Trump directs Justice Department to challenge state AI laws

US President Donald Trump signed an executive order Thursday directing the Justice Department to challenge state artificial intelligence laws the administration says threaten US competitiveness.

In his order, Trump is taking issue with state “requiring entities to embed ideological bias within models” — although the example he gave of embedding bias was “a new Colorado law banning ‘algorithmic discrimination’” that, he said, could “force AI models to produce false results in order to avoid a ‘differential treatment or impact’ on protected groups.”

The order establishes an AI Litigation Task Force within the Justice Department to challenge state laws on grounds they are “unconstitutional, pre-empted, or otherwise unlawful.” The order directed the Commerce Department to publish an evaluation of state AI laws that conflict with national policy priorities and to withhold Broadband Equity Access and Deployment funding from states with such laws.

The US Federal Trade Commission will be required to “explain the circumstances under which State laws that require alterations to the truthful outputs of AI models are pre-empted by the Federal Trade Commission Act’s prohibition on engaging in unfair and deceptive acts, while the Federal Communications Commission will consider adopting “a Federal reporting and disclosure standard for AI models that pre-empts conflicting State laws,” according to the text of the Executive Order.

The order also calls on the administration’s Special Advisor for AI and Crypto to recommend legislation to establish a “uniform Federal policy framework for AI that pre-empts State AI laws that conflict with the policy set forth in this order,” although it will still allow states to set their own laws on AI child safety protections, data center infrastructure, and procurement of AI services.

The order targets a growing patchwork of state regulations. States introduced nearly 700 AI bills in 2024, with 113 enacted. Colorado’s AI Act takes effect in June 2026, requiring developers to disclose information about high-risk AI systems and conduct impact assessments. California’s SB 53 requires transparency about AI use in employment decisions. Texas’s TRAIGA, effective January 2026, sets disclosure requirements for generative AI in contracts.

Compliance costs remain for EU sales

The order aims to simplify domestic compliance, but US companies selling AI products and services in European markets will still need to comply with the EU AI Act, which applies to any AI system used by people in EU member states.

“A deregulated US posture can make American AI firms faster at home, but it does not make them freer abroad,” said Sanchit Vir Gogia, chief analyst at Greyhound Research.

The EU regulation, which entered into force in August 2024, classifies AI systems by risk level and requires conformity assessments, transparency obligations, and human oversight for high-risk applications including hiring tools, credit scoring systems, and law enforcement applications.

That could be an obstacle for products conceived under a different set of laws, said Enza Iannopollo, vice president principal analyst at Forrester, said, “These requirements cannot always be added as an afterthought. Many AI systems need safety, integrity, and ethical safeguards built in by design.”

And, said Gogia, “The EU AI Act is not just a legal framework, it is a procurement filter.” Enterprise procurement teams, internal audit functions, and insurers impose requirements similar to EU standards regardless of local regulation, he said. Multinationals standardize internal AI governance to avoid building separate compliance systems for different markets.

Enterprises face increased liability exposure

The order’s approach of pushing to remove state laws it considers pre-empted by an existing federal law on “unfair and deceptive acts,” and drafting legislation that would, if passed, pre-empt other state AI laws, leaves enterprises navigating increased legal uncertainty, according to analysts.

Without regulation establishing common standards, companies must provide separate assurances to each customer and business partner, increasing transaction costs and legal uncertainty, Iannopollo said.

 “Using AI to power products, services, or business models creates liability across multiple fronts: employment law, consumer protection, privacy, and sector-specific regimes such as banking or critical infrastructure. When AI systems lack built-in safeguards, those liabilities become harder and costlier to manage,” she said.

Technology trade group NetChoice sees the order helping ensure America leads in AI innovation. “Startups and small businesses will greatly struggle to create and compete with a 50-state patchwork of red tape,” said Patrick Hedger, NetChoice director of policy, in a written statement.

Brad Carson, president of Americans for Responsible Innovation, a political action committee lobbying for a thoughtful governance framework for rapidly advancing technologies, said in a written statement that the order “directly attacks the state-passed safeguards that we’ve seen vocal public support for over the past year, all without any replacement at the federal level.”

The order follows Trump’s July 2025 AI Action Plan, which called for removing regulatory barriers to AI development. Trump revoked President Biden’s October 2023 AI executive order in January 2025.