Recently, we surveyed 79 directors of public and private corporations to understand the size, composition, and contribution of the individuals—paid and unpaid—whom directors turn to for advice.

We find widespread use of information networks. Ninety percent of directors rely on paid coaches or informal “kitchen cabinet” advisers, with most of the informal  advisers being unpaid. The prevalence of advice networks suggests that important knowledge relevant to board oversight resides outside the boundaries of the firm and cannot be fully replicated through formal board processes alone.

Below is a brief summary of our findings:

Coaching reflects a continuous learning mindset.

Only 18 percent of directors use a paid coach—a low percentage. Directors join boards to add value through their accumulated professional experience. To some, hiring a professional coach is unnecessary. To others, it is counter to expectation that a director recruited to provide advice would themselves require advice. Those who retain a paid professional tend to do so of their own volition (see Exhibit 1). It requires a mindset of continuous learning, coupled with a degree of humility, to commit to structured learning.

Exhibit 1

Coaching is most valuable in the ramp-up phase.

We find heightened use of paid coaches in the early period of a board member’s first directorship. Two-thirds of directors who use a paid coach begin working with them either before or when they first become a director. Relative to being an executive, the role of director requires a different style and approach, with new skills. A director is expected to advise and guide rather than lead and execute. Many first-time directors discover this is not a natural role.

Their education with paid coaches is a personal endeavor. Only 22 percent of directors who use a coach ask the coach to solicit feedback from their fellow board members for inclusion in their development plan. Directors are pleased with the results. Eighty-nine percent express satisfaction with the training they receive from their coach (see Exhibit 2).

Informal advisers are the true support system.

The vast majority of directors (86 percent) rely on a kitchen cabinet of informal advisers as their primary support network. These relationships span decades and are built on trust, shared history, and common understanding. A typical kitchen cabinet includes between three and five advisers, with some numbering more than 10.

The backgrounds of these individuals are varied: fellow board members at unaffiliated companies (72 percent), former colleagues (60 percent), executives of other companies (30 percent), and friends through professional associations (26 percent). They also include former paid advisers, classmates, and friends made through social clubs, nonprofits, and volunteer activities (see Exhibit 3).

Exhibit 3

The words directors most frequently use to describe their advisers are competence, strategic, experience, candor, character, and discretion—reflecting both the business expertise and personal integrity of these individuals. These are important attributes for people who serve as a sounding board for complicated or sensitive issues.

Not surprisingly, the composition of this group holds steady over time, with 36 percent of directors relying on mostly the same individuals as they did when they first sought outside advice, and 58 percent relying on a mix of individuals that are somewhat different. Three-quarters (71 percent) have relied on informal advisers for more than 10 years (see Exhibit 4).

Exhibit 4

Directors distinguish “on-the-job” and “big picture” topics.

Directors take a portfolio approach to their advice network, directing questions to the individual or individuals best situated to address them. With professional coaches and paid advisers, directors are more likely to discuss on-the-job issues, like satisfying their role as director and overseer, managing boardroom dynamics, and interfacing with management.

They turn to their kitchen cabinet for “big picture” questions of strategy, risk, dealing with stakeholders, and company reputation. In these matters, they appear to prefer the counsel of long-time acquaintances who have gone through similar experiences and with whom they can discuss nuanced and sensitive topics with trust and confidence (see Exhibit 5).

Exhibit 5

Directors leverage their networks to help their companies.

Directors use their advice networks to support management and fellow board members through introductions and referrals, in addition to information flows. Approximately half of directors (44 percent) refer a coach to other directors for their professional development. The same percentage (44 percent) refer a coach to the CEO (see Exhibit 6).

Exhibit 6

Directors leverage their advisory networks to solve an average of 7.5 issues for the benefit of their companies, and a quarter (26 percent) leverage their networks more than 10 times.

This demonstrates that directors create value not only through their individual expertise but also through access to broader networks of information and relationships.

Conclusion

How corporate directors use professional coaches and informal advisers is a greatly underexplored area of research. Advice networks—both formal and informal—can be viewed as governance mechanisms that supplement the information available through official board processes. They allow directors to acquire knowledge, reduce uncertainty, and access specialized expertise that may improve oversight and decision-making. The widespread use of such networks suggests that effective board governance depends not only on the human capital directors bring into the boardroom, but also on the external relationships through which that human capital is continually refreshed and expanded.

Paid and unpaid advisers are both important elements of these networks. First-time directors, in particular, rely on paid coaches for guidance through the transition phase and to help them acquire new skills.

Unpaid advisers serve as a more expansive, longer-term reservoir of information that directors tap into repeatedly throughout their tenure, reflecting a lifetime of personal achievement. The breadth of knowledge and diverse experience of these advisers contribute to the value a director brings to the firm in addressing governance matters.

These benefits, however, must be weighed against potential costs. Reliance on a stable group of trusted advisers may reduce exposure to diverse viewpoints and reinforce existing beliefs. Advice obtained through personal networks may also be shaped by experiences that are not transferable to a firm’s particular circumstances. More generally, directors face a tradeoff between expanding their sources of information and preserving confidentiality, independence, and accountability in decision-making.

David F. Larcker is the James Irvine Miller Professor of Accounting, Emeritus at Stanford Graduate School of Business. Stephen A. Miles is founder and CEO of The Miles Group. Amit Seru is the Steven and Roberta Denning Professor of Finance and Senior Associate Dean for Academic Affairs at Stanford Graduate School of Business. Brian Tayan is a researcher at Stanford Graduate School of Business. This post is based on their recent paper, “When Directors Need Direction: Whom Do Board Members Go to for Advice?” available here.

Below we summarize the key elements of the proposed changes and suggest practical steps companies can consider taking now.

Key Changes to Filer Status Categories

The proposed amendments would create two primary filer status categories—large accelerated filers (LAFs) and non-accelerated filers (NAFs)—and eliminate the existing filer status categories for accelerated filers (AFs) and smaller reporting companies (SRCs). The proposal would not affect the statutorily-based emerging growth company (EGC) category, although it would make most of the benefits of EGC status available to all NAFs. According to the SEC, if the proposed amendments were in effect today, 19.2 percent of all current public companies would be LAFs (compared to 35.4 percent currently), and 80.8 percent would be NAFs.[1]

Key changes to the existing framework are as follows:

• The expanded NAF definition would extend the benefit of the full range of current SRC and EGC scaled disclosure accommodations to most public companies. This includes scaled executive compensation disclosure, including no requirement for compensation discussion and analysis, fewer tabular and narrative disclosure requirements and no pay versus performance disclosure, fewer years of audited financial statements (with reduced presentation requirements), no auditor attestation requirement with respect to internal control over financial reporting (ICFR), and no say-on-pay or say-on-frequency votes We discuss these accommodations in more detail below.
• Every newly public company would have at least a five-year on ramp as a NAF. The requisite period after which a public company could potentially be categorized as an LAF would increase from 12 consecutive calendar months under the current rules to 60 consecutive calendar months following the month in which a company becomes subject to the reporting requirements of the Securities Exchange Act of 1934 (the Exchange Act).
• The public float threshold for LAF status would nearly triple. The proposal would raise the threshold from $700 million to $2 billion, resulting in most public companies being classified as NAFs.
• The LAF threshold would be calculated based on an average stock price over 10 trading days, rather than a single day’s closing price. The current rules measure public float for purposes of determining LAF status on a single day—the last business day of a company’s second fiscal quarter. The proposed rules would instead use the average closing price (or, if applicable, the average of bid and ask if no closing price is available) over the last 10 trading days of a company’s second fiscal quarter, multiplied by the aggregate number of shares of voting and non-voting common equity held by non-affiliates as of the last day of the second fiscal quarter. This change is designed to mitigate the impact of temporary shifts in stock price that could otherwise unexpectedly affect a company’s filer status.
• Filer status does not change for at least two consecutive years. A company would only transition into or out of LAF status after its public float has been above or below the $2 billion threshold as of the end of each of a company’s two most recent second fiscal quarters. Along with this change, the proposal would also eliminate the current separate, lower exit thresholds for transitioning out of LAF or AF status—a feature that has contributed significantly to the complexity of the existing rules. Instead, the proposal would use a single $2 billion threshold with a two-year lookback for both entry and exit, providing additional predictability for public companies.
• The AF and SRC categories would be eliminated. NAF status would become the default for all reporting companies unless they satisfy the LAF conditions. The NAF category would absorb and replace the current AF and SRC categories. Except for a proposed new category of the smallest public companies (described below), the filing deadlines for NAFs would remain unchanged from the current rules: 90 days after fiscal year end for Form 10-K annual reports and 45 days after fiscal quarter end for Form 10-Q quarterly reports, thus extending the reporting deadlines for current AFs.
• A new “small NAF” subcategory would provide extended filing deadlines for the smallest companies. NAFs with total assets of $35 million or less[2] for the two most recent fiscal years would be categorized as “small NAFs” and receive an additional 30 days to file Form 10-K (extending the deadline to 120 days) and an additional five days to file Form 10-Q (extending the deadline to 50 days).

Scaled Disclosure and Other Accommodations for NAFs

One of the most significant aspects of the proposal is the extension of scaled disclosure requirements and other accommodations currently available to SRCs and EGCs to all NAFs. Under the proposal, a majority of the companies currently classified as AFs or LAFs would transition to NAF status and thereby benefit from a material reduction in their disclosure obligations. (As under current rules, a NAF could elect to comply with some or all of the more rigorous disclosure obligations applicable to LAFs.) The principal accommodations available to NAFs would include:

• Scaled financial statements and MD&A. NAFs would be permitted to prepare their financial statements on a slightly more condensed basis in accordance with Article 8 of Regulation S-X, and would only be required to include two (instead of three) years of audited financial statements in annual reports and registration statements. Further, NAFs would only need to include two years of corresponding MD&A disclosure and also would be able to benefit from more flexible age of financial statement requirements.
• No required auditor attestation of ICFR. NAFs would not be required to obtain an auditor’s attestation on management’s assessment of the effectiveness of internal control over financial reporting as contemplated by section 404(b) of the Sarbanes-Oxley Act of 2002 (SOX). The other provisions of SOX section 404 would continue to apply.
• Significantly reduced executive compensation disclosures. NAFs would be permitted to provide executive compensation disclosure for fewer named executive officers (three instead of five, generally), provide two (instead of three) years of data in their Summary Compensation Table, and would not be required to comply with several other executive compensation disclosure rules, including those requiring a compensation discussion and analysis, pay ratio disclosure, pay versus performance disclosure, and certain other compensation-related tables.
• No required shareholder advisory votes. NAFs would be exempt from the requirements to conduct say-on-pay, say-on-pay frequency, and golden parachute compensation advisory votes.
• Other disclosure accommodations. NAFs would not be required to provide risk factor disclosure in Forms 10-K and 10-Q, performance graph disclosure, supplementary financial information, quantitative and qualitative disclosures about market risk, disclosure of policies for approving related party transactions, compensation committee interlocks and insider participation disclosure, or certain other disclosures.
• New or revised accounting standards. For a five-year period following the initial registration of securities under the Exchange Act, all NAFs would be permitted to irrevocably elect to defer compliance with certain new or revised financial accounting standards issued by the Financial Accounting Standards Board, consistent with the same accommodation currently available to EGCs.
• Material unresolved SEC staff comments. Notwithstanding the scaled disclosures, the proposal would require all NAFs to disclose in their annual reports the substance of material unresolved SEC staff comments received at least 180 days before fiscal year end — a little used requirement currently applicable only to LAFs, AFs, and well-known seasoned issuers.

Transition Provisions

As proposed, companies would be required to initially assess their new filer status as of the end of their fiscal year prior to the effective date of the final rules, based on public float (and, if applicable, total assets) measured as of the second fiscal quarter for such fiscal year and the immediately prior fiscal year. Companies would be permitted to initially assess their filer status at any time after effectiveness of the final rules, but no later than the day prior to the last day of their fiscal year in which the final rules go into effect. For example, if the proposed rules and amendments are adopted and become effective on January 15, 2027, then existing calendar year end companies would be required to assess their filer status as of December 31, 2026 no later than December 30, 2027, but would be permitted to complete such assessment as of any date between January 15 and December 30, 2027. After assessing filer status, companies could begin availing themselves of scaled disclosures and other accommodations (as applicable) in their next filing.

Existing companies would not carry forward their prior filer status for purposes of the initial assessment. This means that a current LAF with public float below $2 billion, or that has not been a reporting company for 60 consecutive calendar months, would become an NAF upon effectiveness of the proposed rules. Existing LAFs and AFs may choose to continue reporting subject to their current requirements if preferred.

How Public Companies Would Be Affected

The proposed amendments would affect virtually every domestic public reporting company, though the nature and degree of impact would vary:

• All current AFs and current LAFs with public float between $700 million and $2 billion would transition to NAF status and thereby be able to take advantage of the full range of scaled disclosure and other accommodations, described in greater detail above.
• Current SRCs would transition to NAF status but would generally see little substantive change in their disclosure obligations, as the NAF accommodations would closely mirror their current requirements, but would benefit from some incremental disclosure accommodations that under current rules are available only to EGCs.
• Newly public companies would benefit from a minimum five-year on-ramp as NAFs before potentially becoming subject to LAF requirements, regardless of their size.
• The largest public companies (public float of $2 billion or more, with at least 60 months of seasoning) would continue as LAFs and would see no reduction in their disclosure obligations.

What Companies Should Be Doing Now

Monitor related rulemaking. The SEC notes that this proposal is being made in conjunction with a separate proposing release on reforms to the securities offering process that would make Form S-3 and shelf offerings available to significantly more issuers. Companies should track both proposals as they move through the rulemaking process, as they are designed to work in tandem. SEC rulemaking has continued apace in 2026 with the SEC also recently proposing to permit public companies to elect to file periodic reports on a semiannual instead of a quarterly basis. If adopted as proposed, these rulemakings, taken together, would alter the timing and content of public communications required by public companies. See Covington’s client alert on the semiannual reporting proposal here.

Engage with the SEC. Companies that are supportive of the proposed changes or have additional viewpoints for the SEC to consider are highly encouraged to engage in the SEC’s comment process.

ENDNOTES

1. Foreign private issuers (FPIs) that elect to file reports in accordance with the rules and forms designated for FPIs (Form 20-F and Form 40-F) would not be categorized under the LAF and NAF definitions. FPIs filing on Form 20-F would continue to be required to provide an ICFR auditor attestation if they have a public float of $75 million or more, unless they qualify as an EGC.

2. The proposed rules would also revise the SEC’s definitions of “small entity” for purposes of the Regulatory Flexibility Act, raising the total asset threshold from $5 million to $35 million to align with the proposed small NAF threshold.

This post is based on a Covington & Burling LLP memorandum, “Scale Overload! SEC Proposed Major Expansion of Scaled Disclosure Requirements, Simplifying Reporting Framework for Most Public Companies,” dated May 21, 2026, and available here. 

Economists define money by a familiar triad: a medium of exchange, a unit of account, a store of value. But these phrases tell us what money does, not what it is, and say nothing about how something becomes money.

A modern monetary system comprises many forms of money, from coins and notes to bank deposits, checks, digital wallet balances, and money-market shares. As the economist Perry Mehrling has shown, these instruments are not equals but occupy an interlinked hierarchy, each one a promise to pay the layer above it, with public money (coins, notes, and central bank reserves) at the apex of today’s fiat system. Where something lands in that hierarchy depends on how reliably it does money’s job (a quality economists call “moneyness,” which they’ve traditionally explained through economic properties). James Tobin taught that moneyness is a matter of degree, not of kind. Gary Gorton and Bengt Holmström tied moneyness to “information insensitivity,” which is the quality that lets people accept money without investigating its issuer.

Legal scholars have built on what the economists began. Yet, where an instrument sits in that hierarchy is not fixed by economics alone. Each layer is a promise, and a promise is only as good as the law behind it. Dan Awrey’s work on “bad money” and Morgan Ricks’ on money as a public franchise explain how public law manufactures trust. Deposit insurance, central-bank access, supervision, and orderly resolution turn fragile claims into safe, widely accepted money. But, however essential safety may be, it does not exhaust what makes an instrument money.

We develop an original framework in which moneyness depends not only on these public protections but also on a precise private-law infrastructure. Its intensity, we argue, turns on four elements: the nature of the claim (what the holder actually owns, and against whom), safety (confidence the promise will be honored, in performance and in recovery if the issuer fails), discharge capacity (whether handing the instrument over settles a debt), and negotiability(whether it passes free of competing claims and defenses). Deficiency in any one of these elements undermines the instrument’s capacity to serve as money.

Our framework is a tool for assessing any monetary instrument, old or new, and stablecoins are the test case of the moment. At first glance, they look the part. Each token carries a right of redemption: the issuer’s promise to buy it back for a dollar, backed one-for-one by a reserve of safe assets. Stablecoins are efficient, too. Issued on open blockchains rather than the conventional financial system, they move anywhere in minutes for a few cents. Taken together, these traits seem to give stablecoins a high degree of moneyness. Yet, closer scrutiny tells a different story.

Drawing on the issuers’ own terms of service, user agreements, and regulatory filings, our article makes a test case of the market’s two dominant issuers, Tether and Circle. The picture is sobering. In practice, the right to redeem is conditional and revocable, a privilege the issuer can suspend. Indeed, most stablecoin holders cannot even exercise it. Tokens are typically bought not from the issuer but on secondary markets. This means that an issuer’s contracts run only to a small cohort of vetted institutional accounts, leaving millions of people with no privity and no direct claim. The terms of service push nearly every risk onto holders while shielding issuers from liability. And the backing is not theirs either. The reserves that stand behind the coins belong to the issuer. Holders own no property interest in them. If an issuer fails, stablecoin holders rank as ordinary unsecured creditors, not owners of the backing assets they were promised.

The GENIUS Act addresses some of these failures and introduces others. Take the redemption right. The act bars issuers from claiming government backing and obliges them to redeem, yet it leaves the claim’s legal nature unsettled. It does not fix whether that duty to redeem runs to every holder or only to the issuer’s direct, pre-approved counterparties. Nor does the law clearly address whether the right to redeem is built into the token or is a separate asset that can circulate apart from it. We argue for holder-protective answers, but the statute does not compel these results.

Safety is no firmer. The act builds it on a narrow-bank model that requires an issuer to back every coin with high-quality liquid assets (chiefly cash and Treasuries) and prohibits lending them out. Thus, safety turns on what the issuer holds, not on any public backstop. Importantly, we note that those reserves sit with custodian banks, so a holder’s safety rests on institutions it never chose. When Silicon Valley Bank collapsed in 2023, more than $3 billion of Circle’s reserves were trapped inside it, and USDC slipped to $0.88. Perhaps worst of all, the act’s insolvency rules contradict each other. One provision pulls the reserves out of a failed issuer’s bankruptcy estate while others still treat them as part of it. And the holders’ “super-priority” for shortfalls in the reserve asset pool backfires: By ranking them ahead of even the trustee and rescue lenders whose fees a bankruptcy must pay first, it can leave no one willing to run the case.

The GENIUS Act is conspicuously silent on the question of whether paying in a stablecoin actually settles a debt (what we call discharge capacity). Nothing requires a creditor to accept one, so acceptance is negotiated transaction by transaction, and nothing fixes when payment becomes final. For a peer-to-peer transfer, no rule says when the payer’s obligation is discharged. Where the payment runs through exchanges or other platforms, the gap is wider. There is no analogue to UCC Article 4A, which for ordinary electronic fund transfers fixes when an intermediary is bound, when the debt is discharged, and who bears the loss if it fails midway. Negotiability, the last element, turns on a question left open above: whether the right to redeem is merged with the token or stands apart from it. Cash passes from hand to hand cleanly. Whoever takes cash in good faith keeps it. A stablecoin is only half there. The token itself travels clean—under UCC Article 12, whoever obtains control of it, in good faith, for value takes it free of any competing claim. But at present the right to redeem is a separate asset, governed by the rules for assigning contractual claims. This is the very opposite of negotiability. Under strict nemo dat—no one can give what he does not have—and first-in-time priority, a transferee takes the redemption right burdened by every defense and competing interest that arose before. Until the right to redeem is welded to the token itself, the shell circulates like money while the value inside it may not be like money.

From a broader perspective, how much moneyness stablecoins ought to possess, if any, is a normative and political judgment for lawmakers and regulators. That inquiry is distinct from the descriptive question our article sets out to answer. Should they decide in favor of more moneyness, the article identifies the five required interventions, each closing one of the gaps that our framework exposes. Three go to safety: Let qualifying issuers hold reserves at the Federal Reserve rather than with private custodians, as the Bank of England is weighing; create industry-funded insurance functionally similar to the Securities Investor Protection Corporation; and replace the act’s tangled insolvency provisions with a perfected security interest in the reserves under UCC Article 9, thereby giving holders a property right of certain priority whose treatment in bankruptcy is well understood. One goes to discharge: a finality rule treating transfer of control as discharging the payer’s debt peer-to-peer, with an Article 4A-style regime for intermediated payments. The last goes to the claim and negotiability: Unequivocally tokenize the redemption right so that controlling a coin carries the right to redeem it. This would fuse the coin and the promise into a single asset under one body of law.

A common thread runs throughout our article—public and private law must be wedded. Financial regulation too often fixes on prudential requirements, disclosure, and licensing while ignoring the contract and property rights that are essential to the operation of money. This lesson reaches beyond money. Across finance, from payments to investments, instruments rest on private-law foundations as much as public ones, and getting both right will only matter more as innovation accelerates.

Christopher K. Odinet is a professor and Mosbacher Research Fellow at Texas A&M University School of Law. Andrea Tosato is a professor at Southern Methodist University’s Dedman School of Law. Yesha Yadav is the Milton R. Underwood Chair, an associate dean, and a professor at Vanderbilt University Law School. This post is based on their article, “The Moneyness of Stablecoins,” forthcoming in the Yale Law Journal and available here.

As we explained in our June 2020 memorandum on Liu v. SEC, the Supreme Court’s 2017 decision in Kokesh had raised questions about the SEC’s authority to obtain disgorgement by holding that disgorgement is a penalty for statute-of-limitations purposes.  The Court answered those questions in Liu, preserving the SEC’s ability to seek disgorgement but making clear that the remedy is subject to traditional equitable limitations.  In keeping with those limitations, Liu held that disgorgement must be limited to a wrongdoer’s net profits, but left open whether the SEC may obtain disgorgement when the funds cannot feasibly be distributed to injured investors.  Sripetch addresses another question arising from Liu’s equitable limitations, holding that traditional equitable principles do not require the SEC to prove investor pecuniary loss before obtaining disgorgement.

Disgorgement, the Court explained, is measured according to governing equitable principles by the wrongdoer’s gain, not the victim’s loss.  In applying that principle to SEC disgorgement, the Court treated investors whose legally protected interests have been invaded as victims even where the SEC cannot prove that investors suffered pecuniary loss.  The Court rejected the argument that its earlier holding in Liu that disgorgement be “awarded for victims” effectively imposed a requirement to establish a victim’s pecuniary loss, explaining that equitable principles have never required such a showing.

The central import of Sripetch is that the SEC has again succeeded in preserving one of its most significant remedial tools.  After Sripetch, the absence of provable investor losses will no longer be a standalone answer to a claim for disgorgement.  That will matter in cases, including insider-trading and accounting matters, where investors’ legally protected interests may have been invaded but pecuniary harm is diffused or difficult to quantify.  The decision, however, does not disturb the other limitations on disgorgement recognized in Liu.  Disgorgement must still be limited to net profits and tied to gains causally connected to the violation.  It remains to be seen how courts will apply Liu’s victim distribution requirement where investors’ legally protected interests were invaded but pecuniary losses are difficult to prove.  Likewise, courts will also need time to consider whether the SEC may obtain disgorgement when distributions to injured investors are not feasible.  Those issues will likely be the subject of future litigation and a point of debate in settlement discussions with the SEC.  But for now, disgorgement will certainly remain on the table as a viable remedy for the Commission to pursue in appropriate cases.

This post is based on a Wachtell, Lipton, Rosen & Katz memorandum, “Supreme Court Rejects Investor-Loss Limit on SEC Disgorgement,” dated June 4, 2026.

Whether EU Inc. can realistically prevent EUxits remains an open question. Much commentary has focused on what the proposal does not do. It does not establish a fully autonomous, supranational corporate law regime, leaving substantial room for national corporate law and national courts. It does not create a European equivalent to the Delaware Court of Chancery. This is true.

Yet focusing exclusively on those limitations may obscure a more interesting possibility. EU Inc. may alter the structure of jurisdictional competition within the EU itself. At present, incorporation decisions within Europe are generally framed in purely national terms: the German GmbH versus the Dutch BV, the French SAS versus the Italian S.r.l., and so on. To be sure, following Centros, Überseering and Inspire Art, companies already possess significant freedom to incorporate in one Member State while operating primarily in another, subject to the uncertainty associated with Gebhard. EU Inc. would therefore not create materially new regulatory-arbitrage opportunities, as further explained below. Its potential effect is subtler. If more aspects of the incorporation decision are standardized through a common European form, the remaining differences among Member States may become easier to isolate and compare. As a result, incorporation choices may become less about selecting among national corporate forms and more about selecting among the corporate law frameworks that remain beneath what is, in effect, a 28th regime offered in 27 different flavours.

If that shift proves meaningful, it could create new forms of regulatory competition within the EU. Member States with comparatively flexible corporate-law regimes, sophisticated courts, and internationally oriented legal infrastructures may emerge as focal points for EU Inc. incorporations. The Netherlands is perhaps the most obvious candidate. Dutch corporate law is already regarded by many investors and practitioners as relatively flexible and commercially sophisticated. The Enterprise Chamber offers a degree of specialization unusual in Europe, and relatively modest institutional reforms such as broader availability of English language proceedings could further strengthen the Netherlands’ position as a preferred jurisdiction for scaling companies. Of course, no Member State currently combines the scale, adjudicative centralization, and capital market dominance that underpin Delaware’s position in the United States.

To understand why this possibility nevertheless matters, one must first understand what makes Delaware attractive in the first place. Investors choose Delaware because it offers familiarity, predictability, and institutional coherence. Venture capital and growth equity financing depend heavily on private ordering. Liquidation preferences, anti-dilution protections, drag-along rights, hybrid securities, and complex board-control arrangements are not peripheral terms. They are central elements of the investment bargain. Investors want confidence not only that such arrangements can be drafted, but that courts will interpret and enforce them consistently.

Corporate law is, of course, only one component of the broader ecosystem that attracts global capital alongside securities regulation, liquidity, analyst coverage, and exit markets. But governance predictability still matters enormously in the allocation of capital, particularly in later stage financings and exit planning.

Delaware provides that confidence through a combination of broad contractual freedom, sophisticated adjudication, and network effects. The Delaware Court of Chancery has generated a dense body of precedent that allows lawyers, founders, and investors to model outcomes with relative confidence. Over time, those dynamics reinforce one another. Investors become increasingly comfortable deploying capital into familiar governance structures while lawyers and founders standardize around established market terms and transactional practices.

This helps explain the persistence of the Delaware “Topco” and European “Opco” structure among many European scaleups. The operating business may remain in Paris, Milan, Berlin, or Stockholm while the holding company sits in Delaware. In practice, this often reflects less a desire to “be American” than an effort to align the governance framework with the expectations of global capital providers.

That said, similar structures are already legally possible within the EU. A Dutch holding company with a German operating subsidiary does not require EU Inc., and for many scaleups the practical significance of Gebhard uncertainty at the holding company level may be very limited. Yet no European jurisdiction has achieved anything close to Delaware’s degree of market centrality or investor familiarity. The question, therefore, is whether EU Inc. might help alter those dynamics.

Against this background, the principal criticism of EU Inc. is straightforward. It does not establish a complete supranational corporate law regime. Corporate governance, fiduciary duties, shareholder remedies, and much of the adjudicative framework remain dependent on national law and national courts. In many respects, the proposal appears to place a European wrapper around existing domestic systems rather than displacing them.

That criticism is largely correct. Yet the proposal’s incompleteness may still produce an important if more modest shift in the European market for corporate domiciles. If EU Inc. succeeds in reframing jurisdictional choice within Europe, Member States may begin competing more directly to attract scaling companies and investment structures. The result may not be a single European corporate law regime, but rather increased pressure on Member States to improve the institutional environments surrounding their own versions of EU Inc.

This dynamic would not replicate Delaware. Nor would it eliminate the fragmentation that currently characterizes European corporate law. But it could, at the margin, begin generating some of the network effects that make Delaware attractive in the first place. Familiarity among investors, accumulated jurisprudence, standardized transactional practice, and concentration of professional expertise tend to reinforce one another over time. A jurisdiction that successfully attracts a critical mass of EU Inc. incorporations may become increasingly attractive precisely because others have already chosen it.

Still, this possibility should not be overstated. The proposal’s structural limitations remain significant, and Article 103 is central among them.

Article 103 substantially preserves room for host state intervention through mandatory national rules. In effect, it reproduces much of the uncertainty already associated with the Centros, Überseering, and Inspire Art line of cases and the broader Gebhard framework. A Dutch EU Inc. operating primarily in Germany may still face uncertainty regarding the extent to which German mandatory rules could apply in practice.

That uncertainty matters enormously. Regulatory competition functions effectively only if market participants can predict which law will govern the relevant corporate relationship. Investors can adapt to different substantive rules. What they struggle to price is uncertainty over which rules ultimately apply. If host state intervention remains materially available, then EU Inc. may fall short of generating the predictability and institutional coherence necessary for strong network effects to emerge.

From a transactional perspective this is where the proposal’s limits become most apparent. Investors do not choose jurisdictions primarily because of administrative convenience. What matters is certainty across events in the corporate lifecycle, including governance disputes, financing rounds, restructurings, and exits. Investors can adapt to different substantive rules. What they struggle to price is uncertainty over which rules ultimately apply. The market does not want to re-price governance risk every time a company crosses a border.

The irony is that EU Inc.’s incompleteness may simultaneously support and undermine its success. Reliance on national law could permit beneficial jurisdictional competition among Member States and allow particularly sophisticated jurisdictions to emerge as focal points. At the same time, the persistence of host state intervention and fragmented adjudication may prevent the degree of certainty necessary for those network effects fully to develop.

None of this means EU Inc. is irrelevant. The proposal may still improve the European market for corporate domiciles at the margins. A standardized European corporate form could increase familiarity among investors, reduce some cross border friction, and make it marginally less necessary for European companies to adopt Delaware holding structures. Even modest standardization at the EU level could reduce some of the informational and coordination costs associated with purely national corporate forms. But if the ambition is genuinely to compete with Delaware for global capital, then procedural harmonization alone is unlikely to suffice. Delaware’s advantage is not merely statutory. It is institutional, adjudicative, and deeply embedded in market practice. The more realistic question may therefore not be whether EU Inc. can replicate Delaware, but whether it can make remaining within European corporate law so predictable, familiar, and scalable as to make fewer companies feel compelled to leave it.

Luca Enriques is professor of business law at Bocconi University, and John C. Friess is a corporate lawyer at Sullivan & Cromwell LLP in London. A version of this post appeared on the Oxford Business Law Blog, here.

Nature of EH&S Risks

EH&S risks associated with data centers differ from those typically evaluated by private equity firms and other investors in deals involving manufacturing or other operations.  Data center EH&S risks requiring consideration include the following:

• Water Consumption. Most large data centers rely on cooling-tower systems that continuously draw and evaporate water to keep their servers from overheating.  Cooling systems can require millions of gallons of water per day, which could strain supplies in water-stressed regions.  Issues related to water usage could result in disputes with local communities, municipalities, nongovernmental organizations and others.  Such disputes could impair a company’s reputation, causing investors to reconsider potential investments.  Water shortages are increasingly becoming a significant issue in certain regions in the United States, which is likely to raise red flags in data center deals in these regions.  Municipalities and other authorities could impose water usage limits on existing data center operations, forcing data center operators to curtail operations.  Water issues for new data center projects will need to be analyzed more critically as they affect siting feasibility.
• Noise. Material noise issues do not often arise in deals involving manufacturing and other operations, but noise issues can pose unique risks in data center deals.  Hundreds of servers operating in a small space can create significant noise levels, particularly when combined with noise from HVAC systems that cool servers and generators that serve as backup power sources.  Noise issues are particularly problematic when data centers are located near residential communities.  Rising concerns across the U.S. over noise from existing and proposed data centers have led some residents to file suit to cease data center operations.  Some investors may reconsider their proposed investments if they believe data centers will need to curtail operations to abate noise issues.
• Air Emissions. Air emissions from diesel generators and other data center sources may include nitrogen oxides, fine particulate matter, carbon monoxide and other hazardous materials.  A November 2025 Harvard Business Review article highlighted potential respiratory-related health impacts resulting from emissions of fine particulate matter and other hazardous materials.  There could be future claims alleging respiratory and other adverse health effects related to air emissions from data centers.  In addition, some governmental authorities are conducting health impact assessments of diesel generators, potentially resulting in the need to replace or upgrade such equipment.
• Power Availability/GHG Emissions. Securing adequate and reliable power for data centers is a major issue that transcends environmental considerations.  The growing appetite for artificial intelligence and digital services requires substantial energy due in part to the electricity required to power equipment and the cooling systems essential for maintaining optimal operating conditions.  Data centers are being blamed for rolling brownouts, causing some authorities to impose temporary moratoriums on new data centers.  Given the potential strain on grid infrastructure, some data centers could be impacted by usage caps or other imposed limitations.  As most of the electricity used by U.S. data centers is generated from fossil fuels, incremental power demand is likely to be met largely through carbon-intensive sources.  The significant greenhouse gas emissions may raise issues with investors concerned that such emissions could run afoul of current or future laws restricting GHG emissions or may otherwise impact investors’ own climate-related commitments.
  

Data Center Due Diligence

EH&S due diligence on data centers differs from the diligence on manufacturing or other operations typically evaluated by investors.  Data center due diligence reports tend to focus on water usage, noise and the EH&S issues identified above, rather than on soil and groundwater contamination, which is often investors’ primary concern.  These reports are more holistic in nature than the Phase I environmental site assessments (Phase Is) that private equity firms and other investors typically commission as the cornerstone of their due diligence for investments in other industries.  EH&S advisors will need to coordinate their review with other deal advisors to ensure investors properly evaluate the impact of identified issues on potential litigation risks, reputational concerns, permit delays and regulatory roadblocks.Though beyond the scope of this article, greenfield data center projects require a considerably more comprehensive analysis of EH&S issues than investments in existing data center projects, as even relatively minor EH&S issues can significantly impact project timing and feasibility.  New projects will require developers to navigate local, state and federal requirements and to consider environmental impacts beyond water, noise, air and GHG emissions, including those arising under the National Environmental Policy Act and Endangered Species Act.

*     *     *

Private equity firms and other investors should ensure they properly evaluate EH&S risks associated with data centers.  Though EH&S risks are typically not as significant as power supply, land use and certain other risks, they could significantly impact an investment.  Investors will need to ensure they consider all EH&S risks and evaluate reputational, litigation and other concerns.

This post is  based on a Debevoise & Plimpton LLP memorandum, “Investing in Data Centers:  Don’t Overlook Environmental Risks,” dated May 18, 2026. 

Yet there seems to be a major disconnect between that bullish market sentiment and the difficult realities and major structural challenges that continue to confront Venezuela post-Maduro. Notwithstanding Maduro’s removal from power, Venezuela still faces a collapsed economy, an enormous sovereign debt overhang of $150 billion or more, a severe humanitarian crisis, and a political system widely seen as lacking legitimacy given the sidelining of the democratic opposition despite its overwhelming victory in the August 2024 presidential election.

In the face of this multidimensional crisis, Venezuela will need a comprehensive recovery strategy that simultaneously addresses sovereign debt restructuring, economic reconstruction, humanitarian relief, and the restoration of a legitimate and credible government.  In a new article, I discuss the key elements of such a strategy and set forth a blueprint for restructuring Venezuela’s sovereign debt and rebuilding its economy.

Too often discussions of Venezuela’s future have proceeded within policy silos where each challenge facing Venezuela is treated as a discrete problem to be addressed on its own terms. Yet these challenges do not exist in isolation but rather are deeply interconnected and mutually reinforcing.

A sovereign debt restructuring will not be durable if Venezuela’s economy remains in a shambles because the restructuring will depend on the economy generating the resources needed to repay the restructured debt. Similarly, any plan for economic reconstruction will not succeed unless Venezuela’s debt is restructured, thereby creating the fiscal space and access to capital needed to rebuild the economy.

Moreover, neither debt restructuring nor economic reconstruction will succeed unless Venezuela addresses its humanitarian crisis and crisis of political legitimacy. A population that is suffering from malnutrition, inadequate healthcare, shortages of medicine and inadequate healthcare, and widespread poverty cannot contribute productively to Venezuela’s economic recovery.  In addition, Venezuela will not be able to deploy its full complement of human capital unless it can attract back to Venezuela some of the millions of its citizens who fled the country during the economic crisis.  Likewise, without a government viewed as legitimate and credible, it will be difficult to build domestic public support for reform or attract the international assistance needed to sustain recovery.

The more promising path forward is an integrated strategy that treats sovereign debt restructuring, economic reconstruction, humanitarian stabilization, and political renewal as complementary components of a broader national recovery effort. What might such an integrated recovery strategy look like in practice?

A first pillar of such a strategy would be a comprehensive sovereign debt restructuring. Given the scale of Venezuela’s debt burden and the depth of its economic collapse, traditional restructuring tools such as principal reductions, maturity extensions, coupon reductions, and grace periods will almost certainly be required. Yet Venezuela’s circumstances may also call for innovative instruments that will not only lead to a sustainable debt burden but also contribute to broader recovery and development objectives.

One promising tool would be both modernized and expanded forms of debt-for-equity swaps.  Venezuela could introduce a modernized version of the debt-for-equity swaps used during the Brady Plan era of the late 1980s and early 1990s under which creditors exchanged debt claims for equity stakes in privatized enterprises.  However, this earlier model would need to be updated because Brady-era debt-for-equity swaps typically relied on local currency conversion arrangements through which debt claims were converted into equity stakes, an approach that would be difficult to replicate in Venezuela today given the severe devaluation of its currency.

In the expanded form of the debt-for-equity swap, creditors could also swap their debt for development rights tied to oil and gas as well as to the rich and diverse supply of minerals in Venezuela. But such exchanges and the underlying development rights in particular would need to be subject to rigorous valuation by independent experts, and the exchanges would also need to have broad public support. Otherwise, the government could open itself to criticism that it was giving away the “national patrimony.”

Debt-for-nature or climate swaps offer another promising avenue. Venezuela possesses incredibly rich and diverse ecological assets, including vast rainforests, extensive river systems, and remarkable biodiversity. Under such swaps, creditors could effectively agree to debt relief in exchange for financial commitments by the Venezuelan government to preserve and protect these resources. Such arrangements would reduce debt burdens while supporting environmental conservation and sustainable development, but the costs and complexity of such transactions would need to be considered.

Economic reconstruction represents the second pillar of any recovery strategy for Venezuela. A debt restructuring may create fiscal space, but it cannot by itself generate economic growth or rebuild productive capacity. Venezuela therefore requires a broader reconstruction effort, and the centerpiece of such an effort should be economic diversification.  Venezuela should diversify its economy into sectors where Venezuela could enjoy a comparative advantage and where it could count on a reliable stream of foreign exchange earnings.

For decades, the Venezuela has relied overwhelmingly on hydrocarbons, leaving it vulnerable to commodity price volatility and the so-called “resource curse.”  A more resilient economy would diversify into sectors such as ecotourism, alternative energy, logistics, agro-processing, specialty steel, and critical minerals.

Economic reconstruction must also encompass the reform of state-owned enterprises (SOEs) and rebuilding of  infrastructure. Many SOEs have become inefficient and financially unsustainable and should therefore be reformed or privatized if they are viable or liquidated if they are not.  Venezuela’s electricity, transportation, telecommunications, water, and oil infrastructure require extensive rehabilitation after years of neglect and underinvestment.  Public-private partnerships could play an important role in mobilizing the capital and expertise needed for the refurbishing of Venezuela’s infrastructure.

Most important, these initiatives should not be viewed as separate undertakings. The design of the debt restructuring itself can reinforce the broader reconstruction agenda. For instance, debt-for-equity swaps could channel investment toward sectors identified as national priorities under an economic diversification strategy, while debt-for-nature or climate swaps could support environmental conservation and the development of sustainable industries such as ecotourism.   More generally, a successful restructuring would restore Venezuela’s access to capital markets and create fiscal space that allows scarce public resources to be devoted to areas such as infrastructure, healthcare, education, and social welfare rather than to debt service.

In short, Venezuela’s recovery will depend on advancing sovereign debt restructuring, economic reconstruction, humanitarian stabilization, and political renewal in parallel. Venezuela must therefore embrace such an integrated strategy in order to lay the foundation for a sustainable national recovery.

Steven T. Kargman is the founder and president of Kargman Associates/International Restructuring Advisors. This post is based on his recent article, “Venezuela 2.0,” published in The International Economy (TIE) and available here. The article is reprinted with the kind permission of the publisher of TIE.

In our forthcoming essay, we build on Adediran’s account through a distinct question: If racial diversity itself is politically contested, can mandatory racial disclosure still survive?

We argue that it can. But its viability does not depend on political consensus around diversity as a social good. Instead, we argue that mandatory corporate racial disclosure may, in fact, be politically and normatively viable not because Americans agree about diversity, but because ideological opponents may converge on the importance of transparency.

Following the racial reckoning of 2020, many large firms considerably expanded their diversity reporting, announced racial equity commitments, and published workforce demographic data. More recently, however, many of these firms rolled back their commitments in a process Adediran terms “race-conscious retraction”—the cycle of robust racial disclosure followed by strategic retractions or softening of racial commitments when legal, political, or reputational pressures shift.

Across corporate America, firms dramatically shifted their disclosures and reporting, replacing explicit references to race with softer language like “belonging,” or removing race references entirely. Firms in the S&P 100—some of the largest and most established in corporate America—markedly reduced their diversity-related human capital disclosures in 2025, removing “DEI” terminology and reducing quantitative diversity metrics from their reporting. Many firms also eliminated diversity initiatives. For example, Goldman Sachs rolled back board diversity criteria and abandoned prior commitments related to board diversity in IPO underwriting. Apple reportedly removed ESG- and diversity-linked metrics from executive compensation packages amidst political backlash. Concurrently, state and federal governments have reframed many DEI practices as potential sources of legal liability, targeting corporate actors they view as out of compliance.

But the story is not just one of simple retraction. Demands for demographic information have not disappeared. Institutional investors continue to seek racial workforce data through shareholder proposals and governance initiatives. Progressive stakeholders seek corporate racial data to hold firms accountable to racial progress. Simultaneously, conservative litigants and regulators increasingly seek the same information to challenge allegedly unlawful race-conscious practices. The result is a political dynamic in which both advocates and critics of corporate DEI increasingly favor access to corporate data. What divides these actors is not whether disclosure should exist, but the reason for the disclosure.

This is where legal scholar Derrick Bell’s interest-convergence framework becomes particularly useful. Bell argued that racial reform primarily occurs not through moral consensus, but when the interests of subordinated groups converge with the interests of dominant actors. In our view, contemporary racial disclosures may represent precisely this kind of convergence. Both advocates and critics of corporate racial justice initiatives have incentives to demand data. Progressives seek corporate data to measure inequality and enforce accountability. Conservative critics seek corporate data to investigate overreach or unlawful favoritism. Both sides, for different reasons, demand transparency.

Importantly, the primary resistance to disclosure may not come from ideological opponents of diversity initiatives. It may come from firms themselves. Adediran’s book demonstrates that corporations often use racial disclosures strategically. Companies issue race-conscious statements when reputational incentives favor them and retreat when political or legal conditions shift. Disclosure can become a form of reputational insulation rather than meaningful transformation. Firms may invoke prior disclosures to resist deeper accountability or use carefully calibrated metrics that preserve managerial discretion over the pace, scope, and depth of racial progress.

But opacity serves firms in another way as well, by preserving narrative control. Without standardized racial data, firms remain free to selectively disclose favorable information while withholding unfavorable realities. They can emphasize aspirational commitments while obscuring promotion bottlenecks, leadership disparities, or inequitable workforce stratification. Mandating disclosure disrupts this flexibility. It subjects corporate claims to measurement and accountability, creating baselines against which investors, employees, regulators, and the public can evaluate progress or retrenchment.

Racial disclosure matters because work is not merely a site of economic exchange. It can also either advance or undermine dignity, identity, and human flourishing. Corporate governance structures shape who gains access to opportunity, advancement, and leadership. They influence whether individuals experience work as inclusion, marginalization, or exclusion. When firms obscure demographic realities, they do more than withhold information. They shape the conditions under which accountability and flourishing become possible.

Disclosure also matters because corporations are not merely economic actors. Increasingly, they also function as civic actors embedded within democratic society. Corporations shape labor markets, influence public policy, fund political campaigns, participate in constitutional litigation, and structure access to opportunity across communities. They enjoy extensive legal privileges—limited liability, perpetual existence, access to public and private capital markets, and constitutional protections and political participation. In exchange for those privileges, transparency represents a minimal civic obligation.

Our argument is therefore not that corporations should be free from more substantive racial justice obligations. To the contrary, democratic governments may legitimately pursue affirmative racial justice goals within corporate governance. But in a polarized political environment marked by deep disagreement over diversity, comprehensive mandates may prove politically unattainable in the near team.

Transparency, by contrast, occupies a different position. It does not require agreement about racial justice as a moral ideal. It requires only agreement that firms exercising significant social and political power should disclose the consequences of that power.

That distinction matters because disclosure does not mandate ideology. Instead, it reveals firm choices. Some firms may pursue racial equity aggressively. Others may remain narrowly focused on shareholder value. Still others may retreat from race-conscious commitments entirely. Mandatory disclosure does not eliminate this pluralism—it makes it visible. Once demographic information becomes public, investors, employees, consumers, and regulators can sort among firms based on their own commitments and preferences. This sorting function is particularly important in the current environment, where critics of DEI often frame diversity initiatives as opaque systems of favoritism insulated from accountability, and progressives often argue that firms make symbolic commitments without measurable change. Both critiques point toward a shared interest in disclosure.

Transparency provides the information necessary for assessment, accountability, and contestation. By reframing racial disclosure as a civic obligation of corporate personhood, grounded in transparency rather than moral consensus, we show how the path to mandatory racial disclosure may lie not in resolving ideological conflict, but in leveraging it through a shared demand for measurable truth.

Emilie K. Aguirre is an associate professor of law, and Veronica Root Martinez is Simpson Thacher & Bartlett Distinguished Professor of Law, at Duke University School of Law. This post is based on their forthcoming essay, “Converging on Disclosure,” available here.

Key Takeaways

These back-to-back enforcement actions carry several overarching messages:

• S. enforcement authorities will pursue prediction market traders even when they reside outside the United States. The complaints allege that Spagnuolo is based in Switzerland and traded on an international blockchain-based platform with decentralized trade execution. The CFTC complaint grounds venue in the Southern District of New York based on the prediction market’s New York headquarters, the fact that a majority of the “Markets” team responsible for creating and deploying the contracts at issue worked from New York during the relevant period, and the presence of Polygon blockchain transaction-validating nodes in the United States. The DOJ’s criminal complaint similarly alleges venue in the Southern District of New York, relying on the same New York nexus points.
• In press releases, leadership at both the CFTC and the U.S. Attorney’s Office for the Southern District of New Yorkcontinue to signal that prediction market insider trading is a top enforcement priority.
• The actions follow a traditional misappropriation theory of insider trading, in which a corporate insider is alleged to have misappropriated confidential business information of his employer in breach of a duty of trust and confidence in order to place profitable bets on the prediction markets.
• Companies should treat prediction markets as a compliance risk. As we discussed in prior client alerts, companies whose employees have access to material nonpublic information—including information that may not traditionally be considered “financial” in nature—should consider updating their insider trading policies, codes of conduct, and employee training to address the growing prediction market landscape. Information-barrier and access-control measures for employees and other insiders are also critical.

Alleged Scheme

According to the complaints, Spagnuolo, in his role as a software engineer, accessed the tech company’s confidential Year in Search data through an internal tool bearing a red “Confidential” banner. The tech company’s annual Year in Search campaign publicly reveals the year’s top trending searches as part of a coordinated, commercially significant marketing event; the underlying data is tightly held within the company until the moment of public release.

On approximately October 15, 2025, Spagnuolo allegedly accessed the confidential 2025 Year in Search data. The next day, and before the tech company’s Year in Search results were publicly revealed, he began placing bets on Year in Search outcomes on the prediction market platform through an account known as “AlphaRaccoon.” On November 27, 2025, Spagnuolo allegedly accessed the data again—learning that “d4vd” had overtaken Kendrick Lamar as the #1 searched person—and approximately three hours later wagered on d4vd taking the top spot at near-zero implied odds. In total, from approximately October 15 through December 4, 2025, Spagnuolo purchased “Yes” or “No” shares across at least 23 Year in Search contracts, with near-perfect accuracy, risking approximately $2.75 million on outcomes the market treated as unlikely. After the tech company publicly released its Year in Search 2025 results on December 4, 2025, Spagnuolo’s account realized approximately $1.2 million in profits. According to DOJ and the CFTC, the bets Spagnuolo placed on the prediction market platform are swaps that are subject to enforcement under the Commodity Exchange Act (CEA).

DOJ further alleges that Spagnuolo took deliberate steps to conceal his proceeds and identity, including routing funds through cryptocurrency swaps and a service designed to obscure blockchain wallet addresses, and deleting his “AlphaRaccoon” username after users on Discord and X (formerly Twitter) publicly speculated that the account belonged to a tech company insider. The online community’s identification of “AlphaRaccoon” as a suspected tech company insider preceded and, according to the CFTC complaint, informed the government’s investigation.

The Charges

The DOJ’s unsealed criminal complaint charges Spagnuolo with three counts: (1) commodities fraud under Section 6(c)(1) of the CEA and CFTC Rule 180.1, carrying a maximum sentence of 10 years’ imprisonment; (2) wire fraud under 18 U.S.C. § 1343, carrying a maximum sentence of 20 years; and (3) money laundering under 18 U.S.C. § 1956, also carrying a maximum sentence of 20 years. The CFTC’s parallel civil complaint charges violations of CEA Section 6(c)(1) and Regulations 180.1(a)(1) and (3), and seeks disgorgement, restitution, civil monetary penalties, and permanent trading and registration bans.

ENDNOTES

[1]See Sealed Complaint, United States v. Spagnuolo, No. 26 MAG 2020 (S.D.N.Y. filed May 27, 2026); See Complaint, CFTC v. Spagnuolo, No. 26-cv-4419 (S.D.N.Y. filed May 27, 2026).

This post is based on a Morrison & Foerster LLP memorandum, “DOJ and CFTC Bring Parallel Insider Trading Actions Based on Internet Search Trend Event Contracts,” dated June 1, 2026, and available here.