Data Centers Are Looking Up
As discussed in previous client alerts, the rapid growth of artificial intelligence (AI), cloud computing, and digital services has dramatically increased demand for data centers. As companies face growing challenges related to power, water, and land availability, some are looking for solutions beyond Earth.
Proposed space-based (or “orbital”) data centers could range from relatively modest satellites that process information generated in space before transmitting selected data to Earth to much larger systems designed to perform cloud-computing or AI workloads currently handled by terrestrial facilities.
While this may sound like science fiction, the concept is moving closer to reality. The Federal Communications Commission (FCC) has accepted four applications proposing space-based data center systems, including one consisting of up to one million satellites using optical inter-satellite links and specified radio frequencies for communications with Earth, and three others proposing data center constellations of approximately 88,000, 51,600, and 100,000 satellites, respectively, in sun-synchronous orbits.1 All four are undergoing agency review.
These filings do not mean large-scale orbital data centers are imminent. But they do demonstrate that orbital data centers are becoming a real regulatory and investment issue and are no longer a distant hypothetical.
Space Solves Some Problems but Faces Others
Orbital data centers offer several potential advantages. Satellites can generate electricity directly from the sun and do not require connections to electric grids. Processing information in space may also reduce the amount of data that must be transmitted back to Earth. In addition, orbital systems avoid many of the land use, water supply, and local siting challenges associated with terrestrial data centers.2
At the same time, moving computing infrastructure into space introduces major technical challenges. One of the most significant is cooling. Traditional data centers rely on air and water to remove heat. But the vacuum of space does not support conventional heat transfer through air. As a result, heat must be dissipated through specialized radiator systems, which remain in development at the scale required for large orbital data centers.
Other challenges include radiation exposure, hardware reliability, launch cost and capacity, communications bandwidth, maintenance, and replacement.3 A failed server on Earth can often be repaired or replaced quickly. A failed server in orbit may require an entirely new launch, autonomous repair capability, or acceptance of shorter hardware life cycles.
These issues will have significant implications for project economics, diligence, and contractual risk allocation. Companies will need to decide who bears the risk when there are complications with launches, communications are lost or disrupted, equipment is damaged, satellites collide, or computing capacity is reduced below expected levels.
The Regulatory Framework Is Still Developing
Orbital data centers sit at the intersection of several existing regulatory systems. In the U.S. alone, depending on the project, federal approvals and reviews may include:
The specific requirements will depend on what the system does. A platform focused on communications may face different requirements than one focused on Earth observation, data storage, AI processing, in-space servicing, or another mission element.
That fragmentation creates a governance challenge. Different agencies likely will regulate different parts of a mission. As a result, a company may satisfy the requirements of one regulator only to discover that another regulator has additional concerns. Questions may also arise regarding which agency takes the lead, how cumulative risks are evaluated, and how overlapping agency requirements interact.
Moreover, the regulatory landscape is evolving. In 2026, the FCC adopted a new framework for licensing space and earth stations, while the Office of Space Commerce launched a pilot certification program for novel in-space activities, including orbital data centers.4 The pilot phase is now open and the Office of Space Commerce has invited interested U.S. operators to submit expressions of interest by October 5, 2026.
Neither development fully resolves the authorization question. The certification program implements Section 5 of Executive Order 14335, which directed the Department of Commerce to propose an authorization process for space activities “not clearly or straightforwardly governed by existing regulatory frameworks.”5 The pilot is voluntary, a certification on its own will have “no direct legal effect,” and participants must still satisfy FCC and FAA licensing requirements, although information submitted in the process may support satisfaction or waiver of FCC rules such as those regarding orbital debris mitigation.6 Congress has not enacted legislation codifying that authority. Nor do the FCC’s new rules add constellation-level debris requirements; they carry forward the existing collision and disposal rules, and the FCC found it “premature to adopt” large-constellation standards without first determining the required parameters.7
Companies therefore face a familiar dilemma for emerging technologies: Move first and help shape regulatory expectations, or wait for greater certainty and risk losing strategic advantages such as access to spectrum, launch opportunities, commercial relationships, and desirable orbital locations.
International Law and Data Regulation Still Matter
Operating in space does not free a company from laws on Earth.
International treaties generally make governments responsible for supervising activities conducted by private companies in space. Specifically, parties to Article VI of the Outer Space Treaty (State Parties) bear international responsibility for national activities in outer space, including activities conducted by nongovernmental entities (private companies) that require authorization and continuing supervision by the appropriate State Party.8 The Convention on Registration of Objects Launched into Outer Space and the Convention on International Liability for Damage Caused by Space Objects separately address registration of space objects and international liability for certain damage caused by them, respectively.9 In other words, orbital data center operators may remain subject to oversight by the countries that authorize and register their activities.
The legal picture can become especially complicated when different parts of a project are located in different countries. Launch providers, satellite owners, computing customers, ground infrastructure, and data subjects may all be located in separate jurisdictions with different or inconsistent rules.
Companies must also consider privacy laws, cybersecurity rules, export controls, data-localization requirements, sanctions restrictions, and emerging AI regulations. Processing data in orbit does not eliminate these obligations.
Most of these regimes attach to the operator or the individual rather than to the location of the server. The General Data Protection Regulation (GDPR) applies to processing by a controller or processor “regardless of whether the processing takes place in the [European] Union or not”;10 the U.S. CLOUD Act reaches data within a provider’s “possession, custody, or control, regardless of whether such … information is located within or outside of the United States”;11 and under Article VIII of the Outer Space Treaty, the state of registry retains “jurisdiction and control” over a space object, so its law follows the satellite into orbit.12
National security issues also may receive close attention. Depending on the technologies involved, the ownership structure, the nature of the data being processed, and the intended use of the system, projects may attract heightened government scrutiny, including export-control or foreign-investment review.
Environmental Risk Changes Rather Than Disappears
Part of the case for orbital data centers is that they could reduce demands on Earth’s electric grids, water supplies, and land resources. But environmental risk does not disappear simply because infrastructure is placed in orbit.
Accordingly, environmental diligence should consider the complete project life cycle, including manufacturing, launches, atmospheric emissions, orbital congestion, collision risk, space debris, replacement, reentry, and disposal. These issues will be especially important to evaluate for very large proposals involving tens or hundreds of thousands of satellites.
Federal environmental review may also present challenges. Large projects could require approvals from multiple agencies, raising questions about who leads the review process and how broadly environmental impacts should be evaluated. Moreover, orbital systems that require a large number of individual launches could raise questions of how to define project scope or review cumulative impacts. The answers to all of these questions could affect both project timelines and litigation risk.13
The FCC has treated satellite licensing as categorically excluded from detailed NEPA review, an approach the Government Accountability Office criticized in 2022.14 In July 2026, environmental groups petitioned the FCC to prepare a programmatic environmental impact statement covering all pending orbital data center applications and to pause licensing until it does.15 The FCC has since circulated a draft order, scheduled for a vote at its September 30, 2026 open meeting, concluding that FCC-licensed space-based operations, including “the launch, deployment, and operation of space stations,” are not “major Federal actions” subject to NEPA because their effects occur outside U.S. jurisdiction, and rejecting arguments based on light pollution and orbital debris.16 If the order is adopted, that determination would narrow one avenue for challenging orbital data center licenses, although it may itself be challenged, and FAA launch and reentry licensing would remain subject to NEPA for now.17
As always, companies should take care in marketing orbital systems as “green,” “zero-impact,” or categorically more sustainable than terrestrial facilities. Sustainability claims should be based on a thorough, documented analysis of the project’s entire life cycle, from launch to end-of-mission impacts, not just the anticipated absence of terrestrial grid electricity or cooling-water consumption.
Key Questions for Developers, Investors, and Customers
Before investing significant time or capital, companies should consider:
Looking Ahead
Orbital data centers will not replace terrestrial facilities in the immediate future. Large-scale systems face consequential technical, economic, and regulatory obstacles. Smaller systems that process data already generated in space may develop sooner than orbital facilities intended to replicate hyperscale computing on Earth. That distinction is important for investors and customers assessing near-term claims about the market’s maturity.
Still, recent regulatory filings and government initiatives indicate that space-based computing is moving beyond the conceptual stage. For companies exploring this area, success will depend not only on technical feasibility but also on the complex and evolving legal and regulatory landscape that may shape project timing, cost, and viability. The opportunity may be in space, but successful deployment will depend on managing risks that remain firmly grounded in law and policy.
WilmerHale’s lawyers regularly counsel clients across the AI, technology, and space sectors and are well positioned to help developers, investors, providers, and customers assess the regulatory, technical, environmental, cybersecurity, and contractual risks associated with emerging orbital computing projects and navigate the evolving intersection of data center infrastructure, commercial space regulation, and cross-border data governance.
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