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Many theoretical accounts of punishment fail at explaining developments over time, in particular the recent stabilisations and declines in incarceration rates that have been observed for some US states. This research therefore focuses on proximate rather than distal causes and drivers of incarceration, and analyses the policy process rather than structural conditions. The framework that guides our study is based on the concept of ‘critical junctures’ (Soifer 2012) which are historical moments when long-term and transformative change starts, and we define the 2008 financial crisis as one such critical juncture. We analyse the intentions of US states to drive down incarceration through the adoption of legal reforms, focusing on three different types of legal change: reducing prison populations; expanding community corrections including diversion; and supporting re-entry of prisoners. Our results, based on conjunctive case analyses and multivariate models, show that the debt crisis opened up the route towards change, but had no impact on its own. Drivers and ‘spoilers’ differ across the types of legal change, and confirm Zimring’s (2016) analysis for California that change is driven political elites. High incarceration rates and previous punitive laws can act as incentive, whilst the election of judges emerges as a restraint.