AI Regulation: Draft Executive Order Would Preempt State AI Laws

The Trump administration is reportedly circulating a draft Executive Order that would preempt many state laws purporting to regulate various aspects of the development and deployment of Gen AI tools.  This Jones Walker blog summarizes the provisions of the draft Order:

The six-page draft, titled “Eliminating State Law Obstruction of National AI Policy,” deploys a multi-agency strategy:

AI Litigation Task Force (Section 3). The Attorney General would be required to establish, within 30 days, a task force “whose sole responsibility shall be to challenge State [sic] AI laws, including on grounds that such laws unconstitutionally regulate interstate commerce, are preempted by existing Federal regulations, or are otherwise unlawful.” This would effectively transform the Department of Justice (“DOJ”) into an active adversary of state AI policymaking.

Federal Identification of State Laws (Section 4). Within 90 days, the Secretary of Commerce would be required to identify state AI laws that “require AI models to alter their truthful outputs” or compel disclosures that “would violate the First Amendment or any other provision of the Constitution.” The order explicitly highlights (in Section 1) California’s transparency requirements and Colorado’s algorithmic discrimination provisions.

Broadband Funding as Leverage (Section 5). States with identified AI laws would be “ineligible for non-deployment funds” under the Broadband Equity Access and Deployment (“BEAD”) Program unless they agree “not to enforce any such laws during any year in which it receives the discretionary funding.” This attempts to enforce, through executive action, what the Senate effectively rejected 99-1 in July.

Agency Preemption Efforts (Sections 6-7). The Federal Communications Commission (“FCC”) would, in consultation with the Special Advisor for AI and Crypto, initiate a process to determine whether to adopt a federal reporting and disclosure standards for AI models that preempts conflicting state laws. And the Federal Trade Commission (“FTC”), also in consultation with the Special Advisor, would have to explain when state requirements are preempted as compelling “deceptive acts or practices affecting commerce.”

The blog goes on to point out the potential Constitutional issues associated with the proposed Executive Order, as well as its implications for companies.  These include the continued enforceability of state laws pending the issuance of injunctions or final judgments invalidating them, the absence of a federal regulatory framework, and contractual compliance issues arising out of vendor contracts referencing various state AI laws that may be invalidated.  It also offers guidance for general counsels on how to manage this evolving situation.