Fraudulent Inducement After Kousisis

Wire-Fraud Liability on a Fraudulent-Inducement Theory After Kousisis v. United States

The Supreme Court held that "[a] defendant who induces a victim to enter into a transaction under materially false pretenses may be convicted of federal fraud even if the defendant did not seek to cause the victim economic loss" Kousisis v. United States, 605 U.S. 114 (2025). In the Court’s words, "the wire fraud statute is agnostic about economic loss" — it "does not so much as mention loss, let alone require it" — and a defendant violates it by scheming to "obtain" the victim's "money or property," "regardless of whether he seeks to leave the victim economically worse off." Two limits survive. Money or property must still have been an object of the fraudster’s scheme: "So if the scheme is one to alter the exercise of regulatory power—say, by tricking the Government into handing over a gaming license—the fraudulent-inducement theory has no role to play." And the Court reiterated "that materiality of falsehood is an element of" — and thus a limit on — the federal fraud statutes; "[a] conviction premised on the fraudulent-inducement theory cannot be sustained without it." The text of 18 U.S.C. § 1343 points the same way: it reaches anyone "having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises," and says nothing about leaving the victim poorer.

Kousisis sits atop, and does not disturb, the property-fraud line that polices what counts as an object of the scheme. Kelly v. United States, 590 U.S. 391 (2020) overturned the Bridgegate convictions because the federal fraud statutes are "limited in scope to the protection of property rights": the lane realignment was "a quintessential exercise of regulatory power," and "a property fraud conviction cannot stand when the loss to the victim is only an incidental byproduct of the scheme." Ciminelli v. United States, 598 U.S. 306 (2023) then discarded the Second Circuit’s right-to-control theory, holding that "the wire fraud statute reaches only traditional property interests," that "[t]he right to valuable economic information needed to make discretionary economic decisions is not a traditional property interest," and that "[b]ecause the theory treats mere information as the protected interest, almost any deceptive act could be criminal." Kousisis distinguished rather than repudiated that holding: fraudulent inducement is not a "repackag[ing]" of the right-to-control theory because it does not treat "mere information as the protected interest" — "[r]ather, it protects money and property" Kousisis v. United States, 605 U.S. 114 (2025).

Post-Kousisis appellate decisions treat materiality as the working limit on the theory. United States v. Runner, 143 F.4th 146 (2d Cir. 2025) affirmed mail- and wire-fraud convictions under the fraudulent-inducement theory, reading Kousisis to establish that "a defendant commits federal fraud whenever he uses a material misstatement to trick a victim into a contract that requires handing over her money or property" and that "the government did not need to prove economic loss to convict under the mail and wire fraud statutes." The Second Circuit emphasized the "demanding" requirement of materiality as "the principled basis for distinguishing everyday misstatements from actionable fraud," and measured the proof against its own standard that "[t]o be material, the information withheld either must be of some independent value or must bear on the ultimate value of the transaction."

The theory also forecloses benefit-of-the-bargain defenses. United States v. Abrams, No. 24-1998 (3d Cir. Jan 30, 2026) rejected an investment-fraud defendant’s argument that wire fraud requires an intent to cause economic harm, observing that "the Supreme Court squarely rejected that position in Kousisis" and that a defendant may violate section 1343 "regardless of whether he seeks to leave the victim economically worse off." Because "economic or pecuniary harm is not required under § 1343," the "benefit-of-the-bargain" line of cases the defendant invoked "have been abrogated by Kousisis." Nor does the victim’s credulity matter: quoting Neder, the court repeated that "justifiable reliance . . . plainly ha[s] no place in the federal fraud statutes."

Under these decisions, wire-fraud liability may rest on a fraudulent-inducement theory even where the victim received full economic value — a contractor who completes the work, an investment that pays out, or a merchant who delivers the goods can still commit fraud if a material lie induced the counterparty to part with money or property on those terms. The government’s burden shifts to the two remaining checkpoints. First, traditional money or property must be an object of the scheme: prosecutions aimed at regulatory choices, licenses, or the bare informational interest condemned in Ciminelli remain outside the statute, and property loss that is merely an incidental byproduct of a scheme with some other aim still cannot support a conviction under Kelly. Second, the misrepresentation must clear the demanding materiality bar — it must go to the value or essence of the transaction, not to everyday puffery or collateral matters — and a fraudulent-inducement conviction cannot be sustained without it. Defense arguments framed as no-net-loss or benefit-of-the-bargain theories are now foreclosed; the litigation battleground after Kousisis is materiality and the identification of a traditional property object.