On one level, the case is about whether civil rights laws that Congress enacted decades ago envisioned such protections of transgender rights.

But underlying the complaint are also fundamental questions about the discretionary power of federal agencies, checks and balances and the difference between clarifying laws and rules and writing new ones.

The Department of Justice says it’s imposed no new law or directive. It argues, instead, that it merely issued non-binding guidance packaged in what’s called a “Dear Colleague” letter, which it posted online earlier this month. The administration has yet to take legal action against states that flout the policy.

An 11-state coalition led by Texas argues that the guidance should be surrounded with scare quotes. Hanging over school districts in those states, they argue, is the threat of litigation and the loss of federal funding if they fail to fall in line.

“The [Dear Colleague] letter concerns ‘Title IX obligations regarding transgender students’ and provides insight as to the manner in which DOE and DOJ will evaluate how schools ‘are complying with their legal obligations’ (emphasis added),” states the complaint, which accuses the Obama administration of trying to “rewrite Title IX by executive fiat.”

The question of when guidance is really guidance is a crucial distinction here.

That’s largely due to a 70-year-old federal rule-making law called the Administrative Procedure Act, which governs what federal agencies are allowed to do — and how. Under the APA, “substantive rules” must follow a “notice and comment” process that gives the public a chance to weigh in before the rules become final. Regulations, unlike informal guidances, are also subject to tighter standards of judicial review to determine if they’re “arbitrary and capricious” — and as such unlawful.

The process required of informal guidance is exactly that — informal, as long as the statute leaves room for interpretation and delegates power to the agency over the specific issue in question.

So what’s the difference between guidance and a regulation? From immigration, to banking to labor law, that’s been a subject of much contention.

Judges have tried to answer it. The Supreme Court recently gave more deference to federal agencies with a decision last year that held that no formal rule-making process is needed when they’re interpreting a rule they enforce or adjusting that interpretation. Making an entirely new rule, however, still requires going through all of the hurdles laid out by the APA.

Thing is, it’s often hard to tell the difference between an interpretation of an existing rule and something that looks more like a new rule altogether. Because that distinction is often blurry, says New York Credit Union Association deputy general counsel Henry Meier, “agencies have become increasingly enamored” of issuing guidance, rather than new rules from whole cloth.

“After all,” he wrote in an article on the subject, “it is much easier and quicker to publish a document than go through the cumbersome process of publishing a proposed regulation reacting to comments, and then promulgating a final mandate.”

Vaguely worded laws passed by Congress also add to the confusion, he said.

The issue flared up five years ago when the U.S. Education Department’s Office for Civil Rights circulated a “Dear Colleague” letter to college campuses about their obligations in dealing with sexual misconduct and harassment complaints from students.

In a recent op-ed, Harvard law professor Jacob E. Gersen described it as an example of stealth regulation. “[T]his letter was one of those nonbinding documents. Yet it contains obligations that exist nowhere else in federal law,” the professor wrote.

With respect to the transgender policy, the Obama administration disputes that it’s promulgating any sea change.

“This guidance does not add requirements to applicable law, but provides information and examples to inform recipients about how the Departments evaluate whether covered entities are complying with their legal obligations,” its letter states.