses exclusively on Dodd-Frank Whistleblower representation. She is the former acting director of the Whistleblower Office in the Division of Enforcement at the U.S. Commodity Futures Trading Commission. She was a senior attorney in the SEC’s Division of Enforcement, where she assisted in drafting the SEC rules to implement the whistleblower provisions of Dodd-Frank and served as Senior Counsel to the Director of the SEC’s Division of Enforcement and to its Chief Economist.

Christina represents whistleblowers in the presentation and prosecution of fraud claims before the SEC, CFTC, FinCEN, as part of the U.S. Treasury, the Department of Justice, and other government agencies.

In September, the Securities and Exchange Commission (SEC) withdrew 14 proposed rules dating from the Biden administration. The announcement represented a significant shift in the agency’s regulatory approach to the financial sector under President Trump’s SEC Chair Paul Atkins. Specifically, withdrawing a rule that required investment advisors to “eliminate or neutralize” conflicts of interest arising from their use of artificial intelligence highlights major differences between the Biden and Trump administrations’ assessments of the threat posed by predictive analytical technologies and how best to regulate this rapidly advancing area.

Under the Biden administration, then SEC Chair Gary Gensler rang the alarm bell about the potential impact of artificial intelligence on the financial markets. Prior to becoming SEC Chair, Gensler was a professor at MIT and co-authored a research paper arguing that uniform data and model designs would result in financial market risks. He explained “models built on the same datasets are likely to generate highly correlated predictions that proceed in causing crowding and herding” leading to systematic risks that could unleash a financial crisis. As an example, Gensler cited the 2008 financial crisis, where systemic risk created by the financial sector’s heavy reliance on three major credit agencies to regulate collateral obligations contributed to a global crash. In an August 2023 interview with The New York Times, then-Chair Gensler predicted that just a few AI companies would create financial models undergirding the economic system, setting up global markets for a financial crash. “This technology will be the center of future crises, future financial crises,” Gensler said. “It has to do with this powerful set of economics around scale and networks.”

Not surprisingly, the SEC under Gensler proposed in July 2023 a rule that would have prevented broker-dealers or investment advisors from using AI that resulted in investment firms placing their own interests ahead of investors. Under the proposed rule, investment firms were also required to adopt and maintain written policies and procedures that would prevent such violation of the policy. In addition, the firm would have to comply with certain record-keeping requirements.

The proposal was criticized for several reasons. First, opponents argued the rules would place a serious compliance burden on investment firms. Second, opponents argued that such a proposal hurt the development of new technologies and innovation. Finally, opponents argued the definition of “covered technology” (as applied to AI) was too broad. For example, “covered technology” would include regulating a simple technology like Excel spreadsheets.

The Trump administration and SEC Chair Atkins have taken positions diametrically opposed to Gensler’s, focusing more on enabling innovation than on enforcement. In July, President Trump announced an “AI Action Plan” that described regulation as a barrier to AI innovation. In August, Chair Atkins announced the creation of an AI Task Force consistent with the administration’s approach. The announcement said that the Task Force would “remove barriers to progress” and “focus on AI applications that maximize benefits.” Furthermore, the SEC under Atkins is examining whether investment firms possess the proper governance procedures to monitor AI technologies as opposed to eliminating any conflicts of interests associated with new technologies.

Even those who are proponents of AI’s capabilities believe that AI poses a real threat to financial stability and continue to sound the alarm. In July, OpenAI CEO and ChatGPT co-creator Sam Altman warned about a “significant, impending fraud crisis brought about by artificial intelligence.” The effectiveness of the new administration’s focus on proper disclosure of investment firms’ AI use and governance—as opposed to eliminating conflicts on new technologies—can only be determined over the course of time.

On July 22, 2025, Judge Robert J. Colville of the U.S. District Court for the Western District of Pennsylvania granted preliminary approval of a $167.5 million all-cash settlement to resolve claims that EQT Corporation overstated the synergistic benefits of its $6.7 billion merger with Rice Energy, another natural gas drilling company operating in the Marcellus shale of Western Pennsylvania, in violation of the federal securities laws.

The $167.5 million settlement is the largest securities class action recovery ever in the history of the Western District of Pennsylvania and the 14th largest in the history of the Third Circuit.

As co-lead counsel in the case, Cohen Milstein represents a lead plaintiff group consisting of the Eastern Atlantic States Carpenters Annuity Fund, Eastern Atlantic States Carpenters Pension Fund, Government of Guam Retirement Fund, and Cambridge Retirement System.

In particular, the case alleged that from June 19, 2017 through June 17, 2019, Defendants made materially false and/or misleading statements and omissions regarding EQT’s drilling performance and capability, and about the purported benefits of acquiring Rice Energy, a competitor. The alleged false and misleading statements concerned, among other things, the combined company’s ability to drill 1,200 lateral wells at an average lateral length of 12,000 feet, and to realize $2.5 billion in synergies. The complaint alleged that, after the acquisition, following disappointing financial results midway through the class period, former Rice executives launched and ultimately won a proxy contest to take control of the combined company, citing in part EQT’s failure to seek or realize the stated synergies. The complaint asserted that Defendants’ alleged misrepresentations and omissions caused investors to purchase EQT common stock at artificially inflated prices and/or to approve EQT’s proposed Acquisition. The complaint further alleged that the truth was revealed to the public in a series of partially corrective disclosures on October 25, 2018, February 5, 2019, and June 17, 2019, that caused the price of EQT common stock to decline, causing investors to suffer damages when the truth was revealed.

In arriving at this settlement, Cohen Milstein and its co-lead counsel reviewed over 7 million pages of documents, subpoenaed over 50 third parties, participated in over 50 depositions of fact and expert witnesses, retained and worked with experts on the subjects of damages, loss causation, natural gas drilling, and corporate due diligence, and thoroughly reviewed the applicable facts and law. Furthermore, the parties extensively briefed motions to dismiss, for class certification, for summary judgment, and to exclude expert opinions and testimony.

During the hard-fought litigation, the Court certified the class on August 11, 2022, and on September 23, 2022, the U.S. Court of Appeals for the Third Circuit denied Defendants’ petition for interlocutory review of the Court’s order granting class certification.

The case team at Cohen Milstein included Steven J. Toll, Daniel S. Sommers, S. Douglas Bunch, Christina D. Saler, Benjamin F. Jackson, and Alexandra Gray. A hearing to consider final approval of the settlement is set for October 30, 2025.

Heightened Focus on Fiduciary Compliance, Retail Investor Protection, Investment Advisers, and Emerging Technology

On Nov. 17, 2025, the SEC’s Division of Examinations released its Fiscal Year 2026 Examination Priorities. The Division of Examinations (Division) begins by stating that it has reassessed how best to deploy its resources to meet both growing responsibilities and evolving risks shaped by developments in the U.S. capital markets and broader economic and geopolitical forces. The Division further adds, this involves reevaluating our risk-based priorities and how we approach various trends in the markets, new and emerging products and services, and our processes to ensure our examinations continue to be efficient and effective. Division staff carry out their responsibilities with focus and efficiency, ensuring that our risk-based examinations remain effective and responsive to the needs of investors and the marketplace.

The Division is continuously assessing risks and discussing with its colleagues around the SEC how it can best support the SEC’s mission and priorities. Further, the Division’s priorities may shift in response to new or emerging risks, products and services, market events or investor concerns.

The Division is also zeroing in on cross-market risks—cybersecurity, operational resiliency, governance, vendor oversight, access controls, identity-theft prevention (Regulation S-ID), and compliance with updated Regulation S-P data-protection and notification rules. It is heightening scrutiny of emerging financial technologies, including automated tools, artificial intelligence (AI)-driven recommendations, and algorithmic trading, with a focus on data governance, bias mitigation, supervision, model oversight, and AI-related cyber, fraud, and model-risk vulnerabilities.

Notably, the Division does not reference cryptocurrency, signaling a departure from its FY 2024 and FY 2025 priorities.

The FY 2026 priorities are discussed below.

Investment Advisers

Examining investment advisers’ (adviser) adherence to their duty of care and duty of loyalty obligations remains a priority for the Division, particularly regarding aspects of the advisers’ business that serve retail investors. The Division identifies higher-risk categories of advisers: (1) advisers that are dually registered as broker-dealers, particularly where such advisers have representatives who are also dually licensed as registered representatives and receive compensation or other financial incentives that may create conflicts of interest that must be addressed (e.g., account recommendations and allocations); (2) advisers utilizing third-parties to access clients’ accounts, where controls may be insufficient to protect client assets and data; and (3) advisers that have merged or consolidated with, or been acquired by, existing advisory practices, which may result in accompanying operational and/or compliance complexities or new conflicts of interest; and (3) never-examined advisers, with particular interest on registered investment advisers.

Examiners will assess the effectiveness of Advisers’ Compliance Programs. These examinations typically include an evaluation of the adviser’s marketing, valuation, trading practices, expense disclosures and filings, custody, and private fund governance.

Investment Companies

The Division continues to prioritize examinations of registered investment companies (RICs or funds), including mutual funds and exchange-traded funds (ETFs) due to their importance to retail investors, particularly those saving for retirement.

Examinations will generally include compliance programs, disclosures, filings and governance practices with a particular focus on:

• Fund fees and expenses;
• Portfolio management practices and disclosures; and
• Compliance with the amended fund “Names Rule” following the compliance date.

The Division will also prioritize never-before-examined RICs for examination.

Broker-Dealer Trading-Related Practices and Services

Broker-dealer equity and fixed income trading practices remain a Division priority. Areas of review will include extended hours trading and municipal securities, including the rates reset process on variable rate demand obligations, priority of orders, and mark-ups disclosure. The Division will also review broker-dealers’ routing and execution of orders.  With respect to Regulation SHO, the Division will review whether broker-dealers are appropriately relying on the bona fide market making exemption. The Division will also examine broker-dealer sales practices and continue to prioritize retail investor protections under Regulation Best Interest (Reg BI).  

Examinations will also focus on products that are complex or tax advantaged, such as variable and registered index-linked annuities; ETFs that invest in illiquid assets such as private equity or private credit; municipal securities, including 529 Plans; private placements; structured products; alternative investments; and other products that have complex fee structures or return calculations, are based on exotic benchmarks, are illiquid, or represent a growth area for retail investment.

Self-Regulatory Organizations

The Division will assess the effectiveness of regulatory and enforcement programs at national securities exchanges, such as Financial Industry Regulatory Authority (FINRA), and the Municipal Securities Rulemaking Board (MSRB).

For clearing agencies, examiners will focus on risk management frameworks, liquidity and collateral practices, recovery and wind-down planning, and remediation of prior findings.
Security-based swap dealers and execution facilities should expect targeted reviews of transaction reporting, margin and capital requirements, and operational-risk controls.

CLEARING AGENTS

These examinations will focus on clearing agencies’ core risks, processes, and controls and will cover the specific areas required by statute, including the nature of clearing agencies’ operations and assessment of financial and operational risk.

The Division will conduct risk-based examinations of registered clearing agencies that have not been designated by statute as systemically important. The Division will examine for compliance with the SEC’s Standards for Covered Clearing Agencies, which are rules requiring policies and procedures that address core risk-management functions, including maintaining sufficient financial resources, protecting against credit risks, managing member defaults, and mitigating operational risk.

TRANSFER AGENTS

The Division will continue to examine transfer agent processing of items and transfers, recordkeeping and record retention, safeguarding of funds and securities, and filings with the SEC. Examinations will also focus on transfer agents that use emerging technology to perform their transfer agent functions.

FUNDING PORTALS

The Division will focus on funding portal arrangements with qualified third-parties regarding the maintenance and transmission of investor funds and examine whether funding portals are making and preserving required records.

SECURITY-BASED SWAP DEALERS (SBSDs)

The Division will continue to focus its examinations on whether SBSDs are complying with their obligations under Regulation SBSR to accurately report security-based swap transactions to security-based swap data repositories. The Division also expects to focus on SBSDs’ risk management practices and compliance with capital, margin and segregation requirements.

SECURITY-BASED SWAP EXECUTION FACILITIES (SBSEFs)

The Division expects to begin conducting examinations of registered SBSEFs focusing on the SBSEF’s rules and related internal policies and procedures addressing trade monitoring, trade processing, and participation. Moreover, the Division plans to assess how SBSEFs establish programs of risk analysis and oversight to identify and minimize sources of operational risk.

Additional Areas Impacting Market Participants

Cybersecurity practices by registrants remains vital to help ensure the safeguarding of customer records and information. Particular attention will be placed on policies and procedures pertaining to governance practices, data loss prevention, access controls, account management, and responses and recovery to cyber-related incidents, including those related to ransomware attacks. In addition, focus will be on training and security controls that firms are employing to identify and mitigate new risks associated with AI and polymorphic malware attacks, including how they are operationalizing information from threat intelligence sources.

The Division will assess compliance with Regulations S-ID and S-P, as applicable. Examinations will focus on firms’ policies and procedures, internal controls, oversight of third-party vendors, and governance practices. Regarding Regulation S-ID, the Division will focus on firms’ development and implementation of a written identity theft prevention (ITP) program that is designed to detect, prevent, and mitigate identity theft in connection with covered accounts. Specifically, the Division will assess the reasonableness of firms’ policies and procedures included within their ITP programs, including whether they are reasonably designed to identify and detect red flags, particularly during customer account takeovers and fraudulent transfers, and include firm training on identity theft prevention.

The Division remains focused on emerging financial technology, i.e., registrants’ use of certain products and services, such as automated investment tools, AI technologies, and trading algorithms or platforms, and the risks associated with the use of emerging technologies and alternative sources of data. As such, the Division will examine firms that engage in activities such as automated investment advisory services, recommendations, and related tools and methods.

Regulation Systems Compliance and Integrity (SCI) will focus on policies and procedures related to incident response and how SCI entities review the effectiveness of these policies and procedures and SCI entities’ management of third-party vendor risk and properly identifying vendor systems that qualify as SCI systems or indirect SCI systems.

Anti-Money Laundering (AML) remains a Division priority. The Bank Secrecy Act (BSA) requires certain financial institutions, including broker-dealers and certain RICs, to establish AML programs. AML programs should be reasonably designed to prevent these financial institutions from being used for money laundering or the financing of terrorist activities and to achieve and monitor compliance with applicable BSA requirements.

Lastly, the Division will review whether broker-dealers, advisers, and RICs are monitoring the Department of Treasury’s Office of Foreign Assets Control sanctions and ensuring compliance with such sanctions.

Whistleblowers Play a Critical Role

Whistleblowers play a critical role in ensuring the integrity of the U.S. and global financial markets. Both the SEC and CFTC rely on whistleblowers to help them enforce violations of the federal securities laws and the Commodity Exchange Act. If you have witnessed fraud, or noncompliance with the examination priorities listed above, consider blowing the whistle.

What to Do if You Have Witnessed Fraud or Noncompliance:

1. Speak with an Experienced Whistleblower Attorney: Contact an experienced whistleblower attorney who understands the SEC and CFTC whistleblower programs. These consultations at Cohen Milstein are confidential and free of charge. Counsel can guide you through the process and assist in preparing and submitting your Tip, Complaint, and Referral (Form TCR) to the SEC or CFTC.
2. Gather Your Information: Along with your personal observations and a completed Form TCR, the SEC and CFTC requires supporting information that is original and not in the public sphere.
3. Understand the Potential for a Whistleblower Award: If your information leads to a successful SEC or CFTC enforcement action resulting in more than $1 million in monetary sanctions, you may receive an award ranging from 10-30% of any amount collected.

The SEC’s Whistleblower Program and the CFTC’s Whistleblower Program provide comprehensive guidelines on reporting fraud and the whistleblower process. Access the Tip, Complaint or Referral (TCR) forms: SEC Form TCR and the CFTC Form TCR.

About the Author

Christina McGlosson, special counsel in Cohen Milstein’s Whistleblower practice, focuses exclusively on Dodd-Frank Whistleblower representation. She is the former director of the Whistleblower Office in the Division of Enforcement at the U.S. Commodity Futures Trading Commission. She was a senior attorney in the SEC’s Division of Enforcement, where she assisted in drafting the SEC rules to implement the whistleblower provisions of Dodd-Frank and served as Senior Counsel to the Director of the SEC’s Division of Enforcement and to its Chief Economist.

Christina represents whistleblowers in the presentation and prosecution of fraud claims before the SEC, CFTC, FinCEN, as part of the U.S. Treasury, the Department of Justice, and other government agencies.

Responding to a call to action by President Donald Trump, Securities and Exchange Chair Paul Atkins is “fast-tracking” a proposal that would allow publicly traded US companies to file financial reports twice a year instead of quarterly. The proposed rule change has triggered opposition by some stakeholders.

If the rule is relaxed, it would end a practice that has undergirded the US investment framework for 55 years. Since 1970, US companies have been required to file unaudited “Form 10-Q” reports with the SEC to share certain information about their financial performance with shareholders, in addition to submitting audited annual Form 10-K reports.

The quarterly reporting requirement makes the US somewhat of a global outlier—to some, quarterly reporting is part of what makes US stock markets the gold standard for transparency; others consider it costly red tape that encourages short-termism.

President Trump falls squarely in the latter camp. During his first term in 2018, he urged the SEC to ditch quarterly reports, but the initiative stalled after the Commission issued a request for comment on the matter. On September 15, President Trump again pushed the idea in a social media post as a way for corporations to “save money” spent on compliance “and allow managers to focus on properly running their companies” instead of doing so “on a quarterly basis.”

This time, however, President Trump has an important ally in SEC Chair Atkins, who voiced immediate support and pledged to fast-track the rule in a September 29 Financial Times opinion piece.

“The government should provide the minimum effective dose of regulation needed to protect investors while allowing businesses to flourish,” Chair Akins wrote, saying he was “fast-tracking President Trump’s proposal to equip companies with the option to report on a semi-annual basis, rather than locking them into the current quarterly reporting regime.”

In the article, Chair Atkins praised President Trump for ending the “mission creep” by which the SEC had “drifted from the precedent and predictability that sustain … confidence” in capital markets and abandoned “its core mission of protecting investors, maintaining fair, orderly and efficient markets, and facilitating capital formation.”

Specifically, he blasted predecessors who he believes strayed from the “principle of materiality” to write rules “for shareholders who seek to effect social change or have motives unrelated to maximising the financial return on their investment.” 

“It is time for the SEC to remove its thumb from the scales and allow the market to dictate the optimal reporting frequency based on factors such as the company’s industry, size and investor expectations,” Chair Atkins said. “Giving companies the option to report semi-annually is not a retreat from transparency.”

Chair Atkins noted that foreign companies listed on US exchanges are only required to file semiannual reports, as are companies in the European Union and the United Kingdom. Both imposed quarterly financials for a time before reverting to twice-yearly reports, the EU from 2004 to 2013 and the UK from 2007 to 2014. Most Canadian and Japanese companies, like those in the US, file quarterly financial reports, as do all companies in India and China, which is ironic, given President Trump’s assertion in his social media post that “China has a 50 to 100 year view on management of a company …”

Critics say less frequent reporting will hurt shareholders, especially retail investors, by widening the gap between publicly available information and facts known by company insiders. Unlike Chair Atkins, they say the move will undermine transparency by reducing the steady flow of reliable financial information to market participants.

In a 2020 research article in The Accounting Review, researchers studying thousands of US and European peer companies across multiple industries found that when US companies announced quarterly earnings, the European companies’ stock price more closely tracked their US counterparts when the European companies weren’t reporting.

The authors of article, “The Dark Side of Low Financial Reporting Frequency,” concluded that the “information vacuum” created by semiannual reporting caused investors to “periodically overreact to peer-firm earnings news in the absence of own-firm earnings disclosures in interim periods.” In addition, investors overcorrected when the European peer companies finally issued their semiannual earnings reports.

“We conclude[d] that less-transparent reporting causes more volatile and less efficient stock prices,” said Salman Arif, an associate professor at the University of Minnesota’s Carlson School of Management and one of the paper’s authors.

Some also take issue with the idea that semiannual reporting will motivate managers to make longer-term decisions. On September 19, columnist James Mackintosh of The Wall Street Journal argued that President Trump was “wrong in every possible way.” For one thing, six months isn’t the long term, he wrote. For another, US companies actually do invest for the long term despite quarterly reporting, he said, citing technology companies’ investment of “nearly $400 billion this year in long-term artificial intelligence projects.”

Furthermore, Mackintosh wrote, there was “no effect on investment or research spending for companies that switched to half-yearly reporting” in the UK since quarterly requirements were eliminated in 2014. “Indeed, if quarterly reporting were such a huge barrier to companies, it’s odd that the U.S. market is thriving, while London is struggling to attract new listings or even hold on to existing once,” he said.

Chair Atkins has said he would present a proposed rule for public comment late this year or in early 2026. SEC rule changes typically take more than a year go into effect, even when expedited, and there is no guarantee the new rule will be approved or what exact shape it will take. Given the strong opposition to less frequent reporting among academics, institutional investors, and shareholder advocates, the public comment period should yield a vigorous debate.

Governments impose taxes known as tariffs and duties on goods that are manufactured abroad and imported for use or sale within their borders. Tariffs are used to generate revenue, protect domestic industries and jobs, enhance national security, and serve as bargaining power in trade negotiations. But as global trade grows more competitive and tariff rates rise, so too does tariff evasion, an expanding fraudulent practice that harms Americans and impedes fair competition. 

In 2025, the U.S. government greatly expanded the tariffs it charges on goods imported from numerous countries. Almost half of all goods that enter the U.S. are now subject to tariffs. These tariffs, which vary by product and country of origin, in some cases exceed 100% of the imported products’ value. While business owners, CEOs, consumers, economists, and politicians have differing views on the effectiveness of U.S. trade and tariff policies, tariffs are legal obligations that must be paid. When importers evade these obligations, they not only cheat the government and American citizens out of billions in revenue but also gain an unfair advantage over competitors who play by the rules and abide by the law.  

The Widening Tariff Gap 

According to economists at Goldman Sachs, importers evaded payment of an estimated $125 billion in tariffs on goods imported into the U.S. in 2023. The difference between the total amount of tariffs owed and the total amount paid is referred to as the “tariff gap.” While tariff gap data for 2025 is not yet available, with the U.S. government’s expansion and escalation of tariffs this year, tariff evasion schemes are increasing in prevalence, and the tariff gap is widening. Studies show that when tariff rates rise, tariff evasion increases disproportionately. Tariff cheaters, on average, lower the tariff amounts they actually pay by a substantially higher percentage than the amount of the tariff rate increase – i.e., for every 1% tariff increase, the tariff gap widens by 3%. 

Common Tariff Evasion Schemes 

To evade payment of some or all the duties and tariffs owed on goods, many importers engage in fraudulent schemes including these more common schemes: 

• Understating the value of the goods that are being imported in documentation that importers are required to submit to U.S. Customs (i.e., Entry Summary (Form 7501) and commercial invoices) 

• Misclassifying the goods being imported in required documentation submitted to U.S. Customs (i.e., falsely reporting that the good is another product that has a lower tariff or duty rate) 

• Lying about the country of origin in required documentation submitted to U.S. Customs (i.e., falsely reporting that the good was manufactured in another country for which the tariff rate is lower) 

• Smuggling goods into the U.S. without disclosing their entry to U.S. Customs. 

Using the False Claims Act to Hold Companies Engaging in Customs Fraud Accountable  

There is a powerful tool to hold companies that engage in customs fraud accountable and protect fair competition: the False Claims Act. The False Claims Act makes it unlawful to knowingly avoid payment of a financial obligation to the U.S. government. Companies that evade payment of owed tariffs and duties violate the statute. A person who violates the statute is liable to the government for three times the total amount of owed duties and tariffs they did not pay, plus interest, and is also required to pay substantial penalty for each fraudulent import transaction. 

Incentives for Whistleblowers 

To better enable the government to combat fraud that harms the country, Congress included a qui tam provision in the False Claims Act. This provision allows companies and individuals to bring whistleblower or qui tam actions on behalf of the U.S. government against companies that have engaged in customs fraud. To encourage those with information about companies that have engaged in customs fraud to come forward and assist the government in recovering the unpaid duties and tariffs, the law rewards whistleblowers a substantial share – typically 15% to 30% depending on multiple factors ‒ of the recovery the government obtains as a result of the whistleblower’s information and lawsuit.   

Whistleblowers who expose tariff evasion under the False Claims Act not only aid in recovering funds owed to the United States, but they also help uphold trade integrity and fair competition. 

The False Claims Act has been an overwhelmingly effective fraud enforcement tool, recovering over $78 billion for the government and American taxpayers since 1986, and has been successfully used on numerous occasions to combat tariff evasion. This success is largely due to whistleblowers using the statute’s qui tam provision to hold those who engage in customs fraud accountable. 

About the Author

Casey Preston represents plaintiffs across the country in qui tam  actions brought under the False Claims Act against companies that engage in fraudulent conduct that causes economic harm to federal and state governments.