Executive Order Seeks to Block State AI Regulations

Action: On December 11, the President issued an Executive Order directing the Attorney General to establish a task force within 30 days to challenge state laws deemed inconsistent with the Administration’s goal of advancing US global AI dominance.¹ The Order also directs the Department of Commerce to identify “onerous [state] laws” within 90 days that conflict with this goal and directs agencies to assess whether to withhold Federal funding from those states.

Trusted Insights for What's Ahead^®

• Tensions over the roles of the Federal and state governments in regulating AI have become more significant this year. While Congress has not enacted a regulatory framework for AI, during consideration of H.R. 1, also known as the “One Big Beautiful Bill Act” (OBBBA), Congress considered a provision that would have largely banned states from regulating AI and taken away certain Federal funding from states that passed regulatory measures. However, the effort failed.
• Reaction to the Order has been mixed with support and criticism coming from members of both parties.² The Administration has generally opposed AI regulations, arguing that burdensome rules could slow innovation, undermine US competitiveness, and hinder the nation’s ability to maintain technological leadership in AI. Others support enacting a Federal regulatory framework or permitting states to regulate in certain areas, such as prevention of deepfakes and governance.
• Legal experts expect that the Order will face legal challenges from both states and groups supporting increased AI oversight.³ Courts are likely to scrutinize the Order under the Tenth Amendment – considering whether AI regulations fall within traditional state powers and whether the Federal government can coerce states into abandoning those powers by threatening funding, including potentially funding in unrelated areas. Courts may also consider whether the Order exceeds the President’s authority, particularly given Congress’ decision to adopt the moratorium and refusal to take away Federal funding in OBBBA.
• What this means for business:
  • The direct impact of this Order depends on many factors, including (1) what states businesses operate in, (2) what AI regulatory measures those states have adopted, (3) how the states choose to respond to the Order, and (4) the results of any litigation. If the Order withstands legal scrutiny, it would reduce regulatory burdens for AI developers and users. Tech firms such as OpenAI and Google have previously advocated for such a moratorium to avoid a patchwork of state AI rules.⁴
  • The Order could have broad reaching impacts beyond the AI sector. Colorado’s AI Act, for example, regulates the use of AI in areas such as employment, lending, housing, education, and healthcare.⁵ Tennessee’s ELVIS Act likewise has important implications for intellectual property rights, prohibiting unauthorized use or deepfakes of artists’ voices and likenesses. An analysis by the National Conference of State Legislatures found that thirty-eight states adopted or enacted about 100 AI regulatory measures in the first half of 2025 alone.⁶ State policymakers have raised particular concern about the impact the Order may have on state laws focused on potentially anti-competitive and discriminatory impacts of AI on the housing market.⁷
  • In the near-term, however, the high likelihood of legal challenges will likely mean uncertainty for businesses while litigation is ongoing. While courts have upheld many of the President’s Executive Orders, Congress’s clear intent to not adopt a moratorium and state common law principles make the results of litigation challenging to predict. In the meantime, businesses should closely monitor the shifting regulatory environment to understand their potential exposures and prepare for changing compliance requirements