# States Challenge DOL Grant Cancellations

A coalition of states is suing the federal government to recover more than $100 million in American Rescue Plan Act grants canceled by the U.S. Department of Labor. The funding supported state unemployment-insurance technology, fraud prevention, and application-system projects. The litigation creates uncertainty for contractors working on these programs as states determine whether to restart, scale back, or fund affected work through other sources.

- The grants covered technology infrastructure and fraud-prevention projects, creating potential disruptions to active or planned state unemployment-system work.
- Contractors serving these programs should account for uncertainty in project scope and funding while the litigation proceeds and states decide how to handle affected projects.
- State agencies may need to reassess project priorities or identify alternative funding if canceled grants are not restored.

**Jurisdictions:** sled
**Industries:** Information Technology
**Topics:** Grants & Funding
**Published:** October 09, 2026

### Government Entities
- U.S. Department of Labor (DOL)
- Maryland Department of Labor
- U.S. Court of Federal Claims