Trump Executive Order Targets State AI Laws – Raising Questions and Risks

Last week, President Trump issued an Executive Order (the “EO”) entitled “.” The December 11, 2025, EO aims to establish U.S. “dominance” in artificial intelligence (AI) through a moratorium on fragmented and “onerous” state-level AI regulations. Congress has previously rejected such a moratorium twice: first prior to the passage of H.R. 1, and more recently before approving the National Defense Authorization Act (NDAA). The Administration now proposes a federal framework and new executive actions that include potential litigation, regulation and preemptive legislation.

Key Elements

AI Litigation: The EO directs the U.S. Attorney General to establish an AI Litigation Task Force within 30 days. Additionally, the Secretary of Commerce must publish, within 90 days, a list of state laws considered “onerous” and impediments to AI innovation. The list will also target for potential litigation those laws that compel AI businesses to alter “truthful outputs” or infringe upon constitutional rights. For reference, the EO calls out the Colorado AI Act and its prohibition on “algorithmic discrimination.”

Restrictions on State Funding: Within 90 days, the Secretary of Commerce must outline conditions of state eligibility for remaining funds under the Broadband Equity Access and Deployment (BEAD) program. States identified as having restrictive AI laws will be ineligible for future BEAD money and may lose other discretionary funding unless they sign binding agreements not to enforce those laws.

Other Regulatory Action: The EO instructs the Federal Trade Commission (FTC) to issue a policy statement within 90 days regarding how altering truthful AI outputs may violate the deceptive conduct provisions of the FTC Act. Furthermore, 90 days following the Commerce Secretary’s state law evaluations, the Federal Communications Commission must commence proceedings to consider a federal standard for AI model reporting and disclosures that would supersede conflicting state regulations.

Federal AI Legislation: Overall, the Administration advocates for the creation of a uniform national AI policy “framework,” including federal legislation to foster AI innovation and preempt inconsistent state laws. The proposed legislation would preserve certain state regulatory authority, specifically regarding child safety, data centers (excluding permitting) and state procurement of AI services. No definitive timeline has been set for finalizing the federal framework.

Deadlines to Watch

January 10, 2026: End of 30-day period.

• U.S. Attorney General: Establish the AI Litigation Task Force.

March 11, 2026: End of the 90-day period.

• Secretary of Commerce:
  • Publish evaluation of onerous state AI laws;
  • Refer cases to the Justice Department’s AI Litigation Task Force; and
  • Issue policy notice on state eligibility for remaining BEAD funds.
• FTC Chairman: Issue statement regarding potential deception in state AI laws. 

June 9, 2026: 90 days post-Commerce evaluations.

• FCC: Initiate proceedings for possible adoption of federal AI reporting/disclosure standards that preempt state law.

Issues to Watch

Likely Challenges: Following the White House announcement, Congressional and state leaders have indicated plans to contest the EO. Representative Don Beyer (D-VA), Co-Chair of the bipartisan Congressional AI Caucus, released a describing the EO as “a terrible idea” and expressing his intent to explore legislative responses “with members in both chambers and both parties….” California Governor Gavin Newsom (D-CA) similarly his concerns that the EO overrides important state protections. These comments echo bipartisan to state preemption measures included in recent NDAA proposals.

Scope of Preemption: The extent to which the Administration push for preemption remains uncertain. The EO appears primarily directed at comprehensive state AI legislation, such as the Colorado AI Act, and regulation of developers of large language models and general-purpose AI platforms. However, it is unclear how the EO would affect everyday businesses and organizations that “deploy” AI for specific uses—such as consumer chatbots, clinical decision-making and job application screening. For local officials concerned about data centers, White House “AI Czar” David Sacks clarified in a television that the EO seeks to “preserve the ability of local communities to choose what infrastructure is in their communities.” Still, he did not address “permitting,” which often falls under the authority of local boards and yet remains targeted by the EO for potential preemption.

Litigation, Funding Risks: Along with the scope of preemption, the EO raises questions about who will be targeted for litigation and lost funding. Identification of restrictive AI laws will not only affect specific states and lawmakers but also businesses and organizations that stand to lose BEAD money and other federal funds.

Developments related to this EO will require close monitoring, especially leading up to the deadlines in March 2026, which are expected to clarify its implementation and impact. In the interim, if you have any questions regarding the EO or broader matters concerning AI strategy, lobbying, data governance, policy, contracts or litigation, please contact your Manatt relationship partner or any member of our .