Overview
On December 11, President Trump signed a new executive order establishing a task force to create a "national policy framework" for artificial intelligence, working with Congress to align federal priorities. The directive explicitly orders federal agencies to identify and challenge state AI regulations that are deemed inconsistent with emerging federal objectives.
Media commentators and industry observers have quickly characterized this move as a sweeping federal preemption of state AI regulation. For businesses, however, the impact is far more operational than legal — at least for now. While the executive order signals a shift toward deregulation and federal primacy, the legal reality is more nuanced, and companies should not expect immediate uniformity across jurisdictions. Nor does it change the necessity for General Counsels and compliance officers to assess and effectively manage the risks of AI within their company operations.
This alert analyzes the constitutional mechanisms at play and focuses on what this order means for businesses navigating the complex patchwork of AI compliance.
The Preemption Question
To understand the impact of this executive order, one must first revisit the constitutional doctrine of preemption. Under the Supremacy Clause, federal law can supersede or invalidate conflicting state law. Generally, preemption falls into three categories:
- Express Preemption: Congress explicitly states in a statute that federal law overrides state law.
- Implied Preemption: Courts infer preemption because federal regulation in a specific area is so pervasive that "no room" remains for state action (field preemption).
- Conflict Preemption: State law is invalidated because it directly conflicts with federal law, making compliance with both impossible.
The Critical Distinction: Preemption requires federal law. An executive order, while powerful, is an instruction to the executive branch; it is not a statute passed by Congress. Therefore, an executive order alone cannot preempt state legislation. Only Congress can achieve that legal effect. While Congress has recently debated passing legislation to preempt state AI regulations, no such law, nor a broad statute regulating AI, is likely to pass in the near future. The executive order may also be an attempt to keep those conversations at the fore and put pressure on Congress to act.
What the Executive Order Actually Does
If the executive order cannot instantly invalidate state laws, how does it aim to achieve a "national framework"? The text of the order relies on administrative pressure, investigations, and litigation to influence state behavior, rather than statutory supremacy.
Key directives include:
- Creation of an AI Litigation Task Force: The Department of Justice (DOJ) is directed to form a task force specifically to challenge restrictive state AI laws in court, potentially arguing that they burden interstate commerce or conflict with existing federal statutory regimes.
- Evaluation of State Laws on AI: The Commerce Department is tasked with evaluating state AI laws to determine if they align with the new national policy framework. This review may set the stage for additional federal standards or further state-specific challenges.
- Funding as Leverage: Perhaps most consequential for states and companies, the executive order directs federal agencies to use their discretion to condition federal grants and funding on the absence of "restrictive" state AI laws. This puts financial pressure on states to revise or scale back AI requirements to align with federal deregulation, creating uneven regulatory change across the country. Congress took similar action in the 1980s to cause states to adopt a national minimum drinking age. This executive order goes further and envisions that agencies may unilaterally condition grants to achieve AI policy objectives without express direction from Congress.
- Unfair and Deceptive Acts or Practice: The executive order directs the Chairman of the Federal Trade Commission (FTC) to issue a policy statement on the application of the FTC’s unfair and deceptive acts or practices application to AI models.
Key Takeaways for Clients
While the executive order sets the stage for a significant federal-state showdown, it does not immediately erase state-level compliance obligations. Here are some takeaways:
1. State Laws Remain in Effect (For Now)
State AI regulations (such as those in California, Colorado, or New York) remain valid and enforceable until a court rules otherwise or Congress passes preemptive legislation. Companies should not abandon compliance programs built around these state standards based solely on this executive order. Rolling back processes prematurely could expose companies to significant state consequences.
2. Expect Litigation
The establishment of an AI Litigation Task Force confirms that the federal government will be an active participant in challenging state statutes. We expect to see the DOJ intervening in ongoing suits or filing new complaints arguing that specific state mandates obstruct federal policy.
3. Watch the Funding
The leverage applied through federal grants will be the key political mechanism for driving state-level change. States heavily reliant on federal tech or innovation grants should closely monitor shifting requirements as they may be forced to repeal or water down their AI laws to maintain eligibility.
4. The "Signal" vs. The "Law"
For General Counsel and compliance officers, this executive order should be viewed as a political and administrative signal rather than an immediate legal change. It creates an additional friction point between Washington, DC and state capitals. The ultimate boundaries of AI regulation will likely be decided by the courts as they determine whether the federal government's new strategies hold water.
Our team is closely monitoring the formation of the AI Litigation Task Force and emerging federal challenges to state AI laws. We will continue providing updates and strategic guidance as specific state laws become targets of federal action.
