Trump AI Executive Order Targets State Regulatory Overreach To Protect National Markets
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On December 11, President Donald Trump issued a new executive order (EO) on “Ensuring a National Policy Framework for Artificial Intelligence (AI)” to address the rapid proliferation of state and local AI rules across the nation.
To win the AI revolution, the EO argues, “United States AI companies must be free to innovate without cumbersome regulation. But excessive state regulation thwarts this imperative.” It warns that “State-by-State regulation by definition creates a patchwork of 50 different regulatory regimes that makes compliance more challenging, particularly for start-ups,” and creates other problems because such rules “sometimes impermissibly regulate beyond State borders, impinging on interstate commerce.”
President Trump is correct. Compounding state AI mandates threaten to create a confusing and costly regulatory situation for this strategically important sector and could unduly burden smaller innovators in particular. Preemption of such laws has been a hot topic over the past year, but Congress has not yet been able to formulate a national policy framework that would address this growing patchwork and offer a more harmonized approach to American AI policy.
The new EO represents an attempt by the Trump administration to do what it can in the short term to discourage state and local regulatory overreach and safeguard American AI innovation and leadership going forward. “Until such a national standard exists,” the president states in the EO, “it is imperative that my Administration takes action to check the most onerous and excessive laws emerging from the States that threaten to stymie innovation.”
The EO’s overarching policy directive to the executive branch is, “to sustain and enhance the United States’ global AI dominance through a minimally burdensome national policy framework for AI.” Pursuant to that objective, the EO directs the Attorney General to create a new “AI Litigation Task Force” that will challenge State AI laws inconsistent with the policy vision established by the order. It also instructs the Secretary of Commerce to work with other offices to “publish an evaluation of existing State AI laws that identifies onerous laws that conflict with the policy set forth” in the EO.
The EO also includes new responsibilities for the Federal Communications Commission and the Federal Trade Commission to assist in examining state laws that contradict the national policy objectives established in the order. Finally, the EO says that states could lose access to federal Broadband Equity Access and Deployment (BEAD) funds if they impose burdensome AI laws or fragmented policies that undermine BEAD-funded broadband deployments.
While Congress must step up and create an AI policy framework that addresses the federal-state balance of powers, in the meantime, the new White House EO can at least put some partial guardrails on excessive state regulation that threatens interstate algorithmic commerce and speech. Some analysts argue that, absent any national policy framework, AI will become “the most heavily regulated nascent, general-purpose consumer technology in modern history.” Policymakers must avoid that result if they want to ensure America remains a leader in cutting-edge AI innovation as the global race for computational supremacy heats up with China.
How We Got Here
Three years ago, AI policy was barely on the political radar screen. Following OpenAI’s launch of ChatGPT in November 2022, however, interest in the governance of AI systems grew rapidly at all levels of government, with much of it being highly regulatory in character. State proposals began growing at a more rapid pace in 2024 and then exploded in 2025. One tracking system counts almost 1,200 AI-related bills total. This represents an unprecedented degree of political interest in any emerging technology.
Many state AI proposals are becoming law and some large activist-minded states—such as California, New York, Illinois, and Colorado—are advancing particularly aggressive regulatory measures. In the absence of any federal limits on parochial regulatory activity, firms will need to comply with a confusing crazy-quilt of policies. Axios warns of a coming “anti-AI socialist scenario” among many blue states and cities, with liberal lawmakers advancing far-reaching mandates that could have extraterritorial effects and slow AI innovation and investment nationwide.
California is poised to play an outsized role in dictating national outcomes in the absence of any federal limits on state AI regulation. The danger of the so-called “Sacramento effect” coming to AI markets explains why Congress has held hearings investigating the potential “Californication” of AI policy. Likewise, as President Trump has previously warned, “if you are operating under 50 different sets of state laws, the most restrictive state of all will be the one that rules.” “California writes the playbook for AI regulation” if the federal government remains silent, one analyst concludes.
Unfortunately, Congress has thus far failed to take action, and an attempt to fashion a 10-year pause on state and local AI-specific regulatory activity this summer failed on the Senate floor, even after a compromise was brokered to save it. Meanwhile, the Trump administration has issued a series of executive orders, policy statements, and a comprehensive “AI Action Plan,” to establish a “try-first” policy framework for accelerating America’s algorithmic capabilities and squaring off against China in the growing “AI Cold War.”
Absent a federal framework, state lawmakers “say they feel even more emboldened,” and are now “retooling as they prepare for another round of fights over artificial intelligence regulation in the new year,” notes one reporter.
The Need for a More Simple and Coherent Policy Approach
These developments set the stage for President Trump’s new EO as a way to somewhat limit the damage of an incoherent 50-state system of conflicting AI policies, which could undermine the administration’s AI policy goals and counter other national development and security priorities. Recent R Street analysis and congressional testimony identified how the proliferating patchwork of state and local AI-related regulations could undermine (1) ongoing investment and competition; (2) life-enriching innovations; and (3) geopolitical strength and security.
Over the past three decades, America became the leader in digital innovation thanks to a bipartisan policy framework Congress and the Clinton administration created in the 1990s. The most important attributes of U.S. computing and internet policy during this period is that it has been (1) characterized by flexible, iterative, and light-touch policies, and (2) primarily national in character.
Prior to the birth of the internet and online platforms, state governments and their public utility commissions had created many convoluted, competition-restricting licensing rules and other regulations. Congress and the Clinton administration rejected that policy model for the internet. Instead of having 50 different State Computing Commissions or overlapping internet regulatory bureaucracies, America’s new approach was rooted in a nationwide freedom to innovate and operate freely across borders. In fact, a major goal of this policy vision was, to the maximum extent possible, ensuring a “borderless internet” such that online commerce and speech could flow freely. The plan generally worked and it served as the policy foundation for the greatest explosion of commercial and speech activity in history.
Alas, America now runs the risk of turning back the clock and reverting to the broken regulatory model of the past by allowing the proliferation of cumbersome, permission slip-based policies that undermine national innovation and AI opportunity.
How the New EO Can Help Counter a Confusing, Costly State AI Patchwork
Eventually, Congress must assert its constitutional authority to oversee interstate algorithmic commerce and address the federal-state balance of responsibility on AI governance. As Congress designs such a policy framework, the Trump administration can use its new EO to address some of the more excessive state and local laws that have extraterritorial impact or counter national AI priorities in various ways.
This summer, the Department of Justice and the National Economic Council solicited public comments in a proceeding on ”State Laws Having Significant Adverse Effects on the National Economy or Significant Adverse Effects on Interstate Commerce.” The many submissions in the proceeding identified a long list of potentially problematic existing or proposed state barriers to nationwide AI innovation, investment, and competition. Those submissions can serve as the starting point for the work of the new AI Litigation Task Force.
To be clear, the EO is not one single rule for AI, or the nationalization of all AI policy. State governments can still pass and enforce generally applicable laws, such as consumer protection standards, civil rights laws, educational policies, and other so-called police powers. Moreover, the EO directs White House tech policy officials to work with Congress to “prepare a legislative recommendation establishing a uniform Federal policy framework for AI that preempts State AI laws that conflict with the policy set forth in this order,” but also makes it clear that there should be some limits on how far the federal government goes to preempt state policies in some areas, including child safety protections and data center infrastructure determinations.
Importantly, while the White House is correct to encourage a greater degree of federal oversight of interstate AI markets, this process should not be used by some federal agencies to expand regulatory authority in their fields without clear statutory authorization from Congress. While the threat of state regulatory overreach in national AI markets is real, some federal agencies (such as the Food and Drug Administration and the Federal Aviation Administration) are already overregulating emerging AI technologies or autonomous systems. While the new AI Litigation Task Force and various federal agencies can play an important role in safeguarding interstate commerce and national interests, they must not go beyond that or use the process to impose any new obligations on state and local governments.
Until Congress acts to develop a more harmonized approach, however, the new White House EO represents a welcome development that can help recalibrate AI policy before a costly patchwork of overzealous state mandates undermines interstate innovation, investment, and competition in this vital national sector.