Contrary to conventional wisdom, Delaware law does not prohibit mandatory arbitration clauses for securities claims. Opinions to the contrary appear rushed and unmoored from statutory text, as well as ignoring both the long-standing public policy of Delaware and established principles of federalism.

In September 2025, the Securities and Exchange Commission voted to remove restrictions on public companies’ adoption of mandatory arbitration clauses for securities claims. The significance of such clauses cannot be overstated: they can significantly reduce the legal fees of defending securities claims, and, by removing the specter of class actions, allow companies to try these claims on their merits rather than accede to extortionate settlements negotiated in the shadow of jury trial uncertainty. Some observers have hailed mandatory arbitration clauses as the remedy to the persistent abuses perceived to endure in stockholder litigation,[1] and others have decried them as upending a well-honed system of private securities enforcement.[2] Whether good or bad, a normative question we do not address here, both camps agree that mandatory arbitration clauses can be transformative.[3]

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