The states filed a complaint in a federal court in Amarillo, Texas, on Thursday arguing that the rule finalized in November will lead many retirement plans to focus on a social agenda rather than long-term financial stability for investors.
The rule, which takes effect on Monday, reverses restrictions on socially conscious investing that were adopted by the Trump administration.
The states in Thursday's lawsuit said the new rule fails to justify the departure from Trump-era regulations, in violation of the federal law governing rulemaking.
And, the states said, it violates the U.S. law that regulates employee benefit plans by failing to protect retirement assets.
The case is Utah v. Walsh, U.S. District Court for the Northern District of Texas, No.