As part of the global War on Terror, governments, including in Australia, have increasingly encouraged teachers to spot students â€˜at riskâ€™ of radicalisation, thereby turning schools into sites of surveillance. Despite their important intended goal, these programs have been criticised for leading to over-reporting, misinterpretation, and the stigmatisation of Muslim students who have been disproportionately affected by such surveillance practices. In a climate of Islamophobic suspicion that constructs Muslims as â€˜potential terroristsâ€™, such outcomes are not surprising, leaving young Muslims vulnerable to discrimination and stereotyping. This article provides a critical reading of Complainant 201822 v Australian Capital Territory (Represented by the Education Directorate) concerning a young Muslim student who was wrongly reported by his school to public authorities due to his supposedly suspicious behaviour. Using the decision as a case study, the article discusses how young Australian Muslims have been caught in a vicious cycle in which anti-terror laws, policing, and surveillance foster their stereotyping as â€˜potential terroristsâ€™. At the same time, the decision illustrates how the law offers little protection against the significant harms caused by this manifestation of systemic Islamophobia.