California’s SB 261, the Climate-Related Financial Risk Act, is on hold. A Ninth Circuit injunction issued on November 18, 2025, blocks the California Air Resources Board (CARB) from enforcing the law while a First Amendment challenge is on appeal, and CARB has confirmed it will not penalize any company for missing the original January 1, 2026, reporting deadline.1White & Case. California Climate Disclosure Laws Ninth Circuit Temporarily Halts SB 2612California Air Resources Board. Climate-Related Financial Risk Reports SB 261 Docket The Ninth Circuit heard oral argument on January 9, 2026, and has not yet ruled. As of mid-2026, the SB 261 status is paused, pending, and uncertain.
Why Enforcement Is Paused
The U.S. Chamber of Commerce, the California Chamber of Commerce, the American Farm Bureau Federation, and other business groups sued over SB 261 and its sister law SB 253 on January 30, 2024, in the Central District of California. In February 2025, the district court dismissed the plaintiffs’ Supremacy Clause and Dormant Commerce Clause theories but let the First Amendment claim proceed. On August 13, 2025, the same court denied a preliminary injunction, finding the plaintiffs unlikely to win on the merits.3U.S. Chamber of Commerce. Chamber v Randolph
The business groups appealed, and the Ninth Circuit reached a different conclusion on the preliminary posture. On November 18, 2025, it granted an injunction halting enforcement of SB 261 pending appeal.1White & Case. California Climate Disclosure Laws Ninth Circuit Temporarily Halts SB 261 The order was brief and offered little reasoning. Notably, the panel did not enjoin SB 253, which continues in force.4Foley & Lardner. Ninth Circuit Stays Enforcement of California Climate Disclosure Law SB 261
The split appears to track how the two laws relate to speech. The district court had already applied intermediate First Amendment scrutiny to SB 261, treating its narrative risk reports as subjective judgments about future financial impacts, while applying a lower standard to SB 253’s purely factual emissions data.5Morrison & Foerster. Federal Court Declines to Enjoin The plaintiffs argue that SB 261 compels companies to “publicly express a speculative, noncommercial, controversial, and politically-charged message” they would not otherwise make.4Foley & Lardner. Ninth Circuit Stays Enforcement of California Climate Disclosure Law SB 261
What the Ninth Circuit Panel Signaled at Argument
On January 9, 2026, a three-judge panel of Judges Nguyen, Bennett, and Matsumoto (sitting by designation) heard argument. The judges spent more time on SB 261 than on SB 253 and pressed California on how the narrative risk reports could escape treatment as compelled speech on a politically charged subject, characterizing the required disclosures as “broadly” and “ill-defined.” Observers read the panel’s heavier focus on SB 261 as a sign the court sees stronger First Amendment concerns there than in SB 253’s data-driven reporting.6Akin Gump. Ninth Circuit Oral Argument Recap Judge Nguyen also floated a remand to the district court to reconsider severability of SB 253’s Scope 3 requirement, and California’s counsel said it would not oppose that step. No ruling has issued, and the court has not announced a timeline.7Cooley. California SB 253 and SB 261 Developments and Litigation
What CARB Is Doing in the Meantime
CARB has confirmed it will not enforce SB 261 against any company for failing to meet the original January 1, 2026, deadline, and that a new reporting date will be announced after the appeal is resolved.2California Air Resources Board. Climate-Related Financial Risk Reports SB 261 Docket In parallel, CARB has opened a voluntary public docket from December 1, 2025, through July 1, 2026, for companies that choose to post their reports anyway. Roughly 100 entities had submitted voluntarily as of January 24, 2026.7Cooley. California SB 253 and SB 261 Developments and Litigation CARB staff review each submission for quality and completeness before posting, a process the agency says takes three to four weeks.
Rulemaking has also continued despite the injunction. On February 26, 2026, the CARB board unanimously adopted initial implementing regulations covering fee structures, the definition of “revenue” (gross receipts as reported to the California Franchise Tax Board), and the meaning of “doing business in California” (tied to the Revenue and Taxation Code).8California Air Resources Board. CARB Approves Climate Transparency Regulation The regulations set a flat annual per-entity fee, with the exact amount set each year by CARB’s Executive Officer.9Sullivan & Cromwell. CARB Approves Initial Regulations SB 253 SB 261 A second rulemaking phase is expected to cover report format, content, assurance, and future reporting dates.10Nixon Peabody. California Climate Disclosure Laws Update In June 2026, CARB withdrew the initial regulation from the Office of Administrative Law for limited clarifications.11California Air Resources Board. CARB Climate Disclosure Regulation Update
Who SB 261 Would Cover and What It Would Require
If SB 261 survives the appeal, it applies to any corporation, partnership, LLC, or other U.S.-formed business entity that does business in California and has total annual revenues above $500 million.12LegiScan. SB 261 Bill Text It reaches public and private companies alike, regardless of state of incorporation, and was estimated to cover more than 10,000 entities.13Ceres. California Sets National Standard for Corporate Climate Disclosure Entities regulated by the California Department of Insurance, or in the business of insurance in any other state, are exempt.
Covered companies would publish biennial reports describing their climate-related physical and transition risks, along with measures taken to reduce or adapt to those risks.12LegiScan. SB 261 Bill Text Reports must follow the Task Force on Climate-related Financial Disclosures (TCFD) framework, the IFRS S2 standards, or an equivalent framework from a regulated exchange or government body. CARB has identified four minimum disclosure areas drawn from the TCFD pillars: governance, strategy, risk management, and metrics and targets.14California Air Resources Board. Climate-Related Financial Risk Report Checklist Scope 1, 2, and 3 greenhouse gas emissions data are not required as a minimum element for the initial reporting period.15White & Case. California Climate Disclosure Laws CARB Releases Draft Guidance SB 261 Reports must be posted on the company’s own website and made publicly accessible, and gaps must be explained with a plan for future disclosure.
SB 253 Is Not Paused
The Ninth Circuit’s injunction applies only to SB 261. SB 253, the companion Climate Corporate Data Accountability Act, requires companies with revenues above $1 billion to report actual greenhouse gas emissions annually, covering Scope 1 and 2 and eventually Scope 3 starting in 2027.16California Air Resources Board. California Corporate Greenhouse Gas Reporting and Climate-Related Financial Risk CARB held a public workshop on March 23, 2026, on proposed rules for 2027 reporting, including phase-in of Scope 3 and acceptable assurance standards.17Sullivan & Cromwell. CARB Holds Public Workshop SB 253 Rulemaking In June 2026, CARB proposed pushing the SB 253 first-year reporting deadline from August 10, 2026, to November 10, 2026, with a 15-day comment period.11California Air Resources Board. CARB Climate Disclosure Regulation Update Companies that fall under both laws should not treat the SB 261 pause as applying across the board.
ExxonMobil’s Parallel Suit
ExxonMobil filed a separate challenge to both laws on October 24, 2025, in the Eastern District of California, raising a First Amendment claim and a preemption argument under the National Securities Markets Improvement Act of 1996.18ALM. Exxon Mobil v Sanchez Complaint After the Ninth Circuit’s injunction, ExxonMobil and California agreed to pause that case, since the appellate ruling already supplied the interim relief ExxonMobil sought.19Harvard Law School Forum on Corporate Governance. California Climate Disclosure Law SB 261 Implementation Halted
What to Watch Next
The next decision point is the Ninth Circuit’s ruling on the preliminary injunction appeal. If the court affirms the injunction or strikes SB 261 on First Amendment grounds, CARB will have to either rewrite the law’s reporting demands through regulation or wait for the legislature. If the court reverses, CARB will set a new reporting deadline and resume enforcement.
The federal backdrop has shifted in a way that cuts both directions. The SEC’s own climate disclosure rule, adopted in March 2024, was stayed by the agency in April 2024, abandoned in defense in March 2025, and formally proposed for rescission in June 2026.20Federal Register. Rescission of Climate-Related Disclosure Rules SB 261 was drafted to let companies rely on reports prepared under equivalent federal requirements, so the collapse of the SEC rule removes a potential compliance shortcut. It also weakens any argument that California’s law is redundant. Whether the Ninth Circuit factors that into its ruling is an open question.
For companies in the SB 261 revenue range, the practical posture is: no reporting is required right now, no penalty attaches to the original January 2026 date, and CARB will give notice of any new deadline. Preparation work on TCFD-aligned risk assessments remains useful, both because the voluntary docket is open and because SB 253, where applicable, is still live.