(Editor’s Note: This post is based on a client memorandum by Daniel N. Budofsky, Robert Colby, Annette L. Nazareth and Lanny A. Schwartz of Davis Polk & Wardwell.)

On May 4, 2009, Senator Carl Levin (D-Michigan) and Senator Susan Collins (R-Maine) introduced the Authorizing the Regulation of Swaps Act, sweeping legislation that, if adopted, would free multiple federal regulators to regulate swap agreements without mandating how that regulatory authority is to be exercised. While the Levin-Collins bill is intended to fill a regulatory hole, it risks creating a regulatory free-for-all, introducing jurisdictional ambiguities and changes and raising possible questions about the federal preemption of state gaming and bucket shop laws with respect to swaps.

This memorandum provides background on the historical treatment of swaps, summarizes the most significant provisions of the Levin-Collins bill and provides preliminary analysis of the issues raised by the bill.

The memorandum is available here.