Week in Review

IN THE NEWS: 

• A federal judge in the U.S. District Court for the District of Massachusetts struck down a Trump Administration rule adding a $100,000 fee to applications for H-1B visas, a type of visa that allows employers to hire nonimmigrant foreign workers for jobs that require specialized knowledge. Judge Leo T. Sorokin ruled that the application fee constituted an unlawful tax enacted without congressional delegation and violated the Administrative Procedure Act (APA) because the Department of Homeland Security (DHS) implemented the rule without providing an opportunity for public notice and comment. An earlier decision by another federal court upheld the application fee.
• The U.S. Food and Drug Administration (FDA) approved bemotrizinol, a chemical that protects against ultraviolet rays, at concentrations of up to 6 percent as a permitted sunscreen ingredient. Bemotrizinol has been approved for use in Europe since 1999, but FDA regulates sunscreen as an over-the-counter drug rather than a cosmetic product, so approval of sunscreen ingredients can take longer in the United States. Bemotrizinol is the first new active ingredient that has been approved for use in sunscreen since the 1990s.
• The U.S. Supreme Court directed the U.S. Court of Appeals for D.C. Circuit to reconsider its decision upholding energy efficiency standards set by the Biden Administration. In a 2-1 decision, the D.C. Circuit ruled in favor of the U.S. Department of Energy’s (DOE) efficiency standards for gas furnaces and water heaters, reasoning that a federal statute gave the agency broad regulatory authority. The American Gas Association, however, led an effort requesting the Supreme Court to reverse the decision, arguing the lower court erred in deferring to DOE’s interpretation of the statute. In a brief supporting the gas industry, U.S. Solicitor General D. John Sauer argued that the D.C. Circuit’s decision rested on a flawed reading of the operating statute.
• The U.S. District Court for the Northern District of California temporarily barred the U.S. Department of Justice from obtaining medical records sought through grand jury subpoenas issued to providers of gender-affirming care for transgender minors. Judge P. Casey Pitts issued a temporary restraining order prohibiting the Justice Department from requesting or obtaining records responsive to a subpoena served on Lucile Packard Children’s Hospital Stanford. The order followed a lawsuit challenging the government’s efforts to obtain confidential patient information through a federal investigation. 
• The Federal Trade Commission (FTC) finalized an order against education technology provider Illuminate Education Inc. requiring the company to strengthen its data security practices following a data breach involving the personal information of 10.1 million students. The FTC alleged that Illuminate failed to implement reasonable security measures despite receiving warnings about vulnerabilities in its systems and failed to notify schools about the breach in a timely manner. Under the order, Illuminate must establish a comprehensive information security program, limit its collection and retention of personal data, and delete information that is no longer necessary to provide its services. The order reflects the FTC’s continued focus on data security and privacy protections for students and other consumers.
• DHS issued a memorandum updating its plan to compile lists of verified U.S. citizens eligible to vote in each state to delay the implementation of President Donald J. Trump’s executive order on election integrity. The Trump Administration announced the new guidance in a notice filed by the Justice Department in ongoing litigation brought by civil rights groups challenging the executive order. The updated approach directs U.S. Citizenship and Immigration Services (USCIS), the Social Security Administration, and the U.S. Department of State to coordinate a secure method to share citizenship data with states by June 30, 2026. In the notice, the Justice Department stated DHS is abandoning its previously proposed method of submitting full state voter rolls to the Systematic Alien Verification for Entitlements system.
• A federal judge in the U.S. District Court for the District of Rhode Island declared unlawful policies adopted by the USCIS that paused immigration processing for applicants from 39 countries. The challenged policies prevented final adjudication of immigration benefits for individuals from the affected countries and provided for re-review of immigration benefits that had already been approved. Judge John J. McConnell, Jr., held that the challenged USCIS policies exceeded USCIS’s regulatory authority under the Immigration and Nationality Act and violated the APA because the policies were not accompanied by reasoned explanations and the explanations that were provided were pretextual.
• The U.S. Securities and Exchange Commission (SEC) issued a rule establishing joint data standards required by the Financial Data Transparency Act of 2022. The rule sets common technical standards for financial data submitted to federal financial regulators, including the Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation, and Consumer Financial Protection Bureau. The rule establishes common identifiers for key categories of regulatory data and supports the submission of machine-readable data across agencies. According to the SEC, the  rule may improve coordination among financial regulators, reduce reporting burdens for financial institutions, and increase the accessibility and consistency of regulatory data for investors and the public.

WHAT WE’RE READING: 

• In a Brookings Institution commentary, Timothy G. Massad, a senior fellow in economic studies and former chair of the CFTC, argued that Congress should consider merging the SEC and the CFTC as part of its effort to regulate digital assets. Massad contended that a merged agency would better regulate digital asset trading, develop clearer standards for classifying tokens as securities or commodities, and coordinate oversight of tokenized financial products. He also explained that current market structure proposals risk creating complex exemptions that could undermine existing securities and commodities regulation. Massad concluded that Congress should prioritize regulatory coordination between the agencies, whether through a merger or joint rulemaking, rather than adopting technology-specific legislation.
• A report by the U.S. Government Accountability Office (GAO) analyzed how effectively federal agencies collect data about service coordinators that work with residents in rural federally assisted housing. Service coordinators help prevent evictions and connect residents in federally assisted housing to services such as health care. In rural areas, service coordinators face challenges related to limited funding and limited social services. Although some studies suggest that service coordinators lead to better health and wellness outcomes for residents, other studies do not show statistically significant effects. GAO recommended that the U.S. Department of Housing and Urban Development develop uniform procedures to collect data about the availability and effectiveness of service coordinators in rural housing.
• In a Brookings Institution report, Gaia Bernstein, a visiting fellow with the Center for Universal Education, argued FDA should regulate artificial intelligence (AI) companion bots by adopting a public health framework modeled on pre-market approval. AI companion bots pose significant public health risks—including encouraging suicide, sexually exploiting minors, and fostering emotional dependence through addictive design. Bernstein contended that current proposals should be framed as recalls on AI companion bots, instead of bans, because a redesigned bot that meets safety standards could return to market. Bernstein emphasized that, as the crisis of loneliness deepens, uniform regulation would transform the industry’s competitive incentive structure by making safety a market asset rather than a liability, without expanding agency authority.

EDITOR’S CHOICE: 

• In an essay in The Regulatory Review, Thomas A. Berry, a legal fellow at the Cato Institute and the editor-in-chief of the Cato Supreme Court Review, argued that the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo marked a fundamental shift in administrative law by overruling Chevron v. Natural Resources Defense Council, which required courts to defer to reasonable agency interpretations of the statutes they administered, and restoring courts’ independent judgment in interpreting those statutes. Berry explained that the majority in Loper Bright concluded that Chevron’s deference framework could not be reconciled with the courts’ obligation to determine a statute’s single best meaning. Berry noted that the decision left Congress free to reinstate deference by amending the APA or explicitly deleting interpretative authority to agencies in individual statutes. Berry concluded that the Loper Bright decision ended a “legal fiction” that prevented judges from judging.