State AI Laws in Peril: Latest EO Aims To “Trump” State AI Laws Toward National AI Framework

On the heels of a failed congressional effort to impose a 10-year moratorium on state artificial intelligence laws, President Trump signed an Executive Order titled “Ensuring a National Policy Framework for Artificial Intelligence” on December 11, 2025 (the EO). The EO declares that AI companies “must be free to innovate without cumbersome regulation” and that “excessive State regulation thwarts this imperative.”

While we await a national AI framework, the EO is intended to try to override or preempt state AI laws that have emerged. Litigation challenges are almost certain to emerge over the EO’s effect on state AI laws, but in the meantime the EO attempts to use cuts or losses of federal funding as a sword to cut back on the current state-by-state effort to regulate AI.

In an effort toward a national AI framework, the EO:

1. contains directives intended to function as a moratorium on state-level AI laws;
2. establishes an AI Litigation Task Force “whose sole responsibility shall be to challenge state AI laws” that cut against the policy of “global AI dominance through minimally burdensome national policy framework for AI;” and
3. calls for coordination with, and action from, Congress to ensure that there is a “minimally burdensome national standard” for AI regulation in the U.S.

An overview of the EO’s key directives and steps businesses can take in the wake of this AI EO are discussed below.

I. AI Litigation Task Force and the Evaluation of State AI Laws

Section 3 of the EO directs the Attorney General, within 30 days, to establish an AI Litigation Task Force empowered to challenge State AI laws deemed inconsistent with the EO’s policy goal, which is to establish a “minimally burdensome national policy framework for AI.” According to the EO, the grounds for legal challenges to State AI laws would include State AI laws that: (1) unconstitutionally regulate interstate commerce; (2) are preempted by existing Federal regulations; or (3) are “otherwise unlawful in the Attorney General’s judgment.”

II. FTC Preemption of “Deceptive Conduct in AI Models”

Section 7 of the EO directs the FTC Chairman, within 90 days, to issue a policy statement on the application of the Federal Trade Commission Act’s prohibition on unfair and deceptive acts or practices under 15 U.S.C. 45, as applicable to AI models. The FTC’s policy statement must “explain the circumstances under which State laws that require alterations to the truthful outputs of AI models are preempted by the Federal Trade Commission Act’s prohibition on engaging in deceptive acts or practices affecting commerce.” The EO makes no reference to the “unfair” prong of the FTC Act[1] restricting acts or practices that causes or are likely to cause substantial injury to consumers.

III. Restrictions on State Funding

Section 5 of the EO directs the Commerce Secretary, within 90 days, to issue a Policy Notice specifying the conditions under which States may be eligible for remaining funding under the Broadband Equity Access and Deployment (BEAD) Program. If a State is determined to have “onerous AI laws” they would be ineligible BEAD funds.

While this section does not expressly preempt State AI laws, the threat of losing access to federal grant funds could have a chilling effect on State AI regulation and provide a basis for some states to abandon their AI-related legislative efforts, according to the Institute for Law & AI.

Currently, all U.S. states receive funding from the $42.5 billion BEAD program to help expand access to high-speed internet. Texas receives the largest amount of BEAD funds (approximately $3.3 billion) and recently passed its own set of AI regulations that are set to take effect on January 1, 2026. Should Texas enforce its AI regulations come January 1, 2026, federal funding under the BEAD program may be at risk.

IV. The EO Raises Important Legal Questions

The EO opens pandora’s box of not only constitutional issues, but also issues pertaining to the EO’s interpretation and scope.

Does the President have the legal authority to issue such an expansive EO on AI targeting state laws? Some constitutional scholars have argued that an executive order attempting to preempt State AI laws would violate State sovereignty under the anti-commandeering doctrine rooted in the Tenth Amendment. Here, the EO may commandeer State regulatory authority. because the EO essentially commandeers State regulatory authority. An attempt requiring states to refrain from enforcing their own laws, or use state resources to implement federal AI policy, may be unconstitutional.

Regarding the EO’s scope, Section 8 of the EO calls for preparing a legislative recommendation to establish a uniform Federal AI policy framework. However, this section also stipulates that that legislative recommendation shall not propose preempting otherwise lawful State AI laws relating to child safety protections; AI compute and data center infrastructure; State government procurement and use of AI; and “other topics as shall be determined.” So regardless of whether a Federal AI framework is adopted, there may be a gap for States to regulate some aspects of AI.

These issues are the tip of the iceberg concerning the enforceability and interpretation of the EO.

V. Takeaways for Businesses

In the absence of a national AI framework and a potential halt on state AI laws, businesses need to be prepared to navigate a fluctuating and unstable regulatory landscape. Below are some practical steps that businesses can take following the issuance of this EO:

• Don't assume immediate changes: Given the legal uncertainty and potential challenges to the EO, it is important to note that existing state AI laws remain enforceable. But whether states will actually enforce their AI regulations in the wake of the EO remains to be seen. Accordingly, it would be prudent for organizations to continue complying with existing state AI regulations.
• Monitor litigation: Watch for the AI Litigation Task Force's actions and any court rulings on the EO’s validity. The outcome of such legal proceedings may provide clarity on which state laws wind up being affected.
• Develop a flexible compliance framework: Given the potential for a continued patchwork of state AI laws, businesses should consider developing or revisiting AI governance frameworks to ensure adaptability.
• Assess vendor contracts to mitigate risk: If your organization uses third-party AI tools or applications, contractual terms become increasingly critical to mitigate risk in the potential absence of state AI regulations.

If you have questions about the current administration’s AI Executive Order, please contact the authors of this article, your Woods Rogers attorney, or a member of the Woods Rogers Cybersecurity & Data Privacy practice team.

_{[1] Under existing FTC regulations,  an act or practice is deemed deceptive where: (i) a representation, omission, or practice misleads or is likely to mislead the consumer; (ii) a consumer’s interpretation of the representation, omission, or practice is considered reasonable under the circumstances; and (iii) the misleading representation, omission, or practice is material.}