TLDRs:
- Trump considers executive order challenging state AI rules, citing federal conflict and commerce concerns.
- Draft proposes AI Litigation Task Force and potential broadband funding penalties for states.
- Over 600 AI bills introduced in 2024 show states moving faster than Congress.
- AI compliance firms benefit as patchwork of state regulations creates demand for guidance.
U.S. President Donald Trump is reportedly considering an executive order aimed at overriding state-level artificial intelligence (AI) regulations, according to a draft reviewed by Reuters.
The move comes amid a surge of state legislation governing AI technology and concerns from the federal government about regulatory conflicts affecting interstate commerce.
The draft executive order would direct Attorney General Pam Bondi to establish an “AI Litigation Task Force” charged with challenging state AI rules. Officials argue that some state regulations may hinder innovation, create inconsistent requirements across state lines, or conflict with federal directives.
In addition, the draft instructs the Department of Commerce to examine state AI laws and consider withholding federal broadband funding from states that implement certain AI restrictions. Such measures echo prior efforts to tie federal programs to state AI compliance, though those attempts previously faced bipartisan resistance. Critics contended that withholding funds could limit protections against fraud and algorithmic bias.
Federal Push Targets State AI Laws
States have accelerated AI oversight faster than the federal government, introducing more than 600 AI-related bills in 2024 alone, with nearly 100 enacted into law.
For instance, Colorado passed a high-risk AI law to prevent discriminatory outcomes from automated algorithms, while California adopted targeted rules focusing on automated decision-making systems.
Legislators in other states are considering similar frameworks that require risk assessments for automated tools, known as Automated Decision Tools (ADT) or Automated Decision Systems (ADS).
Potential Broadband Funding Threats
The draft executive order reportedly criticizes these state laws, citing potential interference with interstate commerce. Linking federal funding to AI compliance remains legally uncertain.
Experts note that federal authorities may lack clear statutory authority to withhold grants, particularly programs like BEAD, in response to unrelated state regulations. Legal challenges could delay or block such enforcement measures.
The pace of state-level AI legislation reflects growing concern about the societal impact of AI, including algorithmic discrimination, privacy violations, and transparency gaps. Enterprises are increasingly required to comply with diverse standards, creating a complex regulatory environment for software providers, fintech companies, and AI developers.
As states move independently, the federal government faces mounting pressure to coordinate a national approach or risk regulatory fragmentation.
Compliance Industry Poised for Growth
The rise of state-specific AI laws has created opportunities for compliance vendors and legal technology firms.
Resources such as the International Association of Privacy Professionals (IAPP) AI Governance Tracker, the Loeb & Loeb AI Legislation Tracker, and Fisher Phillips AI Legislation Map help companies navigate a patchwork of rules. Platforms that flag jurisdiction-specific obligations, offer risk assessments, or assist with algorithmic transparency reporting are likely to see increased demand. Some states allow private lawsuits, while others rely on state attorneys general for enforcement, further complicating compliance strategies.
As the federal-state tension over AI regulation intensifies, companies, lawmakers, and investors are watching closely. The proposed executive order, if enacted, could reshape the AI regulatory landscape in the U.S., balancing innovation, interstate commerce, and consumer protections in a rapidly evolving technological era.
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