Will the FTC’s Non-Compete Ban Survive?

Federal Trade Commission officials have spoken repeatedly about their focus on addressing competition in labor markets, and the agency’s new rule banning nearly all non-compete agreements is perhaps the clearest sign yet that they mean business.

Adopted on April 23 in a 3–2 party-line vote, the rule provides that it is an unfair method of competition — and thus a violation of the FTC Act — for a business to enter into or seek to enforce a non-compete clause with any worker, with limited exceptions.

If the rule takes effect as scheduled — 120 days after publication in the Federal Register (set for May 7) — it will supersede non-compete laws currently regulated at the state level.

Yet when the rule takes effect — even whether it does — is far from a certainty. It already faces two legal challenges, both in federal courts in Texas: one suit from a coalition led by the US Chamber of Commerce, and another from a tax services and software company.

Both challenges contend that the rule exceeds the FTC’s authority, and the plaintiffs in the Chamber’s suit have moved to stay the rule’s effective date and enjoin its enforcement while the rule is being litigated. More legal challenges are sure to follow.

Will the rule survive? The FTC sounds bullish on its chances, but only time will tell whether the agency’s expansive view of Section 5 of the FTC Act — and its aggressive stance on its rulemaking authority — will hold up under courtroom scrutiny.

Our attorneys analyze the rule and its implications.

Low-Carbon Hydrogen: Making Project Finance Work

Project finance has long played a central role in infrastructure development, and the structure is fast becoming pivotal for developing many of the clean and renewable technologies powering the energy transition.

In a conventional project finance structure, sponsors typically set up a special purpose vehicle to raise capital for a project off balance sheet, and lenders are repaid from cash flow that the project generates.

Projects financed this way may be able to attract more debt, on longer tenors, and with better terms than they can through other forms of financing.

Yet despite these advantages, using project finance to develop low-carbon hydrogen projects comes with major challenges, including the risk of investing in unproven technologies, the lack of an established market, and high capital requirements and the related need for government support.

How can project participants overcome these challenges? Our attorneys consider potential solutions in Global Hydrogen Review.

The SEC’s Crypto Crackdown Advances

Does federal securities law apply to sales of cryptocurrency on public platforms?

The SEC’s assertive enforcement campaign against the crypto industry hinges in large part on the premise that it does, and recently the Commission logged a major win toward that end.

On March 27, a Southern District of New York (SDNY) court ruled that the SEC’s complaint against Coinbase — the operator of one of the world’s largest crypto exchanges — plausibly supported its claim that Coinbase was selling an unregistered security in violation of federal securities law.

In doing so, the court rejected Coinbase’s motion for judgment on the pleadings.

According to the court, the SEC adequately pleaded that Coinbase’s sales of crypto assets — to both retail and institutional investors — count as “investment contracts” for securities law purposes, as do transactions using Coinbase’s staking program.

This decision follows two others from SDNY courts on whether crypto sales on public platforms qualify as investment contracts — one siding with the SEC, and another siding against it.

As the Commission’s crypto enforcement continues, look for more and more lower courts to continue to iron out this split in the jurisprudence.

More from our attorneys on the SEC’s latest victory here.

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