🐐FinCEN Isn’t Backing Down: Treasury Appeals the Texas Decision Vacating the Real Estate Reporting Rule

The legal fight over FinCEN’s real estate reporting rule just escalated — and the government’s next move tells us a lot about what may happen next.

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Hey Wicked Title folks — Cheryl here.

Well.

That didn’t take long.

On May 12, FinCEN officially appealed the Texas federal court decision that vacated the Residential Real Estate Reporting Rule nationwide.

Translation?

The government is not walking away from this fight.

And honestly, that changes the temperature of this situation quite a bit.

Because up until now, there was still a lingering question hanging in the air:

“Was Treasury going to quietly let this die and come back later with a rewritten version?”

Apparently not.

At least not yet.

The appeal confirms Treasury believes this rule — or at minimum the authority behind it — is important enough to defend aggressively.

And that matters far beyond just this specific version of the rule.

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🐐 Quick Timeline Refresher

If you’ve been following along with our previous coverage, here’s where things currently stand:

• February 2026: Fidelity loses in Florida and appeals.

• March 1, 2026: FinCEN reporting officially goes live.

• March 2026: Puerto Rican privacy groups file suit against FinCEN.

• March 19, 2026: Flowers wins in Texas and the rule is vacated nationwide.

  • FinCEN pauses enforcement while litigation continues.

• April 2026: ALTA issues an open letter requesting significant changes if the rule is rewritten.

• May 11-13, 2026: ALTA heads to Washington, D.C. for Advocacy Summit meetings with lawmakers.

• May 12, 2026: Treasury officially appeals the Flowers decision.

Which means we are now headed toward:

• an active Fifth Circuit fight (Flowers),

• an active Eleventh Circuit fight (Fidelity),

• and potentially conflicting appellate rulings on the exact same regulation.

And that dramatically increases the odds this eventually lands in front of the Supreme Court.

Because this fight is no longer just about one rule.

It’s becoming a fight over how far FinCEN’s authority under the Bank Secrecy Act actually goes.

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Close with Confidence

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The Rule Is Still Vacated… For Now

For the moment, the rule remains vacated nationwide following the Texas decision in Flowers Title Company v. Bessent.

FinCEN itself acknowledged:

• reporting entities are not currently required to file,

• and companies will not face liability for failing to file while the order remains in effect.

So operationally, most companies:

• paused reporting,

• paused intake procedures,

• paused fees,

• paused filing systems,

• and in many cases paused entire implementation workflows.

Even Fidelity reportedly paused implementation after the Flowers ruling.

But “paused” and “dead” are not the same thing.

And Treasury’s appeal makes that distinction very important.

The Most Important Part of the Texas Decision

This is the piece that matters most now that Treasury has appealed.

Judge Jeremy Kernodle’s ruling essentially said:

FinCEN cannot simply declare an entire category of ordinary transactions “suspicious” because criminals sometimes use them.

That is a MUCH bigger statement than:

“this rule is burdensome.”

The court was not criticizing implementation details.

The court was questioning whether FinCEN had the authority to do this in the first place.

Specifically, the judge hammered FinCEN for failing to justify why:

• non-financed residential entity transfers,

• particularly all-cash deals,

• are categorically suspicious enough
  to justify broad mandatory reporting under the Bank Secrecy Act.

And Treasury appealing tells us something very important:

They are not willing to let that limitation on their authority stand unchallenged.

Because if the Fifth Circuit upholds that reasoning?

It could constrain far more than just this one rule.

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Puerto Rico Enters the Fight — And Changes the Narrative: It Isn’t Just a Title Industry Fight Anymore

The Puerto Rico lawsuit is adding an entirely new dimension to the FinCEN fight:

privacy, cybersecurity, and economic impact.

According to reporting from the San Juan Daily Star, several Puerto Rican organizations and privacy advocates are arguing that FinCEN’s Residential Real Estate Rule could severely disrupt the island’s already fragile real estate market while exposing residents to heightened privacy and cybersecurity risks.

And importantly?

This lawsuit is not framed primarily as:

“title companies don’t like compliance.”

Instead, it leans heavily into:

• privacy rights,

• constitutional concerns,

• economic burden,

• and disproportionate impact on Puerto Rico’s housing market.

The plaintiffs argue that requiring extensive beneficial ownership disclosures, taxpayer information, identification documents, and payment details creates significant risks in a jurisdiction already dealing with:

• economic instability,

• housing affordability challenges,

• and ongoing concerns surrounding fraud and identity theft.

The lawsuit also reportedly argues:

• many Puerto Rican transactions rely heavily on cash due to local banking realities,

• family property transfers and informal ownership structures are more common,

• and the rule may disproportionately burden ordinary residents rather than sophisticated criminal actors.

That matters strategically.

Because it broadens the narrative surrounding the rule.

The fight is no longer just:

“title companies don’t want compliance burdens.”

It’s increasingly becoming:

“does this rule create privacy, economic, and operational harm that outweighs the usefulness of the data being collected?”

And combined with:

• the Texas Flowers ruling,

• Fidelity’s Eleventh Circuit appeal,

• and ALTA’s operational concerns,

…the Puerto Rico lawsuit strengthens the perception that opposition to the rule is geographically and politically broadening rather than narrowing.

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FIRPTA Tax Compliance for Non US Persons

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Fidelity’s Appeal Suddenly Makes More Sense

A lot of people initially looked at Fidelity’s appeal and thought:

“Why are they appealing now? The rule was already vacated.”

But Treasury appealing Flowers changes that dynamic completely.

Because now the rule has a real path back.

And if the Fifth Circuit reinstates the rule — even temporarily — Fidelity absolutely wants its challenge still alive in the Eleventh Circuit.

Why?

Because Fidelity is not just fighting this version of the rule anymore.

They’re fighting:

• the scope of FinCEN’s authority,

• the definition of “suspicious,”

• and the precedent future AML rules could rely on.

That distinction matters.

A lot.

What Fidelity likely hopes to gain:

There are several likely strategic motivations.

1. Erase the Florida precedent problem. Right now, FinCEN can point to Florida and say, “A federal court already upheld this.” Fidelity wants that gone.

2. Create appellate authority limiting FinCEN’s BSA power. A win in the Eleventh Circuit could say FinCEN cannot convert a broad class of ordinary real estate transfers into “suspicious transactions” without more. That would matter far beyond the current vacated rule, influencing any future fight at the Supreme Court.

3. Reduce leverage for a quick reinstatement. If FinCEN appeals Flowers and seeks a stay, the existence of an active appeal challenging the opposite Florida ruling helps show the law is unsettled, not cleanly pro-FinCEN.

4. Force a narrower future rule. Not because the appeal directly rewrites anything, but because a Fidelity win could define what FinCEN is not allowed to do next: no nationwide dragnet, no low-threshold reporting class, no broad reliance on GTO data without stronger justification.

For a more detailed breakdown, read:

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Meanwhile, ALTA Is Taking the Fight to Capitol Hill

While the lawsuits continue moving through federal courts, ALTA is also pushing the issue politically during the 2026 ALTA Advocacy Summit in Washington, D.C.

According to ALTA, concerns surrounding the FinCEN rule were one of the core discussion points title professionals planned to bring directly to lawmakers during Capitol Hill Day.

That matters because the industry is no longer treating this as:

• a temporary compliance headache,

• or an isolated lawsuit.

At this point, the strategy appears to be happening on three fronts simultaneously:

• litigation,

• regulatory pressure,

• and congressional education.

And honestly?

That’s probably smart.

Because even if Treasury ultimately salvages some version of this rule in court, political pressure could still shape:

• future amendments,

• implementation timelines,

• enforcement priorities,

• or whether Congress eventually steps in to clarify FinCEN’s authority more explicitly.

In other words:

the courtroom isn’t the only battlefield anymore.

For a more detailed look at ALTA’s position on the FinCEN Rule read:

🐐🎙️ ALTA vs. FinCEN: The Letter, The Data… and The Collision of Reality

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So… What Happens Next?

At this point, there are really three big possibilities.

Scenario 1: Fifth Circuit Upholds Flowers

If the Fifth Circuit upholds the Texas vacatur:

• FinCEN’s authority gets significantly constrained,

• the current rule likely dies permanently,

• and Treasury probably has to go back to the drawing board.

This is probably the scenario most title agents are quietly hoping for.

Scenario 2: Fifth Circuit Reinstates the Rule

If the Fifth Circuit reinstates the rule?

Things could get messy fast.

Because now:

• implementation systems have been paused,

• workflows have partially unraveled,

• and companies may suddenly need to reactivate compliance systems quickly.

This is also why some firms reportedly continued collecting information even after the vacatur.

Because reconstructing beneficial ownership information after closing is operationally ugly.

Scenario 3: Circuit Split

Honestly?

This is starting to feel increasingly plausible.

If:

• the Fifth Circuit sides with Texas,

• and the Eleventh Circuit sides with FinCEN,

then this starts looking VERY Supreme Court-shaped.

Especially given the courts’ growing skepticism toward broad agency interpretation powers in recent years.

FinCEN Thought This Was a Reporting Rule. The Courts May Turn It Into an Agency Power Fight.

If the Fifth and Eleventh Circuits split, this could very realistically end up before the Supreme Court.

While courts historically have given Treasury substantial deference in AML and national security contexts, the current Court has also shown increasing skepticism toward federal agencies broadly expanding their authority without clear congressional authorization.

That matters because the Texas Flowers ruling did not merely argue the rule was burdensome. It questioned whether Congress ever clearly gave FinCEN the authority to impose this kind of sweeping reporting regime in the first place.

Recent Supreme Court decisions involving agencies like the EPA, OSHA, and SEC have repeatedly signaled:

agencies cannot simply discover major new powers inside vague statutory language.

That does not necessarily mean the Court would eliminate AML real estate reporting entirely. But it could mean:

• narrowing FinCEN’s authority,

• requiring clearer congressional authorization,

• or forcing Treasury toward a much more targeted rule.

In other words:

if this reaches SCOTUS, the biggest question may not be:

“Should AML reporting exist?”

It may be:

“Did Congress actually authorize THIS version of it?”

Also check out the insights from Jonathan Wilson at 🦅FinCEN Report, in

🐐🎙️ FinCEN RER Is “Off”… Until It’s Not: What Happens Next and the Reality Title Agents Aren’t Thinking About

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My Current Read

I still do not think the current version of this rule survives fully intact long term.

But Treasury appealing tells us something critical:

They care deeply about preserving the underlying authority.

Which means even if this specific rule eventually changes, narrows, or gets rewritten…

…the broader fight over AML authority in residential real estate is probably just getting started.

At this point, the Emerging Endgame Looks Increasingly Like This:

Least Likely

• Current rule survives entirely unchanged.

Increasingly Plausible

• Rule survives but gets heavily narrowed by appellate courts.

Very Plausible

• FinCEN withdraws/rewrites portions under political and legal pressure.

Also Plausible

• Congress eventually steps in with explicit statutory authority and guardrails.

Because one thing is becoming increasingly obvious:

The scope of FinCEN’s authority under the Bank Secrecy Act is now very much in dispute.

And title agents should not mistake:

“reporting is paused”

for:

“this issue is over.”

Because it very clearly is not.

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