Trump signs AI order challenging state rules, threatens broadband funding

David Sacks stood beside President Trump in the Oval Office on Thursday, flanked by Senator Ted Cruz and Commerce Secretary Howard Lutnick. The occasion was the signing of an executive order that would, according to Trump, prevent states from "stymying" American AI dominance. "China has one vote because they have one vote, and that's President Xi," Trump said. "He says do it and that's the end of that."

Set aside the peculiar logic of celebrating autocratic efficiency as a model for American governance. The more pressing question is whether this executive order accomplishes what its architects claim. It does not. Trump signed a document that reads like policy but lacks constitutional authority to deliver on its central promise. He is using federal funding as a weapon to reward political allies, and the AI angle is window dressing.

What the order actually does

Trump cannot unilaterally preempt state law. Only Congress holds that authority, and Congress has already rejected AI preemption twice this year. In July, the Senate voted 99-1 to strip a 10-year AI regulation moratorium from the reconciliation bill. Last week, Republican leadership failed to insert similar language into the National Defense Authorization Act despite direct pressure from the White House.

Trump's executive order attempts an end-run around these legislative defeats. Attorney General Pam Bondi has 30 days to establish an "AI Litigation Task Force" whose sole mission is to sue states over AI laws the administration finds objectionable. Commerce Secretary Howard Lutnick will evaluate state laws within 90 days and flag those deemed "onerous." States that make the list face exclusion from the $42 billion Broadband Equity Access and Deployment program.

That program funds fiber trenches in places like rural Montana, where crews are currently laying cable to connect ranches that still run on dial-up. Trump is threatening to halt those projects, to punish state legislators in Sacramento and Albany for passing consumer protection laws. The order's architects know they cannot invalidate state laws through executive action. They're betting that the threat of losing federal dollars will convince governors and state attorneys general to back off. The chilling effect is the point.

The legal weakness

Legal experts have been blunt. "They're trying to find a way to bypass Congress with these various theories in the executive order," John Bergmayer, legal director at Public Knowledge, told NPR. "Legally, I don't think they work very well."

Sacks has argued that the federal government's power to regulate interstate commerce gives it authority to override state AI laws. This misunderstands how commerce clause jurisprudence actually works. States regulate interstate commerce constantly, in healthcare, agriculture, environmental law, financial services. The Supreme Court affirmed this as recently as 2023, when it upheld California's pork industry regulations despite their effects on farmers in other states.

Brad Carson, president of Americans for Responsible Innovation, called the order's legal theory "a flimsy and overly broad interpretation of the Constitution's Interstate Commerce Clause cooked up by venture capitalists over the last six months." The ACLU labeled it "unconstitutional." Courts will likely agree. But the administration does not need to win in court to achieve its political purpose. The message to state legislators is already delivered: pass AI regulations and this administration will target you.

Colorado in the crosshairs

Look at which state law the executive order singles out by name. Colorado's SB24-205 requires AI systems to avoid "algorithmic discrimination." The order calls this an example of states "requiring entities to embed ideological bias within models," claiming such laws "may even force AI models to produce false results in order to avoid a 'differential treatment or impact' on protected groups."

Colorado passed a law saying AI systems used in hiring, lending, and housing decisions should not discriminate based on race or gender. The Trump administration calls this requirement an "ideological bias" that produces "false results." The quiet assumption is that AI models producing racially disparate outcomes are telling the truth, and laws requiring equitable treatment force them to lie.

This rhetorical move explains why the tech industry funded this fight so aggressively. The concern was never really about a "patchwork" of regulations creating compliance headaches for startups. OpenAI, Google, and Meta have armies of lawyers and can handle regulatory complexity. What they cannot easily handle are laws requiring their systems to work fairly across demographic groups. Those laws threaten business models built on optimization functions that sometimes produce discriminatory outputs.

Republican divisions exposed

Governor Ron DeSantis posted his objection on X before Trump even signed the order. "An executive order doesn't/can't preempt state legislative action," he wrote. "The problem is that Congress hasn't proposed any coherent regulatory scheme but instead just wanted to block states from doing anything for 10 years, which would be an AI amnesty."

DeSantis has been drafting his own AI legislation in Tallahassee. His proposed bill of rights includes data privacy rules, parental controls, and consumer protections. He wants guardrails. He just wants Florida to write them.

Steve Bannon went further on his podcast. "You have more restrictions on starting a nail salon on Capitol Hill or to have your hair braided than you have on the most dangerous technologies in the history of mankind." That's Bannon calling the preemption effort a giveaway. To Big Tech. From a guy who helped build Trump's first campaign.

The Heritage Foundation piled on too, warning that ripping up state laws without putting anything federal in their place hands Silicon Valley exactly what it wanted. "A carve-out for Big Tech," in their words. And Republican attorneys general in multiple states are already drafting legal challenges. The conservative coalition has cracked down the middle on this one. Sacks, Vance, and Cruz see deregulation as the price of winning the AI race. Bannon and the populist wing see tech billionaires using MAGA to dodge accountability. Both factions showed up to the same signing ceremony.

Follow the money

Andreessen Horowitz has been pushing federal preemption for months. Marc Andreessen posted in November that "a 50-state patchwork is a startup killer." His firm's government affairs guy, Collin McCune, called Thursday's signing "an incredibly important first step" within hours.

The lobbying runs on cash. Lots of it. AI-linked super PACs have already banked over $100 million earmarked for the 2026 midterms, according to CNBC. OpenAI opened a DC office. Google expanded theirs. When Cruz floated his 10-year moratorium during the reconciliation fight, industry groups ran point. When that died 99-1, the same groups pivoted to executive action. They got what they paid for.

Trump has been generous in return. He has praised AI executives publicly, signed orders directing federal resources toward AI infrastructure, and loosened chip export controls, including sales to China. Thursday's order fits the pattern. It delivers what tech investors requested, creates the appearance of decisive action, and shifts enforcement costs onto state governments now stuck defending their laws in federal court.

Why this matters

For investors and AI companies: The uncertainty this order creates favors doing nothing. A legislator in Denver or Albany now has to wonder whether voting yes on an AI bill means her state loses broadband money or gets sued by the Justice Department. That hesitation buys time. Months, maybe years. Companies racing to ship AI systems before rules solidify just got more runway.

For state policymakers: Litigation is coming. The administration has said as much. California, New York, and Colorado should budget for it. The legal arguments are weak, but defending them costs real money and staff hours.

For job applicants and loan seekers: The order singled out Colorado's anti-discrimination law as ideological. That sends a message. A hiring platform or lending algorithm that produces racially skewed results now has cover to skip the audit. Why run fairness tests when the White House calls them bias?

For Republican strategists watching 2026: DeSantis and the state AGs are the tell. If they sue and win, executive preemption hits a wall, and future administrations inherit that limit. If they fold, donor money officially outranks federalist principle in the GOP platform.

Somewhere in rural Montana, a broadband grant application sits on a county clerk's desk. Whether the fiber gets laid now depends on how Sacramento votes on AI.

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