Good Rules, Bad Government

American capital markets still operate under the same statutes. What changed is the willingness to enforce them.

On a Monday morning in February 2025, federal prosecutors across the country opened their inboxes to find an unusual directive from Washington. Every pending criminal matter opened before October 2022 was to be reviewed and resolved within roughly 10 days. The instruction was bureaucratic in tone. By the end of the month, nearly 11,000 criminal cases had been closed — a single-month total exceeding any in the available federal data going back to 2004, according to a ProPublica analysis of Department of Justice records. The closest prior peak, set in September 2019 during Trump’s first term, was roughly 6,500.

The memo was a small piece of a larger rewiring. Across federal enforcement bodies that police American capital markets, the first half of 2025 produced enforcement contraction without a single statute amended or a public hearing held.

Across the agencies

At the Securities and Exchange Commission, public-company enforcement actions fell roughly 30% in fiscal 2025. Only four such actions were initiated under the new SEC administration in the entire year, the fewest since at least 2013. Standalone enforcement actions reached a 10-year low.

At the Commodity Futures Trading Commission, the new acting chair collapsed the Division of Enforcement’s nine task forces into two and closed roughly half the division’s open matters. Anti-money-laundering and sanctions fines fell 61% year over year. The Foreign Corrupt Practices Act unit at the Department of Justice saw its prosecutor count drop from 32 to 22 after a presidential executive order paused enforcement for 180 days, and the SEC’s parallel FCPA unit was effectively disbanded.

By mid-2025, the cumulative DoJ closure count had reached roughly 23,000 cases. Across federal enforcement bodies that police the rules of American capital markets, enforcement intensity collapsed in tandem during the first six months of 2025. Congress did not change the rules. The executive branch changed how the rules were operated.

A defense, and its limits

The administration’s response is coherent. The 23,000 dropped DoJ cases were largely a data-cleanup exercise, with pending matters closed administratively to clear the books. The SEC’s reorientation reflects a deliberate shift away from what officials describe as overbroad enforcement under the previous administration. The FCPA pause was framed as a strategic review rather than a retreat.

False Claims Act recoveries hit a record $6.8 billion in fiscal 2025, evidence that fraud enforcement has been redirected, not abandoned. Securities class-action settlement severity reached a decade high in median size, suggesting that private litigation is filling some of the gap left by federal action.

Administrative transitions normally produce some enforcement decline. The 2025 contraction exceeded the historical pattern: Cornerstone Research’s analysis of SEC data showed FY2025 produced both the highest pre-transition and lowest post-transition enforcement totals of any administrative change since at least FY2013. And the redirection in fraud enforcement is concentrated: record FCA recoveries come overwhelmingly from healthcare and government-contractor fraud, categories that disproportionately reach businesses outside the financial elite.

Areas where federal enforcement most directly disciplines large institutional actors have contracted sharpest, and the clearest live example is the CFTC’s response to the Iran-window oil trades. Between March and April 2026, four large positions on falling oil prices cleared the futures market in narrow windows immediately before Trump or Iranian announcements; one cluster moved 5,100 Brent and WTI lots in a single minute, 15 minutes before Trump posted that he was delaying strikes on Iran. Combined notional value across the four trades was roughly $2.6 billion. The joint CFTC-DoJ inquiry has produced no charges and no public counterparty identification despite multiple Congressional letters demanding investigation.

Enforcement already completed has also been undone. In October 2022, Nikola founder Trevor Milton was convicted of securities fraud and wire fraud and was later sentenced to four years in prison. In October 2024, with his appeal pending, he and his wife donated $920,000 to the Trump 47 Committee. Two weeks before federal prosecutors were set to ask the judge to order Milton to pay roughly $680 million in restitution to defrauded Nikola shareholders, Trump pardoned him. Six months later, the SEC dropped its parallel civil enforcement case.

Compliance as a political variable

The political scientists Steven Levitsky and Daniel Ziblatt call this institutional forbearance: the unwritten rule that legal power and the conventional use of legal power are different things. Every government has more formal power than it routinely uses. A president has the legal authority to do many things that, by convention, presidents do not do. The 2025 data documents the erosion of that convention in financial enforcement specifically.

For three decades, large institutions have priced an assumption: enforcement intensity moves within a relatively predictable range across administrations. The compliance officer at a global bank, the general counsel at a Fortune 500 industrial, the chief risk officer at a private equity firm — all of them have built budgets, reserves and risk frameworks on a single implicit premise. The difference between a Republican and a Democratic enforcement posture is real but bounded. The 2025 data shows that range has widened materially. Whatever one thinks of the merits, the magnitude of the swing is itself the news.

The implication is structural. Compliance is no longer a fixed cost; it is a political variable. Reserves have to be sized against a wider distribution of enforcement futures.

The Foreign Corrupt Practices Act has a five-year statute of limitations, and the 2009-2016 enforcement surge prosecuted conduct from the early 2000s. Allocators and corporate legal departments are pricing this volatility now, even if not yet saying so publicly.

The harder problem is variance. Conduct that looks low-risk in 2025 can become high-risk in 2029 if the same statutes are operated by different people with different priorities. That changes reserves, indemnity terms, diligence scope and the discount rate applied to politically exposed cash flows. Lower enforcement, in itself, can be priced; a wider band of plausible enforcement intensity cannot.

The allocator’s question

The mechanism cuts in either direction. In 2025 the SEC dropped its enforcement cases against Coinbase, Binance and Robinhood, and the DoJ disbanded its National Cryptocurrency Enforcement Team. The SEC’s 2023 fraud case against Justin Sun, paused after he invested over $75 million in a Trump family crypto venture, settled in March 2026 for $10 million and no admission of wrongdoing. For institutional capital, what now has to be priced is not enforcement direction but enforcement range.

For a sovereign wealth fund modeling US institutional risk over a 30-year horizon, this is the variable that’s changed. Not the level of enforcement intensity in 2025, which is recoverable in either direction. The variable is how widely the same statutes can be applied, or held back, depending on who is in office. Allocators repricing US institutional risk do not move in quarters; they move in years, through governance scorecards, mandate language and manager selection criteria. These are the kinds of considerations that surface in governance frameworks at major sovereign and pension allocators, and in due diligence protocols at large family offices and endowments.

The middle of the enforcement system is thinner than it looks. Private plaintiffs can still sue, and state attorneys general can still bring consumer and antitrust cases. Neither substitutes for a federal securities, sanctions or FCPA machine with cross-border reach. The gap is real and structural.

What runs to 2030

Whether this administration’s enforcement priorities are correct is a political question, and the data documented here cannot answer it. What the data answers is structural: in 2029, or 2033, an administration of the opposite party will have the same demonstrated latitude available, in the opposite direction. The 2025 swing establishes the range of motion; it does not establish where the next swing will land. For institutional capital that has to make decisions on a longer horizon than any single administration, that is the variable now in play.

The political economists Daron Acemoglu, Simon Johnson and James Robinson, who shared the 2024 Nobel Prize for work on institutions and growth, argue that long-run capital formation rests on whether the gap between formal rules and their actual operation stays narrow. When that gap widens, capital eventually goes elsewhere. The American system has been priced for the past half-century on the assumption that the gap would not widen here. In 2025, it widened. The questions their work is built to answer are which institutions support long-run prosperity and which do not. The Trump administration has put that question on the table for the United States.