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On December 11, 2025, President Donald Trump signed an executive order titled Establishing A National Policy Framework For Artificial Intelligence (the “Order”)[1]. The Order’s policy objective is to “enhance the United States’ global AI dominance through a minimally burdensome national policy framework for AI”[2] and comes after Congress considered but did not advance federal legislation that would have preempted state AI regulation earlier this year. The Order justifies federal intervention on three grounds:

  1. The growing number of different state regulatory frameworks has created a fragmented and inconsistent compliance landscape, particularly for small and medium sized businesses.
  2. Some state laws require AI developers to incorporate “ideological bias” into their model outputs. For example, the Order alleges that Colorado’s ban on algorithmic discrimination could pressure AI models to produce inaccurate results in order to avoid differential treatment or impact on protected groups.
  3. Certain state laws may go beyond their proper authority by regulating conduct outside their borders, raising concerns about interference with interstate commerce.

Below we summarize the key elements of the Order, followed by key takeaways for businesses to consider as they develop AI governance programs mapped to an ever-shifting regulatory framework.

Key Provisions of the Order

Building upon Executive Order 14179 of 23 January 2025 (Removing Barriers to American Leadership in Artificial Intelligence), which revoked the Biden Administration’s attempt to regulate the AI industry, the Order escalates federal efforts to prevent state-level AI regulation through forthcoming litigation, funding restrictions and agency preemption proceedings.

Specifically, the Order sets out a multi-pronged federal effort to challenge state AI laws and promote a single federal regime:

  • AI Litigation Task Force: The Order directs the Attorney General to establish an AI Litigation Task Force within 30 days of the Order to challenge state AI laws that conflict with the spirit of the Order, such as laws that unconstitutionally regulate interstate commerce, are preempted by existing federal regulations or are otherwise unlawful (e.g., laws that compel disclosures by AI developers or deployers in violation of the First Amendment).
  • State Law Evaluation: The Order requires the Secretary of Commerce to publish an evaluation of existing state AI laws, within 90 days of the Order, that identifies: (i) onerous laws conflicting with the Order’s main goals (e.g., laws that force AI systems to alter truthful outputs or compel disclosure in violation of the First Amendment), (ii) laws that should be referred to the AI Litigation Task Force, and (iii) laws that promote the development of AI consistent with the policy of the Order.
  • Federal Funding Restrictions: Within 90 days of the Order, the Secretary of Commerce must issue a policy notice specifying the conditions under which States may be eligible for certain remaining federal funding. Specifically, states with onerous AI laws, as identified by the Secretary of Commerce, lose eligibility for certain non-deployment funds under the Broadband Equity Access and Deployment program to the maximum extent allowed by federal law. Executive agencies are also directed to consider conditioning discretionary grants on states not enacting conflicting AI laws or agreeing not to enforce existing ones during the funding period.
  • Federal Preemption Standards: The Order also tasks key agencies with developing federal standards. Within 90 days of the Order, (i) the Federal Communications Commission is required to consider adopting a federal reporting and disclosure standard for AI models that preempts conflicting state laws and (ii) the Federal Trade Commission (“FTC”) is required to issue a policy statement on the application of the FTC Act’s prohibition on unfair and deceptive acts to AI models.  In particular, the Order directs the FTC guidance to explain the circumstances when state laws requiring “alterations to the truthful outputs of AI models” are preempted by the FTC Act’s prohibition on deceptive practices.
  • Legislative Framework: The Order calls for the Special Advisor for AI and Crypto and the Assistant to the President for Science and Technology to prepare a legislative proposal to establish a uniform federal policy framework preempting conflicting state legislation (with limited carve-outs for child safety, AI compute and data center infrastructure, state government use of AI and other topics, as to be determined).

Key Takeaways

The Order marks the Trump Administration’s most substantial effort to date in shaping the federal approach to AI regulation, prioritizing industry flexibility over prescriptive requirements and potentially creating tension with state regulatory frameworks across various jurisdictions whilst leaving open questions about how AI safety, accountability and consumer protection will be addressed at the federal level.. With Congress deadlocked on comprehensive AI legislation and states determined to defend their regulatory authority, the resulting legal battles will likely determine the future of AI legislation in the United States for years to come. 

Given the ever-evolving legal landscape and in the absence of federal legislation, businesses should consider aligning their AI governance programs with industry standards, such as NIST’s AI Risk Management Framework and ISO 42001, which are likely to persist even as the regulatory environment continues to shift.  Businesses should also focus compliance efforts on ensuring transparency and truthfulness in their use and development of AI given the FTC’s recent focus on such principles as aligned with the Order’s directive.[3] Thoughtful AI governance aligned with NIST and ISO principles, coupled with transparent disclosures and documentation, will help businesses navigate the evolving AI compliance landscape.

[1] The text of the Order can be found here.

[2] See Section 2 of the Order.

[3] By directing the FTC to consider application of its deceptive practices prohibition to AI, the Order dovetails with the FTC’s recent enforcement efforts, which have largely focused on appropriate and sufficient disclosure of AI usage and businesses’ alleged misrepresentations of AI capabilities.