President Donald Trump faced a major legal defeat on Tuesday as a federal appeals court refused to pause a ruling requiring his administration to continue disbursing federal funds, marking his first appellate court loss since returning to office.

The 1st U.S. Circuit Court of Appeals, based in Boston, denied the Justice Department’s request to halt an order issued by U.S. District Judge John McConnell in Rhode Island.

McConnell had ruled on Monday that the Trump administration had defied his earlier January 31 decision by continuing to withhold billions in federal funding.

The Justice Department argued that McConnell’s ruling amounted to “intolerable judicial overreach”, insisting that Trump has the authority to direct federal agencies in line with his policy priorities.

However, the three-judge appellate panel responded with a brief order, stating that it was confident McConnell would address the administration’s concerns and clarify whether his ruling restricted Trump’s executive authority.

The panel consisted of U.S. Circuit Judges David Barron, Lara Montecalvo, and Julie Rikelman, all appointed by Democratic presidents.

While the ruling did not block the administration from further contesting McConnell’s order, the court allowed the Justice Department to submit additional arguments by Thursday.

The White House swiftly condemned the decision, with press secretary Karoline Leavitt calling the injunctions “a continuation of the weaponization of justice against President Trump.”

Trump himself took to social media, claiming:

“Certain activists and highly political judges want us to slow down, or stop” his administration’s efforts to cut government waste.

Billionaire ally Elon Musk echoed Trump’s frustration, writing on X (formerly Twitter):

“Democracy in America is being destroyed by judicial coup.”

Musk also called for the impeachment of a judge in New York who had barred his Department of Government Efficiency (DOGE) from accessing Treasury Department systems.

Trump’s increasingly defiant rhetoric has raised concerns about whether his administration will comply with court rulings.

On Monday, the American Bar Association (ABA) issued a warning, citing “wide-scale affronts to the rule of law itself” under Trump’s leadership.

The lawsuit before Judge McConnell was filed by Democratic attorneys general from 22 states and the District of Columbia, following the White House’s Office of Management and Budget (OMB) announcement of a massive spending freeze affecting trillions of dollars.

Though the OMB later withdrew the memo, McConnell ruled that a temporary restraining order remained necessary, citing evidence that the administration’s funding freeze was still in effect.

As legal battles escalate, Trump’s aggressive push to reshape federal spending and bureaucracy is increasingly being challenged in court, setting the stage for a high-stakes showdown over executive power.