Fintech 2026

USA TRENDS AND DEVELOPMENTS Contributed by: Donald J. Mosher, Melissa G. R. Goldstein, Adam J. Barazani and Leel Sinai, McDermott Will & Schulte LLP

and monitoring standards to ensure bank–fintech offerings remain compliant with applicable law. The current administration has also taken steps to scale back federal oversight and constrain the role of state regulators in enforcing federal consumer finan - cial laws. In May 2025, the CFPB rescinded its May 2022 interpretive rule addressing state enforcement authority under the Consumer Financial Protection Act of 2010 (CFPA). The recission limits states’ ability to rely on the CFPA to enforce a wide range of federal consumer financial laws, instead restricting statement enforcement to provisions of the CFPA itself. It also subjects the states to the same enforcement limita - tions applicable to the CFPB under Sections 1027 and 1029 of the CFPA and limits duplicative actions under Section 1042 where the CFPB is already pursu - ing enforcement against the same entity. As federal regulatory oversight has retreated, state regulators have stepped in to fill perceived supervi - sory and enforcement gaps. In May 2025, the Califor - nia DFPI issued an order against a BaaS sponsor bank with multiple fintech partners, citing deficiencies in its compliance programmes and third-party oversight. California has also enacted legislation in response to the Synapse bankruptcy, including AB 1864, which requires banks partnering with fintech companies to maintain detailed records of beneficial ownership for certain deposit accounts. A November 2025 Tenth Cir - cuit decision upholding Colorado’s authority to apply its interest-rate caps to loans involving Colorado bor - rowers – even when originated by out-of-state banks – directly challenges bank–fintech partnership mod - els that rely on rate exportation, and is likely to invite increased state scrutiny of so-called “rent-a-bank” arrangements. As in other areas of fintech regulation, these developments reflect a broader trend in which state regulatory activity has intensified as federal over - sight has become less aggressive. State Money Transmission Licensing Trends There was continued movement towards state adop - tion of the Model Money Transmission Modernization Act (MTMA) in 2025. During the past year, variations of the MTMA were enacted and/or became effective in the following states: Colorado, Kansas, Massa - chusetts, Mississippi, Nebraska, Virginia (effective in

July 2026), and Wisconsin. Enacted in 2024, Illinois’ adoption of the MTMA became fully effective as of 1 January 2026. More than half of the states have adopted versions of the MTMA broadly consistent with the model act. Additional states have adopted select provisions from the MTMA (eg, California and Hawaii). We expect more states to continue pursuing adoption of the MTMA in 2026, including, for example, Alabama, Alaska, Louisiana, Michigan, Ohio, Oklaho - ma, and Washington, DC. The goal of the MTMA is to streamline the application and supervision process, promoting a standardised regulatory framework across states with the goal of supporting growth and innovation in fintech – and its capital fundraising – by providing clarity and uniform - ity on exempt activities, streamlining de novo applica - tions and changes in control, and standardising ongo - ing compliance obligations. Nevertheless, few states have adopted a perfectly clean “repeal and replace” of the model act. For example, Massachusetts includes exemptions for business payments and payroll pro - cessing. Some companies are also finding inconsist - encies between the new laws and examiner expecta - tions. Although we expect ongoing harmonisation to continue, providers are actively conducting a cost- benefit analysis of state money transmitter licences against other available state and federal charters. Conclusion As fintech enters 2026, aggressive federal deregula - tion has shifted oversight to state regulatory authori - ties, increasing fragmentation and compliance com - plexity even as innovation accelerates. Firms must navigate divergent state regimes, evolving charter and partnership options, and heightened scrutiny in areas such as consumer protection, AML, and fraud prevention. Those that align product design with regu - latory strategy and anticipate state-level scrutiny and enforcement will be best positioned to turn regulatory change into a competitive advantage.

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