Supreme Court rejects injury requirement for mail and wire fraud

In Kousisis v. United States, a 9 – 0 decision delivered by Justice Barrett on May 22, 2025, the Supreme Court of the United States endorsed the “fraudulent-inducement” theory of federal mail and wire fraud, ruling that misrepresentations can violate the law even if the person making them has no intention of causing economic loss.

Kousisis is a significant case that warns against overreading the Court’s prior decisions cutting back on the mail and wire fraud statutes. However, as Kousisis itself makes clear (and separate opinions by Justices Thomas and Sotomayor reinforce), the fraudulent-inducement theory can be invoked only when the misstatements in question are material—and the law surrounding materiality is itself deeply unsettled. In Kousisis’s wake, the lack of clarity in that area takes on heightened importance and may eventually warrant further Supreme Court review.

Kousisis resolves a longstanding circuit split over whether non-economic misrepresentations can violate the mail and wire fraud statutes, which prohibit the use of the mail or federal wires to obtain property “by means of false or fraudulent pretenses, representations or promises.” The petitioners, Stamatios Kousisis and an industrial painting company he helped manage called Alpha Painting and Construction Co., were convicted of wire fraud for falsely claiming, when obtaining a contract with the Pennsylvania Department of Transportation (PennDOT), that Alpha would comply with certain federal regulations by subcontracting a substantial portion of the work to a qualifying “disadvantaged” business. Kousisis and Alpha argued that because they had performed the contracted-for services and PennDOT had thus received everything it paid for, any misrepresentation about the identities of Alpha’s subcontractors could not give rise to liability. The Court—affirming the Third Circuit—rejected that view, explaining that the wire fraud statute “does not so much as mention loss, let alone require it.” The key question under the statute, the Court held, is not whether the victim incurred economic loss, but whether the misstatement was material.

In approving the government’s interpretation of the statute, the Court limited the scopes of two prior mail and wire fraud decisions, one of which it issued unanimously just two years ago. The first of those, McNally v. United States, was issued in 1987 and rejected the government’s view that the statutes extend to schemes to obtain things other than property.¹ The more recent decision, Ciminelli v. United States, rejected the “right to control” theory—that is, the notion that liability can arise from suppressing information necessary to make discretionary economic decisions and thus depriving the victim of the “right to control” its funds.² Both McNally and Ciminelli contributed to a general view that when the Court agrees to hear a mail or wire fraud case, it is typically with the aim of brushing back overzealous prosecutors.³ Indeed, Kousisis and Alpha sought to capitalize on that notion, arguing to the Court that the government’s pursuit of the fraudulent-inducement theory amounted to a “game of whack-a-mole” designed to circumvent the Court’s earlier decisions.⁴

In rejecting the whack-a-mole argument and thus cabining McNally and Ciminelli, the Court may have placed the wind at federal prosecutors’ backs. However, as Kousisis recognizes, there remains a significant limiting principle in fraudulent-inducement cases: the statutes’ “demanding” materiality standard, which requires proof that the misrepresentation “constituted an inducement or motive to enter into a transaction.” Though the parties in Kousisis proposed different materiality tests, the Court declined to resolve the debate, instead finding that Kousisis and Alpha had never contested materiality. The Court’s ruling thus leaves open the question of what standard will apply in wire fraud cases going forward: the common law test Alpha and Kousisis proposed (pursuant to which a representation is material if it induces another to enter into a transaction), the “essence-of-the-bargain test” the government proposed (pursuant to which a representation is material only if it goes to the essence of the parties’ bargain),⁵ or some third possibility.

That question will have to be resolved through future litigation. So, perhaps, will the various challenging hypotheticals the concurring justices posited, involving such disparate players as a ticket seller who deceives a Yankees fan into buying seats at a Mets game and an otherwise-exemplary babysitter who gets the job by falsely claiming she has no criminal record. In the meantime, the Court’s holding in Kousisis underscores to government contractors, bidders and commercial actors more generally the importance of ensuring that any representations they make when entering into commercial contracts are accurate. The penalty for a failure to do so can be significant: the mail and wire fraud statutes, like numerous other federal fraud laws, authorize punishments that include 20 years’ imprisonment and significant fines. Violations of the statutes are also predicate acts under the federal RICO statute,⁶ which can trigger significant civil and criminal liability.