A federal appeals court ruled on Friday that House Democrats can proceed with a lawsuit over President Trump’s diversion of $2.5 billion in Pentagon funding to build a U.S.-Mexico border wall.

In a 7-2 decision, the D.C. Circuit Court of Appeals ruled that lawmakers have the legal right to sue the administration over a financing maneuver that a separate California-based federal appeals court found to be an illegal encroachment of Congress's power of the purse.

The Friday ruling was seen as an endorsement of Congress’s right to pursue legal action to enforce its authority over federal appropriations. But it is unclear what practical effect it would have if Democrats ultimately prevail in their lawsuit.

The Supreme Court has allowed the Trump administration to continue using the defense funds amid ongoing litigation, despite the California-based court's ruling that the scheme is unconstitutional.

Disputes over Trump's financing tactic arose early last year after he declared a national emergency at the southern border in an effort to free up additional funding for his signature project. Trump’s move came after a congressional spending bill allocated some $1.3 billion for border security, which fell far short of the nearly $5 billion Trump said was needed to complete the border wall.

Trump then reallocated $2.5 billion in funding that Congress appropriated for defense and military uses, which sparked multiple lawsuits.

A federal district court in California last year temporarily halted the use of the reappropriated funds. But the Supreme Court in July 2019 stayed that order, allowing the administration to use defense funds for the construction project while the appeals process plays out.

On appeal, the 9th Circuit Court of Appeals in California last month ruled against Trump’s financing maneuver. A divided three-judge panel found that the administration had violated the Appropriations Clause of the Constitution, which gives Congress the exclusive power of the purse.

But the Supreme Court in a 5-4 ruling last week declined to let the 9th Circuit’s decision take effect.

Justice Stephen Breyer, writing in dissent on behalf of the court’s four-member liberal wing, said he feared the majority’s ruling “may operate, in effect, as a final judgment.”

Meanwhile, the related challenge initiated by House Democrats last year followed a different trajectory through the federal courts in D.C. That case had been focused on a more preliminary question concerning the separation of powers, which the D.C. Circuit’s Friday decision appeared to resolve by ruling that Democrats were not barred from pursuing legal action against the administration.

The case will proceed before a three-judge panel of the D.C. Circuit. The panel will be guided by a separate Friday decision by the full D.C. Circuit Court, which ruled that the Democratic-led House has the right to enforce its subpoenas in court for the testimony of former White House counsel Don McGahn.