California SB 82: A New “Ceiling” on Consumer Arbitration Clauses — and a Collision Course with the FAA?
California has enacted Senate Bill 82 (SB 82), a new statute aimed squarely at what supporters call “infinite arbitration clauses” — dispute-resolution provisions in consumer contracts that attempt to sweep in essentially any future dispute between the business and the consumer, even when the dispute has little or nothing to do with the original transaction. SB 82 was approved and chaptered on October 6, 2025 (Chapter 350), and it takes effect January 1, 2026.
The headline question is simple: can California, by statute, limit the scope of consumer arbitration (and other dispute-resolution terms) in a way that makes broad arbitration clauses unenforceable for “unrelated” disputes?
The harder question is the one that will drive litigation: does SB 82 survive federal preemption under the Federal Arbitration Act (FAA)?
What SB 82 actually says (and why the wording matters)
SB 82 adds Civil Code section 1670.15. It defines a “consumer use agreement” broadly as a contract a consumer enters into “in order to use, receive, or otherwise enjoy a good, service, money, or credit.”
Then comes the operative limitation:
“Dispute resolution terms and conditions of a consumer use agreement shall be limited to the use, payment, or provision of the good, service, money, or credit provided by that consumer use agreement.”
It also prohibits waiver (“contrary to public policy and void and unenforceable”) and instructs courts to construe the section “liberally” to protect consumers.
Two drafting choices are worth highlighting because they will matter in court:
SB 82 targets “dispute resolution terms and conditions,” not “arbitration” by name. That is almost certainly intentional.
The statute does not expressly say an overbroad arbitration clause is void in its entirety. Instead, it imposes a substantive limit on what those terms may cover, and it makes any “waiver” of the statute void.
That distinction tees up the first wave of practical fights: whether courts will treat an overbroad clause as unenforceable wholesale, enforceable only as narrowed, or severable.
What SB 82 changes in the real world
For many consumer-facing companies, arbitration language is written broadly, often covering disputes “arising out of or relating to” the contract and also the parties’ relationship, affiliates, services, interactions, marketing, data practices, and more. SB 82 is designed to stop that expansion and confine dispute-resolution provisions to the particular transaction or service the consumer agreed to.
Supporters have pointed to high-profile attempts to enforce arbitration clauses based on tenuous connections — a consumer clicks “I agree” for one product, and the business later argues that agreement controls a separate, later dispute.
If SB 82 is applied as written, expect these ripple effects:
More “scope” litigation at the front end. Parties will fight over whether the dispute is about the “use, payment, or provision” of the covered good or service.
More parallel proceedings. A contract claim might be arbitrable, while a later tort or statutory claim could be litigated — potentially producing inefficiency and inconsistent fact findings.
Drafting pressure. Businesses may move toward narrower clauses tied to specific products or services, or separate agreements per product line, rather than one “relationship-wide” clause.
The FAA problem: why preemption challenges are almost guaranteed
SB 82 is already widely viewed as a likely target for FAA preemption challenges. That expectation is not just academic — California has seen repeated arbitration-related statutes challenged (and sometimes enjoined) on FAA grounds, and legislative materials discussing SB 82 anticipated FAA litigation risk and cost.
The FAA, as interpreted by the U.S. Supreme Court, generally prohibits states from:
Singling out arbitration for special burdens, even subtly, and
Imposing rules that “stand as an obstacle” to the FAA’s objectives of enforcing arbitration agreements according to their terms.
SB 82’s supporters will respond that the law is not “anti-arbitration” because it does not ban arbitration — it merely limits how far a consumer contract’s dispute-resolution terms can reach, and it does so by addressing “dispute resolution” generally.
That framing is the core battleground.
The best arguments for SB 82 surviving (the “contract scope” theory)
A strong defense of SB 82 will likely lean on a consent-and-scope narrative:
Arbitration is contractual. The FAA enforces arbitration agreements, but it does not require parties to arbitrate disputes they did not agree to arbitrate.
States retain power over contract formation and interpretation so long as they do not discriminate against arbitration.
SB 82 can be characterized as a consumer-protection rule defining the permissible scope of dispute-resolution clauses in consumer use agreements, akin to regulating non-disparagement clauses, notice provisions, or other terms that legislatures sometimes constrain in consumer contexts.
In other words: SB 82 is not hostile to arbitration; it is hostile to “infinite” scope.
A court inclined to uphold SB 82 might read it as a rule that simply prevents businesses from using one consumer contract as a bridge to force arbitration of disputes arising from other relationships, other products, or later events not fairly tied to the original agreement. The statute’s “cumulative” clause also gestures toward coexistence with other laws and remedies, which defenders will emphasize as evidence it is not trying to rewrite the entire consumer-rights landscape.
The best arguments for striking SB 82 down (the “you can’t ban arbitration of categories of disputes” theory)
The preemption case against SB 82 is also straightforward.
Even though SB 82 uses the label “dispute resolution,” its practical target is arbitration — and courts look to effect, not just labels. Opponents will argue that SB 82:
Prohibits arbitration of a category of disputes (those not tied to “use, payment, or provision”), even when the parties expressly agreed to arbitrate them.
Overrides the parties’ chosen scope in a way that uniquely undermines arbitration’s enforceability — precisely the kind of “obstacle” the Supreme Court has found preempted.
Invites more court involvement at the threshold (scope fights), which can erode arbitration’s efficiency.
Legislative and public messaging about SB 82 — repeatedly describing it as an “end” to “infinite arbitration clauses” — will be used to show the statute’s purpose and practical operation.
A particularly important feature is that SB 82 appears to be mandatory: it does not merely create a default rule that can be contracted around with clearer drafting. It says dispute-resolution terms “shall be limited,” and it makes waiver void. That looks less like interpretation and more like a substantive restriction on what parties may agree to arbitrate.
A likely judicial “middle path”: narrowing construction and severability
Even if SB 82 is challenged immediately, courts may look for off-ramps short of total invalidation.
One plausible path is a narrowing construction:
Treat SB 82 as limiting enforcement only to the extent a dispute-resolution provision exceeds the statutory scope, rather than voiding the entire arbitration agreement.
Compel arbitration of disputes that clearly involve the “use, payment, or provision” of the covered product or service, while allowing litigation for everything else.
This approach reduces the statute’s disruptive impact while still giving it teeth. It also can be framed as compatible with ordinary severability principles in contract law: enforce what is lawful; disregard what is not.
Whether that “middle path” avoids FAA preemption is uncertain. Opponents will say that even partial invalidation still discriminates against arbitration by stripping enforceability from categories of claims the parties selected for arbitration. Supporters will reply that it simply enforces the only scope the legislature permits in consumer use agreements after January 1, 2026.
Practical guidance for businesses (and counsel) before January 1, 2026
Regardless of the ultimate fate of SB 82, it is now a live drafting and litigation risk for any consumer-facing enterprise operating in California.
A few pragmatic steps that tend to reduce pain (and motion practice):
Inventory and map arbitration language across consumer-facing products, apps, websites, and credit programs, identifying clauses that purport to cover “any dispute” across affiliates or future services.
Add disciplined scope language that ties the clause to the “use, payment, or provision” of the specific good, service, money, or credit at issue.
Strengthen severability and fallback provisions so that if a court trims scope, the rest of the clause remains enforceable.
Plan for mixed-forum disputes. If a likely claim set includes both transaction-based issues and later statutory or tort issues, evaluate early whether splitting proceedings is acceptable or whether dispute-resolution design should be rethought.
For consumer-side counsel, SB 82 will become a new lever in arbitrability fights — particularly in cases where the alleged harm feels detached from the transaction that created the consumer relationship.
What this means for dispute resolution professionals
One underappreciated feature of SB 82 is that it may increase “threshold” conflict — the procedural battle over who decides what, and where. Those fights can become expensive and slow, undermining the supposed benefits of either forum.
This is where careful, neutral case management becomes valuable. When parties are confronting scope disputes, parallel proceedings, or complicated severability questions, a disciplined arbitrator or mediator can help the process stay anchored to what matters: identifying the disputes that truly belong together, reducing procedural gamesmanship, and creating space for early resolution.
Nationwide ADR’s work in arbitration and mediation is built for these moments — especially when the law is shifting and parties need a neutral who can keep the process efficient, fair, and resolution-driven.