February 7, 2018, the U.S. District Court for the District of Columbia rejected USCIS’s reliance on a “call option” to deny EB-5 investors’ I-526 petitions. See Chang v. USCIS, — F. Supp. 3d —-, 2018 WL 746081 (D.D.C. 2018). USCIS denied the petitions on the theory that a “call option” (or “buy option”) giving the new commercial enterprise a right to redeem the EB-5 investors’ interests was an impermissible “debt arrangement” and ran afoul of the precedent decision Matter of Izummi. The District Court rejected USCIS’s reasoning on both counts.
It held that the prohibition on “debt arrangements” bars only provisions which give investors a right to repayment, and because call options confer no such rights, the plain language of EB-5 regulations does not prohibit them. Likewise, the Court held that Izummi’s reasoning extends only to financial arrangements which give investors a contractual right to receive their investment back at a particular time. This reasoning, the Court held, “exonerates” call options because while “the company knows that it has a willing seller at a certain time and is assured that it can pay a certain price,” the same is not true of the investor. The Court summed up its decision concluding that in denying the investors’ petitions based on the existence of a “call option,” “USCIS has acted in a manner that conflicts with the plain language of its regulations, that is not compelled by statutory or regulatory purpose, that unreasonably stretches the rationale of Matter of Izummi, and that runs counter to the evidence in the record.