How to Navigate President Trump’s Curbs on State AI Regulations

President Donald Trump’s December executive order intended to curb state regulation of artificial intelligence provides enterprises an opportunity to proactively shape the volatile AI regulatory environment in the months ahead.

Seizing the initiative now offers the best chance to frame favorable outcomes, establish defensible standards, optimize risk, and direct broader legal developments.

Aggressive Signal

The White House directive doesn’t instantly erase state obligations. Under the Supremacy Clause, an executive order is an internal instruction to the executive branch, not an independent source of law.

Nevertheless, it’s an aggressive political and administrative signal with several mechanisms intended to secure state alignment with federal AI policy. These include directing the Department of Justice to create an AI Litigation Task Force to challenge restrictive state AI laws in court; and setting out a framework for conditioning federal funding on whether AI laws are “onerous” or prescribe an “ideological bias.”

Fluid Environment

This fluid regulatory environment is an opportunity to shape AI governance. Here’s how to stay ahead.

Build a durable, defensible narrative. Companies should move beyond a purely reactive “controls” perspective and develop a governance framework that reflects their business priorities and needs. That framework should be narrative-ready: It must tell a clear story about how your organization approaches AI responsibly and aligns with regulators’ core objectives (protecting consumers, preventing fraud, ensuring information is not misleading, protecting privacy, and promoting fairness and transparency.) A well-crafted narrative builds trust with regulators, and positions your company to respond to shifting AI standards.

Focus on state priorities. The order contains specific “carve-outs” for state laws relating to child safety, data center infrastructure, and state procurement, areas firmly within state power. As outlined in a Dec. 9 letter from a coalition of 42 attorneys general, AI applications involving chatbots or interactions with children will remain a high priority for state attorneys general, regardless of the federal stance.

Continue to adhere to state requirements.State laws—like those in California, Colorado, and New York—remain valid and enforceable until a court rules otherwise or federal preemption is established, which will take months (if not years). Maintaining strong compliance programs builds trust and signals accountability. A proactive plan and preemption framework enables organizations to engage confidently with both state and federal regulators—even as those regulators clash over authority.

Seek regulatory clarification.By engaging with state Attorneys General and regulators, companies can obtain further clarity. State AG opinions, for example, empower attorneys general to issue formal interpretations of state law, typically in response to requests from state agencies or officials. Although they don’t carry the force of a court ruling, state AG opinions are highly persuasive and often treated as authoritative guidance within the state. Comment letters serve a similar purpose shaping interpretation—they allow companies to weigh in on proposed rules and signal how those rules should apply in practice. Together, these tools help companies anticipate enforcement trends and influence the regulatory narrative.

Use litigation as a tool. By identifying specific state requirements that interfere with federal authority, companies can bring litigation challenging these mandates as unconstitutional burdens on interstate commerce.Proactively seeking judicial relief empowers companies to prevent the “interruption” of their AI services before a state attorney general files suit. This way, companies can work toward establishing the national framework that addresses the challenges of the existing patchwork approach to AI regulation.

In addition to company-driven initiatives, if the Justice Department initiates a suit against a state and that suit aligns with a company’s strategy and stakeholder interests, companies (or trade associations) can provide data-backed amicus briefs or even seek to intervene in the litigation. This allows organizations to shape the legal narrative while DOJ carries the heavy lifting of the constitutional challenge.

The Path Forward

Given the likely lack of congressional action, the ultimate boundaries of AI regulation will largely be decided in courts and could take years. As the Justice Department task force begins its work, in-house lawyers are uniquely positioned to turn uncertainty into advantage by driving a coordinated approach across legal, policy, and business teams.

A proactive approach to addressing preemption in concert with state and local requirements can build trust and accelerate innovation while influencing the regulatory conversation.

Businesses that step up now won’t just manage risk; they’ll help set the standards for responsible AI and gain an edge in a fast-moving market.

As state and federal mandates evolve, companies that act decisively can turn compliance into a competitive advantage. In other words, if you don’t act now to shape your industry, state actors will shape it for you.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Michelle Kallen, a partner at Steptoe and former Solicitor General of Virginia, helps clients navigate complex matters before federal and state courts.

Carl Hahn is a partner at Steptoe in the investigations, white collar and compliance practice group, who previously served as the chief ethics and compliance officer for Northrop Grumman.

Evelyn Hudson, an associate at Steptoe, focuses on commercial litigation.

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