The Federal Non-Compete Rule Is Officially Off the Books
On September 5, 2025, the Federal Trade Commission voted 3-1 to dismiss its own appeals in Ryan, LLC v. FTC before the Fifth Circuit and Properties of the Villages v. FTC before the Eleventh Circuit, and to accede to the district court’s vacatur of the 2024 Non-Compete Rule. In plain terms, the agency that wrote the rule chose to stop defending it in court, ending any near-term path back to a nationwide FTC ban on employee non-competes.
This is a meaningfully different situation from a rule simply being struck down and appealed further. The Commission itself walked away from the fight, a signal that the rule is not coming back through this route.
How the Rule Got Removed From the Federal Register
On February 12, 2026, the FTC published a Federal Register notice formally removing the vacated Non-Compete Rule, 16 CFR part 910, from the Code of Federal Regulations, conforming the CFR to the courts’ own vacatur decision. That is the procedural step that closes the loop: the rule is no longer sitting in the federal regulatory text at all, beyond simply going unenforced.
Both the FTC’s own press release and the Federal Register notice itself returned bot-block errors on direct attempts to load them in this research, so these two facts rely on two independent, reliable secondaries, a national law firm and a legal-practice-guide site, that both name and quote the vote, date, and CFR citation consistently.
What Governs a Non-Compete Clause Now
With the federal rule gone, non-competes are governed by state law, not a federal rule, meaning the enforceability of a specific clause in an ISO agreement now turns entirely on which state’s law applies to that agreement. California is confirmed as a state with a near-total ban on non-competes for employees, one of the clearest, strictest positions any state takes on this issue.
This research did not confirm the specific status of other frequently mentioned states, including Minnesota, North Dakota, or Oklahoma. An agent or ISO in any state other than California should not assume a specific rule applies without checking that state’s current statute directly.
Why “Check Your State” Is Not a Throwaway Line
State non-compete law varies widely, from near-total bans like California’s to states that enforce reasonably drafted non-competes routinely. With the federal rule removed, that variation is now the entire governing framework, not a backstop underneath a national standard. A clause that would have been preempted or restricted under the 2024 federal rule may now be fully enforceable, or fully unenforceable, depending entirely on which state’s law the agreement falls under.
That is a meaningfully higher-stakes question than it would have been while the federal rule was still being litigated, since state law is no longer a secondary layer, it is now the only layer.
Non-Solicit Is a Separate Clause From Non-Compete
A non-compete clause restricts an agent from working in the same industry or role after leaving, while a non-solicit clause restricts contacting specific merchants, employees, or sub-agents the departing person worked with, without necessarily barring the broader line of work itself. The two clause types are often bundled in the same ISO agreement but raise different questions, and different state-law treatment, since some states that restrict non-competes heavily treat non-solicit language more permissively.
Reading both clauses separately, rather than treating them as one combined restriction, is worth doing explicitly before signing, since a state’s rules on one do not automatically apply the same way to the other.
What to Ask Before You Sign
Before signing an ISO agreement with either clause type, it is worth confirming in writing which state’s law the agreement designates as governing, whether that state currently restricts non-competes, non-solicits, or both, and how long each restriction lasts after the relationship ends. Getting a straight answer to those three questions before signing is a meaningfully better position than discovering the answer only after trying to leave.
Human + AI SDRs can keep an agent’s pipeline moving during exactly this kind of negotiation, so a non-compete or non-solicit clause gets reviewed from a position of leverage rather than urgency to sign and start earning.
What this means for you
- The FTC voted 3-1 on September 5, 2025 to abandon its own appeals defending the 2024 Non-Compete Rule, and formally removed it from federal regulations on February 12, 2026.
- With the federal rule gone, state law now governs non-compete enforceability entirely. Only California’s near-total ban is confirmed here; check any other state’s specific law separately.
- Non-solicit and non-compete are separate clause types that often receive different treatment under the same state’s law, worth reviewing individually before signing an ISO agreement.
Sources
The external data in this guide draws on the sources below. Figures described in the text as estimates or industry triangulations are directional and are not attributed to a single dataset.
- Duane Morris LLP, “FTC Abandons Appeals of Decisions Striking Down Its Noncompete Rule, but Restrictive Covenants Remain an Enforcement Priority”
- OpenAgreements, “FTC Non-Compete Rule Status (2026)”