The price of being noticed by Washington

American regulators have, by most measures, gone quiet. The Securities and Exchange Commission brought 30% fewer enforcement actions against public companies in fiscal 2025 than the year before; federal penalties against financial firms fell by more than a third in the first half of 2025; the group Public Citizen counted 164 corporate enforcement actions halted or dropped in the first year of the new administration. For most shareholders this reads as a tailwind: lighter compliance, smaller legal bills, a referee who has wandered off to smoke. It is the sort of relaxation the market rarely prices but almost never complains about.

Yet in the same period a smaller group of companies has discovered that the state, having loosened its grip on the economy at large, still holds them very tightly indeed. Broadcasters, newsrooms and firms whose deals need a federal blessing have found themselves at the mercy of enforcement that has not disappeared but gone discretionary. The two facts are the same fact. When law is enforced by rule it is predictable, and its cost can be insured against and spread. When it is enforced by discretion, its cost becomes idiosyncratic — a function, in the extreme case, of a company's standing with the occupant of the White House. That is a reallocation of risk that a diversified portfolio experiences as noise and a concentrated one experiences as a fortune.

The toll gate

The cleanest example sits in the communications business. In July 2025 Paramount Global agreed to pay Donald Trump $16m to settle his lawsuit over the editing of a "60 Minutes" interview — an amount trivial to a company of its size, and yet a settlement its own lawyers had long resisted as a surrender of principle. What made the moment different was the timing. The FCC had reopened a closed investigation into CBS's handling of the Harris interview, in the words of its chairman, in the context of the regulator's review of the pending sale of CBS's parent. That sale — Skydance's roughly $8bn takeover of Paramount — sat before the same agency. The settlement was widely read as the price of making the deal go away.

The merger did close, in August 2025, with the FCC approving it on a party-line vote. But the sequence taught a pair of lessons. First, that a company's legal exposure and its corporate future could be joined at the hip: a $16m cheque settled a suit while buying goodwill from an agency reviewing an $8bn transaction. Second, that this was not an accident — rival broadcasters settled the same president's lawsuits for sums their own counsel deemed principled to resist, ABC for $15m, Meta for $25m, YouTube for $24.5m. The pattern looked less like law and more like a toll.

Who gains, who fears

The enforcement pullback and the discretionary pressure are two faces of one institutional change: the substitution of rules by relationships. In normal times a company's expected regulatory cost is a number an analyst can model. Now that number carries a second, largely unmodelled term — the value of being, or not being, a target. For the great majority of firms, that term is roughly zero, and the residue is a mild subsidy. For the minority that depends on federal approvals — a merger that needs FCC consent, a licence that can be reopened, a contract whose counterparty is the government — the term is real and sometimes decisive.

The losers are not only media companies. Any firm with a large federal footprint, a transaction awaiting a federal sign-off, or leadership that has made enemies in Washington now carries a risk that resides entirely outside its earnings guidance. The winners are subtler: companies that were facing enforcement have had the sword sheathed; companies able to make a small, quiet payment rather than fight a discretionary battle have discovered that in this regime, settlement is cheap. Note the perverse incentive this installs. A firm that believes penalties are now discretionary and its opponent vengeful has every reason to pay and no reason to test the institution — which is precisely how a rule of law decays without any single scandal to mark it.

The limits of the story

Honesty requires recording what is not known. The decline in enforcement is partly a transition effect: the SEC's own numbers show 93% of its fiscal-2025 actions were filed before the change at the top, so the real trough will arrive in the current year, making the direction of travel hard to read. The administration denies any politicisation, and much of the evidence of retaliatory intent is circumstantial — a summer's worth of probes against the president's adversaries, from New York's attorney-general to a former FBI director, without a clear prosecutorial theory. A reader should treat the scale of the phenomenon as genuinely contested.

Yet the mechanism does not depend on a verdict about intent, only on the incentives it installs. When enforcement becomes discretionary rather than rule-bound, the value of a predictable legal landscape is transferred from everyone to the few who can call the umpire. That raises the required return on any position that is exposed and, more quietly, on the market as a whole, because a fraction of every American asset's value was always a promise that the law would be applied without fear or favour. A referee who only sometimes whistles fouls does not merely change individual games; he changes the price of admission to all of them.

For the investor the practical conclusion is dull but durable: distribute political exposure the way one distributes any concentrated risk, and be deeply suspicious of a legal settlement that arrives suspiciously small in the shadow of an unrelated federal approval. The cheapest form of that settlement is the one paid by Paramount; the most expensive is the one a shareholder never sees coming, because it was not in the guidance but in a relationship.