Federal Court Finds Texas Energy Anti-Boycott Statute Unconstitutional

On February 4, 2026, the U.S. District Court for the Western District of Texas enjoined enforcement of Texas Senate Bill 13 ("SB 13"), which barred state investment funds and government entities from investing in or contracting with companies that "boycott" the energy industry. The statute broadly defined "boycotting" to include "taking any action" intended to penalize, harm, or limit commercial relations with energy companies, unless taken for an "ordinary business purpose." SB 13 further empowered the state comptroller to maintain a list of financial companies deemed to illegally boycott the energy industry and required companies contracting with state entities to certify that they do not engage in such boycotts.

A sustainable-business trade group sued, alleging that SB 13 violated the First Amendment and was unconstitutionally vague. The district court agreed and granted the plaintiff summary judgment. On the First Amendment claim, the court found the statute facially overbroad because its expansive "taking any action" provision "penalize[d] companies for all manner of protected expression concerning fossil fuels."

On vagueness, the court again focused on the "taking any action" provision, characterizing it as "undefined," subjective, and "unlimited." The court also questioned the clarity of the "ordinary business purpose" exception, noting that the comptroller had listed companies despite their assertions of acting for ordinary business purposes. As the court noted, "[i]t is admittedly difficult to imagine what sort of conduct is both not an 'ordinary business purpose' and not an expression protected by the First Amendment, such that that conduct could fall within SB 13's 'boycott' definition."

For now, the ruling reopens the window for companies with energy-related policies to transact with Texas and to exit the comptroller's list. But this opportunity may be short lived. Texas has filed a notice of appeal, and the Fifth Circuit could reach sharply different conclusions. On the First Amendment, the Fifth Circuit may consider the district court's facial-overbreadth ruling too sweeping by not fully considering SB 13's legitimate application to non-expressive decisions to limit dealings with energy companies. The vagueness ruling may likewise face close scrutiny because of the high bar for invalidating civil statutes like SB 13 on vagueness grounds.

Accordingly, companies should proceed cautiously with reengaging with the state or altering their sustainability policies, until these appellate uncertainties resolve. We could also see similar challenges in jurisdictions with statutes similar to SB 13.