U.S. District Judge Loren AliKhan issued a brief administrative stay, preserving the status quo for at least a few days while further litigation unfolds. The freeze, ordered by the Office of Management and Budget, was set to take effect at 5 p.m. Eastern on Tuesday and would have affected a wide range of federal programs.

Advocacy groups and several states have challenged the directive, calling it an abuse of executive power that would harm nonprofit organizations, small businesses, and state-funded programs.

Arguments From Both Sides

During a hearing in Washington, D.C., Jessica Morton, representing the advocacy groups, argued that the freeze would cause “unequivocal, imminent and serious harm” to grant recipients. She contended that the OMB lacked authority to unilaterally halt federal financial assistance and accused the Trump administration of using the freeze to target programs and organizations based on their alignment with the president’s priorities, including diversity and immigration policies.

In contrast, Daniel Schwei, a Justice Department attorney defending the Trump administration, maintained that many of the groups bringing the lawsuit do not directly receive federal grants and had failed to demonstrate irreparable harm. Schwei also argued that the freeze was limited to programs implicated by Trump’s recent executive orders and was necessary to ensure that federal funds align with his administration’s priorities.

The plaintiffs include the National Council of Nonprofits, the American Public Health Association, Main Street Alliance, and SAGE, along with several states preparing to file separate lawsuits.

State-Level Legal Challenges Coming

New York Attorney General Letitia James announced that New York, California, Massachusetts, and at least 17 other states plan to file lawsuits against the OMB directive. James called the policy “reckless” and “unconstitutional,” asserting that it unlawfully allows the president to selectively enforce laws. She also claimed that states like New York had been blocked from the payment system for Medicaid despite White House assurances that Medicaid was exempt.

“This policy is a callous disregard for the rule of law and a drastic abuse of power that will harm millions of Americans across the country,” said Skye Perryman, president of Democracy Forward, which is representing the plaintiffs.

OMB’s Justification

OMB’s acting director, Matthew Vaeth, defended the freeze, stating that federal money would be put on hold to ensure alignment with Trump’s executive orders, including those targeting diversity, equity, and inclusion programs.

The White House has not provided further clarification on which programs would be affected.

White House press secretary Karoline Leavitt defended the Trump administration’s move in a press conference Tuesday afternoon, pushing back against claims that the order came on short notice.

“There was notice. It was the executive order the president signed. This administration is taking into consideration how hard Americans work and give their tax dollars. DOGE and OMB found $37M that was about to go to the World Health Organization. They also found $50M about to go to fund condoms in Gaza. That is a preposterous waste of money,” Leavitt told reporters.

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What’s Next?

While the administrative stay temporarily blocks the directive, the legal battle over the freeze is far from over.

Advocacy groups, states, and the Trump administration are preparing for further court hearings to determine the directive’s fate.