Executive Summary
- What’s new: Now that the 2026 election has passed, special legal issues arise from inaugural and transition activities, recounts, runoffs, special elections, individuals entering or leaving government and new consultants. The Democratic-controlled Congress is also likely to undertake increased oversight and investigations.
- Why it matters: Individuals and organizations face campaign finance, pay-to-play, gift, conflict-of-interest and lobbying laws. Government contractors, donors to certain entities, financial institutions and emerging technology industries should be especially prepared for congressional investigations.
- What to do next: Preclearance of contributions and gifts is critical. Companies should consider establishing formal vetting procedures for new lobbyists. They can also assess subpoena risk, gather a fast-response team and diligence related records.
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Now that the 2026 election has passed, individuals and organizations should be mindful of special legal issues that arise from contributions made to, and expenses incurred for, inaugural and transition activities, as well as those pertaining to recounts, runoffs and special elections. In addition, there are legal implications relating to individuals entering or leaving government, as well as the hiring of new consultants who plan to lobby newly elected officials. With Democrats taking control of the House of Representatives and the Senate, companies should also prepare for increased congressional oversight and investigations.
Inaugural Committee Contributions and Inaugural Events
State and local inaugural committees. Victorious candidates in state and local races will begin to prepare and fundraise for inaugural events in celebration of taking office. While inaugural committees tend to be set up as distinct nonprofit organizations that are not subject to limits, there are jurisdictions that impose dollar limits on contributions to such inaugural committees, such as Kansas and Ohio. Additionally, inaugural committees are sometimes established as part of, or funded by, a campaign committee, political party or PAC, triggering campaign finance restrictions, including, but not limited to, foreign national bans.
For financial institutions subject to a federal pay-to-play rule (MSRB Rule G-37 for broker-dealers that underwrite municipal securities and municipal advisors; SEC Rule 206(4)-5 for investment advisers; CFTC 23.451 for swap dealers; FINRA Rule 2030 for broker-dealers that solicit investment advisory business; and SEC Rule 15Fh-6 for securities-based swap dealers), a contribution to an inaugural committee of a successful state or local candidate for a covered office would trigger an automatic ban on business or compensation under those rules. In certain states, such as Michigan and New Jersey, inaugural committee contributions are also covered under pay-to-play laws. Please note that these federal pay-to-play rules, and certain relevant state pay-to-play laws, also prohibit soliciting contributions to such inaugural committees.
Since rules vary regarding the permissibility of giving to inaugural committees under state and local campaign finance and pay-to-play laws, preclearance of such contributions is critical.
State and local inaugural events. Whether they are hosted by an inaugural committee or another private organization, numerous inauguration-related events are expected in connection with the inauguration of successful state and local candidates (such as governors). These events may include inaugural balls, breakfasts and luncheons celebrating inaugurations, or events involving the viewing of an inauguration or an inaugural parade. Tickets or admission to these inaugural events are generally considered items of value and are subject to applicable gift laws to the extent they are provided to public officials. Purchases of tickets to an inaugural ball held by a designated inaugural committee also qualify as contributions to such inaugural committee, subject to applicable laws described above.
Must comply with gift rules. To the extent such events involve government officials or employees, or tickets are provided to such an official or employee, a company must ensure compliance with applicable gift and entertainment laws. Given that federal, state and local gift laws vary, preclearance is vital before one invites or provides admission to a public official.
Special ban on paying for a congressional member’s swearing-in or inauguration day receptions. House Ethics Committee guidance expressly states that lobbying firms and other private entities are prohibited from paying the costs of a representative’s swearing-in or inauguration day reception. Private entities should also avoid paying for such events held by U.S. senators, since such payment could be deemed a private subsidy of an official event, which is prohibited under Senate rules. State and local laws vary regarding the permissibility of such payments.
Transition Committee Contributions and Transition-Related Activities
State and local transition teams. Similar to inaugural committees, the permissibility of contributions made to transition teams will depend on what type of entity the successful candidate uses to fund and organize the efforts. Transition teams are usually run out of a separately designated nonprofit, such as a 501(c)(4), and, with a few exceptions, contributions to such nonprofits are generally unlimited under state and local campaign finance laws. However, the making and soliciting of transition committee contributions are expressly covered under federal (and certain state) pay-to-play rules. If the transition teams are instead operated out of campaign committees, party committees or PACs, they would also implicate state and local campaign finance laws. This includes not only monetary contributions (e.g., via check) but also in-kind contributions, such as using company resources or paying expenses to help with the transition effort.
Given that such state and local laws vary, preclearance of such contributions is critical.
Corporate executives serving on state or local transition teams. A corporate executive who serves on a state or local transition team (such as for a governor-elect) raises several legal considerations:
- Conflict of interest implications. Depending on the jurisdiction, a transition team member may be treated as a public official and, as a matter of law or policy, become subject to some or all of that state or locality’s conflict of interest laws.
- Campaign finance and pay-to-play implications. Use of corporate resources, volunteering during working hours, or the executive personally paying for expenses related to his or her volunteer activity may result in an in-kind contribution to the committee, with implications as described above.
- Possible procurement ethics implications. Conflict of interest provisions in many state and local procurement laws prohibit a company from obtaining an unfair advantage by assisting in the preparation of the terms or specifications of a request for proposals (RFP) and then bidding on that RFP. To the extent the volunteer helps or advises the transition on RFPs or the bidding process, this conflicts issue may arise.
- Possible lobbying implications. If a corporate executive’s transition-related activities include communications with covered officials, and the communications are for the purpose of influencing covered decisions on behalf of his or her employer, there may be registration and/or reporting implications under state or local lobby laws.
Contributions to Recount Committees
Corporate contributions to federal recount committees are prohibited. For PACs and individuals, a separate per election limit applies (e.g., $3,500 for individuals, $5,000 for federal multicandidate PACs) to an individual candidate’s recount committee. A separate limit ($132,900 per year for individuals and $45,000 per year for federal multicandidate PACs) applies to a national party committee’s legal recount committee. The contributions are reportable by the recount committee.
Contributions to state or local recount committees are subject to state or local law and possibly federal or state pay-to-play rules.
Contributions for Federal Special and Runoff Elections
Corporate contributions for federal special and runoff elections are prohibited. Such elections are treated as separate elections for limit purposes and a separate per election limit applies ($3,500 for individuals, $5,000 for federal multicandidate PACs). The contributions are reportable by the recipient committee.
Contributions to state or local special and runoff election committees are subject to state or local laws and pay-to-play rules. Please note that state or local runoff elections may have different contribution limits under campaign finance law than previous primary and general elections.
Employees Considering Government Service and Post-Employment Restrictions on Those Leaving the Government
As newly elected officials take office, many individuals will transition out of or into government roles. There are numerous federal and state laws that apply to employees leaving the private sector and entering government service. Executives who accept senior government positions, including in incoming state administrations or congressional offices, will likely need assistance regarding the vetting process, personal financial disclosures and divestiture requirements, if applicable, and related tax issues. This process also can present complex challenges for the business the executive is leaving. In particular, navigating these rules may be challenging for the business if they require the departing executive to unwind illiquid assets, including LP or GP interests in private funds or in their carried interest vehicles. In addition, severance payments and any arrangements that create an ongoing connection to the business, such as deferred compensation agreements, will need to be examined closely and potentially amended to ensure compliance with applicable conflict rules.
At the same time, some companies may seek to hire individuals who are leaving government service. Such employees often carry post-employment restrictions impacting the services they may be able to provide to their new employer. Moreover, in many cases, there are rules regarding if and when a company may discuss future employment with such a government official or employee.
Engaging New Lobbyists and Consultants for a Change in Administration or Legislative Control
Often when there is a change in administration or a change in the party that controls a federal or state legislative body, companies consider engaging new lobbyists or government affairs consultants. Given the unique legal issues (such as post-employment restrictions and lobbying laws) and reputational concerns that come with hiring a new lobbyist or government consultant, companies are increasingly establishing formal vetting procedures for such hires. These procedures should vet relevant areas, including, but not limited to, the consultant’s current and former government positions (which may implicate post-employment/conflict of interest laws) and the nature of their relationship with certain officials. It is also important to have written contracts with robust representations and warranties. We have established protocols for the above vetting process and a model consulting agreement.
Preparing for Heightened Congressional Oversight and Investigations
Companies can prepare for a markedly increased appetite for congressional investigations in the new Congress. Prospective committee chairs have openly discussed subpoenas, sworn testimony and document demands, and committees are already building investigative files. While the White House may be the principal target, the private sector is the likely door: as Rep. Robert Garcia put it, “If you are involved in any way with the Trumps, and if you’re part of an American business, you’re going to respond to the Congress.”
Who should be concerned. Investigative tracks are developing around companies in which the federal government holds equity stakes (concentrated in semiconductors, critical minerals and energy infrastructure); government approval of certain M&A transactions; large federal government contractors, particularly in defense procurement; donors to government- or Trump-affiliated entities such as the White House ballroom project, Freedom 250 and MAGA Inc.; and emerging technology industries, including AI, data centers, online prediction markets, algorithmic pricing and crypto.
What to expect. Inquiries typically begin with sweeping subpoenas for documents and may also include testimony under oath. The Democrats have already been sending inquiries to certain companies, but once they are sworn in and formally control the Senate and House, they will have the authority to compel production through a subpoena. The documents and testimony are not necessarily confidential and can be leaked.
Preparing now. The roughly two-month window before the new Congress convenes provides companies time to prepare, including the opportunity to assess whether they are in a high-risk area for receiving a subpoena, gather the right fast-response team of counsel and government relations professionals to address inquiries as they come in, and diligence certain activities and related records (such as emails) to determine what, if any, exposure may exist. Longer-term, companies may consider either increasing or starting bipartisan political engagement to better position themselves for their interactions with government.
Please contact us with any questions.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.
For further information, please contact:
Ki P. Hong, Partner, Skadden
