California State University filed suit against the U.S. Department of Education after the agency signaled it might strip federal funds from San José State over the campus’s transgender student‑athlete policies. CSU says the department’s proposed settlement and findings are "not grounded in the facts or the law," calling the move "lawless overreach." San José State President Cynthia Teniente‑Matson has vowed the university will defend its policies and refuse settlement terms that would force changes to campus practice. The department alleges San José State violated Title IX by allowing a transgender woman to compete on a women’s volleyball team; the proposed settlement would require the university to adopt federal definitions of sex and gender and undo awards tied to affected athletes. CSU’s lawsuit frames the Education Department’s action as a broader federal overreach with direct consequences for institutional autonomy and federal funding for public higher education. The case follows a recent pattern of federal enforcement actions tied to campus gender policy and comes as other large public institutions weigh compliance risks and reputational exposure. A court fight could set a binding precedent on the extent of the Education Department’s leverage over campuses and the limits of Title IX enforcement in the current administration.