North Carolina officials asked a federal district court Monday to settle the controversy over its law restricting the restroom use of transgender people — a move that could ultimately shape the future of similar legislation across the country.

Gov. Pat McCrory and Frank Perry, secretary of the North Carolina Department of Public Safety, filed 

a federal lawsuit 
in North Carolina asking a judge to find that the Republican-backed House Bill 2 law does not violate the U.S. Civil Rights Act of 1964.

The lawsuit counters a Justice Department letter sent to North Carolina officials on May 4 that 

threatened a lawsuit 
to ensure that the state complies with the civil rights law. The Justice Department said last week that the state is engaging in a “pattern or practice of discrimination” against transgender state employees that violates Title VII of the federal law, since HB 2 treats them differently than non-transgender employees.

“This is now a national issue that applies to every state and it needs to be resolved at the federal level,” McCrory, a Republican up for re-election this year, said in a written statement. “They are now telling every government agency and every company that employs more than 15 people that men should be allowed to use a women’s locker room, restroom or shower facility.”

The fight could have big 

financial stakes for the state

, as well. At risk is $4.7 billion in annual federal education funding to North Carolina, as well as millions in other federal funds and the cost of litigation, according to a study by the Williams Institute, an independent think tank at the UCLA School of Law that focuses on research on sexual orientation and gender identity law and public policy. 

North Carolina’s lawsuit calls the Justice Department’s claim “a baseless and blatant overreach” that is “wholly inconsistent with the intent of Congress and disregards decades of statutory interpretation by the courts.”

“The overwhelming weight of legal authority recognizes that transgender status is not a protected class under Title VII,” the lawsuit states. “If the United States desires a new protected class under Title VII, it must seek such action by the United States Congress.”

The state says that HB 2, which took effect March 23, does not treat transgender employees differently from non-transgender employees. “All state employees are required to use the bathroom and changing facilities assigned to persons of their same biological sex, regardless of gender identity, or transgendered status,” the lawsuit states.

[Related: In North Carolina, LGBT Bill is Political and Personal]

The Justice Department, however, said in its May 4 letter that denying access to transgender individuals is discriminating against an individual on the basis of sex.

“Under HB 2, non-transgender state employees may access restrooms and changing facilities that are consistent with their gender identity in public buildings, while transgender state employees may not,” the letter from Principal Deputy Assistant Attorney General Vanita Gupta stated.

The Justice Department did not immediately return a request for comment on the lawsuit Monday.

The lawsuit means that federal courts could ultimately determine the future of legislation similar to HB 2, which has quickly become the most contentious front in the civil rights arena since the Supreme Court legalized same-sex marriage nationwide in 2015.

The North Carolina bathroom law has sparked a debate in the presidential race and among civil rights groups, as the nation considers how to define a person’s gender or sex when it comes to use of restrooms or locker rooms.

Other states and local governments have acted or are considering similar laws, and received backlash. In North Carolina, companies like PayPal and Deutsche Bank either canceled or scaled back plans for expansion. The National Basketball Association has threatened to move its 2017 All-Star Game out of Charlotte if changes to the law were not made. Bruce Springsteen also canceled a concert in the state.

Jonathan Miller contributed to this report. 

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