Off-Earth Assets: The Gray Area that Leaves Lenders at Risk in Bankruptcy

The commercial space industry is booming.1 On June 12, 2026, the initial public offering (IPO) of a U.S. space company was recorded as the largest IPO in history.2 The IPO raised $75 billion in capital.3 Encouraged by the successful IPO, private-market investors and venture capitalists are increasing their funding of space ventures.4

To the extent these investments are collateralized by assets located off-Earth in outer space, a legal vulnerability exists, because U.S. law governing perfection of securities interests in a debtor’s off-Earth assets is murky. Should a company with assets located off-Earth find itself in bankruptcy, its lenders are vulnerable to having their asserted liens in the off-Earth assets erased.

This article explores what is considered “outer space,” whether assets located in outer space become property of the bankruptcy estate, the legal gray areas regarding perfecting security interests in assets located in outer space, and the risk of the erasure of asserted liens in off-Earth assets, and provides suggested best practices for lenders to reduce risk.

Off-Earth: Where Does “Outer Space” Begin?

As an initial matter, what is considered the “outer space” domain is not clear-cut. There is no universal delineation or consensus regarding where “outer space” begins.5 Many in the international community recognize the Kármán Line, which is located at 100 kilometers (about 62 miles) above mean sea level, as the beginning boundary of outer space.6 Alternatively, various U.S. government agencies consider an altitude of 80 kilometers (50 miles) as the boundary between Earth’s air space and the beginning of outer space.7

What Off-Earth Assets Become Property of the Bankruptcy Estate?

With few exceptions, all legal or equitable interests that the debtor holds in property as of the commencement of the bankruptcy case become property of the bankruptcy estate.8 Nonbankruptcy law determines the nature and extent of a debtor’s interests and rights in property.9

Assets Launched from Earth

Under the 1967 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies (“Outer Space Treaty”), the ownership of objects launched into outer space, including their components parts, is not affected by the objects’ presence in outer space.10 The Outer Space Treaty further provides that the “State Party to the Treaty on whose registry an object launched into outer space is carried shall retain jurisdiction and control over such object.”11

The debtor, therefore, maintains its interests in those assets, such as satellites, equipment, robots or spacecraft, that were launched from Earth into outer space. The legal or equitable interests the debtor has in those assets become property of the debtor’s bankruptcy estate.12

Assets Originating in Outer Space

For those assets that originate in outer space and are not launched from Earth, a different lens is applied to determine whether a debtor can stake an interest in those assets. In 2015, the U.S. enacted the Commercial Space Launch Competitiveness Act.13 The Act grants private U.S. citizens (both individuals and nongovernmental entities) the right to “possess, own, transport, use, and sell” a space resource that U.S. citizens obtain when engaging in commercial recovery of space resources.14

The Act defines a “space resource” as “an abiotic resource in situ in outer space.”15 Abiotic is anything that is nonliving.16 Water, minerals and asteroid resources are specifically listed as space resources in the Act.17

Although the Act provides for ownership of nonliving resources in space, there is a question as to whether U.S. citizens may own unextracted resources, such as land in situ or only the resources they extract.18 Even though the law is not clear on whether a debtor can own unextracted resources in outer space, the debtor has certain possessory rights to the territory in outer space on which the debtor is conducting its activities and operations.19 And the debtor’s possessory, use and control interests and rights over property does become property of the bankruptcy estate.20

Intellectual Property Assets Related to Outer Space Activities

A debtor’s interests in certain inventions in outer space are protected under the U.S.’s Inventions in Outer Space Act of 1990.21 With certain limited exceptions, any invention made, used or sold in outer space on a space object or component of a space object under the jurisdiction or control of the U.S. is recognized and receives protection under U.S. patent law.22

The law doesn’t define the term “space object.” Nonetheless, in the space industry the term “space object” is generally understood to be any object launched from Earth into outer space, including its component parts as well as its launch vehicle and parts. In contrast to objects launched from Earth, there is a legal vacuum with respect to inventions made from and on space resources found in outer space and not launched from Earth when those inventions are not made on space objects or components of space objects launched from Earth.23

“Perfected” Security Interests in Off-Earth Assets Are Not So “Perfect”

Where lenders that finance off-Earth assets are most vulnerable is with respect to how to properly perfect a security interest in assets in outer space. Although a lender may have obtained a security interest in an asset in outer space, the ability to “perfect,” i.e., establish, “priority rights in the collateral against most subsequent lenders, buyers of the property, and lien holders,”24 is questionable under current law. This leaves the lender’s asserted lien vulnerable to attack in bankruptcy.

All 50 U.S. states plus the District of Columbia have adopted some form of the Uniform Commercial Code (UCC). Section 9-301 of the UCC governs the perfection and priority of lenders’ security interests in a debtor’s assets that are not goods covered by a certificate of title or letter-of-credit rights. Generally, “while a debtor is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in collateral.” 25 So, an Earth-based debtor would file a UCC financing statement in its local jurisdiction.

If a lender has a possessory security interest in an off-Earth asset, then the law of the jurisdiction where the asset is located would govern perfection, the effect of perfection or nonperfection, and the priority of a security interest in the asset.26 Under this scenario, there is no “outer space jurisdiction” that has law that can apply to perfect a security interest in the off-Earth asset. Thus, a legal void exists.

Most assets off-Earth, however, will likely not be possessory and will fall into two main other categories: goods and as-extracted collateral. Off-Earth assets that are movable at the time a security interest attaches are considered “goods.”27

Further, although a debtor’s location determines where a UCC financing statement is filed for a good, the jurisdiction in which a good is located determines “the effect of perfection or nonperfection and the priority of a nonpossessory security interest in the collateral.”28 However, there is no “outer space jurisdiction” with established law to determine the effect of perfection and priority of a security interest in an off-Earth asset. This accordingly presents yet another legal vacuum and risk for lenders asserting liens in off-Earth assets.

For the off-Earth assets that are considered “as-extracted collateral,”29 “the local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in [the] as-extracted collateral.”30 There currently is no local law of the jurisdiction of the Moon or outer space that would enable a lender to perfect a security interest in valuable extractable minerals such as Helium-3 on the Moon or the rare minerals and metals on asteroids.

The Risk of Lien Avoidance Under Bankruptcy Code § 544(a)

Given the murkiness of a lender’s ability to perfect a security interest in off-Earth assets, a trustee or debtor-in-possession may challenge the validity of the lender’s purported lien in a bankruptcy case of the debtor. Under Bankruptcy Code § 544(a), the debtor-in-possession or “trustee stands in the shoes of a hypothetical judgment lien creditor who may contest liens that are unperfected as of the date of the commencement of the case.”31

The Code grants the trustee or debtor-in-possession “strong-arm powers” to erase an asserted lien in property belonging to the estate. If a judgment lien creditor could successfully invalidate or obtain priority over an unperfected or otherwise legally voidable lien asserted against property of the debtor’s bankruptcy estate that relates to any transfer of property of the debtor or any obligation incurred by the debtor, then the trustee or debtor-in-possession can do the same under § 544(a).

Mining on the Moon: As-Extracted Collateral Analysis

There are companies and governments that plan to mine and extract the Helium-3 on the Moon, which is valued at approximately $20 million per kilogram. 32 If, before extraction, a security interest is created by a debtor having an interest in the Helium-3 and the security interest attaches to the minerals as extracted, then Helium-3 would be considered as-extracted collateral under the UCC. Therefore, a lender seeking to “perfect” a security interest in Helium-3 would look to the local law of the jurisdiction in which the wellhead or minehead for the Helium-3 is located on the Moon to determine how to perfect a security interest/lien in the Helium-3. But currently there is no local Moon jurisdiction and law that governs Helium-3 on the Moon. Thus, it appears that the lender has no legal avenue to “perfect” the security interest in the Helium-3. This is where the legal vulnerability lies.

A trustee or debtor-in-possession could argue that no validly perfected lien exists in the Helium-3 as of the bankruptcy petition date. Consequently, under the strong-arm powers granted the trustee or debtor-in-possession under § 544(a) of the Code, the lender’s asserted lien in the Helium-3 could be invalidated and wiped out. And if the lender did not obtain and properly perfect security interests in other assets of the debtor, the lender’s entire claim could be rendered unsecured after avoidance of the asserted lien in the Helium-3. This highlights the gray area that lenders need to be aware of when considering collateralizing off-Earth assets.

Final Analysis

As the foregoing highlights, as financing in the space industry increases, so does lender-side risk. The ability of a lender to perfect a security interest in certain off-Earth assets is uncertain. Given the gray areas in current law, a lender’s security interests in certain of a debtor’s off-Earth assets may be unperfected at the time of a bankruptcy filing.

Hence, the lender, through an avoidance action, could lose its asserted lien position in the subject off-Earth asset. If, after avoidance of the lien, the off-Earth asset remains unencumbered by other liens, the unsecured creditors of the bankruptcy estate stand to benefit from the value of the assets now made available for distribution to unsecured creditors.

Best Practices for Lenders

Considering the foregoing, it would behoove lenders that provide secured asset-based financing to companies with off-Earth assets to obtain other forms of security besides (or in addition to) liens in the off-Earth assets. Other forms of security may include obtaining perfected security interests in the debtor’s tangible and intangible assets located on Earth, including all real estate, accounts, payment intangibles, and all the debtor’s revenues and receivables owned and after-acquired. Lastly, given the growing commercialization of the space sector and the murkiness of current secured transactions law governing off-Earth assets, careful and creative secured financing structures will be key to safeguarding a lender’s interests when a transaction involves off-Earth assets.