On December 11, by an Executive Order titled “Ensuring a National Policy Framework for Artificial Intelligence” (the Order), the White House announced a federal push to reduce state-by-state artificial intelligence (AI) regulations and to promote a national policy of a single “minimally burdensome” framework for AI regulation. While the Order does not automatically invalidate any state AI laws, it directs federal regulators to challenge and preempt state laws that the administration views as obstructive to AI innovation and discourages state legislatures from passing new laws that might be challenged. This Order creates the conditions for an immediate conflict between federal and state approaches to AI regulation, with significant implications for technology companies, AI developers and deployers, as well as organizations subject to emerging state AI requirements.
Key Elements of the Order
- AI Litigation Task Force: The Attorney General must establish an AI Litigation Task Force within 30 days of the date of the Order to challenge state AI laws deemed inconsistent with the Order’s policy. The Task Force is directed to bring actions on grounds including unconstitutional regulation of interstate commerce, preemption by existing federal regulations, and any other appropriate legal theories.
- Evaluation of State AI Laws: Within 90 days, the Department of Commerce must publish an evaluation identifying laws that require AI models to alter their truthful outputs, compel AI developers or deployers to disclose or report information in a manner that would violate the First Amendment, and any other “onerous” state AI laws that conflict with the Order’s policy. These identified laws must then be referred to the Task Force for potential litigation.
- Restrictions on State Funding: States with AI laws conflicting with the national policy risk losing access to federal non-deployment funds under the Broadband Equity Access and Deployment (BEAD) Program. The Order also directs federal agencies to review their discretionary grant programs and consider conditioning grant awards on states’ committing to refrain from enforcing AI laws that conflict with the Order’s policy.
- Development of Federal AI Standards: The Federal Trade Commission (FTC) must issue, within 90 days, a policy statement explaining how the Federal Trade Commission Act’s prohibition on unfair and deceptive acts applies to AI models, and how it preempts state laws that require the alteration of truthful model outputs. Separately, within 90 days of the Department of Commerce’s publication identifying state AI laws for the Task Force to target, the Federal Communications Commission (FCC) must initiate a proceeding to consider adopting a federal reporting and disclosure standard for AI models that would preempt conflicting state regulatory regimes.
What State Laws Are Impacted?
The Department of Commerce is tasked with identifying laws that the administration considers to be “onerous” or conflicting with a “minimally burdensome” national framework; however, the Colorado Artificial Intelligence Act was specifically identified in the Order as problematic in the administration’s view due to its ban on “algorithmic discrimination.” President Trump also referenced AI laws in California, Illinois and New York in the signing ceremony for the Order. The Order creates uncertainty for these states and others that have enacted AI laws or that are considering such laws in upcoming legislative sessions.
On the other hand, the Order contemplates legislative proposals that would not preempt state laws in specified carve-out areas, including child safety protections, AI compute and data center infrastructure, and state procurement and use of AI, signaling that some state regulatory space will remain.
Going Forward
Companies should prepare for evolving and potentially conflicting AI compliance environments as federal preemption efforts proceed, while state AI obligations remain effective until otherwise invalidated by the regulatory efforts of this Order. In the short term, litigation is likely on two tracks: federal challenges to state AI laws under the AI Litigation Task Force, as well as potential state or private challenges to federal actions implementing the Order. In the long term, companies should anticipate FTC and FCC actions that could reshape disclosure and reporting expectations regarding AI systems.
Organizations developing or deploying AI systems should continue to comply with applicable state AI obligations, evaluate where those requirements may conflict with forthcoming federal regulatory actions, and assess the risk of policy shifts that could reduce or eliminate the need to comply with certain state regulations. Finally, companies should also monitor potential carve-out areas, where state regulations are more likely to persist alongside any national framework, and plan governance and product strategies accordingly.
The Bass, Berry & Sims AI practice is closely monitoring these developments. Please contact one of the authors if you have any questions regarding the Order or how it may impact your business.