AI Regulation Moves to Federal Level; Startups Concerned Over Trump Executive Order

Staff Report: PNN

US President Donald Trump signed a new executive order directing federal agencies to challenge state-level AI laws, asserting that AI, as an interstate commerce issue, should be regulated federally.

The order, titled “Ensuring a National Policy Framework for Artificial Intelligence,” instructs the judiciary to form a task force within 30 days to challenge certain state laws and directs the Commerce Department to list “overly strict” state laws within 90 days, affecting federal funding.

The Federal Trade Commission (FTC) and Federal Communications Commission (FCC) are to review standards that could override state laws nationally. Coordination with Congress is also mandated to create a unified national AI law.

Critics warn the order may protect large tech companies, while startups face uncertainty. The order does not create laws directly; state laws remain effective until challenged in court. Experts say the matter may reach the Supreme Court, leaving startups to balance federal directives with state laws.

Small startups, lacking legal resources, may face significant hurdles, while larger tech companies can mitigate risk with legal teams. Experts suggest a risk-based national AI law, coordinated by Congress, could stabilize the sector.