Washington Takes Aim At California Preferences

California’s “gay certification” contracting scheme is now under federal civil-rights investigation, and the stakes go far beyond one blue-state program.

Story Snapshot

Assistant Attorney General Harmeet Dhillon has opened a Justice Department inquiry into California’s LGBT-owned business contracting program.
The California Public Utilities Commission steers hundreds of millions in utility contracts toward state-certified LGBT-owned firms each year.^[2]
To qualify, owners must prove their sexual orientation or gender identity through documentation, raising serious privacy and fairness concerns.^[2]
Critics say the program punishes straight and faith-based business owners and violates federal bans on discrimination in public contracting.^[1]

Dhillon Targets California’s LGBT Contracting Preferences

Assistant Attorney General for Civil Rights Harmeet Dhillon announced that the Department of Justice is investigating the California Public Utilities Commission’s Supplier Diversity Program after reports that it offers special advantages to firms certified as LGBT-owned.^[1] Dhillon said on social media that the Constitution does not allow government to play favorites based on race or sex, and warned that the Civil Rights Division will take any appropriate action if it finds illegal discrimination in state-directed utility contracting.^[1]

Reporting from City Journal and follow-up coverage say the program pressures major utilities to award roughly six hundred thirty-three million dollars in contracts to LGBT-owned firms once they secure state-recognized “gay certification.”^[1]^[2] Instead of judging bids only on price, quality, and reliability, utilities must track how much they spend on certified LGBT suppliers and file plans to increase that share, creating a system where identity status can tilt the playing field in competitive state-regulated markets.^[2]^[15]

How California’s “Gay-Certification” System Works

The LGBT preference runs through a body called the Supplier Clearinghouse, which the California Public Utilities Commission uses to verify which contractors qualify as women, minority, LGBT, or disabled-owned enterprises.^[16] To receive LGBT certification, owners must prove that at least fifty-one percent of the business is owned and controlled by individuals who identify as LGBT, often by submitting sensitive personal records to show both ownership and sexual orientation or gender identity.^[11]^[12]^[13]^[16]

According to reporting summarized in the Washington Times, the Clearinghouse checklist allows applicants to show their LGBT status with items such as a same-sex marriage certificate, evidence of “family building” with a same-sex partner, or even letters from contacts attesting to the owner’s orientation.^[2] California’s Assembly Bill 1678 folded LGBT-owned firms into the state’s broader supplier diversity law and authorizes criminal penalties of up to one year in jail for business owners who falsely claim to be LGBT to win such contracts.^[2]^[15] That structure effectively makes intimate life details part of the gateway to state-favored economic opportunity.

Why Federal Civil-Rights Officials See a Legal Problem

Dhillon and her team are testing a clear legal theory: government cannot give or withhold economic benefits based on protected traits like sex or sexual orientation without colliding with federal civil-rights guarantees.^[1]^[2] Under long-standing law, states and entities that receive federal funds must certify that their programs do not discriminate, and the Trump Justice Department has already warned that any identity-based preferences tied to contracts or grants may trigger liability, including under the False Claims Act for entities that sign compliance forms while running biased schemes.^[19]^[20]^[21]

The Civil Rights Division under Dhillon has spent the last year challenging policies that assign benefits or burdens based on identity categories, from university diversity plans to corporate hiring and promotion systems.^[19]^[20]^[21] In this case, investigators will likely examine whether non-LGBT business owners, including many family businesses and religious conservatives, lost out on utility work because they could not or would not “prove” their sexual orientation to a government-approved certification body.^[2]^[16] If that pattern is confirmed, the Justice Department could push for changes, settlement agreements, or even litigation to shut down identity-based contract preferences.

Part of a Larger Fight Over DEI and Parental Rights

This new probe into California’s contracting rules fits into a wider push by the Trump administration to roll back what it calls “illegal diversity, equity, and inclusion programs” across schools, universities, and federally connected businesses.^[19]^[20]^[21] In recent months, Dhillon has opened civil-rights investigations into dozens of school districts, including four in Northern California, over policies that teach children about gender ideology and LGBT topics without clear parental notice or opt-out rights.^[3]^[5]^[8]^[18]

𝐂𝐀𝐋𝐈𝐅𝐎𝐑𝐍𝐈𝐀’𝐒 '𝐆𝐀𝐘 𝐂𝐄𝐑𝐓𝐈𝐅𝐈𝐂𝐀𝐓𝐈𝐎𝐍' 𝐏𝐑𝐎𝐆𝐑𝐀𝐌 𝐃𝐈𝐕𝐄𝐑𝐓𝐒 $𝟔𝟑𝟑 𝐌𝐈𝐋𝐋𝐈𝐎𝐍 𝐈𝐍 𝐔𝐓𝐈𝐋𝐈𝐓𝐘 𝐂𝐎𝐍𝐓𝐑𝐀𝐂𝐓𝐒 — 𝐃𝐎𝐉 𝐒𝐀𝐘𝐒 𝐈𝐓’𝐒 𝐈𝐋𝐋𝐄𝐆𝐀𝐋

Christopher Rufo has exposed what California officially calls its Supplier Diversity… pic.twitter.com/VRdEw9K9ZT

— M.A. Rothman (@MichaelARothman) June 18, 2026

In those education cases, the Justice Department has warned that schools receiving public funds must respect parents’ rights to shield their children from lessons that clash with their religious beliefs, and must not keep secrets from parents about a child’s gender identity at school.^[3]^[5]^[8]^[18] Together with the contracting inquiry, these actions show a single theme: federal civil-rights law should protect individuals from identity-based favoritism and hidden ideological agendas, not be twisted to justify new forms of discrimination dressed up as inclusion and equity.^[1]^[2]^[18]^[19]