Digital Assets: A Brief Summary of the Current Legal Landscape

Since Bitcoin’s creation in 2009, cryptocurrency and digital assets have skyrocketed in both popularity and value. Today, the global cryptocurrency market cap is roughly $2.78 Trillion.[1] This quick growth has led to people and entities attempting to fraudulently enter the market and perform illegal activities under the guise of a mysterious new asset class. As such, these currencies have received considerable attention from administrative agencies such as the SEC, CFTC, and FTC.

Relevant Supreme Court Cases Relied Upon by the SEC

The 75-year-old Howey test guides courts’ inquiry into allegations of the Securities and Exchange Acts when the SEC finds questionable behavior.[2] Under Howey, an investment contract exists when there is: (1) the investment of money (2) in a common enterprise (3) with a reasonable expectation of profits (4) to be derived from the efforts of others. This test is flexible and may apply to any contract, scheme, or transaction, regardless of whether it has any characteristics of traditional securities.

The Reves test aids Howey in digital asset litigation. Unlike Howey, where clear prongs must be met for an investment contract to be present, Reves lays out factors to balance while considering whether notes are securities. When applying the Reves test, courts “begin with a presumption that every note is a security. From there, the analysis turns on four factors: (1) the motivations of the parties; (2) the plan of distribution of the instrument; (3) the reasonable expectations of the investing public; and (4) whether some factor such as the existence of another regulatory scheme significantly reduces the risk of the instrument.”[3] The SEC has applied this test several times in cease-and-desist orders and has relied on it in recent litigation involving digital assets. Like Howey, Reves is a Supreme Court decision released decades before the emergence of crypto and digital assets.

The SEC acknowledges that tokens, in and of themselves, are not securities. Thus, the appropriate question becomes whether transactions, in which a particular token is implicated, qualify as investment contracts.

Recent and Unfolding Developments

Last year, separate lawsuits brought by the SEC—involving Ripple Labs, Inc. (“Ripple”)[4] and Terraform Labs PTE Ltd (“Terraform”)[5]—resulted in, unsurprisingly, inconsistent results. In Ripple, the Southern District of New York analyzed three types of sales: institutional, programmatic, and “other distributions under written contracts.” The court held that institutional sales of XRP, a cryptocurrency, were investment contracts, and therefore subject to securities regulations. Programmatic sales, however, did not meet the third Howey prong, because it was not certain that buyers had an expectation of profits from Ripple’s efforts. The “other distributions” were given to employees in exchange for consideration other than money, so the court could not find the first Howey prong.

Terraform saw the Southern District of New York rule that three separate currencies were securities based on Terraform’s conduct while advertising the currencies, promised profits, and were responsible for developments that would play a large role in the currencies’ future value. Terraform, decided a few days after Ripple, expressly rejects Ripple’s distinction between secondary markets and direct sales, saying Howey makes no such distinction. The clear divide between courts within the same District is yet another example of how the SEC’s regulation by enforcement is not conducive to innovation or growth within the digital assets market.

The SEC has attempted to strike while the Iron is hot post-Terraform, commencing actions against prominent cryptocurrency platforms Binance, Coinbase and Kraken over the last year. These suits are still unfolding, with hearings set throughout 2024.

Looking at one of the actions brought in the wake of the Ripple and Terraform decisions, the Southern District of New York recently held that the SEC’s action against, among others, Coinbase, Inc. (“Coinbase”) may, for the most part, proceed.[6] The SEC had charged Coinbase with acting as a national securities exchange, a broker, and a clearing agency with respect to transactions in 13 identified crypto assets, which the SEC contended were securities, and of offering and selling securities without a registration statement. Coinbase moved for judgment on the pleadings, arguing that the SEC’s claims should be dismissed, as even if the SEC’s allegations as pleaded were true, they fail to give rise to an entitlement to relief. The Court found that “the SEC has sufficiently pleaded that Coinbase operates as an exchange, as a broker, and as a clearing agency under the federal securities laws, and, through its Staking Program, engages in the unregistered offer and sale of securities.”[7] The Court followed Terraform in not refusing to accept a distinction between secondary markets and direct sales stating,

with specific regard to the Crypto-Assets at issue here, there is little logic to the distinction Defendants attempt to draw between the reasonable expectations of investors who buy directly from an issuer and those who buy on the secondary market. An investor selecting an investment opportunity in either setting is attracted by the promises and offers made by issuers to the investing public. Accordingly, the manner of sale has no impact on whether a reasonable individual would objectively view the issuers’ actions and statements as evincing a promise of profits based on their efforts.[8]

Thus, for now, there remains no clear answer on the status of secondary markets. While this does not mean that the SEC will ultimately be successful in proving the merits of its claims, it does mean that the SEC overcame a huge initial hurdle.

Key Considerations for Developers

While Ripple and Terraform provide thorough inquiries into digital assets as securities, neither are binding precedent nor have they brought clarity to the market. With this in mind, the Howey test remains instructive to assets in the digital assets class, with factual distinctions serving as helpful guides on how an asset may fall within or outside of the definition of a security.

Tangible and definable. The Court’s decision holding Ripple’s “other distributions” fell outside of the realm of a security rested squarely on its failure to satisfy the first prong of the Howey test, as Ripple provided its token in exchange for nonmonetary contributions. Ripple is a rare case where the first Howey element is not met. Providing money in exchange for a currency, though, is usually a straightforward inquiry and typically met.

Commonality of enterprise. Commonality can be found through either horizontal or vertical commonality. Horizontal commonality exists when there is a pooling of assets, usually combined with the pro-rata distribution of profits. Vertical commonality is present when the fortunes of investors are linked with those of promoters. The common theme here is that funds from investors are linked to the company providing the currency itself. On the other hand, Bitcoin and Ethereum are not regulated by securities laws because they do not possess the requisite centralization and are sold exclusively through secondary markets.

Setting expectations of profits. Leading investors to expect financial gain typically comes through the advertising campaign and how the currency is marketed to investors. Guaranteeing a specific return on investment with no hedging language (think “may” return a certain percentage as opposed to “will” return a certain percentage), speaking to how much better a currency is than others, and similar behavior are key cues that lead the average investor to expect a return on investment, likely making the currency a security.

Active participation. A party to the transaction bearing responsibility for the continued development of an asset or exercising continued management or promotion of a network contributes to a reasonable investor’s expectation of a profit derived from the profits of others. This can be important both at the time of investment and after the investment. An investment will be reevaluated at a later date depending on how important the continued efforts are to the asset’s value.

Attachment to an investment. Coins themselves are not securities. They need to be tied to something that may appreciate over time. Additionally, buying something purely for consumptive value may lead to its falling outside of securities laws’ purview.

Companies considering launching digital assets through initial coin offerings or on a decentralized finance platform should be mindful of the factors courts have weighed in recent cases. This area of law is evolving rapidly, and it is essential to stay abreast of developments in current cases and in changes to the regulatory framework. Pastore LLC has securities lawyers with expansive experience in securities litigation, aiding broker-dealers, investment banks, and investment advisers, and can be effective counsel advising clients on digital assets and cryptocurrencies’ status as securities.

[1] Digital Assets, Forbes, (last visited Mar. 30, 2024).

[2] Framework for “Investment Contract” Analysis of Digital Assets, U.S. Securities & Exchange Commission, (last visited Mar. 30, 2024).

[3] SEC v. Genesis Glob. Capital, LLC, No. 23-cv-00287 (ER), 2024 U.S. Dist. LEXIS 44372, at *25-26 (S.D.N.Y. Mar. 13, 2024) (internal quotation marks omitted) (citing Reves v. Ernst & Young, 494 U.S. 56, 65-67 (1990)).

[4] SEC v. Ripple Labs, Inc., 2023 U.S. Dist. LEXIS 120486 (S.D.N.Y. July 13, 2023).

[5] SEC v. Terraform Labs Pte. Ltd., No. 23-cv-1346 (JSR), 2023 U.S. Dist. LEXIS 132046 (S.D.N.Y. July 31, 2023).

[6] SEC v. Coinbase, Inc., 2024 U.S. Dist. LEXIS 56994 (S.D.N.Y. Mar. 27, 2024).

[7] Id. at *105.

[8] Id. at *68 (citing Terraform I, 2023 WL 4858299, at *15).

Key Regulations Concerning NIL Deals

Since the NCAA’s policy change in 2021 allowing college athletes to profit from their Name, Image, and Likeness (NIL), both states and schools have scrambled to adopt regulations to govern these deals. While specific rules can vary widely depending on the jurisdiction and institution, several key regulations have emerged as common themes across the country. These regulations are designed to protect student-athletes, ensure fair play, and maintain the integrity of college sports.

Key Regulations Concerning NIL Deals

  1. Disclosure Requirements. Many states and schools require student-athletes to disclose NIL deals to their institution. This ensures transparency and allows schools to monitor compliance with NCAA rules and state laws.
  2. Prohibition of Pay-for-Play. Regulations commonly prohibit NIL agreements that directly pay athletes for their performance on the field or court. The intent is to distinguish NIL compensation from pay-for-play arrangements, maintaining the amateur status of college athletes.
  3. No School Involvement in Securing Deals. There is a general prohibition on schools being involved in negotiating NIL deals on behalf of their athletes. This aims to prevent conflicts of interest and ensures that NIL deals are made independently of the athlete’s participation in collegiate sports.
  4. Compliance with School and Conference Policies. Student-athletes must comply with policies set forth by their schools and athletic conferences. These policies often include restrictions on partnering with certain types of businesses (e.g., alcohol, tobacco, gambling) and guidelines on how athletes can use school logos and trademarks.
  5. Education on NIL and Financial Literacy. Recognizing the complexity of NIL deals and their potential tax implications, some states and schools mandate or encourage education programs on NIL, financial literacy, and contract law for student-athletes.
  6. Agent Registration and Certification. To protect athletes from exploitation, regulations often require agents and advisors involved in NIL deals to be registered and certified. This helps ensure that those representing student-athletes are qualified and adhere to professional standards.
  7. Conflict of Interest and Endorsement Limitations. Rules may restrict deals that present a conflict of interest with existing school sponsorships or that are deemed detrimental to the school’s image and values. Athletes are typically barred from endorsing products or services that conflict with NCAA rules or school policies.

Impact and Considerations

The patchwork of state laws and individual school policies creates a complex regulatory environment for NIL deals. While these regulations aim to provide a framework for the ethical and fair conduct of NIL activities, they also present challenges. Compliance can be burdensome for student-athletes and institutions alike, necessitating careful navigation of the legal landscape.

As the NIL space continues to evolve, further adjustments to regulations are expected. Stakeholders, including lawmakers, educational institutions, and advocacy groups, are closely monitoring the impact of NIL deals on college sports to ensure that the regulations serve the best interests of student-athletes, schools, and the broader sports community.

(Paul Fenaroli  (former NFL Athlete) is an Associate Attorney at Pastore, a law firm that helps corporate and financial services clients find creative solutions to complex legal challenges. He can be reached at 203.658.8470 or

Navigating the New Frontier: The Rise of NIL Collectives in College Sports

The landscape of college athletics has undergone a seismic shift with the introduction of Name, Image, and Likeness (NIL) rights, granting college athletes the unprecedented ability to profit from their personal brands. Amidst this transformation, a new concept has emerged at the forefront of the NIL era: NIL collectives. These entities, often formed by universities, alumni groups, and third-party organizations, are rapidly reshaping the dynamics of college sports, providing a structured platform for athletes to capitalize on their NIL opportunities while ensuring compliance with the complex web of regulations governing these activities.

The Purpose of NIL Collectives

At their core, NIL collectives serve as bridges connecting student-athletes with businesses and brands interested in leveraging the athletes’ NIL for endorsements, sponsorships, and other promotional activities. By facilitating these deals, collectives not only help athletes monetize their fame but also ensure that such agreements adhere to state laws, NCAA rules and school policies.

Beyond deal-making, many collectives are committed to providing athletes with resources and education on financial literacy, personal branding and the legalities of contract negotiation. This holistic approach is crucial, empowering athletes to navigate the NIL landscape wisely and sustainably.

The Impact on College Athletics

NIL collectives are redefining the recruitment game, offering schools an additional allure for prospective talents. The promise of a supportive, compliant, and profitable NIL ecosystem can be a significant draw for recruits, potentially tilting the competitive balance in favor of those institutions with the most robust NIL programs.

However, the rise of collectives also brings challenges and concerns. Issues of equity and access loom large, with fears that the focus on lucrative deals for a few may overshadow the broader athlete community, particularly those in less prominent sports. Moreover, the expanding commercialization raises questions about the future of amateurism in college sports and its traditional values.

Regulatory and Legal Considerations

The regulatory landscape surrounding NIL and collectives is still in flux, with state laws, NCAA policies and potential federal legislation evolving. This fluidity presents both opportunities and pitfalls for collectives, requiring vigilant compliance efforts and adaptive strategies to navigate the legal complexities.

Legal professionals play a pivotal role in this environment, offering guidance to collectives, universities, and athletes alike. From structuring collectives in compliance with regulations to negotiating contracts and safeguarding athletes’ rights, attorneys are indispensable navigators in the NIL era.

Looking Ahead

As we venture further into the NIL era, the significance of NIL collectives in college athletics will undoubtedly continue to grow. These entities have the potential to not only transform how athletes engage with the market but also to influence the very fabric of college sports. The challenges are significant, from ensuring equitable opportunities to maintaining the spirit of amateurism, but so too are the opportunities for empowerment, education, and entrepreneurship among student-athletes.

The future of NIL collectives, like the landscape of NIL itself, is poised on the edge of vast potential and profound change. Stakeholders across the spectrum of college sports—legal advisors, educational institutions, athletes and businesses—must collaborate to navigate this new frontier responsibly and innovatively. Together, they can ensure that the NIL era heralds a period of growth, opportunity and fairness for all involved in college athletics.

As we chart this unexplored territory, one thing is clear: NIL collectives are more than just a passing trend. They represent a pivotal development in the business of sports, reflecting a broader shift towards recognizing and compensating the value that student-athletes bring to their institutions and beyond.

(Paul Fenaroli (former NFL Athlete) is an Associate Attorney at Pastore, a law firm that helps corporate and financial services clients find creative solutions to complex legal challenges.  He can be reached at 203.658.8470 or

Are Your Website Terms of Service & Privacy Policies Enforceable? Turns out not as much as you might think.

In late January, the N.D. of California (Chen J.) rendered a decision that may have wide impact on the enforceability of Website Terms of Service across the Internet and Metaverse.  Does this sound the death knell for “informed” click-through consent to either terms of use or data privacy policies?

It very well may….and a close review of your terms of service language and enforceable informed consent by the user is required to avoid the pitfalls that Meta Platforms, Inc. (“Meta”) literally brought upon themselves.

Meta brought a suit against Bright Data Ltd. (“Bright Data”) for breach of its Terms of Use.  Bright Data is an Israeli company that gathers information by “scraping” the web for Fortune 500 companies and other clients.    Judge Chen of the N.D. of Cal., found in favor Bright Data on cross motions for Summary Judgment testing the enforceability of Meta’s Terms of Service.

Judge Chen found that the Terms of Service did not apply to web-scraping activities conducted by Bright Data when Bright Data was not logged in.  Bright Data had FaceBook and Instagram accounts – but they were not bound by the Terms of Service unless they were using their Meta accounts to conduct web-scraping.  Meta was able to produce no such evidence.  Judge Chen did find that the survival clause of the Terms of Service such as choice of law and jurisdiction applied to non-logged-in users but otherwise sounded the death knell for Meta’s enforceable Terms of Service in their current form.

Judge Chen was skeptical about the placement and availability of the Terms of Service on Facebook and Instagram as well.  Although only dicta, these comments may also spurn new litigation on the enforceability of consent.  Informed Consent is a hot-button topic.  This decision, while still appealable – needs to be carefully considered and dissected to determine its effect on every company’s website policy and the user’s manifestation of consent.  For convenience this decision is attached.

Pastore, LLC stands ready to help companies review and adapt to the latest theories and developments in website governance and privacy polies.  Website Terms of Service and Privacy Policies need to be an ever-evolving collection of guidelines and control mechanisms and Pastore, LLC is a leading creative innovator and can assist you in a top to bottom review of your forward-facing websi

Big Changes in Unemployment Benefits: What Connecticut Employers Need to Know

The unemployment and severance law landscape is constantly evolving. Connecticut’s legislature recently passed Public Acts 21-200 and 22-67, aiming to enhance the financial stability of the Unemployment Insurance (UI) Trust Fund following the COVID-19 pandemic. Companies that operate in Connecticut should prioritize these changes, implemented on Jan. 1, 2024, as they profoundly impact employers and the labor force within the state.

This article will explore the modifications in unemployment benefits and severance pay, potential legal implications for noncompliance, and strategies to navigate the changes effectively.


Major Changes in Connecticut

Critical changes to Connecticut’s unemployment benefits include:

  • Disqualification of unemployment with severance – Previously, unemployment benefits and severance pay could be received concurrently as part of a separation agreement. Now, receiving severance pay for a specific period disqualifies the employee from unemployment benefits during that period.
  • Increased payment – The minimum weekly unemployment benefit payment has increased from $15 to $40. It will be subsequently indexed annually due to inflation. However, the minimum benefit will revert to $15, when the federal government provides a fully federally funded supplement to the individual’s weekly benefit amount.
  • Accrued vacation pay – An employee’s receipt of accrued vacation pay at the time of dismissal won’t disqualify them from unemployment benefits, assuming they meet other eligibility requirements. However, vacation pay issued during a shutdown period will still lead to disqualification or reduction in benefits.
  • Annual inflation adjustment – The minimum base period earnings requirement for unemployment benefits increased from $600 to $1,600 and will be subsequently indexed annually to inflation. However, the minimum base period earnings requirement will revert to $600 when the federal government provides a fully federally funded supplement to the individual’s weekly benefit amount.
  • Maximum unemployment benefit rate – This will be frozen from October 2024 through October 2028.

Connecticut employers must also note the tax changes, including the taxable wage base increase from $15,000 to $25,000, and ensure compliance.


Legal Ramifications for Noncompliance

Although the legal consequences may differ depending on the specific type of non-compliance, the most immediate outcome can be financial penalties. Falsifying or intentionally misstating employee hours or wages to reduce UI contributions can lead to significant fines and potential legal action. Failure to submit required UI reports or providing inaccurate information can also result in fines and potential audits from the Connecticut Department of Labor (DOL).

If an employer doesn’t submit the required paperwork or provides incorrect information, it can delay or deny UI benefits for laid-off employees. This can have severe financial repercussions for workers experiencing job loss. Failure to comply with UI regulations can negatively impact the employer’s rating, potentially leading to denials of future UI claims for affected employees.

Non-compliance with UI laws can result in a public record of violations, damaging the employer’s reputation and making it difficult to attract new customers and retain talent. In high-profile cases, non-compliance can lead to negative media attention and further damage to the employer’s brand and reputation.

There may also be other legal consequences, such as the DOL filing court orders requiring employers to comply with UI regulations. Employees or the DOL may bring civil lawsuits against employers for violating employee rights or the UI system.


Strategies to Navigate the New Laws

Although navigating the complexities of the new unemployment benefits changes requires careful consideration of your specific situation, here are some general strategies to consider:

  • Remain compliant – Familiarize yourself with the changes to unemployment insurance eligibility, employer tax rates and other relevant provisions to remain compliant. State agencies like the DOL offer information and resources to help employers and workers understand the new UI laws.
  • Stay informed – Since this recently came into effect and legal interpretations and penalties may still be evolving, it’s imperative that you stay informed about any updates and modifications to help you adjust your strategies as needed.
  • Review your internal policies – Update your company’s policies and procedures concerning layoffs, terminations and severance packages to align with the new laws. This includes documenting reasons for termination, eligibility for unemployment benefits and severance pay calculations.
  • Retain detailed records – All termination decisions, reasons for termination and communication with affected employees are critical and will be valuable in case of legal challenges.
  • Keep open employee communication – Be transparent with employees about the new laws and their potential impact on them. Consider holding informational sessions or providing written materials to explain the changes clearly. Open communication with employees can help avoid future disputes.
  • Seek legal counsel – Understanding the nuances of the new UI laws is necessary to ensure compliance and avoid potential legal issues. Likewise, legal counsel can assist you with appealing decisions, challenging tax assessments and negotiating agreements to protect your interests.

Remember, these are just general strategies. The approach you take will depend on your company’s specific circumstances. Consulting with a qualified employment lawyer who specializes in your jurisdiction is essential to developing a tailored plan for effectively navigating the legal complexities of these new UI laws. For legal inquiries, please contact us at Pastore LLC.


This article is intended for informational purposes and does not constitute legal advice.


(Joseph M. Pastore III is chairman of Pastore, a law firm that helps corporate and financial services clients find creative solutions to complex legal challenges. He can be reached at 203.658.8455 or

7 Myths About Contesting Election Night Outcomes in Connecticut

    It’s rare, but it happens. And sure enough, it did recently in Bridgeport, Conn.: a court-ordered redo of a mayoral election after allegations of misconduct that led state legislators to consider changes to the voting system.

    Like all states, Connecticut has strict laws regarding elections—and even more stringent laws for contesting election night outcomes. Yet, misconceptions about these laws, fueled by high-profile court cases and media narratives, are widespread in political campaigns or those seeking legal representation in election matters.

    Misinterpretations of election law in Connecticut lead to false impressions and distorted views of the election process and how to best challenge election results. Several already abound. Below are seven myths and the reality of each:


    Myth: Uniform Election Processes Across Connecticut

    The notion that election processes, from voting by mail to voter registration, are uniform across Connecticut is a common misconception.

    Connecticut’s 169 cities and towns function independently, leading to varied interpretations and executions of state election laws. The Secretary of the State’s office is responsible for interpreting election law and who’s eligible to vote. Still, local practices can differ significantly, sometimes leading to issues like refusing secure drop box delivery or mismanagement at polling places​​.


    Myth: Legal Disputes Always End in Court

    The need for court involvement in election disputes is only sometimes necessary. The American Arbitration Association emphasizes the benefits of alternative dispute resolution (ADR) methods in resolving election-related disagreements, including vote counting and post-election audits. These approaches offer quicker and more cost-effective solutions compared to litigation.

    Campaigns need to explore these alternative avenues of resolution for more minor or technical conflicts.


    Myth: Any Voter Can Challenge Results for Any Reason

    In Connecticut, the law does not allow just any voter to challenge election results on any ground. The legal framework specifies that only certain parties—typically candidates, political parties or a group of qualified voters—have standing to contest election results. This limitation is in place to ensure that challenges are severe and have a basis in substantial issues affecting the election’s outcome.

    Restricting who can challenge election results prevents the electoral process from being overwhelmed with frivolous or unsubstantiated claims. Those who challenge results must present legitimate reasons, usually grounded in evidence of irregularities or legal violations. Examples include allegations of fraud, procedural errors or other issues that could have materially affected the election outcome. These challenges are subject to judicial scrutiny, and the burden of proof lies with the person or party making the challenge.


    Myth: Recounts Happen Automatically in Close Races

    While Connecticut law provides automatic recounts in certain circumstances, they are triggered only when the results fall within precise and narrow margins. For instance, a recount may be mandated if the vote difference between candidates is less than a certain percentage of the total votes cast. This small number margin is defined by state law and does not apply to every close race.

    This law ensures accuracy in very close elections where minor errors could alter results. Suppose the victory margin is above the threshold. In that case, no automatic recount occurs. Still, candidates or parties can request one through a different process with specific criteria. It’s important to understand these thresholds and the recount process. Misunderstandings can cause unrealistic expectations of a recount, leading to needless disputes and eroding trust in the electoral process.


    Myth: Challenges Can Delay Swearing-in Indefinitely

    Legal challenges to election results can delay the certification and swearing-in of elected officials, but they cannot do so indefinitely. Connecticut has legal and procedural frameworks that set timelines and processes for resolving election disputes. These frameworks ensure that protracted legal battles do not unreasonably disrupt governance.

    Election dispute resolution timelines are short to ensure power transitions and term commencements, with courts prioritizing these cases for speedy resolution. Frivolous or unsubstantiated challenges are unlikely to lead to lengthy delays, as courts can quickly dismiss cases that lack merit. This system balances the need to address legitimate concerns with the broader public interest in stable and effective governance.

    Myth: Voter Suppression Claims are Always Valid Grounds for Contesting Elections

    Voter suppression claims can prompt election contests, yet not all claims warrant legal action. In Connecticut, such claims need clear evidence showing a significant effect on election outcomes. Allegations may include restrictive ID laws, few polling places, voter roll purges and misinformation.

    Proving their decisive impact involves showing that suppression of eligible voters happened and that it changed enough votes to alter the election. Courts require detailed, credible evidence to consider these claims.


    Myth: All Election Challenges are Politically Motivated

    The view that election challenges are solely based on partisan politics is incorrect. They can result from various issues, like procedural errors, and not just partisan motives. Recognizing varied reasons for election challenges is critical to understanding election integrity complexities and advocating a non-partisan approach. Some challenges highlight the need for fair, transparent electoral processes beyond political lines.

    Additionally, these challenges follow strict timelines and rules to resolve disputes quickly to avoid governance disruption. This emphasizes the need for substantial evidence and legal justification in challenging election results.

    A thorough grasp of election law is essential for political campaigns and legal representatives to contest an election outcome. Legal guidance helps maneuver the electoral process and maintain compliance for devising a winning victory. The Bridgeport fallout shows that the waters of electoral disputes are far from still, with more contested outcomes sure to come on the political horizon.


    (Joseph M. Pastore III is chairman of Pastore, a law firm that helps corporate and financial services clients find creative solutions to complex legal challenges. He can be reached at 203.658.8455 or

    ESG Data Assurance Requirements: 10 Steps to Prepare for the Legal Implications

      Research shows a substantial percentage of companies are not prepared for the environmental, social and governance (ESG) data assurance requirements. Only 25% of companies feel they have the ESG policies, skills and systems in place to be ready for independent ESG data assurance. This is despite the fact that two-thirds of companies must disclose such data or will soon be expected to do so on a mandatory basis.

      One of the core challenges for companies planning for ESG assurance is a need for more internal skills and experience. Learn how these requirements will impact corporate and financial services companies. Plus, uncover the proactive steps your company can take to prepare for the legal implications of these requirements.

      Impact on Corporate and Financial Services Companies


      The ESG data assurance requirements create the following opportunities if handled correctly, in addition to challenges for corporate and financial services companies:


      • Reduced risk and compliance costs: Proactive data quality management can help avert costly fines associated with regulatory non-compliance.
      • Competitive advantage: Companies prioritizing data assurance can distinguish themselves in the marketplace as trustworthy and reliable partners.
      • Improved decision-making: Trusted data results in better-informed decisions at all organizational levels—from product development and customer service—to risk management and compliance.
      • Enhanced trust and credibility: Strong data assurance processes can build trust with your customers and investors by committing to transparency and data integrity.



      • Evolving regulatory landscape: Keeping up with the ever-changing regulatory landscape, especially in areas like ESG reporting, can be exhaustive for your internal resources.
      • Increased costs and complexity: Implementing and maintaining effective data assurance programs requires an investment in technology, personnel and processes, which can be a financial and administrative burden on your company.
      • Lack of talent and expertise: This can have significant consequences for your company, resulting in operational challenges, inaccurate data, and increased costs and inefficiencies. Moreover, finding and retaining skilled professionals with data governance and assurance expertise can take time and effort.


      You can gain a competitive edge by preparing and leveraging the potential benefits. Conversely, the implications of non-compliance can be significant and multifaceted, from regulatory fines and penalties to negative brand perception.

      Key Steps to Prepare

      Here are some proactive steps you can take to prepare for the ESG data assurance requirements:


      1. Stay informed:Monitor emerging standards for ESG data assurance, including the proposed International Standard on Sustainability Assurance (ISSA) 5000 and legislative developments. Acquaint yourself with relevant regulations in your jurisdiction and industry.


      1. Conduct a risk assessment:Find areas where your ESG data collection, management and reporting practices might be vulnerable to legal risks because of possible inaccuracies.


      1. Develop robust internal controls:Establish strong data governance policies and internal controls to confirm data accuracy and consistency within your company.


      1. Invest in data management systems:Upgrade your technology and data infrastructure to assist in effective and trustworthy data collection, retrieval and storage.


      1. Examine disclosure obligations:Recognize your legal responsibilities for ESG data disclosure, both mandatory and voluntary, under stock exchange listing requirements and relevant regulations.


      1. Establish ESG reporting policies:Create thorough policies for ESG data collection, verification, aggregating and reporting. Ensure they support recognized standards and best practices.


      1. Provide training:Offer training for employees engaged in ESG data collection, management and reporting to guarantee compliance with internal policies and legal requirements.


      1. Consider independent assurance:Evaluate the need for independent third-party assurance of your ESG data to enhance stakeholder confidence and mitigate legal risks. Select reputable assurance providers who adhere to relevant standards and ethical codes.


      1. Conduct due diligence with suppliers and partners:Assess the ESG practices of your suppliers and partners to ensure alignment with your commitments and avoid reputational risks.


      1. Partner with legal experts: Consult with legal professionals specializing in ESG and sustainability to guarantee compliance with relevant laws and regulations and navigate potential legal risks associated with your ESG data disclosures. For legal inquiries, please contact us at Pastore LLC.


      By taking these proactive steps, you can begin to prepare for the evolving ESG data assurance requirements. The legal landscape is dynamic, so staying updated and adapting your strategies is crucial.


      This article is intended for informational purposes and does not constitute legal advice.


      (Julie D. Blake, JD, LLM, CIPP, CIPM, is an experienced commercial litigator and data privacy expert with expertise in cybersecurity, data privacy breaches, risk assessment and data privacy policy review.)

      Navigating the New Cybersecurity Rules: What Companies Need to Know

      Public companies must report their cybersecurity risk management, governance and strategy on their annual filings for fiscal years ending on or after Dec. 15, 2023, to comply with the recently imposed Securities and Exchange Commission (SEC) rules.

      In the U.S., almost all publicly traded companies with a focus on consumers and a large number of financial services corporations have experience in cybersecurity. This results from cybersecurity regulations being implemented by various federal agencies and all states. Specifically, the Safeguards Rule in Gramm-Leach-Bliley (GLB) requires the following types of  financial institutions to address cybersecurity to establish extensive measures:


      • Banks
      • Savings and loans
      • Insurance companies
      • Broker-dealers
      • Investment advisers

      The SEC implemented a prior set of disclosure rules for reporting firms to give investors the necessary data to evaluate the impact of a cyberattack. Further, many other registered firms have enacted cyber procedures on their own initiative, based on responsible legal guidance.

      As a result, following the introduction of the new law, financial services firms, consumer-oriented reporting firms and businesses that have independently implemented cyber policies shouldn’t have any significant implementation issues. However, those that haven’t will have a considerable undertaking to address these new requirements. Therefore, the 10K revisions will have an extensive impact on these companies.

      The rule’s provisions will likely sanction those failing to comply with the change. This could involve letters of caution, fines and suspension.


      Navigate the Cybersecurity Requirements by Taking Steps

      Here are some steps to help your company navigate the new cybersecurity requirements:

      Ensure a written information security policy (WISP) is in place. This creates a framework for cyber management and typically calls for creating and upkeeping a risk assessment manual and a written asset inventory.

      The WISP also includes procedures addressing access controls, identity and access management, entitlement transparency, and other important topics listed below:


      Access to Entitlement Transparency

      Human Resources (HR) should be able to provide immediate access to your company’s entitlement transparency structure, including a complete listing of access by each employee to the firm’s system from initial employment to departure.

      Upon employee advancement or transfer, the employee’s new superior, HR and an appropriate senior techie should reassess the employee’s access. This should be an established firm procedure and not a one-off. If an employee has been reprimanded in any way or has a questionable employment history, this should be maintained in their file.


      Departure/Termination Procedures

      Creating definitive procedures that can be immediately implemented upon termination plays a significant role in your company’s cybersecurity. These procedures should include immediate notification company-wide of an announced departure, especially if it’s a termination for cause.

      Upon notification of an employee’s departure, immediately implement access restrictions. Upon departure, execute an immediate and complete access shutdown. It’s important to understand that current employee’s access to a former employee’s HR files is often a critical factor in illegal intrusions into the firm’s systems. In all of this, consider when a current or former employee is involved in a breach and what you would want to know about him/her to evaluate the situation properly.


      Password Protection Policy

      A strong password protection policy is mandatory for access security and should incorporate a requirement for multi-factor verification, including a user code and a password. The password should have eight alphanumeric characters with at least one symbol, should be changed every 90 days and not repeated for at least six months. Three errors in an attempted entry should suspend use for at least an hour and be reported to IT.

      Data Loss Protection

      One of WISP’s primary functions is to ensure that your company’s designated information requiring security is adequately protected in accordance with its degree of risk.

      This review should be based on:


      • Guidance from National Institute of Standards and Technology (NIST) releases and guidelines
      • Relevant industry guidelines
      • Operational manuals
      • Data maps
      • Audits (internal and external)
      • Testing (internal and external)
      • Other appropriate mechanisms


      Finally, determine if the company’s personal identifiable information (PII) and other designated data are being properly identified, maintained and protected within the firm’s systems.


      Security Devices and Review

      To accomplish compliant, sophisticated protection, the company should employ technology such as encryption, firewalls, intrusion detection and protection systems, as well as monitoring and auditing devices. One approach is to institute a defense-in-depth strategy using the devices above layered within the firm’s systems. This review’s determination is vital to your company and should be documented and maintained in the WISP Manual.

      After an incident, the entire team should conduct follow-up reviews to make recommendations for corrective and remedial action, and it should then oversee and approve this action.



      In conjunction with legal, IT and outside IT forensic vendors, your company should develop cybersecurity training programs, including mock and tabletop sessions. Develop and provide regular cybersecurity awareness training for all personnel and regularly update this to reflect current risks.

      The chief compliance officer (CCO), in conjunction with the chief information security officer (CISO), should conduct follow-up reviews. To establish an effective training program, they should work with legal and IT and outside legal and IT advisers.

      Training should also discuss the appropriate handling of customer’s requests for username and password changes, wire transfers and identity verification—particularly those involving large money transfers to an overseas location or third parties. This should include sound practices regarding opening e-mail attachments and links, including using simulated phishing campaigns where the firm identifies and retests employees who failed the exercise.


      Vendor Selection and Management

      Vendors play an essential role in a company’s business and, as a result, have a significant involvement in cybersecurity. Vendors and employees are two major risk factors in cybersecurity breaches.

      As such, have an established due diligence process for the selection of vendors, which should focus on cybersecurity awareness. As a part of your cybersecurity program, develop a strong vendor management plan. Finally, ensure all vendor contracts contain pertinent provisions and employ regular oversight practices.



      Check your existing policies for their cyber insurance coverage. If appropriate, discuss with your insurer to address any areas requiring additional coverage. You don’t necessarily need to obtain a separate cybersecurity policy if you have proper coverage otherwise. Also, the employment of a WISP can significantly assist a firm in evaluating the need for and securing appropriate insurance.



      No U.S. business, small or large, can escape phishing attacks. These can result in the loss of substantial sums of money, often in six and seven figures, and valuable, susceptible company information. As a result, phishing problems can be reduced through training and testing, which includes demonstrations of various attacks experienced by peer firms. Although there’s no easy solution, regular and informed testing and training can effectively address this problem.



      Regular testing is required of all WISPs and involves internal testing by firms and independent outside vendors. Most testing aims to ensure that key controls, systems and procedures of a WISP meet established standards.

      One of the most important types of testing is third-party penetration testing. Penetration testing is an essential element in any cybersecurity program. It simulates an internal or external attack on a company’s computer network to detect its vulnerabilities and evaluate your firewall system’s effectiveness.

      In conjunction with legal, compliance and a trusted outside vendor, IT should develop cybersecurity training and testing programs, including mock and tabletop sessions. These tests should be administered periodically (annually, quarterly and when necessary) by capable internal or outside technology experts and can be invaluable to your cybersecurity program.


      Incident Response Plan

      Lastly, a major element of a WISP is its Incident Response Plan, which provides a procedural structure for your company to respond to a cybersecurity incident expeditiously. The plan should contain specific policies and procedures for responding to a cyber incident with specific provisions.


      The plan should require the firm to establish an incident response team (IRT) responsible for addressing all cyber incidents. Depending on the company and the cyber incident, the IRT can comprise members from IT, compliance, legal, HR and other relevant departments. Each member should be a seasoned officer sophisticated in the firm’s technical systems and operations.


      Partner with Legal Experts for Assistance

      A law firm with a sophisticated cybersecurity group can assist with all the undertakings described above and do so expeditiously and cost-effectively. Pastore LLC has a sophisticated group of seasoned counsel who can direct the development and completion of a WISP and be crucial players in effectively advising on any cyber incident.


      This article is intended for informational purposes and does not constitute legal advice.


      (Jack Hewitt is a securities lawyer and focuses on securities litigation and regulatory advice and counsel to broker-dealers, investment banks and investment advisers. His work involves virtually every aspect of the federal and state securities laws, including equity, fixed income and derivatives trading, market manipulation, net capital, short-selling, suitability, record retention, insider trading, cybersecurity and registration issues.)

      What Standard of Care Applies When Engaged in Fitness Activities?

      The fitness industry, while promoting health and wellness, is not immune to legal challenges. Businesses in this sector, particularly in states like Connecticut, need to be vigilant about potential litigation, especially concerning negligence and contract breaches. This article aims to guide fitness facility operators on how to mitigate these risks, incorporating real case examples and legal principles.

      Understanding the Risks: Negligence  

      Negligence forms the core of many lawsuits in the fitness industry. Cases often revolve around personal training, where trainers may fail to consider clients’ medical conditions, provide unsuitable exercises, or inadequately supervise workout sessions. These oversights and decisions can lead to severe injuries, ranging from fractures to more serious conditions like heart attacks or strokes due to overexertion.

      In Connecticut, the standard of care in fitness-related injuries can vary based on the nature of the activity. Importantly, Conn. Gen. Stat. § 52-572h makes clear that a participant’s assumption of the risk does not bar recovery in negligence actions in Connecticut and instead, the standard of “comparative negligence” applies.

      The Connecticut Supreme Court in Jaworski v. Kiernan (1997) established that the duty owed to a participant in a sport where physical contact is inherent or expected is not to engage in reckless or intentional conduct, rather than the ordinary standard of acting in a reasonable manner under the circumstances.

      However, this heightened standard of care does not always apply.  In Jagger v. Mohawk Mountain Ski Area, Inc. (2004), the court found that, in non-contact sports like skiing, participants are expected to engage in the sport reasonably and appropriately. This “ordinary” standard of care has also been applied in evaluating whether providing standard fitness safety equipment (in the form of a yoga mat) was actionable conduct Schmus v. Davis (2021) and even in sporting activities where physical contact seems unavoidable – like boxing – where the plaintiff, as a trainee, enlisted the defendant trainer, as a trainer for instruction in fitness boxing. They were not co-participants in an athletic contest. Robles v. Dean (2017).

      Practical Steps to Mitigate Risks

      1. Regular Equipment Maintenance and Safety Checks: Regularly inspect and maintain equipment to prevent accidents.
      2. Qualified Personnel: Employ qualified trainers and ensure they are well-versed in handling diverse client needs and health considerations. This reduces the risk of injuries due to inappropriate training methods.
      3. Effective Use of Waivers: Develop comprehensive and specific waivers, clearly outlining the risks involved in various fitness activities. Remember, the clarity and specificity of a waiver can be pivotal in legal defenses.
      4. Emergency Protocols and Staff Training: Establish clear procedures for handling injuries and emergencies. Ensure all staff members are trained to respond effectively and document incidents thoroughly.
      5. Insurance Coverage: Maintain adequate insurance to cover potential claims. This not only provides financial protection but also ensures compliance with legal standards.
      6. Legal Consultation: Regularly consult with legal experts to ensure that all operational practices, contracts, and waivers align with current laws and regulations.
      7. Client Communication and Education: Educate clients about the risks associated with fitness activities and the importance of acknowledging their health conditions and limitations.

      By addressing these key areas, fitness facilities can significantly reduce the risk of litigation. It’s not just about legal protection; it’s also about creating a safe and responsible environment for clients to pursue their health and fitness goals.


      This article is intended for informational purposes and does not constitute legal advice.

      (Paul Fenaroli is an Associate Attorney at Pastore admitted in Connecticut and the District of Connecticut. He provides private companies with a full range of business law services covering formations, mergers, acquisitions, corporate governance, securities offerings and litigation)

      Personal Financial Data Rights Rule: Strategies for Financial Institutions

      Financial institutions are vulnerable to the complex and dynamic regulatory landscape. Forty-two percent of organizations cited facing regulatory issues and compliance changes within the next 2-5 years as a top challenge. Financial institutions must be adaptable and remain informed on the latest industry regulations to operate effectively.

      An example is the new Personal Financial Data Rights rule (PDFR) the Consumer Financial Protection Bureau (CFPB) proposed on Oct. 19, 2023. The proposed rule is the first application to implement Section 1033 of the Consumer Financial Protection Act, which charged the CFPB with implementing personal financial data sharing standards and protections. The CFPB expects to cover additional products and services in future rulemaking.

      Currently in its notice-and-comment period, which will end on Dec. 29, 2023, the proposed rule would require depository and nondepository entities to:

      • Make some data regarding consumer transactions and accounts available to consumers and authorized third parties.
      • Establish obligations for third parties accessing a consumer’s data, including important privacy protections.
      • Provide basic standards for data access.
      • Promote fair, open and inclusive industry standards.

      The requirements would be implemented in phases, with larger providers being subject to them much sooner than smaller ones. Community banks and credit unions with no digital interface with their customers would be exempt from the rule’s requirements.

      If approved, this will profoundly change how financial institutions handle consumer’s financial data and present compliance challenges. Financial institutions failing to comply with the proposed PFDR rule could face legal ramifications such as civil penalties, cease-and-desist orders, reputational damage and consumer and data breach lawsuits. Specific legal implications will depend on the nature of the violation, consumer damage and relevant laws and regulations in effect at the time.

      Although the PFDR is still in the proposal phase and subject to change, it’s key for financial institutions to take steps to minimize risks.

      Here are some strategies to consider in preparation:

      Focus on Compliance

      To increase compliance, carefully review the PFDR rule and its requirements. Be sure to examine crucial areas such as data access rights, data use restrictions, data security standards and covered data. Review your current procedures and practices to determine which ones may not comply. Then develop a thorough implementation plan defining the actions to achieve compliance. This includes timelines, communication strategies and resource allocation.

      Take a Proactive Approach to Data Management

      Thoroughly evaluate any third-party service providers and vendors who access your customer data to ensure they comply with the PFDR rule’s data security and privacy requirements. In addition, clarify data access rights in user agreements and contracts with those parties. To limit third parties’ use and disclosure of data, apply contractual provisions.

      Additionally, boost your data security by applying robust cybersecurity actions. This will protect your customer data from unauthorized misuse and breaches. In a breach, be prepared with a well-defined incident response plan.

      Build Consumer Trust

      It’s imperative to communicate with your customers about what the rule is and what their data rights are, along with providing educational materials and other resources. To make certain your customers understand and approve how their data will be used and shared, provide detailed consent procedures.

      Restrict authorized third-party data usage by creating firm policies and verifying that the data will only be used for authorized purposes and not shared or sold without consent. Finally, employ effective processes for responding to customer complaints and inquiries concerning security and data access.

      Seek Legal Counsel

      Consulting with legal counsel with expertise in the financial services industry will help you navigate the PFDR rule complexities and ensure compliance. The specific legal approach will depend on your financial institution’s unique circumstances.

      Skilled legal counsel can address your concerns and increase compliance by:

      • Keeping you informed on developing regulations and providing guidance through existing changes to data procedures.
      • Providing guidance on how to comply with the rule while evaluating consumer privacy and data security concerns.
      • Addressing potential legal issues swiftly and effectively to mitigate risks.
      • Handling litigation risks and guarding against potential lawsuits.

      In summary, although the PFDR rule is still in its final development stages and it’s feasible that regulations may evolve, prepare by staying informed and adapting your strategies accordingly.

      By investing in legal counsel early on, you can leverage the expertise of professionals to mitigate risks, prevent costly mistakes and take advantage of the opportunities presented by this new regulatory landscape. For legal inquiries, please contact us at Pastore LLC.

      This article is intended for informational purposes and does not constitute legal advice.

      (Julie D. Blake, JD, LLM, CIPP, CIPM, is an experienced commercial litigator and data privacy expert with expertise in cybersecurity, data privacy breaches, risk assessment and data privacy policy review.)