Trump Signs EO On National AI Policy

A Focus on Federal Preemption to Secure U.S. AI Dominance

The Executive Order (EO) titled "Eliminating State Law Obstruction of National Artificial Intelligence Policy," signed by President Trump, represents a significant federal effort to establish a uniform, national regulatory framework for Artificial Intelligence by actively limiting the scope of state-level AI laws.

The central policy objective of the EO is to "sustain and enhance America's global AI dominance" through a "minimally burdensome, uniform national policy framework." The Administration asserts that the current "patchwork" of state regulations, such as those passed in states like Colorado, creates a compliance "nightmare" that stifles innovation and forces companies to comply with the "lowest common denominator," thereby hindering U.S. competitiveness in the global AI race.

Key Provisions and Directives

The Executive Order employs a multi-pronged approach, directing several federal agencies to take action to either challenge or supersede existing and future state AI regulations:

• Department of Justice (DOJ) AI Litigation Task Force:
  • The Attorney General is directed to establish an AI Litigation Task Force with the sole responsibility of challenging state AI laws in federal court.
  • Legal challenges are to be based on grounds that state laws unconstitutionally regulate interstate commerce (Dormant Commerce Clause), are preempted by existing federal law, or violate other federal provisions.
  • The EO specifically targets state laws that may "require AI models to alter their truthful outputs" or impose disclosure requirements that could violate the First Amendment.
• Federal Funding Conditions:
  • The EO directs the Secretary of Commerce (via the Assistant Secretary of Commerce for Communications and Information) to specify conditions under which states may be eligible for remaining funding under programs like the Broadband Equity Access and Deployment (BEAD) program, potentially withholding funds from states with "onerous" AI laws.
  • Federal agencies are also directed to assess whether they can condition discretionary grants on states refraining from enacting AI laws that conflict with the policy set forth in the EO.
• Federal Communications Commission (FCC) Action:
  • The FCC Chairman is directed to initiate a proceeding to determine whether to adopt a Federal reporting and disclosure standard for AI models that would preempt conflicting State laws.
• Federal Trade Commission (FTC) Policy:
  • The FTC Chairman is directed to issue a policy statement on the application of Section 5 of the FTC Act (prohibiting unfair and deceptive acts or practices) to AI models.
  • This policy must specifically explain the circumstances under which state laws that require alterations to AI model outputs are preempted by the FTC Act.
• Legislative Recommendation:
  • The EO directs White House officials to prepare a legislative recommendation to Congress for a comprehensive uniform Federal regulatory framework for AI designed to explicitly preempt conflicting state AI laws.

Impact and Legal Implications

The Executive Order is set to ignite a significant legal and political debate over the division of authority in regulating AI:

• Federal vs. State Authority: The EO clearly asserts federal primacy over AI regulation, viewing state-level actions as detrimental fragmentation.14 This directly conflicts with states that have already passed or are considering laws focusing on specific consumer and civil rights protections, such as algorithmic bias mitigation and transparency.
• Litigation Risk: The DOJ's new task force signals the federal government's intent to actively engage in litigation to nullify state AI laws, significantly increasing the preemption risk for any state or local AI legislation.
• Industry Preference: The move is generally supported by major technology industry associations, who favor a single, unified federal rule over navigating 50 different state compliance regimes.

This Executive Order mandates an aggressive, executive-branch-led push to establish a deregulatory, innovation-focused national standard that aims to supersede the existing, or quickly developing, state-level regulatory efforts.

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What This Means for Industry Stakeholders 

The Executive Order has immediate and long-term implications for companies developing, deploying, or investing in AI technologies, as well as for organizations that rely on AI-enabled tools across sectors such as healthcare, financial services, telecommunications, manufacturing, and cybersecurity.

Potential Impacts on Clients

• Regulatory Uncertainty in the Near Term: While the EO aims to create a uniform federal standard, its aggressive approach to preemption will trigger litigation, political pushback from states, and regulatory jockeying among agencies. Companies should expect a period of regulatory flux as courts weigh challenges and agencies articulate new federal policies.
• Shifts in Compliance Obligations: If federal agencies move quickly, companies operating in states with existing AI laws (e.g., Colorado, California) could see their compliance obligations change—potentially easing the burden as federal standards override state requirements. Conversely, firms may need to rapidly adapt to new federal disclosure, auditing, or reporting standards issued by the FCC, FTC, or Commerce Department.
• Opportunities to Shape the National AI Framework: The EO directs agencies to develop new standards, enforcement priorities, and funding conditions. This creates a critical window for industry to advise, influence, and shape how preemption, transparency requirements, and model governance rules are defined.
• Increased Focus on Content Authenticity and Model Output Requirements: Because the EO specifically targets state laws requiring alterations to “truthful outputs,” sectors that rely heavily on generative AI content (media, marketing, education, platform services) may see changing expectations around content authentication, labeling, and model behavior.

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Now Is the Time To Get Engaged and Stay Informed

• Federal Standards Are Being Developed Quickly: Agencies have tight timelines to issue task force structures, policy statements, and preemptive regulatory actions. Early engagement will be essential to ensuring client concerns are understood before frameworks harden.
• Congress Will Soon Enter the Debate: The Administration’s legislative recommendation will prompt congressional activity—whether supportive or oppositional—creating opportunities for stakeholders to shape any eventual statutory framework.
• State Laws Are Not Going Away Quietly: States are expected to challenge the EO’s preemptive reach from California to Florida. Companies must prepare for a multi-year environment in which federal and state authorities test the boundaries of their respective powers.
• Competitive Advantage Through Early Positioning: Companies that track developments, submit comments, participate in agency consultations, and build relationships with federal AI policymakers will be better positioned than peers once federal rules become the dominant standard.
• Risk Mitigation: With agencies reassessing the application of Section 5 (FTC), developing potential FCC reporting regimes, and exploring funding conditions at Commerce, firms should anticipate potential new compliance risks and ensure internal teams are informed and prepared.

The Nelson Mullins federal advocacy team has extensive AI experience to bring clients an understanding of how the legislative, administrative, regulatory, and political processes operate on the Hill and at various state houses and, in turn, impact your industry and members. 

Please reach out to Jake Kohn  or Jason Epstein for any questions regarding this topic.