A recent lawsuit alleges that the Trump administration is illegally tying the distribution of billions in health, education, and research funds to states’ willingness to engage in discriminatory practices against transgender individuals.

The federal government’s stance on transgender issues is not a new development, with President Donald Trump having signed an executive order aimed at “gender ideology” at the start of his second term. However, this stance has faced consistent legal challenges, as emphasized by the plaintiffs in their 61-page complaint.

The lawsuit highlights that legal actions against these anti-transgender funding conditions have seen considerable success. Various groups have contested directives from the Department of Health and Human Services (HHS), resulting in victories in at least three district courts nationwide.

“Despite these court rulings, HHS has not removed the Gender Conditions from its Terms and Conditions or Grants Policy Statements, nor informed State Recipients that these conditions would not be enforced,” the lawsuit states. “Instead, the department has continued to include these conditions in various funding notices.”

Even with these legal setbacks, the administration has introduced a new policy that mirrors previous conditions, impacting funding recipients during the months of October, November, and December 2025, according to the lawsuit.

“Under the direction of Secretary Robert F. Kennedy, Jr., the HHS has swiftly moved to unlawfully enforce the executive order’s discriminatory mandates,” the complaint asserts.

The plaintiffs, led by New York Attorney General Letitia James, say the litigation is specifically aimed at a new HHS policy in which Title IX protections are being read to include part of Trump’s anti-gender ideology executive order. In turn, HHS is now demanding states certify their compliance with anti-transgender language as part and parcel of Title IX compliance. The plaintiffs insist these are not at all the same.

The crux of the new HHS policy is that states, public universities, health agencies, hospitals, and other recipients of federal funds must certify compliance with “the requirements” of the president’s executive order redefining sex in a way that erases the existence of transgender people, according to the plaintiffs.

“Plaintiff States have long certified their compliance with Title IX — it is HHS’s grafting of an executive order into Title IX that Plaintiff States challenge,” the lawsuit goes on. “HHS continues to impose this condition despite orders from three courts enjoining and vacating it as unlawful.”

Under the disputed policy, the agency is threatening to terminate grants, demand repayment of already outlaid and spent funds, and even to pursue civil or criminal enforcement actions against states and groups deemed to be non-compliant, according to the lawsuit.

“The President cannot amend statutory law by executive order, and HHS’s efforts to carry out the directives of the Gender Ideology EO by attempting to shoehorn them into Title IX are unlawful on multiple grounds,” the complaint reads.

The lawsuit is premised on multiple violations of the Administrative Procedure Act (APA), the federal statute governing agency actions.

To that end, the plaintiffs say the contested policy was issued in a manner known as “arbitrary and capricious,” an APA-sourced term of art which refers to agency actions that go too far while simultaneously eschewing formal, mandatory processes.

“The Gender Conditions reverse previous policies — in effect across multiple federal agencies and administrations, including the first Trump administration — recognizing that federal laws prohibiting sex discrimination, including Title IX, protect against discrimination on the basis of gender identity,” the complaint goes on. “To the extent HHS claims that the Gender Ideology EO requires such a change, an executive order is not a sufficient basis for an agency’s adoption of a wholly new policy position, which under the APA must be supported by a reasoned and deliberative process.”

In a related APA challenge to the HHS policy, the plaintiffs say the Trump administration has “attempted to alter the substantive requirements of Title IX” and offer a new rule on which to base enforcement actions. But, the plaintiffs point out, such rules require a process where the government gives notice of the new rule and allows the public to comment during a statutorily-mandated timeframe. And none of that happened here, the lawsuit notes.

Moreover, the Trump administration is effectively trying to rewrite Title IX, a federal statute passed by Congress, by executive decree, the lawsuit says. This effort runs afoul of the U.S. Constitution and several federal statutes, the plaintiffs say.

From the lawsuit, at length:

The Gender Conditions exceed the agency’s statutory authority to impose conditions on funds appropriated by Congress, and are contrary to various laws and constitutional protections, including separation of powers and the Spending Clause of the U.S. Constitution. They are further not in accordance with numerous federal and State constitutional and statutory protections guaranteeing equal rights and dignity to transgender individuals. Because these infirmities render them in excess of HHS’s authority and contrary to law and the Constitution, this Court should hold them unlawful and set them aside under the APA.

“If interpreted how Plaintiff States fear HHS intends, the Gender Conditions are patently contrary to law and exceed the agency’s authority,” the lawsuit goes on. “Defendants do not have the authority to graft new terms onto a federal statute by means of an EO or a funding condition.”

New York is joined by nine other states as plaintiffs in the litigation, which asks a federal court to “hold unlawful” and “set aside” the disputed policy as well as any similar policy. The plaintiffs are also seeking a permanent injunction.

“The federal government is trying to force states to choose between their values and the vital funding their residents depend on,” James said in a press release announcing the litigation. “This policy threatens health care for families, life-saving research, and education programs that help young people thrive in favor of denying the dignity and existence of transgender people. New York will not abandon our values, our laws, and above all, our residents. My office is suing to block this cruel and unjust directive.”