Data center

Developers, operators, and investors could consider state and federal law theories that may provide a basis to challenge these measures or that may allow for compensation.

By Matthew A. Brill, Nikki Buffa, Melissa Arbus Sherry, and Hasala Ariyaratne

Data centers have become a focal point of public debate and, increasingly, state and local regulation. On Election Day 2026, voters considered 41 ballot initiatives1 on data centers across 10 states, nearly all of which resulted in new restrictions or bans.

These restrictions take many forms. Recent ballot measures alone have included outright bans, partial bans on facilities above a certain size, temporary moratoria, new zoning regulations, and voter-approval requirements for large developments. Voters have also rejected rezonings and other measures that would have allowed specific data center projects to proceed. The thresholds that trigger these restrictions vary and may be based on electricity demand, building size, or water use.

Can a New Restriction Apply to a Project Already Underway?

The vested rights doctrine may protect projects that are already underway from restrictions that were passed in the 2026 midterm elections. Grounded in due process and anti-retroactivity principles, the doctrine generally protects existing uses of property and, in many states, permitted projects on which the owner has relied through meaningful investment or construction. The vested rights analysis tends to be highly fact-specific, turning on the status of approvals and progress at the time a restriction takes effect.

Can a Local Government Impose the Restriction in the First Place?

State law may also preempt local restrictions on data centers. In home-rule states, local measures that conflict with general state law may be preempted. There may also be other state statutes that govern data center siting directly or indirectly. Affected parties should review each state’s statutory landscape closely.

Does the Restriction Burden Interstate Commerce?

Data center restrictions that significantly burden interstate commerce may be challenged under the dormant Commerce Clause. The Supreme Court has interpreted the Commerce Clause of the Constitution2 to contain a “dormant” component that prohibits state and local laws that either discriminate against out-of-state economic interests or impose substantial burdens on interstate commerce that are clearly excessive in relation to their local benefits. Because data centers support cloud computing, e-commerce, and communications that cross state lines continuously, challengers may invoke the undue burden standard of Pike v. Bruce Church, Inc.3 as refined in National Pork Producers Council v. Ross.4

Are Affected Property Owners Entitled to Compensation Under the Takings Clause?

The Takings Clause of the Fifth Amendment may potentially offer a path to compensation for affected property owners. Claims may be considered by courts under the Penn Central Transportation Co. v. New York City5 framework, which considers economic impact, investment-backed expectations, and the character of the government action. A successful takings claim would typically yield just compensation rather than invalidation of the restriction.

Does the Restriction Interfere With Existing Agreements?

The Contracts Clause of the Constitution,6 which provides that no state shall pass any “Law impairing the Obligation of Contracts,” may be relevant where restrictions impair existing agreements. These could include tax abatement, development, or community benefits agreements with local governments, as well as power supply and infrastructure agreements. Courts would then weigh the impairment against the public purpose served.

Does the Restriction Improperly Single Out Data Centers?

Restrictions that single out data centers may also raise concerns under the Equal Protection Clause of the Fourteenth Amendment. Such claims may focus on measures that treat data centers differently than other similarly situated, power-intensive industrial uses.

Does Data Centers’ Role in Communications Implicate the First Amendment?

Some restrictions may also raise questions under the First Amendment given the role of data centers in enabling expression. Challengers may draw on precedent addressing restrictions on cable systems, billboards, newsracks, and other channels of communication.

Could Federal Statutes Provide Additional Grounds for Challenge?

The federal Communications Act may provide a basis for preemption arguments. Section 253 provides that no state or local requirement may “prohibit or have the effect of prohibiting” the provision of telecommunications service.7 Telecommunications connectivity is a central feature of data centers, as fiber optic lines invariably are installed to transmit large amounts of data between such facilities and other cloud locations, and a ban on operating a data center has the inevitable effect of preventing the transmission of telecommunications traffic to and from that facility. 

Conclusion

As restrictions on data center development proliferate, legal challenges are likely to follow. The viability of any challenge will depend on the jurisdiction, the specific restriction, and the status of the affected project, making it important for developers and other affected parties to evaluate potential claims early.

  1. Ellie Quinlan Houghtaling, “10 states with data centers on the ballot all voted to ban them” The New Republic (2026), https://newrepublic.com/post/217485/data-centers-ballot-initiatives-midterms. ↩︎
  2. U.S. Const. art. I, § 8, cl. 3. ↩︎
  3. Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). ↩︎
  4. National Pork Producers Council v. Ross, 598 U.S. 356 (2023). ↩︎
  5. Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978). ↩︎
  6. U.S. Const. art. I, § 10, cl. 1. ↩︎
  7. 47 U.S.C. § 253(a). ↩︎