As private capital continues to flow into the commercial space sector, investors face a regulatory environment that is becoming both more active and more fragmented. At the same time, the European Union and the United States are taking differing approaches to the use of regulation to guide commercial space activity. For private equity investors in the space arena, these differing approaches make regulatory diligence increasingly important and complex.

A Growing Market Shaped by Competing Regulatory Priorities

The commercial space sector has grown rapidly in recent years, as technological advances have lowered launch costs and increased demand for satellite communications, earth observation and other space-enabled services. The global space economy is projected to reach approximately $1.8 trillion by 2035, up from $630 billion in 2023. Private capital has played a central role in this growth, with investors deploying roughly $170 billion across more than 1,300 space companies since 2009. In 2025 alone, private investment in the space sector reached $12.4 billion—a 48% increase over the previous year—with more than 110% growth seen in the building and launch segments of the industry. Investment activity spans the core layers of the space economy, including infrastructure, telecommunications and manufacturing. These segments reflect growing demand for satellite communications, earth observation services and space-enabled data across both commercial and government sectors.

Both the European Union and the United States have responded with regulatory frameworks covering the rapidly expanding space economy but, as outlined below, those frameworks have different priorities. The primary intent of the proposed EU Space Act is to establish a unified legal framework among Member States and to promote interoperability of critical space infrastructure. In the United States, however, the priority has been to foster accelerated commercial space-related activity while mitigating against national security threats. For private equity sponsors, these underscore how space-sector regulation is evolving in ways that may simultaneously facilitate commercial activity and increase compliance risk.

Sponsors should identify early in the due diligence process which regulatory regimes may apply to the target and how compliance may affect market access, costs, operations and growth. In a sector where regulation may create both opportunity and friction, careful cross-border regulatory diligence and early compliance planning should form part of transaction structuring and post-closing governance.

Regulatory Developments in the European Union and the United States

On June 25, 2025, the European Commission released a proposal for an EU Space Act, which is expected to become effective on January 1, 2030. The Space Act will regulate space activities by both providers established in the European Union (or controlled by EU providers) and third-country providers offering space-based data or services in the European Union and includes new requirements for spacecraft, launch and in-space operation providers. Lighter regimes apply to certain specialized providers and research institutions.

The proposed new requirements include:

• Authorization and Registration: EU space operators must be authorized by an EU Member State, while third-country operators must demonstrate compliance and be registered with the Union Register of Space Objects (URSO), the list of all space operators operating within the European Union.
• Traffic Management: New tracking, maneuverability and debris mitigation requirements for spacecraft, launchers and satellites, which may require design modifications.
• Cybersecurity: Preventive measures to mitigate system failures or attacks, plus reporting requirements.
• Environmental Sustainability: Operators must calculate and report environmental footprint, comply with design requirements and limit light and radio pollution.

On August 13, 2025, six weeks after the European Commission released its proposed Space Act, President Trump signed Executive Order 14335, the objective of which is to increase commercial space launch cadence and novel space activities by 2030. Key features of the Executive Order include the following:

• elimination or expedition of environmental reviews for launch and reentry;
• harmonization and evaluation of states’ compliance with federal space regulations; and
• a streamlined mission authorization process under the Outer Space Treaty.

The Federal Communications Commission has also been active in recent months. Its October 2025 proposal on “Space Modernization for the 21st Century” would create a so-called “licensing assembly line,” designed to speed reviews through a modular system that would route and resolve applications according to each company’s needs.

At the same time, the FCC is increasing its national security-related regulation and enforcement activity. On January 8, 2026, the FCC announced its first-ever enforcement of a mitigation agreement issued by Team Telecom, the interagency committee tasked with assessing national security risks in FCC applications. The FCC settlement addressed a satellite operator violating its mitigation agreement obligations related to unauthorized foreign employee access to communications infrastructure and customer data. Under the settlement, the satellite operator agreed to pay a $175,000 voluntary contribution and implement a robust compliance plan. The action signals that the FCC is closely monitoring compliance with Team Telecom mitigation agreements and actively enforcing these agreements.

In addition, on January 29, 2026, the FCC adopted two sets of new rules that enhance its evaluation of national security concerns in the U.S. communications sector. These new rules include new reporting requirements for FCC license holders and applicants regarding ownership, control and other ties to foreign adversaries, and new rules clarifying the Commission’s foreign ownership review process.

Implications for Private Equity Investors

These developments have several implications for private equity investors considering an acquisition in the space sector. First, investors should assess at the outset which regulatory frameworks are likely to apply to the target’s business and geographic footprint. The proposed Space Act reaches not only EU-based operators but also third-country providers offering space-based data or services in the European Union. In the United States, companies face heightened scrutiny of foreign ownership, data access and national security safeguards, even as implementation remains uncertain and technology may outpace regulatory clarity. Investors should diligence not only where a target operates today, but also which jurisdictions may become relevant as the business scales.

Second, investors should evaluate whether the target has the technical and organizational capacity to manage evolving and potentially conflicting requirements across jurisdictions. The proposed Space Act, in particular, may impose near-term costs through spacecraft redesign, contract renegotiation and new reporting processes, while dual U.S.-EU exposure may create additional challenges where regulatory equivalency remains uncertain. There is also the possibility of having to adapt to regulatory countermeasures one jurisdiction might take against the other. FCC Chairman Brendan Carr, for example, has warned that the United States could consider reciprocal measures if the European Union adopts policies favoring European satellite providers over U.S. competitors.

Finally, investors should treat compliance, transaction structuring and post-closing governance as ongoing tools for managing regulatory and dispute risk. Compliance risk should be viewed as a dynamic operational issue, not a static legal one, because new requirements may increase cost and execution risk over time and may also trigger contractual disputes over cost allocation or claims that regulation is disproportionate or discriminatory. Early planning around regulatory engagement, compliance buildout and governance can help mitigate this exposure as cross-border expectations evolve. Although harmonized EU standards could eventually reduce operating costs and improve safety and sustainability, the cross-border nature of the space industry means that many U.S. actors may remain subject to EU rules regardless of U.S. deregulation, potentially driving either convergence around EU standards or further fragmentation of market access.

Private Equity Report Spring 2026, Vol 26, No 1