Letitia James sues HHS over tying federal funds to transgender policy

New York Attorney General Letitia James and a coalition of state attorneys general sued the federal government Tuesday, claiming a new Department of Health and Human Services (HHS) policy illegally pressures states to discriminate against transgender people or risk losing critical funding.

The lawsuit challenges a new federal policy that conditions billions of dollars in health, education and research funding on compliance with a presidential executive order regarding sex and gender-related treatments.

"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 statement. "This policy threatens healthcare for families, life-saving research, and education programs that help young people thrive in favor of denying the dignity and existence of transgender people."

Last month, HHS announced a sweeping package of proposed regulatory actions to end "sex-rejecting procedures" on minors as part of President Donald Trump's January 2025 executive order calling on the department to protect children from "chemical and surgical mutilation."

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The HHS declaration warned doctors that they could be excluded from federal health programs, including Medicare and Medicaid, if they provide treatments such as puberty blockers, hormone therapy and gender surgeries to minors.

Failure to comply with the policy could lead to termination of grants, repayment of funds already spent, or potential civil or criminal penalties, according to the lawsuit.

The attorneys general argue that HHS lacks the authority to impose the conditions and is attempting to rewrite federal law through executive action.

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The lawsuit claims that HHS has failed to clearly define what compliance requires, leaving recipients uncertain about which policies or actions could jeopardize funding.

James and the coalition further argue that the executive order conflicts with laws in several states that protect transgender individuals from discrimination.

The lawsuit asks a federal court to declare the policy unlawful and block HHS from enforcing it, allowing states and institutions to continue receiving federal funding without changing existing policies.

Fox News Digital’s Emma Colton and Landon Mion contributed to this report.