U.S. District Judge John McConnell issued a temporary restraining order preventing the administration from enforcing its halt on aid disbursements, rejecting the Justice Department’s argument that the case was moot after the Office of Management and Budget (OMB) rescinded a memo outlining the freeze. The order will remain in place until further order of the court while the judge considers whether to issue a longer preliminary injunction.

The ruling marks a significant legal setback for President Donald Trump’s early executive actions and is the second court order this week to limit his administration’s ability to freeze federal funds.

A separate judge in Washington, D.C., had already temporarily halted the policy in response to a lawsuit from private organizations, and the Trump administration has asked to dismiss that complaint.

Rescinded Memo Fails to Sway Court

The dispute arose after the White House abruptly announced earlier this week that federal aid disbursements would be frozen pending an internal review.

The move prompted swift litigation from a coalition of 22 states and Washington, D.C., which argued the administration had acted unlawfully and disrupted critical funding streams.

On Wednesday, the OMB withdrew its memo announcing the freeze, but White House press secretary Karoline Leavitt clarified in a post on X that the administration was rescinding “only the memo itself, not the funding pause.”

McConnell took note of that distinction in his ruling, writing that the administration’s position amounted to “a distinction without a difference.”

“The policy has not changed,” said Sarah Rice, an attorney for Rhode Island, during a court hearing Wednesday. “And that policy, to sum it up, is: ‘Freeze first, ask questions later.’ That’s the gravamen of our complaint; that is the source of our harm.”

The Justice Department had argued that without the OMB memo, the states’ motion was no longer a live controversy. Government attorney Daniel Schwei told the court that the states would need to file new legal challenges if they wished to contest the broader effects of Trump’s executive actions.

A 1974 law called the Impoundment Control Act created procedures designed to restrict a president from not spending money appropriated by Congress. Trump, however, has said he believes the president has the power to withhold money if he does not agree.

But McConnell was convinced by the states’ argument that the White House was still moving forward with its policy despite formally discarding the directive.

Immediate Implications and Next Steps

The temporary restraining order blocks the administration from enforcing the freeze while litigation continues. The Justice Department is expected to appeal the ruling, setting up an early test of the judiciary’s willingness to rein in Trump’s executive orders.

The case is one of around 20 legal challenges to Trump’s use of executive authority since his return to office and could set the stage for broader court battles over his policy agenda.