President Trump’s New AI Executive Order Targets State Laws—Here’s What Companies Should Know

By: Chloé Nelson

On December 11, President Trump signed an executive order outlining a new federal approach to artificial intelligence regulation. The order reflects growing concern within the Administration that a patchwork of state AI laws is slowing innovation and creating uncertainty for companies operating across multiple jurisdictions.

The order does not invalidate any existing AI laws, and it does not prevent states from continuing to pass new ones. Instead, it sets out a plan for federal agencies to challenge certain state laws, apply funding pressure, and explore federal standards that could eventually override state requirements. For now, it increases uncertainty rather than reducing it.

A New Federal Litigation Strategy

The executive order gives the Department of Justice and the Department of Commerce specific assignments—and short deadlines—aimed at identifying and challenging certain state AI laws:

  • Department of Justice: Within 30 days, establish an AI Litigation Task Force focused on bringing legal challenges to state AI laws the Administration views as inconsistent with federal policy, including potential arguments tied to interstate commerce and federal preemption.

  • Department of Commerce: Within 90 days, publish an evaluation of “onerous” state AI laws, with particular attention to laws that may (i) pressure AI models to change truthful outputs or (ii) mandate disclosures the Administration argues could raise constitutional concerns. The order specifically flags Colorado’s AI Act  as an example.

Federal Funding and Agency Action

One of the more unusual elements of the order is its use of federal funding as leverage. States identified as maintaining conflicting AI laws will be ineligible for remaining funds under the Broadband Equity, Access, and Deployment (BEAD) Program, which supports broadband expansion. Federal agencies are also directed to assess whether other discretionary grant programs can be conditioned on states not enacting or enforcing AI laws that conflict with federal policy.

The order also directs action by two key federal agencies:

  • Federal Communications Commission: Following the Commerce Department’s evaluation, initiate a rule making process to determine whether to adopt a federal AI reporting or disclosure standard that would preempt conflicting state requirements.

  • Federal Trade Commission: Issue a policy statement explaining when state laws that require altering the truthful outputs of AI models may be preempted by the FTC Act’s prohibition on deceptive acts or practices.

What Has Not Changed

Despite its broad language, the executive order does not override state AI laws. Companies must continue to comply with existing requirements in states and cities that regulate AI, including regimes in Colorado, California, New York City, and Illinois.

The order also carves out certain areas. It does not target state laws related to child safety and AI, state government use or procurement of AI systems, or laws governing AI data center infrastructure (other than general permitting requirements). In addition, the order does not define “artificial intelligence,” leaving open questions about how broadly its approach could apply to automated decision-making tools that are not typically labeled as AI.

Why This Matters for Employers, Platforms, and AI Developers

  • Employers (HR, hiring, and workplace tools): If you use automated tools for recruiting, performance monitoring, scheduling, or other workplace-related activities, don’t assume this order changes your obligations. Existing state and local rules can still apply, and early litigation could create mixed signals about what “fairness,” disclosures, and documentation are expected.

  • Platforms (consumer-facing products and content): If you deploy AI features for recommendations, personalization, moderation, or customer support, the order is a reminder that requirements may continue to vary by state—at least for now. You should plan for continued questions about transparency, user notices, and how AI systems behave in real-world use.

  • AI developers (model and tool providers): This order increases the chances of federal–state conflict over what states can require—especially around disclosures and constraints on model outputs. Until litigation or federal standards produce clearer outcomes, customers will still look to vendors for practical compliance support, such as documentation, testing results, configurable settings, and clear “how it works” explanations.

Practical Takeaways for Companies Using AI

For companies developing or using AI, the immediate impact is modest, but the longer-term implications are worth watching:

  • No immediate relief from state compliance obligations. Existing AI laws remain in force.

  • More uncertainty. The order increases the likelihood of lawsuits involving states, federal agencies, and advocacy groups.

  • Potential shifts ahead. Federal guidance and court decisions in 2025 and 2026 may begin to clarify how much room states have to regulate AI.

For now, the executive order is best viewed as a roadmap rather than a rule change. Its real effect will depend on how courts respond, whether Congress steps in, and how aggressively states defend their AI laws. Companies should continue current compliance efforts while monitoring developments closely.

Originally published by InfoLawGroup LLP. If you would like to receive regular emails from us, in which we share updates and our take on current legal news, please subscribe to InfoLawGroup’s Insights HERE.

Chloé NelsonAI, Artificial Intelligence