North Carolina’s new law which voided local laws protecting LGBT people could lose the state federal funding.

The Obama administration on Friday said it was considering whether the law makes the state ineligible for federal funding constituting billions of dollars.

The federal government is not the first to threaten to cut off funding or to use finance to push the state to repeal the new law.

Earlier this week, GV, formerly known as Google Ventures, joined hundreds of companies urging the repeal.

The $2.4 billion fund also banned investment in North Carolina.

The threat from the Obama administration could put the funds for schools, highways and housing.

But Governor McCrory, who eagerly signed the bill after it was passed in a special session which lasted just hours, had told residents that the law would not affect federal funding.

The Obama administration would not need to take North Carolina to court in order to stop funding, but it is expected that the move would lead to a court battle.

The secretary of transportation Anthony Foxx on Tuesday suggested a review of federal funding which provides $1 billion to North Carolina for transportation.

The department of education on Friday also said it was re-evaluating its funding, and would not hesitate to do so “if students’ civil rights are being violated”.

The Department of Housing and Urban Development also said it was evaluating its funding.

Measures have been used by the federal government to convince several states to rethink laws.

If the administration decides to take this route, the battle over the funding could be drawn out.

In addition to GV, New Jersey’s Braeburn Pharmaceuticals earlier this week said it is “reevaluating our options on the recent, unjust legislation”, deciding whether to build the $20 million manufacturing and research base in Durham County.

If Braeburn pulls the factory, it will take with it the 50 jobs, paying an average of $76,000 each.

Governor McCrory sat down with human rights activist earlier this week who brought with them a HRC letter signed by over 100 business leaders.

The governor “appreciated the opportunity to sit down and deal with these complex issues through conversation and dialogue as opposed to political threats and economic retaliation,” his spokesman, Josh Ellis, said in a statement.

Also yesterday it was announced that County Clerk-turned-jailbird Kim Davis’ lawyers from the Liberty Counsel had offered to defend the law, as the state’s Attorney General said he thought it was unlawful.

The new law, signed into law by Republican Governor Pat McCrory, bans transgender students in public schools from using their preferred bathroom.

McCrory’s decision has attracted a legal challenge as well as a growing boycott of the state – with two of the largest cities in the US opting to ban travel to the North Carolina.

In close succession, the Mayor of San Francisco Ed Lee, Mayor of New York City Bill de Blasio and New York Governor Andrew Cuomo announced travel bans.

Davis, who served five days in jail last year for refusing to allow gay couples to marry, shocked opponents this year when she came out against proposals to segregate Kentucky’s marriage licences.