Trump preempts state AI laws as Commerce and FTC act on executive order

"President Trump signed an executive order titled Ensuring a National Policy Framework for Artificial Intelligence on December 11, 2025. The order set three 90-day deadlines, all falling around March 11, 2026: the Commerce Department must publish an evaluation of state AI laws identifying those deemed onerous; the FTC must issue a policy statement explaining when state laws requiring AI models to alter outputs are preempted by the FTC Act''s prohibition on deceptive practices; and the FCC must consider whether to adopt a federal AI disclosure standard. The executive order also directed federal agencies to assess whether their discretionary grant programs could be conditioned on state AI law compliance, and specifically gave Commerce authority to condition the remaining $42 billion in BEAD broadband infrastructure funding on states avoiding AI laws the administration deems onerous."

"The Commerce Department''s state AI law evaluation, published by March 11, identified specific categories of state legislation as priorities for referral to the DOJ''s AI Litigation Task Force. The categories targeted include algorithmic discrimination laws that require bias audits before deployment, transparency obligations requiring disclosure of training data or model architecture, state laws governing AI-generated political content and deepfakes, and reporting or governance requirements imposed on AI developers. Colorado''s AI Act, California''s SB 53, Texas''s Responsible AI Governance Act, Illinois''s AI bias and hiring law, and New York''s law restricting AI use in hiring decisions are all in the target category. Critically, the Commerce evaluation does not itself invalidate any state law. Baker Botts analysts confirmed that until courts rule on federal preemption and other legal challenges to state AI laws, those state laws remain enforceable."

"The FTC policy statement due March 11 advances a novel and legally contested theory: that when a state law requires an AI developer to adjust model outputs to mitigate demographic bias, that state is compelling the developer to produce outputs that are deceptive under the FTC Act because they deviate from the model''s training data. Paul Hastings analyzed this theory as stemming from the White House''s AI Action Plan, which prioritized preventing the imposition of ideological constraints on AI development. Critics noted this would effectively argue that AI outputs replicating documented racial or gender bias in hiring, healthcare, and credit scoring are truthful and therefore federally protected from state correction. ZwillGen, King & Spalding, and the Transparency Coalition all assessed the FTC theory as legally untested and likely to face significant court challenges."

"The DOJ''s AI Litigation Task Force, established January 9, 2026, had not filed any lawsuits as of March 11. The task force is mandated to challenge state AI laws on three grounds: unconstitutional regulation of interstate commerce under the dormant Commerce Clause, federal preemption by existing federal regulations, and any other basis the Attorney General deems appropriate. The Transparency Coalition''s analysis found the dormant Commerce Clause theory plausible but not compelling. Legal scholars note that the dormant Commerce Clause is most effective against laws that explicitly discriminate against out-of-state economic actors, and state AI bias laws apply equally to companies regardless of domicile."

"California, Texas, Colorado, Illinois, and New York have all signaled they will defend their AI laws vigorously against federal challenge. California Governor Gavin Newsom signed SB 53 in September 2025, requiring frontier AI developers to publish safety risk frameworks. Texas TRAIGA, effective January 1, 2026, requires impact assessments for AI systems used in consequential decisions. Colorado''s AI Act requires bias testing and impact assessments, effective June 2026. Buchanan Ingersoll''s analysis noted that companies that maintain disciplined governance programs will navigate this transition more effectively than those who interpret regulatory uncertainty as regulatory absence."

"The federal AI preemption strategy represents a live test of how far executive branch authority can extend into state regulatory decisions without Congress acting. The executive order''s approach combines four levers: DOJ litigation, FTC policy statements, FCC rulemaking, and conditional federal funding. None of these levers creates preemption on its own without court validation. However, the combined effect creates a chilling effect on state legislative activity that may function as practical preemption even without legal preemption. The Transparency Coalition analysis noted that the EO creates a deterrent effect that discourages state legislatures from pursuing new regulations, regardless of what the courts decide."

"The March 11 deadlines also triggered an FCC proceeding. The EO directed the FCC Chairman to consider adopting a federal AI reporting and disclosure standard that would preempt conflicting state laws, with the FCC proceeding to be initiated within 90 days of the Commerce Department''s evaluation. If the FCC adopts a federal AI disclosure standard, it would preempt state AI disclosure laws under the FCC''s express preemption authority over telecommunications — the broadest preemption authority of any of the four mechanisms in the EO."