A federal appeals court ruled on Monday that California cannot enforce its first-of-its-kind climate disclosure laws, handing business groups a major victory. The Ninth US Circuit Court of Appeals panel in San Francisco held that the First Amendment limits the government's power to compel speech.

The decision, in Chamber of Commerce v. Sanchez, blocks key parts of two landmark California laws while leaving narrower emissions reporting rules in place. It is a partial victory for the US Chamber of Commerce, the American Farm Bureau Federation and California business groups that sued. California was the first state to require such disclosures.

Key Points

• The Ninth Circuit ruled on Monday, November 9, 2026, that California cannot enforce its landmark climate disclosure laws (Chamber of Commerce v. Sanchez, No. 25-5327).
• The court blocked Senate Bill 261, which requires companies with more than $500 million in annual revenue to disclose climate-related financial risks every two years.
• It also blocked the Scope 3 part of Senate Bill 253, which required businesses with over $1 billion in revenue to report indirect emissions across their value chains.
• California may still enforce the Scope 1 and Scope 2 parts of Senate Bill 253, with the first filing deadline on Tuesday, November 10, 2026.
• Judge Jacqueline Nguyen wrote that the First Amendment limits compelled speech. Judge Mark Bennett partly dissented and would have blocked both laws entirely.

What Happened

The panel ruled unanimously that Senate Bill 261 would likely fail because it forced companies to share what the judges called "value-laden" judgments on a "politically fraught" subject, rather than simply providing factual information. The law asked them to offer assessments about climate risk that involve opinion and judgment.

The judges applied the same reasoning to the Scope 3 provisions of Senate Bill 253, which required large businesses to report indirect emissions across their value chains. The court said the requirement went too far, because companies would have had to vouch for emissions data from businesses they do not control. Judge Nguyen wrote: "The First Amendment, however, limits the government's ability to compel speech." The case now returns to US District Judge Otis Wright in Los Angeles.

Background: What the California Laws Require

Governor Gavin Newsom signed both laws in 2023, making California the first state to require such disclosures from large companies. Senate Bill 261 applies to companies with more than $500 million in annual revenue and requires them to disclose climate-related financial risks every two years.

Senate Bill 253 applies to businesses with more than $1 billion in annual revenue and requires annual reporting of greenhouse gas emissions, in three categories known as scopes. Scope 1 covers emissions a company produces directly. Scope 2 covers emissions from the energy a company buys. Scope 3 covers everything else in the value chain, including emissions from suppliers and customers using the company's products. Scope 3 is usually the largest category, and the hardest to measure.

California Climate Disclosure Laws and the First Amendment Fight

The legal fight turns on a question the Supreme Court has wrestled with for decades: when can the government force a business to say something it would rather not say? Courts have generally allowed factual, non-controversial disclosures, such as nutrition labels, but the government faces a much higher bar when compelling speech on contested subjects.

The business groups that sued argued that California's laws crossed that line. They said the risk disclosures forced companies to adopt the state's framing of a disputed issue, and Scope 3 reporting forced them to publish estimates they could not verify. California argued investors need the information, the disclosures would cut emissions, and the rules would prevent misleading claims. The Ninth Circuit sided with the businesses on the most contested parts of the laws, while leaving the Scope 1 and Scope 2 rules in place as closer to the kind of factual reporting the government can require. The ruling matters beyond California, the world's fifth-largest economy, where the rules would have applied to thousands of large companies.

Reactions

The Chamber of Commerce welcomed the ruling as a win for free speech and for businesses that said the laws would have forced them to publish speculative and misleading information. The Chamber said it will seek permanent injunctions against the laws. The American Farm Bureau Federation and California business groups also backed the challenge, calling the requirements costly and unworkable. Supporters of the laws said the public deserves a clear picture of how large companies contribute to climate change. The ruling shifts the debate to the next stage of the case, and possibly to the full Ninth Circuit or the Supreme Court.

Why It Matters

The ruling matters for three reasons. First, it limits the most ambitious corporate climate disclosure regime in the country: companies will not have to publish the risk assessments Senate Bill 261 required, or report Scope 3 emissions under Senate Bill 253, while the case continues. Second, it sharpens the legal test for compelled corporate speech, giving businesses a strong argument against future disclosure laws on contested topics. Third, it preserves the narrower rules that remain: Scope 1 and Scope 2 disclosures will still show the largest companies' direct emissions, with the first filings due Tuesday, November 10, 2026.

What Happens Next

The case returns to US District Judge Otis Wright in Los Angeles, where the Chamber of Commerce will ask for permanent injunctions against the blocked provisions. California could ask the full Ninth Circuit to rehear the case, or appeal to the Supreme Court. In the meantime, the Scope 1 and Scope 2 filing deadline on Tuesday, November 10, 2026, still stands. Those businesses must still report their own emissions, even as the broader parts of the law remain blocked. For now, the court has drawn a line: California can require facts about a company's own emissions, but cannot force contested judgments about climate risk.

Frequently Asked Questions

What did the Ninth Circuit decide?
On Monday, November 9, 2026, the court ruled California cannot enforce Senate Bill 261 or the Scope 3 part of Senate Bill 253, finding both likely violate the First Amendment.

What are Senate Bill 253 and Senate Bill 261?
Senate Bill 253 requires businesses with over $1 billion in revenue to report greenhouse gas emissions yearly. Senate Bill 261 requires companies with over $500 million in revenue to disclose climate-related financial risks every two years. Governor Gavin Newsom signed both in 2023.

What are Scope 1, Scope 2 and Scope 3 emissions?
Scope 1 covers a company's own emissions, Scope 2 covers emissions from energy it buys, and Scope 3 covers indirect emissions across its value chain. The court blocked only Scope 3.

Do companies still have to report any emissions in California?
Yes. The Scope 1 and Scope 2 parts remain in force, with the first filings due Tuesday, November 10, 2026.

What happens next in the case?
The case returns to Judge Otis Wright in Los Angeles, where the Chamber will seek permanent injunctions. California could seek a rehearing by the full Ninth Circuit or appeal to the Supreme Court.

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