Good morning. In January of this year, executives from the Big3 basketball league met with Justice Department officials in Washington to present their case: that the National Basketball Association was violating federal antitrust law. The meeting, according to people familiar with the matter, included Jonathan Kanter, the Biden administration’s assistant attorney general for antitrust, who often likes to reference his own sports fandom.

The DOJ’s antitrust division has since launched an investigation into the question, people familiar with the matter said, but its attention is part of something far broader than whether the NBA acted anti-competitively in response to a 3-on-3 basketball league. The Justice Department is very, very interested in sports.

• The scale of the scrutiny is broad: The biggest and most powerful leagues in the country are under unprecedented scrutiny from U.S. antitrust enforcers these days. Other organizations known to be in the DOJ’s sightline in some form include the PGA Tour, Augusta National Golf Club, Major League Baseball, FIFA and U.S. Soccer, and the NCAA. Even esports haven’t escaped the brightening spotlight.
   
• The picture is clear: professional sports leagues, which had often been left alone by federal regulators, are increasingly getting attention from the top antitrust enforcers in the United States. The Justice Department hasn’t explicitly said this publicly. But the new focus has been sitting in plain sight in court filings and speeches made by key figures in the antitrust division over the past five years.
   
• Similar remarks had been made before: As early as 2018, the previous antitrust chief Makan Delrahim was pointed in his conviction that college sports weren’t immune from antitrust law. DOJ’s antitrust division went on to file a Supreme Court brief against the NCAA in a case where the association was arguing that it should be allowed to maintain strict limits on athlete compensation, and enjoy ample latitude to govern college sports.

Lawmakers press Costco on China forced labor

Costco Wholesale faces questions from influential U.S. lawmakers over alleged links between forced labor in China and products sold in the retail giant’s stores.

Costco should explain why it continues to sell seafood and security cameras that are allegedly tied to human rights abuses in China’s Xinjiang region and elsewhere, said Rep. Chris Smith (R., N.J.) and Sen. Jeffrey Merkley (D., Ore.) in a letter to Costco Chief Executive W. Craig Jelinek. Smith and Merkley head the Congressional-Executive Commission on China, a group of lawmakers and executive branch officials that monitors human rights developments in the country.

Another federal judge backs Treasury on sanctions against Tornado Cash

A federal judge in Florida has denied a cryptocurrency advocacy group’s bid to challenge U.S. sanctions imposed on crypto mixer Tornado Cash.

Coin Center, a Washington, D.C.-based crypto-focused think-tank, along with several individuals, filed a suit last year against the U.S. Treasury Department, asking it to remove Tornado Cash from its sanctions list. The suit argued the designation exceeded the Treasury’s authority and violated the First Amendment.

A federal judge rejected those arguments and ruled Monday in favor of the Treasury Department, allowing the sanctions to remain in place.

A federal judge in August rejected a similar suit filed in Texas that challenged the Tornado Cash sanctions. Crypto exchange Coinbase financed the court challenge.

—Mengqi Sun

Court sends stock-buyback rule back to SEC

A conservative appeals court dealt a setback to the Securities and Exchange Commission’s plan to give investors more information about stock buybacks after business groups challenged the rule.

Responding to a May lawsuit by the U.S. Chamber of Commerce and two Texas-based business groups, a three-judge panel on the Fifth Circuit Court of Appeals ruled that the SEC’s new requirements for share repurchases were “arbitrary and capricious.” The judges agreed with the groups’ assertion that the SEC didn’t adequately explain the rule’s costs and benefits.

• New York’s financial watchdog published significant updates to its cybersecurity regulations Wednesday, adding strict provisions around board oversight and ransom payments that go further than recent federal rules.
   
• Prosecutors and defense attorneys clashed Wednesday over whether FTX founder Sam Bankman-Fried was a liar who stole billions of dollars—or an unconventional executive who made mistakes.
   
• A financial startup is turning to the courts to settle a long-running debate over whether Americans should be able to bet on U.S. elections. Online-trading startup Kalshi sued the Commodity Futures Trading Commission on Wednesday, arguing the regulator wrongfully denied its application to launch a market for derivatives tied to results of congressional elections.
   
• A federal judge in Florida signaled Wednesday she is open to delaying Donald Trump’s trial over his handling of classified documents set for May, providing a sliver of good news to the former president, who has faced several legal setbacks in recent weeks.

U.S. all but stopped spying on Hamas in years after 9/11

U.S. intelligence agencies all but stopped spying on Hamas and other violent Palestinian groups in the years after the Sept. 11, 2001, terrorist attacks on the U.S., instead directing resources to the hunt for the leaders of al Qaeda and, later, Islamic State, according to U.S. officials familiar with the shift.

Calculating that Hamas had never directly threatened the U.S. and burdened with other spying priorities, Washington ceded the responsibility to Israel, confident that its aggressive security services would detect any threat, the U.S. officials said. It should have been “a well-placed bet,” said one senior counterterrorism official.

Meanwhile, foreign nationals and wounded Palestinians left Gaza into Egypt from the Rafah border Wednesday, Egyptian and U.S. officials say, with more than 100 people—including some Americans—allowed to leave in a major diplomatic breakthrough.

• Israeli Airstrike Hits Crowded Refugee Camp in Northern Gaza
• Cornell Student Arrested After Allegedly Threatening to Kill Jewish Students

• The Biden administration is preparing to hold a rare discussion with China on nuclear-arms control as the U.S. seeks to head off a destabilizing three-way arms race with Beijing and Moscow.

• The Federal Reserve left interest rates unchanged at a 22-year high and signaled rates would remain elevated well into next year to keep inflation moving down.

The new executive order by the Biden administration that seeks to regulate artificial intelligence will likely spur more investment into AI compliance, privacy and security tools, venture investors say.

“You’ll see a whole cohort of companies, dozens or hundreds, that are built around compliance with regulations,” said Scott Beechuk, a partner at Norwest Venture Partners. He said that just as there are companies that currently control and audit systems with regard to the European Union’s General Data Protection Regulation—a strict data-privacy and security law that took effect in 2018—so, too, there will be demand for tools that analyze, track and prevent breaches with regard to AI regulation.

Norwest has come across about a dozen early-stage AI governance and security startups, Beechuk said. Such startups have already seen demand from corporate customers who wanted to ensure they are careful with regard to issues such as privacy, bias and disclosure of company secrets. Regulatory pressure will only increase demand, he said.

Rising regulation of AI has already created opportunities for some startups, said Sheila Gulati, co-founder and managing director of Tola Capital.

Holistic AI, one of Tola’s portfolio companies, for example, worked with a client recently that wanted help analyzing its data and algorithms to check for bias in order to comply with New York City’s Local Law 144, a 2021 law that the city began enforcing this year. The law allows automated employment decision tools to be used only if they undergo a bias audit.

Regulatory frameworks will drive demand for technology that makes generative AI “transparent and explainable,” Gulati said.

—Yuliya Chernova

• The reverberations of the Israel-Hamas conflict are playing out loudly everywhere in life—except at work. 
   
• House lawmakers are set to vote as soon as Wednesday night on whether to expel Rep. George Santos (R., N.Y.), who made a series of bold fabrications in running for office and faces federal fraud charges related to his 2022 campaign.
   
• Panama Canal officials will cut available slots for ship transits by half this winter as extreme drought leaves the man-made waterway lacking enough water.

Follow us on X at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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