WAGES AND WHITE LION INVESTMENTS, LLC, AND Vapetasia, LLC—two e-cigarette liquid manufacturers—spent years navigating the Food and Drug Administration’s (FDA’s) process and requirements to submit marketing applications for their products. After successful submissions, the FDA denied more than a million of their applications. The agency changed its approval criteria after the companies submitted their applications.¹Jacob James Rich and Leland Ben, “The Future of ‘Chenery II,’” Reason Foundation, December 16, 2024.

This change in standards and subsequent denial were the result of an ad hoc (case-by-case) adjudication, not traditional rulemaking. The decision represented an effective ban on non-menthol-flavored vape products. Billions of dollars in investments and a sizable market were obstructed by the FDA’s ad hoc determination.²Rich and Ben, “Future of ‘Chenery II.’”

The companies challenged the FDA’s blanket denial, arguing it was “arbitrary and capricious,” and the Fifth Circuit Court of Appeals agreed.³Wages and White Lion Investments, LLC, v. Food and Drug Administration, No. 21-60766 (5th Cir. Jan. 3, 2024). In FDA v. Wages and White Lion Investments, LLC, however, the US Supreme Court vacated the Fifth Circuit’s ruling, finding the denial was consistent with the FDA’s guidance. But the Court declined to express a view about the larger issue of the FDA developing these new standards through adjudication rather than through traditional notice-and-comment rulemaking.⁴Food and Drug Administration v. Wages and White Lion Investments, LLC, 604 U.S. __ (2025).

What the FDA did in this case is a textbook example of a common practice among federal agencies when creating legally binding rules: regulation by adjudication.

Federal agencies largely have two main mechanisms at their disposal: rulemaking and adjudication. Rulemaking is both general and prospective; it applies to everyone and to future conduct. Adjudication is both particular and retrospective; it applies to a single party in a dispute with another and to past conduct.

These mechanisms, however, are not always distinct. In fact, many agencies blend the two, exercising one to accomplish the other, thereby setting legally binding policy. This is called regulation by adjudication. In effect, agencies create rules when they resolve individual cases and disputes. These decisions become agency policy that the American public is expected to follow, like any formal rule or regulation carrying the force of law.

This research in brief explores the origins of regulation by adjudication and what it looks like in practice. It does so by taking a closer look at the National Labor Relations Board and specific case examples. The piece also considers regulation by adjudication’s implications for public policy, the separation of powers, and the rule of law.

Download the PDF here.