Federal court in Texas halts enforcement of anti-money laundering law over 'unprecedented' breadth

The U.S. District Court for the Eastern District of Texas on Tuesday issued a preliminary injunction and nationwide stay that halted the implementation of the Corporate Transparency Act.

The law, which passed in 2021, has faced multiple legal challenges recently and would require millions of small businesses to provide information about their owners to the Treasury Department. 

Judge Jeremy Kernodle found that Congress likely exceeded federal authority in creating and passing the act. 

"The Corporate Transparency Act is unprecedented in its breadth and expands federal power beyond constitutional limits," Kernodle wrote in a 35-page ruling. "It mandates the disclosure of personal information from millions of private entities while intruding on an area of traditional state concern."

The ruling comes after two plaintiffs challenged the law, arguing that it violates the federal Commerce Clause powers under the Constitution. The judge also found that the plaintiffs would be "irreparably harmed" if the law was enacted. 

The Texas Public Policy Foundation (TPPF), which represents the two plaintiffs, celebrated the ruling in a statement shared with Just The News.

"The court's decision affirms the principle that federal government power is not unlimited," TPPF General Counsel Robert Henneke said. "This ruling is a powerful reminder that our Constitution limits federal power to protect individual rights and economic freedom."

The ruling comes after the Justice Department asked the Supreme Court last month to weigh in on the law, arguing that lower courts were the ones that overreached by blocking the law and insisted that the CTA is constitutional.

Misty Severi is a news reporter for Just The News. You can follow her on X for more coverage.