Trump Orders DOJ to Sue States Over AI Laws, Threatens Federal Funding
TL;DR
President Trump signed an executive order on December 11, 2025, directing the Attorney General to establish an AI Litigation Task Force within 30 days to sue states with AI laws the administration deems "onerous." The order also threatens to withhold BEAD broadband funding from non-compliant states. Within eight days, 23 state attorneys general filed a bipartisan letter urging the FCC not to preempt state AI regulations, arguing the agency lacks authority.
What Happened
President Trump signed the executive order "Ensuring a National Policy Framework for Artificial Intelligence" on December 11, 2025, launching the most aggressive federal challenge to state AI regulation to date.
The order establishes a two-pronged strategy: litigation and funding restrictions.
AI Litigation Task Force: The Attorney General must establish the task force within 30 days (by January 10, 2026) to challenge state AI laws on grounds including unconstitutional regulation of interstate commerce, preemption by federal regulations, or other bases the AG deems appropriate.
Funding Leverage: Within 90 days, Commerce Secretary Howard Lutnick must issue a policy notice specifying that states with "onerous" AI laws lose eligibility for remaining Broadband Equity, Access, and Deployment (BEAD) Program funds.
FCC Rulemaking: The FCC Chair must initiate a proceeding within 90 days to determine whether to adopt federal AI reporting standards that preempt conflicting state laws. FCC Chairman Brendan Carr welcomed the directive the following day.
The order specifically criticizes Colorado's algorithmic discrimination law (SB 24-205, effective February 1, 2026), claiming it "may even force AI models to produce false results in order to avoid a 'differential treatment or impact' on protected groups."
Why It Matters
The executive order fundamentally reshapes the AI regulatory landscape, with direct implications for data center operations and infrastructure planning.
Immediate Uncertainty: Companies operating in states with comprehensive AI laws—including California, Colorado, Texas, and Utah—now face competing compliance pressures. State laws remain enforceable until courts rule otherwise, but federal litigation creates planning uncertainty.
Infrastructure Carveout: The order explicitly excludes "AI compute and data-center infrastructure" from preemption recommendations, along with child safety and state procurement policies. Data center permitting and operations regulations remain state-level concerns for now.
Bipartisan State Resistance: On December 19, a bipartisan coalition of 23 state attorneys general filed reply comments urging the FCC not to preempt state AI laws, arguing the agency lacks authority. The coalition includes both red and blue states: Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Oregon, Rhode Island, Tennessee, Utah, Vermont, Washington, Wisconsin, and the District of Columbia.
Historical Pattern: The administration attempted multiple preemption strategies in 2025. A "Big Beautiful Bill" provision imposing a 10-year moratorium on state AI laws drew opposition from 40 state AGs and was removed. A similar NDAA provision failed after 36 AGs objected.
Technical Details
Executive Order Timeline
| Action | Deadline | Responsible Party |
|---|---|---|
| AI Litigation Task Force established | January 10, 2026 | Attorney General |
| Commerce identifies "onerous" state laws | March 11, 2026 | Secretary of Commerce |
| BEAD eligibility conditions issued | March 11, 2026 | Secretary of Commerce |
| FTC policy on AI/deceptive practices | March 11, 2026 | FTC Chairman |
| FCC preemption proceeding initiated | March 11, 2026 | FCC Chairman |
State Laws Under Scrutiny
| State | Law | Effective | Focus |
|---|---|---|---|
| Colorado | SB 24-205 (ADAI) | Feb 1, 2026 | Algorithmic discrimination in high-risk AI |
| California | TFAIA | 2026 | Transparency for frontier AI systems |
| Texas | HB 1709 | Sept 1, 2025 | AI disclosure requirements |
| Utah | SB 149 | May 1, 2024 | AI disclosures in regulated industries |
Preemption Legal Theory
The EO directs the FTC to explain circumstances where state laws requiring AI output alterations conflict with the FTC Act's prohibition on deceptive practices. Legal analysts at Goodwin and Gibson Dunn note this theory faces significant hurdles—no existing federal AI statute provides clear preemption authority over comprehensive state laws like Colorado's ADAI.
Colorado ADAI Requirements (SB 24-205)
Colorado's law requires AI developers and deployers to use reasonable care to protect consumers from algorithmic discrimination in "consequential decisions" made by high-risk AI systems. Violations constitute unfair trade practices, punishable by up to $20,000 per violation.
What's Next
The AI Litigation Task Force launches January 10, 2026. Initial litigation targets and strategy remain undisclosed.
Key uncertainties for early 2026:
Enforcement Gap: State laws remain fully enforceable until courts rule otherwise. Companies face a compliance dilemma—ignoring state requirements risks state penalties, while the EO signals federal support for non-compliance.
Congressional Action: The order directs officials to prepare legislative recommendations for a uniform federal AI framework. Previous preemption attempts failed amid bipartisan opposition; Congressional appetite for federal AI legislation remains uncertain.
BEAD Leverage: Whether Commerce can legally condition broadband funding on AI law compliance faces legal challenges. States may sue to protect allocated funds.
Introl Angle
The executive order's explicit carveout for data center infrastructure preserves state-level permitting and operations requirements. Introl's network of 550 field engineers support GPU deployments across 257 global locations regardless of regulatory jurisdiction. Learn more about our coverage area.
Published: December 30, 2025