A lawsuit filed in the Eastern District of Texas has upended another Treasury reporting rule—this time targeting residential real estate transactions.

Months after the Treasury announced it would not enforce the Corporate Transparency Act (CTA) against domestic companies, a new challenge—Flowers Title Companies LLC d/b/a East Texas Title Companies v. Bessent—has resulted in a federal court striking down a separate reporting regime focused on cash purchases of residential real estate. By FinCEN’s own calculation, the number of reportable transfers would have been between approximately 800,000 and 850,000 annually, costing between approximately $428.4 and $690.4 million in the first compliance year.

The rule was part of a continued pushed to expand anti-money laundering (AML) reporting. An earlier attempt involved the CTA, which took effect in 2024, and initially required millions of companies to report ownership information to the federal government (after a series of court rulings, Treasury signaled the requirement would only be enforced against foreign companies).

After the CTA, the focus shifted to real estate. Treasury, through the Financial Crimes Enforcement Network (FinCEN), proposed—and later finalized—a rule targeting non-financed (cash) residential real estate transactions, seen as a gap in AML enforcement. Unlike financed deals, which go through regulated financial institutions, all-cash transactions often lack similar oversight. Regulators were increasingly concerned that real estate was being used to hide “dirty money.”

FinCEN—a name you might recognize if you file an FBAR—is a part of the Treasury that enforces the Bank Secrecy Act (BSA) and collects and analyzes financial data to support law enforcement and national security efforts.

What The Rule Required

The final rule required certain real estate professionals—mainly those involved in closings and settlements—to collect and report detailed information about non-financed residential real estate sales to legal entities, trusts, and shell companies. Sales to individuals were excluded.

For the purposes of the rule, “non-financed” transactions include those not involving a traditional mortgage or other credit extension from a regulated financial institution—largely, cash purchases. Transactions financed by private lenders without existing reporting obligations were also included.

The reporting requirement did not have a minimum purchase price threshold, meaning it applied to all transfers, including gifts. The rule required multiple disclosures, including the identities of the reporting person, the buyer (including the owners of an entity or trust) and the seller. Details about the property and the transaction also had to be reported. Reports were due within 30 days of closing, and failure to comply could lead to significant civil penalties and even criminal charges.

If that sounds familiar, it’s because the framework closely resembles the CTA. But FinCEN claimed this rule was different since, instead of ongoing entity reporting (as with the CTA), it was designed as a transaction-specific requirement targeting “high-risk” activity.

The Lawsuit To Stop Enforcement

What defines “high-risk” activity was a key point in a lawsuit challenging the rule. In April 2025, East Texas Title Companies, a family-owned business based in Tyler, Texas—a mid-sized city about an hour and a half southeast of Dallas—filed suit to stop the rule.

Title companies usually help with transferring property ownership during real estate transactions. This can include conducting title searches, resolving title issues, and assisting with real estate closings. In its filings, East Texas Title Companies claimed it handles thousands of such real estate closings each year. Some of those closings involved cash purchases, which would have subjected it to the new Treasury reporting requirement.

The company argued that the rule was burdensome and costly (requiring new compliance systems and staff time), overbroad (capturing routine, legitimate transactions), and unconstitutional (specifically, targeting the Fourth Amendment and separation-of-powers principles). It effectively, they argued, forced private businesses to conduct government surveillance on their clients.

Last year, Luke Wake, an attorney for Pacific Legal Foundation representing East Texas Title Companies pro bono (meaning he represented the company for free), told Forbes that the requirements under the reporting rule were "incredibly sweeping," noting that the authority claimed by FinCEN under the BSA authorizes reporting for "any suspicious transaction relevant to a possible violation of law or regulation." In this case, the "suspicious" element is a cash transaction.

According to authorities, cash purchases of residential real estate are high risk for money laundering. FinCEN Director Andrea Gacki stated last year that it was "an important step toward not only curbing abuse of the U.S. residential real estate sector, but safeguarding our economic and national security."

East Texas Title Companies challenged that characterization in its court filings, arguing that there is nothing inherently suspicious about a buyer using cash. There can be many legitimate reasons for doing so, including saving on lending costs and interest payments.

Such broad language is concerning, the company says, because "there is no limit to what sort of consumer transactions FinCEN might require reporting on" if the agency finds it useful for regulatory purposes. If upheld, the plaintiff argued, FinCEN’s interpretation could allow reporting requirements to expand far beyond real estate—potentially to any transaction the agency deemed useful. Wake warned, "You can hardly move a stone without implicating some sort of regulation."

The Court Strikes Down The Rule

On March 19, 2026, the U.S. District Court for the Eastern District of Texas struck down the rule. The parties had filed cross-motions for summary judgment. Judge Jeremy Kernodle (the same judge involved in some of the CTA rulings) granted summary judgment for the plaintiff, denied FinCEN’s cross-motion, and vacated the rule entirely, ruling that FinCEN exceeded its authority under the BSA.

Summary judgment is a decision issued by a court in favor of one party and against another. In a civil case, it is usually prompted by a pre-trial motion asking for a ruling on the case's merits. It’s granted when there is no dispute over any material fact, and the party making the request is entitled to judgment as a matter of law. At the heart of this decision was a simple question: Are all-cash real estate transactions inherently suspicious?

FinCEN said yes, at least for reporting purposes, citing, among other things, that, “from 2017 to early 2024, approximately 42 percent of non-financed real estate transfers captured by the Residential Real Estate GTOs were conducted by individuals or legal entities on which a SAR [Suspicious Activity Report] has been filed.” Suspicious Activity Reports (SARs) are filed by banks, credit unions, broker-dealers, money services businesses, casinos, and other financial institutions subject to the BSA when they detect transactions that may involve violations of law or attempts to evade reporting requirements. FinCEN claimed this proves that individuals involved in a type of transaction known to facilitate illicit financial activity—the cash purchase of residential real estate—are also engaging in other identified forms of suspicious activity.

The court disagreed. The BSA authorizes reporting of “suspicious” transactions. However, the court found that FinCEN failed to show that non-financed residential real estate transactions, as a category, meet that standard.

“FinCEN’s explanations are vague, conclusory, and unpersuasive,” the court wrote, adding, “The fact that some bad actors have conducted non-financed real estate transactions does not make such transactions categorically ‘suspicious.’”

Where FinCEN Went Too Far

The court identified two key problems with the rule.

First, FinCEN failed to justify why all of these transactions should be considered suspicious. FinCEN argued that the BSA authorizes it to require reporting of certain transactions and to impose related recordkeeping and compliance obligations. Specifically, it pointed to provisions that allow the Treasury to require reports on “suspicious” transactions and mandate procedures designed to prevent money laundering.

The court, however, found that the BSA did not go far enough to justify this rule—especially because FinCEN classified an entire category of transactions (cash real estate deals) as reportable without proving they are inherently suspicious.

Second, FinCEN relied on broader provisions of the BSA to support the rule. Again, the court concluded that those BSA provisions do not authorize a sweeping, standalone reporting regime like the one proposed under the new rule.

Because the rule exceeded FinCEN’s authority, the court vacated it under the Administrative Procedure Act.

Constitutional Questions Left Unanswered

Although East Texas raised constitutional claims in its filings—including arguments based on the non-delegation doctrine and the Fourth Amendment—the court did not address those issues. Instead, it decided the case solely on statutory grounds.

That’s typical, since courts generally avoid constitutional rulings when a case can be decided more narrowly. However, that means that those underlying concerns about the extent of agency power and compelled data collection remain.

Impact On Taxpayers And Treasury

The court ruling applies nationwide. By overturning the rule entirely, the court removed the reporting requirement for all covered businesses, not just the plaintiff (unlike the initial CTA rulings, which only applied to the plaintiffs). This means title companies, settlement agents, and others are no longer required to follow the rule—at least for now.

The decision marks another setback for Treasury’s broader transparency agenda. The courts have already limited the enforcement of the CTA, and this most recent ruling stops a separate effort to collect ownership information relating to real estate deals. Both efforts aimed to fill supposed gaps in AML enforcement. However, Treasury is finding that the courts believe agencies cannot categorize entire categories of routine transactions as suspicious without explicit congressional approval.

Treasury could appeal the decision, though it’s unclear whether this administration would have the appetite to do so. For now, however, the real estate reporting rule has been overturned—and real estate professionals who were preparing to comply are left in a familiar position: waiting to see what happens next.

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