The legal action, titled Ianelli v. York Space Systems Inc., targets the company alongside its executives and IPO underwriters for alleged violations of the Securities Act. Central to the complaint are claims that York Space launched satellites with incomplete software, jeopardizing critical contracts with the Pentagon’s Space Development Agency. These contracts accounted for 96% of the company's fiscal 2025 revenue.

Scrutiny intensified on May 11, 2026, when Wolfpack Research released a report suggesting that the Pentagon’s decision to cut Tranche 3 funding stemmed from performance failures. Former engineers cited in the report claimed the company deployed hardware without verifying if the software could execute basic missions. As the litigation proceeds, investors with significant losses may petition the court to act as lead plaintiff, a role that involves directing the class action and selecting legal counsel. Robbins Geller Rudman & Dowd LLP is representing the claimants in the case.