Supreme Court Reinstates Anti-Money Laundering Law Amid Legal Battle
The U.S. Supreme Court has agreed to temporarily reinstate the Corporate Transparency Act (CTA), a federal anti-money laundering law, while a legal challenge continues in a lower court. This decision, which comes at the request of the federal government, puts a hold on a lower court’s injunction that had blocked the enforcement of the law. Notably, Justice Ketanji Brown Jackson was the lone dissenter in the ruling.
Supreme Court’s Emergency Stay Keeps CTA in Place
The Biden-era Justice Department petitioned the Supreme Court late last month to reinstate the CTA, and the court responded swiftly, issuing its ruling just three days after President Trump’s inauguration. While Trump’s Justice Department did not withdraw the application, he had previously opposed the CTA during his first term.
Originally passed as part of the annual defense bill in early 2021, the CTA requires millions of small business owners to disclose personal details—including birth dates and addresses—to the Financial Crimes Enforcement Network (FinCEN). The law was designed to combat financial crimes such as money laundering and fraud. However, its implementation has sparked controversy, particularly among business groups and anti-regulatory advocates, who argue that the measure is overly invasive and burdensome.
Legal Battle Heads to the 5th Circuit Court of Appeals
With the Supreme Court’s stay in place, the case will now proceed to the 5th U.S. Circuit Court of Appeals. The Justice Department will continue its defense of the CTA, asserting that Congress has the constitutional authority to regulate interstate commerce. In the meantime, the stay allows officials to begin enforcing the law, which was originally set to take effect this month.
Justice Jackson, appointed by former President Biden, dissented in the ruling, contending that the government failed to demonstrate “sufficient exigency” to warrant immediate Supreme Court intervention.
“The Government deferred implementation on its own accord—setting an enforcement date of nearly four years after Congress enacted the law—despite the fact that the harms it now says warrant our involvement were likely to occur during that period,” she wrote in her dissent. “The Government has provided no indication that injury of a more serious or significant nature would result if the Act’s implementation is further delayed while the litigation proceeds in the lower courts. I would therefore deny the application and permit the appellate process to run its course.”
DOJ Argues Delaying CTA Would Cause Irreparable Harm
The Justice Department countered that delaying the law’s implementation would cause substantial harm, both domestically and internationally. Former Solicitor General Elizabeth Prelogar outlined several key arguments in the government’s application to the Supreme Court:
- National Security Concerns: The DOJ claims that suspending the CTA impedes efforts to prevent financial crimes and safeguard national security.
- International Implications: The law is essential for the U.S. to maintain its leadership in urging other nations to strengthen their anti-money laundering policies.
- Disruption of Implementation: Pausing the law’s enforcement disrupts the government’s ongoing efforts to ensure compliance and transparency within the financial sector.
Despite these arguments, the Supreme Court rejected an alternative proposal from Prelogar that would have placed the case on the justices’ regular docket. This would have allowed the Court to examine the broader question of whether federal district judges have the authority to issue nationwide injunctions blocking laws—a legal tactic increasingly used to challenge regulations from both Democratic and Republican administrations.
Universal Injunctions: A Point of Debate
The issue of nationwide injunctions has become a significant topic in legal circles, with some justices questioning whether lower courts should have the power to block federal laws nationwide. Justice Neil Gorsuch, Trump’s first Supreme Court appointee, expressed his concerns in a brief concurrence:
“I agree with the Court that the government is entitled to a stay of the district court’s universal injunction. I would, however, go a step further and, as the government suggests, take this case now to resolve definitively the question whether a district court may issue universal injunctive relief.”
This sentiment echoes a broader debate over whether single federal judges should have the power to halt laws across the entire country.
Origins of the Case: Who Is Challenging the CTA?
The legal battle over the CTA began when a coalition of plaintiffs—including a firearms dealer, a dairy farm, an information technology company, one of its owners, the National Federation of Independent Business (NFIB), and the Libertarian Party of Mississippi—filed a lawsuit arguing that the law exceeds Congress’s constitutional authority. The plaintiffs claim that the CTA unfairly burdens small businesses while infringing on privacy rights.
Conclusion: What Comes Next?
With the Supreme Court’s emergency stay in place, the CTA remains active while the legal challenge continues in the 5th Circuit. The outcome of this case could have major implications not only for business owners but also for the future of federal regulatory authority and the use of nationwide injunctions in legal battles.
As the case progresses, business groups, privacy advocates, and lawmakers will be closely watching how the courts rule on the constitutionality of the CTA and its broader implications for financial transparency and regulatory power in the United States.