Legal Analysis of Leaked Draft AI Preemption Executive Order
A draft executive order (EO) has recently been circulated that addresses state laws regulating artificial intelligence (AI). The order would implement a strategy to limit, challenge, and potentially preempt the authority of states to regulate artificial intelligence. It aims to use litigation, administrative rulemaking, funding conditions, and federal policy statements to pursue outcomes that Congress has not authorized through statute.
However, although entitled “Eliminating State Law Obstruction of National AI Policy,” the EO does not directly preempt or invalidate any state AI law or purport to establish a federal standard that would have immediate preemptive effect. Instead, the draft EO would direct federal agencies to take various future actions under their existing authorities to discourage the enactment of state AI laws, or to challenge state AI laws in court, where the state law conflicts with the administration’s goal of establishing a uniform national policy that imposes minimal regulation on the AI industry. The following is a summary of the draft EO’s provisions and their susceptibility to legal challenge.
Sections 1 and 2.
These sections announce the administration’s desire to promote the development of AI in the United States through minimal regulation. The EO expresses a preference for a “minimally burdensome, uniform national policy framework for AI” rather than state-based regulation. It identifies two state laws as problematic: California’s “complex and burdensome disclosure and reporting law” and Colorado’s “algorithmic discrimination” law. The EO does not cite any congressionally enacted statute as a source for these policies.
As statements of the administration’s policy goals, sections 1 and 2 have no legal effect and would not be subject to legal challenge.
Section 3.
Section 3 of the draft EO directs the Department of Justice (DOJ) to establish a “task force” within 30 days “whose sole responsibility shall be to challenge State AI laws.”
This provision does not confer on DOJ any authority that it did not already possess. Rather, it directs the Attorney General to dedicate existing DOJ resources to seek judicial invalidation of state AI laws on constitutional or preemption grounds.
However, its purpose is clear: create a standing mechanism for the federal government to attack a wide range of state laws even before those laws are fully implemented and, ideally, chill them from being adopted in the first place.
Section 4.
Section 4 directs the Commerce Department to evaluate existing state AI laws for conflict with the administration’s AI policy and publish a report within 90 days. Section 4 provides that the evaluation should focus on state laws that “require AI models to alter their truthful outputs, or that may compel AI developers and deployers to disclose or report information in a manner that would violate the First Amendment or any other provision of the Constitution.” The issuance of the report itself is unlikely to have legal effect and, therefore, is unlikely to be subject to legal challenge. The Commerce Department is directed to channel its findings to the Department of Justice, which may then challenge the legality of state laws and regulations.
Section 5.
Section 5 of the draft EO directs the Commerce Department, within 90 days, to issue a “policy notice” that specifies “the conditions under which States may be eligible for remaining funding under the Broadband Equity Access and Deployment (BEAD) Program.” The only condition required by the draft EO is that “States with AI laws identified” by the Commerce Department report required by section 4 of the EO “are ineligible for non-deployment funds, to the maximum extent allowed by Federal law.” BEAD funds are generally made available to the states, although the program anticipates that states will make BEAD funds available to grantees. Because the mandated condition focuses on non-deployment funds, but also because the administration has not yet approved any state’s final proposal for BEAD Deployment funds, it is unclear what the financial impact of the funding condition would be. Any condition based on the existence of state AI laws will likely be challenged by impacted states, and potentially impacted grantees.
Section 5 also directs other agencies to review their discretionary grant programs to determine whether conditions based on the existence of state AI regulations may be imposed. If an agency imposes such a condition, impacted states would likely challenge the conditions through litigation.
Section 6.
Section 6 directs the FCC to initiate a rulemaking to adopt federal reporting and disclosure standards for AI models, with the expectation that the FCC’s rules would preempt state disclosure and reporting laws. The draft EO does not identify what statutory authority the FCC possesses to regulate the AI industry. Impacted states would likely challenge an FCC rule that purports to preempt state disclosure and reporting laws.
Section 7.
Section 7 directs the FTC to issue a policy statement on the application of the federal ban on unfair and deceptive acts and practices to AI models. It also directs the FTC to address when state laws that “require alterations to the truthful outputs of AI models” would be preempted by the FTC Act. It is unclear whether the policy statement’s discussion of preemption would purport to preempt state laws or would instead merely articulate the FTC’s views on preemption without having legal effect. Again, any attempt to preempt state AI laws would likely be challenged by the states.
Section 8.
Section 8 concerns the development of the administration’s legislative proposals to Congress. Although the section does not create preemption on its own, it signals an intention to pursue statutory preemption in the future. Section 8 would not be subject to legal challenge because Congress remains free to reject the administration’s proposals and to decide instead not to preempt state laws regulating AI.
Section 9.
Section 9 is a boilerplate provision confirming that the executive order does not alter any agency’s statutory authority and must be implemented consistently with applicable law.