Reversing a sweeping injunction, the Second Circuit gave the Justice Department a green light Wednesday to withhold funding from New York City and seven states in retaliation for their sanctuary policies on immigration.

"The case implicates several of the most divisive issues confronting our country and, consequently, filling daily news headlines: national immigration policy, the enforcement of immigration laws, the status of illegal aliens in this country, and the ability of states and localities to adopt policies on such matters contrary to, or at odds with, those of the federal government," wrote U.S. Circuit Judge Reena Raggi, a George W. Bush appointee, on behalf of a unanimous three-judge panel.