Leaving AI Regulation to States Could Suffocate AI

Artificial intelligence is growing rapidly across the United States, but fragmented state regulations could slow the sector's progress. In July 2025, 38 states enacted nearly 100 AI-related measures, according to the National Conference of State Legislatures.

In response, President Donald Trump has urged Congress to establish a federal standard to override state-level AI laws. However, the likelihood of such legislation passing appears low. Ahead of Thanksgiving, Trump used Truth Social to advocate for a single federal AI standard to maintain U.S. competitiveness against China, calling on congressional Republicans to include preemption provisions in the National Defense Authorization Act (NDAA) or pass a standalone bill to secure America's edge in AI development.

Shortly afterward, details of a draft executive order titled "Eliminating State Law Obstruction of National AI Policy" were leaked. According to Public Citizen, the order would have directed the Justice Department to create a task force to challenge state laws that conflicted with the Constitution or federal preemption. The draft also instructed the Commerce Department to withhold federal broadband funding from states whose AI laws contradicted the presidents AI Action Plan.

Following criticism from GOP lawmakers, the White House withheld the order. Nevertheless, Trump continues to push for NDAA language that would nullify state and municipal AI regulations. Some Republican representativesincluding Marjorie Taylor Greene (RGa.), Thomas Massie (RKy.), and Chip Roy (RTex.)oppose this approach, viewing it as an overreach that undermines federalism rather than an appropriate regulation of interstate commerce. House Majority Leader Steve Scalise reportedly told Politico that the NDAA "wasn't the best place" for such preemption measures.

In the Senate, resistance from Senators Marsha Blackburn (RTenn.) and Josh Hawley (RMo.) suggests that a standalone federal preemption is unlikely to achieve the 60 votes needed to overcome a filibuster. Blackburn previously blocked an AI moratorium in earlier legislation, while Hawley has introduced multiple bills aimed at strict AI regulation.

Experts warn that while federal overreach is a concern, state-level regulations carry significant risks. Kristian Stout, director of innovation policy at the International Center for Law and Economics, notes that a patchwork of state laws "threatens to impose substantial costs while failing to achieve the consumer protection goals that motivate such regulation." While some policymakers hope rules will rein in major tech firms, the reality is that large incumbents are better equipped to navigate complex, state-specific requirements, leaving smaller startups at a disadvantage. This compliance burden could stifle innovation and harm the economy and national security.

Trumps newly announced Genesis Mission, described as a Manhattan Project for AI, aims to fund coordinated private-sector research in AI. Experts argue that U.S. AI development does not require industrial policy but does need a nationwide regulatory framework to provide clarity for startups and established companies alike, enabling continued investment and innovation. Current political dynamics, however, make the passage of such a framework unlikely in this Congress.

Author: Harper Simmons