President Donald Trump recently signed an executive order aimed at establishing a singular national framework for artificial intelligence, directing federal agencies to challenge existing state AI laws. While the administration argues this move will relieve startups from a confusing "patchwork" of regulations, legal experts and AI companies warn it could instead trigger protracted court battles, leaving emerging businesses in a state of legal limbo as they await a unified federal standard.
Titled "Ensuring a National Policy Framework for Artificial Intelligence," the executive order mandates the Department of Justice to establish a task force within 30 days. This task force will challenge specific state AI laws, asserting that AI falls under interstate commerce and thus requires federal oversight. Additionally, the Commerce Department has 90 days to identify "onerous" state AI regulations, an evaluation that could impact states' access to federal funding, including broadband grants.
The order further instructs the Federal Trade Commission (FTC) and Federal Communications Commission (FCC) to investigate potential federal standards that could preempt state regulations. It also directs the administration to collaborate with Congress on developing a uniform AI law. This directive comes amidst ongoing efforts to curb fragmented state-level AI rules, especially after congressional attempts to halt state regulation faced setbacks. Both Republican and Democratic lawmakers have previously expressed concerns that without a federal standard, preventing states from acting could leave consumers vulnerable and companies largely unregulated.
Michael Kleinman, head of U.S. Policy at the Future of Life Institute, a body dedicated to mitigating extreme risks from transformative technologies, sharply criticized the order. In a statement, Kleinman asserted,
"This David Sacks-led executive order is a gift for Silicon Valley oligarchs who are using their influence in Washington to shield themselves and their companies from accountability."
Sacks, known as Trump’s AI and crypto policy czar, has been a prominent advocate for the administration’s AI preemption strategy.
Even proponents of a national framework acknowledge that the executive order does not immediately establish one. With state laws remaining enforceable unless courts intervene or states voluntarily halt enforcement, startups could face an extended and complex transition period.
Sean Fitzpatrick, CEO of LexisNexis North America, U.K., and Ireland, anticipates that states will vigorously defend their consumer protection authority in court, potentially leading cases all the way to the Supreme Court.
While some supporters contend the order might centralize the debate over AI regulation in Washington, thereby reducing uncertainty, critics argue that the ensuing legal conflicts will create immediate challenges for startups grappling with conflicting state and federal requirements. Hart Brown, principal author of recommendations for Oklahoma Governor Kevin Stitt’s Task Force on AI and Emerging Technology, explained,
"Because startups are prioritizing innovation, they typically do not have…robust regulatory governance programs until they reach a scale that requires a program. These programs can be expensive and time-consuming to meet a very dynamic regulatory environment."
Arul Nigam, co-founder of Circuit Breaker Labs, a startup specializing in red-teaming for conversational and mental health AI chatbots, echoed these concerns. Nigam highlighted the uncertainty facing companies in his sector, asking,
"There’s uncertainty in terms of, do [AI companion and chatbot companies] have to self-regulate? Are there open-source standards they should adhere to? Should they continue building?"
He acknowledged that the existing "patchwork" of state AI laws disproportionately affects smaller startups and expressed hope for swifter congressional action on a robust federal framework.
Andrew Gamino-Cheong, CTO and co-founder of AI governance company Trustible, warned that the executive order could ultimately hinder AI innovation and broader pro-AI objectives. He stated,
"Big Tech and the big AI startups have the funds to hire lawyers to help them figure out what to do, or they can simply hedge their bets. The uncertainty does hurt startups the most, especially those that can’t get billions of funding almost at will."
Gamino-Cheong further explained that legal ambiguity complicates sales to risk-averse clients such as legal teams, financial firms, and healthcare organizations, leading to longer sales cycles, increased systems work, and higher insurance costs. He concluded that even the perception of unregulated AI would erode public trust, which is already low and threatens widespread adoption.
Gary Kibel, a partner at Davis + Gilbert, noted that while businesses would generally welcome a single national standard,
"an executive order is not necessarily the right vehicle to override laws that states have duly enacted."
He cautioned that the current ambiguity could lead to two extreme outcomes: overly restrictive regulations or a complete lack of oversight, either scenario potentially creating a "wild west" environment that disproportionately benefits larger tech companies capable of absorbing risk and weathering prolonged uncertainty.
Morgan Reed, president of The App Association, urged Congress to swiftly implement a
"comprehensive, targeted, and risk-based national AI framework. We can’t have a patchwork of state AI laws, and a lengthy court fight over the constitutionality of an Executive Order isn’t any better."
