US AI Regulation: Federal vs. State Showdown

The United States is on the cusp of defining how to regulate artificial intelligence, but the core conflict isn't about the technology itself. Instead, it's a high-stakes battle over jurisdiction: who gets to set the rules—Washington or individual states—and what that means for consumers caught in the middle.

In the absence of a comprehensive federal AI standard focused on consumer safety, states have proactively introduced dozens of bills. These initiatives aim to shield residents from AI-related harms, exemplified by California's AI safety bill SB-53 and Texas's Responsible AI Governance Act, which specifically prohibits the intentional misuse of AI systems.

Industry's "Patchwork" Concern

Tech giants and burgeoning Silicon Valley startups argue that this proliferation of state-level laws creates an unworkable "patchwork" of regulations, threatening to stifle innovation. Josh Vlasto, co-founder of the pro-AI PAC Leading the Future, voiced this concern to TechCrunch, stating, "It's going to slow us in the race against China."

The industry, alongside several of its advocates within the White House, is pushing for either a unified national standard or no regulation at all. This "all-or-nothing" stance has fueled new efforts to prevent states from enacting their own AI legislation.

Federal Preemption Efforts Intensify

In recent weeks, attempts to block states from regulating AI have gained momentum. House lawmakers are reportedly exploring the possibility of embedding language within the National Defense Authorization Act (NDAA) to preempt state AI laws. House Majority Leader Steve Scalise (R-LA) confirmed these discussions to Punchbowl News. While Congress aimed to finalize the defense bill by Thanksgiving, sources indicate negotiations have focused on narrowing the scope to potentially preserve state authority in critical areas like child safety and transparency.

Concurrently, a leaked draft of a White House executive order (EO) revealed the administration's own preemption strategy. Although reportedly put on hold, the draft EO proposed creating an "AI Litigation Task Force" to challenge state AI laws in court, directing federal agencies to evaluate "onerous" state regulations, and pushing the Federal Communications Commission (FCC) and Federal Trade Commission (FTC) toward national standards that would override state rules.

Notably, this EO would have granted David Sacks—Trump's AI and Crypto Czar and co-founder of VC firm Craft Ventures—co-lead authority in establishing a uniform legal framework. This would give Sacks significant direct influence over AI policy, potentially superseding the traditional role of the White House Office of Science and Technology Policy and its head, Michael Kratsios. Sacks has publicly advocated for blocking state regulation and minimizing federal oversight, favoring industry self-regulation to "maximize growth."

Congressional Pushback

Despite these efforts, a sweeping preemption that would strip states of their right to regulate AI is unpopular in Congress. Lawmakers overwhelmingly voted against a similar moratorium earlier this year. Critics argue that without a federal standard in place, blocking states would leave consumers vulnerable to harm and allow tech companies to operate without adequate oversight.

More than 200 lawmakers signed an open letter opposing preemption in the NDAA, emphasizing that "states serve as laboratories of democracies" that must "retain the flexibility to confront new digital challenges as they arise." Nearly 40 state attorneys general also sent an open letter opposing a ban on state AI regulation.

The Patchwork Debate

Sacks' position reflects a common viewpoint within the AI industry. Several pro-AI super PACs have emerged, injecting hundreds of millions of dollars into local and state elections to oppose candidates who support AI regulation. Leading the Future, backed by prominent figures like Andreessen Horowitz, OpenAI president Greg Brockman, Perplexity, and Palantir co-founder Joe Lonsdale, has raised over $100 million. This week, the PAC launched a $10 million campaign urging Congress to craft a national AI policy that overrides state laws.

"When you're trying to drive innovation in the tech sector, you can't have a situation where all these laws keep popping up from people who don't necessarily have the technical expertise," Vlasto reiterated to TechCrunch, arguing that a patchwork of state regulations would "slow us in the race against China."

Nathan Leamer, executive director of Build American AI, the PAC's advocacy arm, confirmed the group's support for preemption even without AI-specific federal consumer protections. Leamer contends that existing laws, such as those addressing fraud or product liability, are sufficient to handle AI-related harms. While state laws often seek to prevent problems proactively, Leamer favors a more reactive approach: allowing companies to innovate rapidly and address issues in court later.

However, cybersecurity expert Bruce Schneier and data scientist Nathan E. Sanders, authors of Rewiring Democracy: How AI Will Transform Our Politics, Government, and Citizenship, argue that the "patchwork" complaint is overblown. They point out that AI companies already comply with stricter EU regulations, and most industries successfully navigate varying state laws. The true motive, they suggest, is to avoid accountability.

The Case for State Agility

Alex Bores, a New York Assembly member running for Congress, is one of Leading the Future's initial targets. He sponsored the RAISE Act, which mandates safety plans for large AI labs to prevent critical harms. "I believe in the power of AI, and that is why it is so important to have reasonable regulations," Bores told TechCrunch. "Ultimately, the AI that's going to win in the marketplace is going to be trustworthy AI, and often the marketplace undervalues or puts poor short-term incentives on investing in safety." Bores supports a national AI policy but emphasizes states' ability to respond more quickly to emerging risks.

Indeed, states have demonstrated greater legislative agility. As of November 2025, 38 states have adopted over 100 AI-related laws this year, primarily addressing deepfakes, transparency, disclosure, and government use of AI. (A recent study found that 69% of these laws impose no requirements on AI developers.)

Congressional activity further underscores this slower pace. Hundreds of AI bills have been introduced, but few have passed. Since 2015, Representative Lieu has introduced 67 bills to the House Science Committee, with only one becoming law.

Path to a Federal Standard

Representative Ted Lieu (D-CA) and the bipartisan House AI Task Force are preparing a comprehensive package of federal AI bills, which Lieu hopes to introduce in December. This "megabill," reportedly over 200 pages, covers a wide range of consumer protections, including fraud, healthcare, transparency, child safety, and catastrophic risk. It includes provisions for mandatory testing and disclosure for large language model companies, requiring AI labs to test their models and publish results—practices many currently undertake voluntarily.

Lieu noted that his bill would not directly mandate federal agencies to review AI models, distinguishing it from a similar bill introduced by Senators Josh Hawley (R-MO) and Richard Blumenthal (D-CT), which would require a government-run evaluation program for advanced AI systems before deployment.

Acknowledging the political realities, Lieu stated, "My goal is to get something into law this term. I'm not writing a bill that I'd have if I were king. I'm trying to write a bill that could pass a Republican-controlled House, a Republican-controlled Senate, and a Republican-controlled White House." The path to enacting such a megabill will likely take months, if not years, highlighting why the current push to limit state authority has become one of the most contentious fights in AI policy.