The saga continues and this news marks the latest federal attempt to strip states of their power to regulate AI technology, potentially impacting billions in federal funding in dozens of states.
After failed attempts by Congress to block state AI regulations in July and November, Trump is now using executive power to accomplish what lawmakers could not. The administration argues that fragmented state-by-state regulations threaten America’s competitiveness against countries like China, where companies face uniform federal oversight.
“To win, American AI companies must have the freedom to innovate without burdensome regulation,” says White House announcement.
Lawsuits and lost funding
Attorney General Pam Bondi now has 30 days to create an “AI Litigation Task Force” with one mission: to challenge state AI laws that conflict with Trump’s light-hearted regulatory vision. The task force will focus on laws alleging violations of interstate trade protections and in conflict with federal authority.
Commerce Secretary Howard Lutnick must identify state laws that require AI models to alter their output, which the administration views as potential violations of the First Amendment. States with such “onerous” regulations face the loss of discretionary federal funding unless they agree not to enforce their AI statutes.
The financial interests are enormous. In California alone, $1.8 billion in broadband funding is at risk; money already committed to provide internet access to more than 300,000 people. The order specifically threatens funding for the Broadband Equity Access and Deployment Program, impacting infrastructure projects across the country.
California in sight
No state is facing a bigger impact than California, which has issued more AI regulations than any other state since 2016. The state is home to many famous AI companies, including Anthropic, Google, Nvidia and OpenAI, creating an ironic situation where the industry’s headquarters could lose federal support for efforts to regulate it.
Recent California laws that are now in jeopardy include a ban on AI companies blaming their technology for harm in court, a ban on algorithmic price manipulation, and requirements for AI-generated content identification tools. A law taking effect next month that would require the disclosure of AI training data could also be challenged federally.
The broader scope is intriguing: This year alone, 27 states have passed more than 70 AI-related laws, with California leading the way with about a dozen laws, followed by Texas, Montana, Utah and Arkansas. Colorado’s algorithmic discrimination law, which is specifically criticized in the order, faces implementation delays until June 2026.
The resistance
The response was swift and twofold. The AFL-CIO union called the order a blatant attempt to give tech billionaires unchecked power over the jobs, rights and freedoms of working people. The Center for Democracy and Technology warned that it aims to cool action at the state level while doing nothing to address real and documented harm.
Public opinion strongly favors regulation over industry preferences. Nearly 80% of Californians believe safety should be prioritized over innovation, according to October polling by the Carnegie Endowment. A September Gallup poll found that four in five Americans want lawmakers to prioritize security, even if it slows technology development.
California’s film industry took action, with Animation Guild president Danny Lin warning that AI threatens nearly 40,000 jobs in the state’s entertainment sector. More than a hundred film workers recently supported legislation requiring AI companies to make copyrighted training materials public.
The order
This executive order represents the most sweeping federal challenge to state authority in the AI era. With venture capitalist David Sacks effectively overseeing the litigation group as an unconfirmed “special government employee,” critics charge that the government is prioritizing Silicon Valley’s interests over public protection.
States now face an impossible choice: give up the AI protections their citizens support or risk losing billions in federal funding for vital infrastructure projects. The order creates immediate uncertainty for the ongoing broadband rollout and other federally funded initiatives, potentially affecting millions of Americans who rely on these programs.
But business continues as usual. Spanish banking giant BBVA and OpenAI are teaming up for an ambitious AI transformation.
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