U.S. Government Regulation of the Railroad

U.S. Government Regulation of the Railroad

3 Min.

During the 19th century, railroad companies were one of the largest and most influential industries in the United States. They played a key role in expanding railways across the country with support from the federal government. In 1971, Amtrak was created to manage interstate passenger rail service. Now, in 2021, an infrastructure bill has granted Amtrak a record $66 billion to improve its infrastructure and modernize its operations.


Since its establishment in February 1827 with the Baltimore & Ohio Railroad, the U.S. rail industry has had a close relationship with the government. During the late-19th and early-20th centuries, railways significantly contributed to the country's economic growth. They not only generated profits and increased share prices but also facilitated the development of other industries and improved transportation for the public. Railways revolutionized access to raw materials and established reliable cross-country transportation. The history of the United States is intertwined with the evolution of the railroad sector.

Railroad-Related Regulations

Government regulation has historically influenced the railroad sector. For example, the Pacific Railroad Acts of 1862 and 1864 provided financial aid to companies based on the distance of track laid towards the west. These acts also created mortgage bonds, with higher values for tracks extended further west. In 1966, the Department of Transportation Act established the Federal Railroad Administration (FRA) to oversee the safety of commercial and passenger trains.

Blue Sky Laws Implementation

During the early 1900s, states implemented blue sky laws to safeguard investors from fraud. These laws mandated that securities issuers and brokerages register and comply with specific reporting obligations. The Uniform Securities Act, initially introduced in 1930 and later revised in 1956, served as a template for states seeking to enact legislation against securities fraud in cases not regulated by the federal government or falling under the jurisdiction of the Securities and Exchange Commission (SEC). Nevertheless, certain securities issuers, such as railroads, are exempt from these state laws.

How the State Supported the Railroads

Amtrak Subsidies

Amtrak has received subsidies ranging from hundreds of millions to billions of dollars since the early 1970s under the Rail Passenger Service Act. The utility it provides as a public service was considered vital to the well-being of the country by Congress and President Nixon.

High-Speed Rail Development

The American Recovery and Reinvestment Act of 2009 allocated $8 billion towards the development of a network of high-speed rail lines connecting major American cities. President Obama supported this initiative and signed it into law.

Federal Railroad Administration

The FRA has a significant budget of approximately $222 million (in 2019) devoted to safety and operations. It investigates railway accidents caused by equipment malfunctions and human error. The FRA's role includes implementing measures to prevent avoidable accidents and safeguard the railway sector.

The 2021 Infrastructure and Jobs Law

The Biden Administration signed the Infrastructure and Jobs Law in 2021, resulting in a $66 billion boost in federal spending for America's railways. This is the largest investment in passenger rail since the creation of Amtrak in 1971. The funds will address repair backlogs, modernize the fleet, reduce trip times, and potentially expand rail lines to new cities and routes across the country.


The relationship between the U.S. government and the railroad industry has been intertwined since the 19th century. Through various regulations and investments, the government has played a significant role in the development and growth of the sector. From the Pacific Railroad Act to the recent infrastructure bill, government regulation has had a significant impact on the industry. With a record $66 billion allocated to Amtrak in the 2021 Infrastructure and Jobs Law, the sector is set to experience a boost in modernization and expansion.


The 2021 Infrastructure and Jobs Law
Blue Sky Laws
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