Beyond Clarity: Four Principles for Evaluating the DHS Proposed EB-5 Rule
Part I of a Five-Part Series on the Department of Homeland Security's Proposed Regulations Implementing the EB-5 Reform and Integrity Act of 2022
Introduction
A defining regulatory event has shaped every generation of the EB-5 program. The creation of the Regional Center Program transformed the industry. The 2019 Modernization Rule fundamentally changed investment thresholds, Targeted Employment Area designations, and allowed priority date retention. The EB-5 Reform and Integrity Act of 2022 introduced the most comprehensive statutory reform in the program's history. Now, the Department of Homeland Security's July 2026 Notice of Proposed Rulemaking ("NPRM") seeks to answer many of the questions left open by Congress.
The public comment period on the NPRM closed on August 31, 2026, after industry participants submitted their views on many of its most consequential provisions. As DHS now considers those comments, the discussion enters a different stage. The question is no longer simply what the industry should say about the proposed regulations, but how the proposals themselves should be evaluated and what principles should guide DHS as it develops the final rule.
The legal soundness of individual provisions, however, does not alone determine whether those answers ultimately strengthen the EB-5 program. The industry's initial reaction has understandably focused on the details. Attorneys debate sustainment. Developers worry about bridge financing. Regional Centers examine the proposed compliance obligations. Investors ask how the new rules might affect project selection and the safety of their investments.
Those are all important questions. We believe, however, that they are not the best place to begin. Before asking whether a particular provision is good or bad, we should first ask a more fundamental question:
What makes good regulation?
In our view, that question should guide the evaluation of every provision contained in the NPRM.
This article proposes four principles for evaluating the proposed regulations. Throughout this five-part series, we will apply these principles to the issues that matter most to investors, developers, Regional Centers, and the professionals who advise them.
Our objective is not to advocate for or against the NPRM. Rather, it is to encourage a discussion that recognizes both the legal objectives Congress sought to achieve and the commercial realities through which the EB-5 program operates.
Why This NPRM Matters
The EB-5 industry has lived with uncertainty for much of the past decade. Following the 2019 Modernization Rule, years of litigation, the temporary lapse of the Regional Center Program, and the enactment of the Reform and Integrity Act of 2022, many important implementation questions remained unanswered. Reasonable practitioners frequently reached different conclusions regarding sustainment, bridge financing, redeployment, governance, and other key issues.
The NPRM represents DHS's first comprehensive effort to answer many of those questions. That effort deserves recognition. Greater clarity benefits investors, developers, Regional Centers, and adjudicators alike. Yet clarity alone should not become the objective.
A regulation may eliminate uncertainty while simultaneously creating unnecessary rigidity, discouraging investment, increasing costs, or producing unintended consequences. The question therefore is not simply whether the proposed rule provides answers. It is whether those answers improve the operation of the EB-5 program.
The Unique Nature of the EB-5 Program
Unlike most immigration categories, the EB-5 program depends upon private capital markets. This is not the first time the EB-5 industry has faced sweeping regulatory change. The Immigration Act of 1990 established the original investment framework. Nearly three decades later, DHS significantly increased investment thresholds through regulation, triggering years of litigation and uncertainty before Congress enacted the Reform and Integrity Act of 2022. The current NPRM represents the next chapter in that evolution. Unlike prior regulatory changes, however, its principal purpose is not merely to change numerical thresholds, but rather to clarify how the modern EB-5 program will operate in practice.
Congress did not create a government lending program. Nor did it authorize DHS to finance economic development projects directly. Instead, Congress chose to attract private investment by offering qualified foreign investors the opportunity to obtain lawful permanent residence in exchange for investment in projects that create American jobs.
That structure makes the EB-5 program fundamentally different from virtually every other immigration benefit. Its success depends not only upon sound immigration policy but also upon the efficient functioning of capital markets:
• Investors must be willing to commit capital.
• Developers must be able to finance projects.
• Construction lenders must believe that projects possess adequate financing.
• Regional Centers must administer offerings responsibly.
• Broker-dealers, migration agents, economists, securities counsel, and immigration attorneys must each perform their respective roles effectively.
Every participant operates within the same ecosystem. Congress deliberately chose to achieve economic development through private markets rather than direct government financing. That decision carries an important implication.
Regulations governing the EB-5 program inevitably become regulations governing private capital formation. It is essential to understand how those markets function to evaluate whether a proposed rule will ultimately achieve Congress's objectives. Consequently, regulations affecting one participant frequently influence every other participant as well. A rule intended to reduce one type of risk may unintentionally increase another. Similarly, a regulation that appears legally precise may produce commercial consequences that were never intended. Understanding these interactions is essential to evaluating the proposed regulations.
Why Clarity Alone Is Not Enough
Few would disagree that the EB-5 industry has needed greater regulatory clarity. Investors and practitioners have operated under significant uncertainty regarding several important issues since the passage of the RIA. The industry has expressed differing views on sustainment, redeployment, bridge financing, investment thresholds, and other provisions.
The NPRM represents DHS's effort to provide answers. That effort deserves recognition. Predictable regulations benefit everyone:
• Investors can make more informed decisions.
• Developers can structure projects with greater confidence.
• Regional Centers can improve compliance.
• USCIS adjudicators can apply more consistent standards.
Clarity is therefore an important regulatory objective. However, it should not become the only objective. A regulation may be clear while producing unintended consequences. Likewise, a rule may achieve one policy objective while inadvertently discouraging
legitimate investment or increasing risks elsewhere within the system. For that reason, clarity should be viewed as a means rather than an end.
The ultimate objective is effective regulation. Effective regulation requires balancing two objectives that occasionally pull in opposite directions. On the one hand, Congress sought greater integrity, transparency, consistency, and investor protection. On the other hand, Congress deliberately chose to accomplish those objectives through private investment rather than government funding.
The challenge facing DHS is therefore not simply to write clearer rules. The greatest challenge facing every regulator is recognizing that certainty and effectiveness are not always the same thing. The notice-and-comment process exists precisely because proposed regulations benefit from the practical experience of those who operate within the industries being regulated. The NPRM therefore presents more than an opportunity to comment on specific provisions. It offers an opportunity to improve the final regulations by ensuring that legal requirements align with commercial reality.
A clear rule can still produce poor public policy if it changes market behavior in ways Congress never intended. The objective is to write rules that strengthen the marketplace Congress chose to create. Markets allocate capital through independent investment decisions rather than centralized planning. Therefore, Congress intentionally chose private markets rather than government appropriations. That choice inevitably limits how prescriptive regulation can become before it begins influencing the market itself.
Four Principles for Evaluating the NPRM
In our view, every significant provision of the proposed regulations should be evaluated through four fundamental questions.
- Principle One: Fidelity to Congressional Intent
Administrative agencies possess broad authority to implement statutes enacted by Congress. They do not possess authority to rewrite them. Many of the questions addressed by the NPRM arise because Congress intentionally adopted broad statutory language while leaving implementation details to DHS. Reasonable people may disagree regarding how particular provisions should be interpreted. Nevertheless, the starting point should always remain the statute itself. Does the proposed regulation faithfully implement the objectives Congress sought to achieve? Or does it introduce policy choices that extend beyond the statutory framework? Throughout this series, we will examine several provisions through that lens.
- Principle Two: Respect for Commercial Reality
The EB-5 program functions within private capital markets. Projects are financed through integrated capital structures. Construction schedules follow commercial realities rather than immigration timelines. Investors compare competing opportunities. Developers negotiate with institutional lenders.
Every regulation creates incentives.
Incentives create behavior.
Behavior ultimately determines whether regulation succeeds.
For that reason, regulations should be evaluated not only by what they require, but also by how they change the behavior of investors, developers, lenders, Regional Centers, and other market participants.
Sophisticated market participants rarely respond to regulations exactly as regulators anticipate. Developers adjust financing strategies. Investors compare opportunities across jurisdictions. Construction lenders modify underwriting standards. Regional Centers reconsider governance structures.
Good regulation therefore anticipates those behavioral responses rather than assuming they will not occur. Regulations that ignore these realities may produce unintended consequences despite achieving their immediate legal objectives. Conversely, regulations grounded in commercial practice are more likely to strengthen both investor protection and capital formation. Understanding how the market actually functions is therefore essential to evaluating the NPRM.
- Principle Three: Meaningful Investor Protection
The RIA placed significant emphasis upon protecting investors, an unquestionably important objective. The more difficult question is determining what actually protects investors. In our experience, sophisticated EB-5 investors consistently prioritize two objectives above all others:
• Obtaining permanent residence.
• Preserving invested capital.
Everything else is generally secondary. Accordingly, investor protection should be evaluated according to whether a proposed regulation meaningfully advances those objectives.
Additional documentation, reporting obligations, and compliance requirements certainly have value. Yet governance, sound project financing, meaningful developer equity, prudent capital structures, and responsible fiduciary decision-
making often provide equally important forms of protection. The best regulations recognize both.
- Principle Four: Predictable Administration
Good regulation requires more than clear rules. It also requires consistent administration. Investors, developers, Regional Centers, and their advisers must be able to make decisions with reasonable confidence that similarly situated cases will be evaluated according to similar standards.
That is particularly important in EB-5 because investment and financing decisions are made years before final immigration adjudications may occur. Market participants commit capital, execute loan agreements, begin construction, and structure offerings based upon their understanding of the rules in effect at the time. If evidentiary expectations or interpretations vary materially among adjudicators, even a clearly written regulation may fail to provide meaningful predictability.
Predictable administration does not require eliminating adjudicative discretion. Different cases inevitably present different facts. It does, however, require sufficiently clear and consistently applied standards so that differences in outcomes reflect differences in facts rather than differences in the adjudicator assigned to the case.
Consistency therefore serves both investor protection and program integrity. Investors can make more informed decisions, project sponsors can structure transactions with greater confidence, and USCIS can administer the program more efficiently when market participants understand not only what the rules say, but how those rules will be applied.
Although each of these four principles is useful independently, they are ultimately interconnected. A proposal may faithfully implement congressional intent while failing to reflect commercial reality. Another may strengthen investor protection while creating uncertainty in administration. The most successful regulations advance all four principles simultaneously.
A Common Theme
Throughout this series, we return repeatedly to one central proposition.
Good regulation should focus on substance rather than form.
The objective is not merely to establish clear rules. It is to encourage the behavior Congress intended while avoiding unintended consequences that may discourage responsible investment, increase unnecessary costs, or weaken investor protection.
That principle appears repeatedly throughout the NPRM:
- Should bridge financing be evaluated with respect to the chronological sequence in which funds were advanced, or the integrated financing plan that made the project possible?
- Should lawful source of funds focus on whether investment capital was lawfully obtained, or upon tracing increasingly remote historical transactions that add little practical value?
- Should governance be measured by organizational charts, or by the quality of fiduciary decision-making?
- Should investment thresholds be evaluated according to legal classifications alone, or according to how investors actually respond to economic incentives?
Each issue presents a different version of the same question. Effective regulation should seek to understand the commercial substance underlying the transaction rather than relying exclusively upon its legal form. Throughout the articles that follow, we will repeatedly return to one central theme: regulations should encourage the behavior Congress intended rather than merely prescribe procedural compliance. When legal form and commercial substance diverge, regulators should carefully consider whether the rule continues to advance the statutory objectives it was designed to serve.
Looking Ahead
The four articles that follow apply these principles to several of the NPRM's most consequential proposals.
The next article examines bridge financing and asks whether job creation should be evaluated with respect to the chronological sequence in which capital entered a project or according to the integrated financing plan that made the project possible.
The third article considers recent federal court decisions addressing source of funds and administrative consistency.
The fourth explores governance, redeployment, and the practical protection of investor interests.
The final article steps back from individual provisions to ask a broader question: what distinguishes effective regulation from simply more regulation?
Although each article examines a different aspect of the NPRM, they all seek to answer the same fundamental question.
How can DHS faithfully implement Congress's objectives while preserving the commercial realities through which Congress chose to achieve them?
The close of the comment period does not end the discussion. It begins the next stage. DHS now has the opportunity to consider the perspectives submitted by investors, developers, Regional Centers, attorneys, economists, broker-dealers, and other market participants as it determines how the final regulations should operate.
Thoughtful disagreement should not be viewed as opposition, but as an essential part of effective rulemaking. Better regulations emerge from better conversations.
