Caught in the Crossfire: How Regulatory Turf Wars Turn Compliant Companies Into Enforcement Targets

In a well-functioning regulatory environment, enforcement actions are calibrated responses to genuine violations. Agencies investigate, gather evidence, identify harm, and pursue remedies proportionate to the misconduct. That is the theory. In practice, enforcement decisions are sometimes shaped by something far less principled: institutional competition.

When two or more federal agencies claim overlapping authority over a regulated industry, the companies operating in that space can find themselves transformed from compliant businesses into pawns in an interagency dispute. The enforcement action, in these scenarios, is less about the regulated entity's conduct and more about which agency gets to define the rules of the road going forward.

For compliance leaders at firms in sectors like financial services, cannabis-adjacent businesses, healthcare, and emerging technology, recognizing this dynamic — and knowing how to respond — is now a core professional competency.

The Anatomy of an Agency Turf Battle

Federal regulatory authority in the United States is rarely clean. Statutes overlap. Agency missions drift over time. New industries emerge faster than Congress can assign jurisdictional clarity. The result is a landscape in which multiple agencies frequently assert competing claims over the same regulated conduct.

Consider the well-documented friction between the Securities and Exchange Commission and the Commodity Futures Trading Commission over digital assets. Both agencies have staked jurisdictional claims, often applying different legal standards to functionally similar products. Companies operating in that space have faced enforcement inquiries from both — not always because of clear wrongdoing, but because each agency has institutional incentives to establish precedent before the other does.

Similar dynamics have played out between the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, between state banking regulators and federal counterparts, and between the DEA and state-level cannabis enforcement frameworks. In each case, the regulated entity caught between competing mandates faces a difficult reality: compliance with one agency's interpretation may constitute defiance of another's.

When Enforcement Becomes a Proxy

Institutional competition becomes most dangerous when agencies use enforcement — rather than rulemaking or formal guidance — as their preferred instrument for establishing authority. Rulemaking is slow, transparent, and subject to public comment. Enforcement, by contrast, is fast, highly visible, and capable of generating precedent without the procedural constraints of the formal regulatory process.

An agency that wants to claim jurisdiction over a contested space has strong incentives to find a target, bring a high-profile action, and generate a consent order or settlement that embeds its preferred interpretation of the law. The regulated company becomes, in effect, the vehicle through which the agency writes the rules.

This dynamic is not hypothetical. In the years following the 2008 financial crisis, overlapping enforcement actions from the Department of Justice, the Federal Reserve, the OCC, and state attorneys general created situations in which major financial institutions were simultaneously negotiating settlements with multiple authorities, each pursuing slightly different theories of liability. The total cost to those institutions — measured in fines, remediation, and reputational damage — exceeded what any single agency could have imposed alone.

The Compliance Leader's Dilemma

For the compliance professional caught in this environment, the standard playbook is inadequate. Maintaining a robust compliance program, conducting regular audits, and documenting good-faith efforts to follow the rules are necessary but not sufficient when the threat is not a violation you committed but a jurisdictional dispute you did not cause.

The first challenge is recognition. Many compliance teams are structured to monitor regulatory requirements within a defined set of agencies. They track SEC guidance, maintain FINRA-compliant procedures, file appropriate reports with FinCEN. What they often lack is a mechanism for monitoring the relationships between those agencies — the signals that indicate a jurisdictional dispute is heating up and that their industry is likely to become a proving ground.

The second challenge is positioning. Once a company recognizes that it may be operating in contested regulatory territory, it must make deliberate choices about how it engages with each relevant authority. Proactive communication with one agency may be perceived as an alignment decision by another. Silence can be interpreted as either neutrality or evasion, depending on the political climate.

Strategies for De-Escalation and Positioning

Organizations that have successfully navigated interagency conflicts share several common practices worth examining.

Conduct a jurisdictional mapping exercise. Before a conflict materializes, compliance teams should identify every agency with plausible authority over their core business activities. This is not a theoretical exercise — it requires legal input, regulatory intelligence, and honest acknowledgment of ambiguity. Where genuine jurisdictional overlap exists, document it explicitly and develop contingency protocols for each potential enforcement scenario.

Engage proactively, but strategically. Regulated companies have more influence over their regulatory relationships than many assume. Requesting no-action letters, participating in comment periods, and maintaining open channels of communication with examiners all create a record of good-faith engagement. Critically, these communications should be coordinated across agencies where overlap exists, so that representations made to one authority are consistent with those made to another.

Build a regulatory intelligence function. Agency turf battles rarely emerge without warning. Speeches by agency heads, congressional testimony, budget requests, and staffing changes all provide early signals about institutional priorities. A compliance team that tracks these inputs — or works with outside advisors who do — can anticipate conflict before it generates an enforcement action.

Retain outside counsel with cross-agency experience. When a company becomes the subject of parallel investigations, the coordination of legal strategy across multiple proceedings is enormously complex. Counsel who have represented clients before multiple federal agencies simultaneously are better positioned to identify opportunities for global resolution and to manage the sequencing of disclosures and negotiations.

Avoid becoming a test case. This requires candor about business model risk. If a company's core activities sit squarely in a contested jurisdictional space, that is a strategic risk that belongs on the enterprise risk register — not just the compliance department's problem list. Leadership must weigh the competitive advantages of operating in that space against the probability that the company will eventually serve as the vehicle through which one or more agencies establishes its authority.

The Institutional Dimension of Compliance Risk

Regulated industries have long understood that compliance is not merely a legal function — it is a strategic one. What is less widely appreciated is that the regulatory environment itself is a political system, subject to the same institutional pressures, competitive incentives, and power dynamics that govern any other domain of organizational life.

Agencies compete for budget allocations, congressional attention, and reputational standing. Enforcement actions generate press releases. High-profile settlements demonstrate institutional relevance. In a constrained fiscal environment, the agency that can point to significant enforcement activity is better positioned to defend its budget and expand its mandate.

For compliance leaders, this is not a cynical observation — it is an operational reality. Designing a compliance program that accounts only for the content of regulations, and not for the institutional dynamics of the agencies that enforce them, is building on an incomplete foundation.

The companies that navigate these environments most successfully are those that treat regulatory relationships as long-term strategic assets, invest in understanding the institutional pressures their regulators face, and position themselves as constructive participants in the regulatory process — rather than waiting to become useful examples in someone else's jurisdictional argument.