Overview
On December 23, 2025, DHS killed the H-1B lottery. Starting February 2026, the random draw that decided which 85,000 foreign workers could fill specialty occupation jobs will be replaced by a wage-weighted system. A software engineer offered $150,000 gets four entries in the pool; one offered $65,000 gets one. The change ends a lottery that USCIS says was gamed by outsourcing firms flooding the system with multiple registrations for the same workers.
The stakes: 758,994 registrations competed for 85,000 slots in 2024—and nearly 410,000 were duplicate submissions for the same people, up 140% from the year before. Shell companies submitted thousands of entries per worker. Disney laid off American IT staff and made them train H-1B replacements paid 40% less. Now the fight shifts: Will wage-weighting stop the fraud, or just hand more visas to Big Tech while crushing startups that can't match Google's salaries?
Key Indicators
People Involved
Organizations Involved
USCIS runs the H-1B cap lottery and processes petitions for the 85,000 annual visas.
Global IT services company that files thousands of H-1B petitions annually, often for lower-wage positions.
Indian multinational IT services firm and heavy H-1B petitioner, often criticized for wage suppression.
Used H-1B outsourcing to replace American IT workers in 2015, sparking national controversy.
Timeline
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New System Takes Effect
ImplementationWage-weighted selection begins for FY 2027 H-1B cap season.
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Rule Published in Federal Register
RegulationWage-weighted selection rule formally published.
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DHS Announces Wage-Weighted Selection
RegulationFinal rule replaces lottery with wage-based weighting effective Feb 2026.
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Trump Imposes $100,000 H-1B Fee
ExecutiveNew fee targets program abuse; Indian IT stocks plunge.
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Musk-Bannon H-1B Feud
PoliticalMAGA coalition splits over visas; Trump sides with Musk, calls program 'great.'
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FY 2024 Registrations Hit Record
Data758,994 registrations submitted; 54% are duplicates for same workers.
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USCIS Launches Fraud Investigations
EnforcementAgency investigates dozens of companies for coordinated lottery gaming.
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Grassley-Durbin Bill Reintroduced
LegislationH-1B and L-1 Visa Reform Act filed again; dies in committee.
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Trump Bans New H-1B Visas
ExecutiveTemporary ban issued, later struck down by federal courts.
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Electronic Registration Launches
PolicyUSCIS introduces online H-1B lottery registration; fraud explodes.
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Trump's 'Buy American, Hire American'
ExecutiveExecutive order directs agencies to review H-1B program for abuse.
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Workers Sue Disney
LegalLaid-off employees file federal lawsuit alleging illegal replacement with H-1Bs.
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New York Times Exposé
MediaDisney H-1B scandal breaks nationally, triggering congressional scrutiny.
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Disney Layoffs Take Effect
CorporateWorkers laid off after training H-1B replacements paid 40% less.
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Disney Notifies IT Workers of Layoffs
Corporate250 Disney IT staff told they'll be replaced by H-1B workers from outsourcing firms.
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First Grassley-Durbin Reform Bill
LegislationSenators introduce H-1B fraud prevention bill; fails to pass.
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Cap Set at 85,000
LegislationH-1B Visa Reform Act sets 65,000 regular cap plus 20,000 for US master's degrees.
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H-1B Program Created
LegislationImmigration Act of 1990 establishes H-1B visa for specialty occupations.
Scenarios
Big Tech Dominates, Startups Shut Out
Discussed by: Startup founders, immigration attorneys, Federal Register public comments
Google, Meta, and Amazon hoover up visas by offering Level IV salaries ($150K+) that small companies can't match. Startups needing niche AI or cryptography talent get frozen out even when offering competitive equity packages, because cash wage determines lottery weight. Indian IT outsourcers pivot to 'staff augmentation' at higher rates, passing costs to clients. Concentration accelerates: top 50 employers capture 60% of all H-1Bs versus 40% pre-reform. Congress holds hearings on unintended consequences but takes no action. Venture capitalists lobby for carve-outs; none pass.
Fraud Migrates to Wage Inflation
Discussed by: Immigration enforcement officials, fraud investigators, policy analysts
Shell companies and body shops game the new system by listing inflated Level IV wages on registrations, then paying Level I salaries after approval via side agreements or mandatory 'training fee' kickbacks. USCIS scrambles to audit actual compensation post-selection but lacks resources to verify 85,000 petitions annually. Whistleblowers report rampant wage fraud; enforcement lags years behind. Congress debates mandatory wage verification and site inspections. Meanwhile, legitimate employers bear audit burden while bad actors exploit gaps. By 2028, wage fraud eclipses the old lottery manipulation.
Reform Works, Fraud Collapses
Discussed by: DHS officials, immigration reform advocates, mainstream immigration attorneys
Wage-weighting kills the incentive for duplicate registrations: no point filing 10 entries for a Level I worker when one Level IV worker has quadruple the odds. FY 2027 registrations drop 40% to 450,000; duplicates fall to under 5%. Outsourcing firms either raise wages genuinely or exit the H-1B market, shifting to L-1 visas and nearshoring in Mexico. Median H-1B salary climbs from $95,000 to $125,000. Universities and research labs win more visas for PhD scientists. Displacement complaints decrease. Critics still argue the cap should rise or the program should end, but consensus forms: wage-weighting fixed the lottery's worst abuses.
Congressional Overhaul Replaces Executive Fix
Discussed by: Senate immigration hawks, tech industry lobbyists, bipartisan reform groups
Wage-weighting proves a stopgap. In 2026, Republicans control Congress and pass comprehensive H-1B reform increasing the cap to 110,000 but mandating Level III minimum wages, site audits, and criminal penalties for fraud. Democrats extract green card pathways for STEM PhD graduates in exchange. The bill sunsets DHS's wage-weighted rule, replacing it with statutory requirements. Indian IT firms lobby fiercely; tech giants back the compromise. The law passes with 65 Senate votes. By 2027, the H-1B program looks unrecognizable: higher wages, more enforcement, clearer pathways to permanence.
Historical Context
Canada's Points System Shift (2015)
1967-2015What Happened
Canada pioneered points-based immigration in 1967, awarding visas based on education, language, age, and skills without employer sponsorship. For decades, immigrants arrived without job offers, leading to credential mismatches—engineers driving taxis. In 2015, Canada introduced Express Entry, a hybrid model: candidates still need points, but employers select from a pre-approved pool, blending supply-driven points with demand-driven hiring.
Outcome
Short term: Applications spiked; processing times dropped from years to months.
Long term: Immigrant employment outcomes improved significantly as employer involvement ensured job market fit.
Why It's Relevant
The US H-1B wage-weighted system mirrors Canada's evolution: moving from pure randomness toward valuing market signals—here, wages as a proxy for skill and demand—without abandoning employer sponsorship entirely.
Australia's 457 Visa Abuse and Reform (2017)
1996-2018What Happened
Australia's Temporary Skill Shortage (subclass 457) visa allowed employers to sponsor foreign workers. By 2017, widespread abuse emerged: employers sponsoring workers for fake jobs, paying below-market wages, or using 457s to suppress Australian salaries. In April 2017, Prime Minister Malcolm Turnbull abolished the 457 visa, replacing it with the Temporary Skill Shortage (TSS) visa with stricter wage floors, mandatory labor market testing, and occupation lists tied to genuine shortages.
Outcome
Short term: Visa grants dropped 20%; businesses protested disruption.
Long term: Wage protections strengthened; public trust in skilled migration partially restored.
Why It's Relevant
Like the 457 visa, the H-1B lottery faced exploitation by employers seeking cheap labor rather than scarce talent. The US wage-weighted rule parallels Australia's wage floor approach: using compensation as a gatekeeper to prioritize genuine skill needs over cost arbitrage.
Disney's H-1B Layoffs (2015)
2014-2015What Happened
In October 2014, Walt Disney World notified 250 IT workers they'd be laid off and replaced by H-1B workers from Cognizant and HCL—outsourcing firms paying $61,000 versus Disney's $100,000 salaries. Workers spent 90 days training their replacements or lost severance. The scandal broke nationally in June 2015 via the New York Times, sparking lawsuits alleging illegal displacement and congressional hearings on program abuse.
Outcome
Short term: Disney reversed 35 layoffs; lawsuits filed but largely dismissed on standing grounds.
Long term: The case became a rallying cry for H-1B critics, illustrating wage suppression and the gap between statutory intent (fill labor shortages) and corporate practice (cut costs).
Why It's Relevant
The Disney case epitomizes the problem DHS's wage-weighted rule aims to solve: employers using H-1Bs not for specialized talent but for cheaper labor. By prioritizing higher wages, the new system theoretically blocks the cost-cutting outsourcing model that enabled Disney's layoffs.