Navigating Legal Challenges and Regulatory Reforms in Commercial Space

Daniel Gorelik, Paula Nascimento Daudt, and Staisa Bose

As private space exploration grows, companies like SpaceX and Blue Origin introduce commercial spaceflights, raising new challenges for aviation law and federal oversight. With more frequent private spaceflights, a question emerges: Who is responsible for investigating accidents and determining liability? Traditionally, the Federal Aviation Administration (FAA) solely managed this, but now the National Transportation Safety Board (NTSB) shares some responsibilities, which complicates the regulatory environment. [1]  Under the Commercial Space Launch Act (CSLA), the FAA has historically been responsible for ensuring safety in commercial space activities, and it allowed private companies to conduct investigations under its supervision until recently. [2] However, the 2014 SpaceShipTwo crash exposed gaps in oversight, leading to calls for increased accountability. [3] In 2022, the FAA and NTSB formalized a division of responsibilities: the NTSB would handle serious incidents, while the FAA would handle minor ones. [4] Due to the rapid growth of private spaceflight, the regulatory framework under the Commercial Space Launch Act (CSLA), which is complicated by recent collaboration between the FAA and NTSB, suffers from a lack of clarity in oversight. This unclear oversight blurs accident accountability and raises doubts about the framework's capacity to effectively govern the industry.

The FAA’s authority over commercial space launches stems from the CSLA, which mandates public safety for all licensed launches. [5] The FAA stopped allowing private companies to conduct their accident investigations under its oversight in 2014 when Virgin Galactic’s SpaceShipTwo broke apart mid-flight during a test, resulting in one pilot’s death and another’s serious injury. This incident raised concerns regarding the effectiveness of FAA oversight, resulting in the FAA’s adoption of stricter oversight criteria to address these concerns and more direct involvement in accident investigations. [6] As private space travel grows, the FAA’s resources are increasingly strained, leading to greater collaboration with the NTSB. [7] In a 2022 agreement, the FAA and NTSB formalized their roles, assigning the NTSB responsibility for severe incidents while the FAA handles minor accidents. [8]

The NTSB, primarily responsible for investigating accidents in various transportation sectors such as aviation, has gradually extended its focus to spaceflight accidents as private space travel has become more common. The NTSB’s expertise in accident investigation and accountability makes it a befitting partner to support the FAA. Under the 2022 FAA-NTSB Memorandum of Agreement, the NTSB investigates fatal and serious injuries related to private space flights, while the FAA retains jurisdiction over minor accidents. [9] This division leverages the NTSB’s investigative experience while allowing the FAA to maintain regulatory control. However, the collaboration between the FAA and NTSB, while enhancing the regulatory framework for commercial spaceflight, introduces legal and jurisdictional challenges. For instance, overlapping authority can lead to confusion about which agency has primary responsibility in particular cases, delaying investigations, and potentially causing inefficiencies when both agencies are involved. Differing investigative approaches compound this issue; for example, the FAA may focus narrowly on public safety, while the NTSB emphasizes broader systemic concerns. These misaligned priorities risk producing conflicting conclusions and frustrating operators who rely on clear guidance. Thus, enforcing safety measures becomes a labyrinthine process. The dual oversight structure also creates uncertainty for commercial space operators regarding compliance obligations and the appropriate channels for reporting and addressing safety concerns. Operators may face inconsistent expectations or contradictory regulatory outcomes without a unified framework, adding unnecessary burdens to an already high-risk industry. Such ambiguities may dissuade new entrants to the industry or hinder innovation, slowing the growth of the private space sector. These ongoing legal uncertainties highlight the challenge of adapting space law to accommodate the rapid expansion of private space activities. Addressing these gaps can better enable and help ensure that safety, accountability, and innovation coexist in this evolving sector. [10]

Liability for private spaceflight accidents is a complex issue since it involves both private companies and government agencies. In the past, companies in the aerospace sector have operated under government contracts. [11] The court case, Smith v. Morton Thiokol, Inc.,  revolved around the Government Contractor Defense (Boyle v. United Technologies Corp.) and how it shielded contractors from some form of liability. [12] This case established that contractors could be immune from liability if they strictly adhered to government specifications and disclosed any known risks. However, many private space operators, such as SpaceX and Blue Origin, operate commercially and often with minimal government intervention. While this limited intervention encourages innovation, allowing companies more freedom to create new technologies, it may limit their ability to invoke the Government Contractor Defense. By limiting regulatory burdens, companies have more freedom to develop new technologies. For example, SpaceX’s Falcon 9 and Falcon Heavy reusable rockets, designed for rapid reusability, might face delays under strict government certification processes. Essentially, although limited government intervention is optimal in certain aspects, it might limit private companies’ ability to invoke the Government Contractor Defense.

Regarding spaceflight liability, the CSLA mandates that private operators obtain insurance to cover potential damages, with the government sometimes assuming responsibility for excess liability. [13] However, with private companies serving commercial customers, the CSLA’s provisions may not adequately address the specific risks of private spaceflight. For instance, although the CSLA’s informed consent requirement is critical, it falls short in addressing the evolving risks of private spaceflight. By requiring spaceflight participants to give informed consent to the risks involved with spaceflight, the CSLA would shield operators from certain liabilities. Nevertheless, this protection may not prevent lawsuits in cases of gross negligence or serious accidents, especially given the limited legal precedent in this field. Moreover, the CSLA’s insurance and liability caps, initially structured for traditional government missions rather than commercial space travel, may not cover third-party risks unique to private tourism, such as, hypothetically, environmental contamination. Gaps in the law and sparse case precedent leave this field's legal landscape unpredictable, making it challenging for operators to manage risk effectively in an increasingly complex industry.

As the private space industry expands, it becomes increasingly clear that current liability frameworks, akin to aviation law, and insights from the insurance sector are necessary to ensure companies are held accountable for their actions. Expanding upon the CSLA, some experts recommend adopting explicit liability standards to cover injury, damage, and potential harm to the public. These standards would ensure that private space operators are held accountable for failures stemming from negligence or design flaws, even during government-sanctioned missions.

Proper regulation and reform are crucial to limit government liability and allocate accountability to private space companies. Although the CSLA mandates liability insurance, coverage limits may not adequately address the costs of serious accidents. In the event of costly incidents, taxpayers face substantial financial risk as the government may assume excess liability when losses surpass certain caps. Due to the lack of a strong liability precedent in space law, private operators may traverse this legal terrain without uniform norms and clear liability rules adapted to the unique dangers of space activities. In cases such as vehicle breakdowns in orbit or reentry threats, this issue will lead to unpredictable outcomes.

Regulatory collaboration and reform within the NTSB and FAA are essential for ensuring the growth of safe and reliable space exploration. Before the establishment of the Memorandum of Agreement in 2022, the two agencies last collaborated in 2000, creating a broad framework for commercial space oversight. However, the 2000 agreement failed to fully regulate commercial human spaceflight, and the lack of oversight for the growing field left gaps in juridical boundaries and authority. [14] The NTSB and FAA also took the initiative to limit biases by conducting separate investigations and analyses. Private space companies like SpaceX and Blue Origin are currently pushing to delay commercial space regulations, advocating for the Commercial Standards Paramount to Accelerating Cosmic Exploration (SPACE) Leadership Act, which prevents the FAA from enforcing strict safety regulations. [15] While the input of private emerging companies in government regulations is vital, their influence must be balanced to ensure that safety standards are met in this innovative field. [16] The SPACE Act was implemented to extend the learning period, allowing space companies to innovate and test without strictly enforcing safety regulations liberally. The initial learning period was set in 2004 to last for 8 years; however, this period has extended numerous times due to the push of private space companies. As private companies continue to push for regulatory leniency, their influence must be balanced to ensure the FAA and NTSB can effectively fulfill their roles in enforcing proper safety standards in a rapidly growing field.

As the commercial space industry evolves, regulatory reform must be regularly updated to ensure safety and accountability. Integrating safety standards that adapt to technological advancements is essential as companies like SpaceX and Blue Origin continue to innovate. Current FAA and NTSB regulations, based largely on aviation laws, may not adequately account for the risks associated with long-term space travel. Policymakers should implement a tiered regulatory framework that allocates obligations based on mission type, destination, and risk level, thereby addressing the shortcomings of the CSLA.  Ongoing collaboration between the FAA, NTSB, and private businesses is also imperative. All agencies may stay up to date on emerging technology and operating procedures through regular meetings and exchange of knowledge, allowing regulations to keep pace with technological advances. A unified protocol for accident investigations will ensure proper collaboration and accountability between the two agencies. By establishing clear procedures, the FAA and NTSB can maintain safety while alleviating liability concerns in the commercial space industry. 

[1] 51 U.S.C. §§ 50901–23 (2022).

[2] Id.

[3] Nat’l Transp. Safety Bd., Accident Report: In-Flight Breakup During Test Flight Scaled Composites SpaceShipTwo, Oct. 31, 2014, at 2 (2015).

[4] Memorandum of Agreement between the Fed. Aviation Admin. & the Nat’l Transp. Safety Bd., art. 2 (Apr. 2022).

[5] 51 U.S.C. §§ 50901–23 (2022).

[6] Id.

[7] Nat’l Transp. Safety Bd., supra note 3, at 1.

[8] Id.

[9] Memorandum of Agreement between the Fed. Aviation Admin. & the Nat’l Transp. Safety Bd., supra note 4, art. 3.

[10] U.S. Gov't Accountability Off., GAO-24-105561, Commercial Space Transportation: FAA Should Improve Its Mishap Investigation Process 1 (2023), https://www.gao.gov/products/GAO-24-105561. 

[11] Boyle v. United Techs. Corp., 487 U.S. 500, 512 (1988)

[12] Smith v. Morton Thiokol, Inc., 1 F.3d 25 (2d Cir. 1993).

[13] Commercial Space Launch Act, 51 U.S.C. §§ 50901–23 (2018)

[14] Nat’l Transp. Safety Bd. & Fed. Aviation Admin., Memorandum of Understanding Between the FAA and NTSB Regarding Commercial Space Transportation Investigations, https://www.ntsb.gov/legal/gc/Documents/NTSB-FAA-Commercial-Space-MOU.pdf (last visited Apr. 5, 2025)

[15] Commercial SPACE Leadership Act, S. 4064, 118th Cong (2024)

[16] Jeff Foust, Senate Bills Seek to Reform Commercial Space Regulations, SpaceNews (Mar. 29, 2024), https://spacenews.com/senate-bills-seek-to-reform-commercial-space-regulations/