President Donald Trump signed an executive order Thursday evening that directs federal agencies to challenge state AI laws. The administration argues that startups need relief from what it calls a “patchwork” of conflicting rules. Legal experts and startups, however, say the order could prolong uncertainty by sparking court battles. This would leave young companies navigating shifting state requirements while waiting to see if Congress can agree on a single national framework.
The order, titled “Ensuring a National Policy Framework for Artificial Intelligence,” directs the Department of Justice to set up a task force within 30 days to challenge certain state laws. The challenge will be on the grounds that AI is interstate commerce and should be regulated federally. It gives the Commerce Department 90 days to compile a list of “onerous” state AI laws, an assessment that could affect states’ eligibility for federal funds, including broadband grants. The order also asks the Federal Trade Commission and Federal Communications Commission to explore federal standards that could preempt state rules and instructs the administration to work with Congress on a uniform AI law.
The order lands amid a broader push to rein in state-by-state AI rules after efforts in Congress to pause state regulation stalled. Lawmakers in both parties have argued that without a federal standard, blocking states from acting could leave consumers exposed and companies largely unchecked.
Critics were quick to respond. Michael Kleinman, head of U.S. Policy at the Future of Life Institute, said in a statement that the order is a gift for Silicon Valley oligarchs who are using their influence to shield themselves from accountability. David Sacks, Trump’s AI and crypto policy czar, has been a leading voice behind the administration’s AI preemption push.
Even supporters of a national framework concede the order does not create one. With state laws still enforceable unless courts block them or states pause enforcement, startups could face an extended transition period of legal uncertainty.
Sean Fitzpatrick, CEO of LexisNexis North America, U.K., and Ireland, states that states will defend their consumer protection authority in court, with cases likely escalating to the Supreme Court. While supporters argue the order could reduce uncertainty by centralizing the fight over AI regulation in Washington, critics say the legal battles will create immediate headwinds for startups navigating conflicting state and federal demands.
Hart Brown, principal author of Oklahoma governor Kevin Stitt’s Task Force on AI and Emerging Technology recommendations, explained that startups prioritizing innovation typically lack robust regulatory governance programs until they reach a certain scale. He noted these programs can be expensive and time-consuming to meet a very dynamic regulatory environment.
Arul Nigam, co-founder at Circuit Breaker Labs, echoed those concerns. He pointed to uncertainty about whether AI companion and chatbot companies must self-regulate, what open source standards they should adhere to, and if they should continue building. He added that the patchwork of state AI laws does hurt smaller startups in his field, but he is hopeful Congress can now move more quickly to pass a stronger federal framework.
Andrew Gamino-Cheong, CTO and co-founder of AI governance company Trustible, told TechCrunch the executive order will backfire on AI innovation and pro-AI goals. He stated that big tech and well-funded startups have the resources to hire lawyers or hedge their bets, while the uncertainty hurts startups that cannot get billions in funding at will. He added that legal ambiguity makes it harder to sell to risk-sensitive customers like legal teams and financial firms, increasing costs and reducing trust in AI.
Gary Kibel, a partner at Davis + Gilbert, said businesses would welcome a single national standard, but an executive order is not necessarily the right vehicle to override laws that states have duly enacted. He warned the current uncertainty leaves open two extremes: highly restrictive rules or no action at all, either of which could create a “Wild West” that favors Big Tech’s ability to absorb risk and wait things out.
Meanwhile, Morgan Reed, president of The App Association, urged Congress to quickly enact a comprehensive, targeted, and risk-based national AI framework. He stated that we cannot have a patchwork of state AI laws, and a lengthy court fight over the constitutionality of an Executive Order is not any better.