Will Block receive a SEC Wells notice or formal enforcement action by December 31, 2026?

The SEC inquiry has been active for 3+ years with a follow-on inquiry in July 2024, which signals continued investigative interest rather than routine closure. However, 3+ years without a Wells notice is also meaningful — the SEC typically issues Wells notices within 1-3 years of opening formal investigations. The $255M in settled fines (CFPB + state AML) partially validates Hindenburg allegations #2 and #3, which could provide evidentiary building blocks for the SEC. Against this: FDIC approved Block's banking subsidiary in Q1 2025, knowing about compliance issues. The Black Swan Beacon pegged the full Compliance Cascade at 8-15%, of which a Wells notice is the trigger event — implying the committee itself assessed Wells notice probability at or somewhat above the cascade probability. I weight the long duration without action and the FDIC approval as moderately negative for YES, placing this at 0.28.

The critical detail is the July 2024 follow-on inquiry — this is not typical of investigations winding down. The committee explicitly noted that investigation duration (3+ years) and the follow-on 'suggest these are not routine matters.' The securities class action surviving dismissal (N.D. Cal.) provides an independent judicial assessment that the alleged misconduct is facially plausible. The California compliance lawsuits with court refusing dismissal in February 2026 adds another pressure vector. Cross-agency coordination risk is real — the DOJ could use SEC findings or vice versa. However, the question requires a formal action within the calendar year 2026 (roughly 10 months remaining). Even if the SEC decides to pursue enforcement, the bureaucratic timeline from investigation to Wells notice to formal action is months. The 10-month window constrains probability somewhat. I estimate 0.33.

I anchor on the Black Swan Beacon's Compliance Cascade scenario, which the committee estimated at 8-15% probability with a SEC Wells notice as the trigger event. The cascade probability is conditional on the trigger, so the Wells notice probability must be higher than 8-15% — perhaps 15-30% range. The committee's ELEVATED (not EXISTENTIAL) classification with explicit triggers defined for EXISTENTIAL supports a probability below 0.5 but meaningfully above base rates. However, I note the staleness caveat — fundamentals are 142 days old and SEC/DOJ status may have evolved. Given the committee consensus that ELEVATED is the correct classification with distance from EXISTENTIAL, and that no triggering event has occurred in 3+ years, I estimate 0.25. My confidence is LOW because the SEC's internal decision-making is fundamentally opaque from available disclosures.

The facts paint a picture of active but unresolved enforcement interest. Three years of investigation with a July 2024 follow-on is not consistent with the SEC quietly dropping the matter. The $255M in settled fines from CFPB and state regulators partially corroborate Hindenburg's allegations, which lowers the bar for the SEC to build a case. The securities class action surviving dismissal in federal court is meaningful — judges only let these proceed when the complaint adequately pleads scienter. But 3 years without a Wells notice also has diagnostic value. SEC investigations that result in enforcement typically see Wells notices within 2-3 years. We are past that window. The FDIC approval, while the Black Swan Beacon correctly notes it was subsidiary-level, still represents a federal regulator choosing not to block Block. Probability is moderate — somewhere between the base rate and the elevated risk suggested by the follow-on inquiry. I call it 0.32.

The most important fact is what hasn't happened: after 3+ years, no Wells notice. SEC investigations that produce enforcement actions typically do so within 18-36 months. The follow-on inquiry in July 2024 is concerning but could reflect the SEC's internal process (e.g., a new examiner reviewing existing work, or expanding scope to a different issue) rather than escalation toward enforcement. Block settled $255M with other regulators, which could actually reduce SEC urgency — the deterrence objective is partially served. The FDIC banking approval in Q1 2025 is a relevant signal regardless of Black Swan Beacon's scope objection; FDIC coordinates with other federal regulators. The committee classified REGULATORY_EXPOSURE as ELEVATED with specific triggers for EXISTENTIAL that have not been activated. Probability of formal action within the remaining 10 months of 2026 is below one-quarter.

The unresolved debate between Opus and Sonnet on proximity to EXISTENTIAL is directly relevant. The committee resolved on firm ELEVATED, with specific triggers defined for EXISTENTIAL — and a Wells notice IS one of those specific triggers. The fact that the committee set up this question as having 1.00 information gain (maximum) signals the highest possible analytical uncertainty. The mixed enforcement trajectory — $255M settled resolving two tracks, but SEC/DOJ/class action/California all remaining open — creates genuine ambiguity. The follow-on SEC inquiry in July 2024 is now 19 months ago; if it represented escalation, we might have expected action by now. But SEC timelines are notoriously variable. The cross-agency coordination risk (DOJ using SEC findings or vice versa) could accelerate either path. I estimate 0.30 as a balanced assessment of these competing signals.

SEC inquiry 3+ years old with July 2024 follow-on but no Wells notice. $255M settled with CFPB and states validates some Hindenburg claims, but absence of SEC action after this long is the dominant signal. Black Swan Beacon placed Compliance Cascade at 8-15% probability. FDIC approved banking subsidiary in 2025. All 6 lenses flagged this as monitoring trigger but classified as ELEVATED, not EXISTENTIAL. Probability moderate but below one-third.

The staleness note is important — fundamentals are 142 days old and SEC/DOJ status may have evolved. The question asks about a 10-month future window where we have limited visibility. The committee found 2 of 5 Hindenburg allegations directionally corroborated by enforcement outcomes, class action survived dismissal, California lawsuits refused dismissal in Feb 2026. Multiple courts and regulators are finding merit in complaints against Block. The SEC may simply be building a comprehensive case. Probability slightly above one-third given the accumulating external validation of misconduct claims.

SEC enforcement actions are relatively rare outcomes of inquiries — only about 20-25% of formal investigations lead to enforcement. Combined with 3+ years already elapsed without action and FDIC banking approval, the probability within the remaining 10 months of 2026 is constrained. The July 2024 follow-on prevents going below 0.20 but the overall weight of evidence favors NO resolution by year-end.