The U.S. Justice Department has rescinded a memo issued by the Obama administration that phased out the use of private contractors to run federal prisons.
In a memo dated Tuesday, Attorney General Jeff Sessions said the Obama policy impaired the government's ability to meet the future needs of the prison system.
The Obama administration said privately operated prisons were less safe and a poor substitute for government-run facilities.
Shares of the two leading U.S. private prison companies gained in after-hours trading, with GEO Group. Inc. up 2.15 percent and CoreCivic, Inc. up 3.44 percent.
Thirteen of the federal government's 146 prisons are privately run. Together, those 13 housed 22,600 inmates as of December 2015, down from about 40,000 in 2014.
The Bureau of Prisons began contracting with private companies in 1997.