Preemption: White House Moves to Centralize AI Governance and Block State Regulations
On December 11, 2025, the White House issued a directive aimed at consolidating artificial intelligence policy at the federal level. The Executive Order, “Ensuring a National Policy Framework for Artificial Intelligence,” outlines a strategy to dismantle what it describes as a “patchwork of 50 different regulatory regimes” (Sec. 1) in favor of a unified national standard.
For IP attorneys and in-house counsel managing AI policies and portfolios, this move suggests a shift in the compliance environment, potentially simplifying cross-border operations while introducing new uncertainties regarding federal enforcement.
The Push for Uniformity
The administration argues that disparate state regulations “thwart” the imperative for U.S. AI companies to “be free to innovate without cumbersome regulation” (Sec. 1).
The order explicitly targets state laws that it claims “embed ideological bias,” citing a Colorado statute as an example that might “force AI models to produce false results in order to avoid a ‘differential treatment or impact’ on protected groups” (Sec. 1).
The stated objective is to establish a “minimally burdensome national standard” (Sec. 1) to maintain American economic dominance.
The administration asserts that current efforts to remove barriers have “led to trillions of dollars of investments across the country” (Sec. 1), yet warns that the nation remains “in the earliest days of this technological revolution” (Sec. 1).
Litigation and Funding as Levers
To enforce this uniformity, the order establishes significant enforcement mechanisms:
AI Litigation Task Force: Within 30 days, the Attorney General must establish a task force whose “sole responsibility shall be to challenge State AI laws inconsistent with the policy set forth in section 2” (Sec. 3). The grounds for these challenges will include arguments that state laws “unconstitutionally regulate interstate commerce” or are “preempted by existing Federal regulations” (Sec. 3).
Conditional Federal Funding: The Department of Commerce is directed to issue a Policy Notice regarding the “Broadband Equity Access and Deployment (BEAD) Program” (Sec. 5). Under this notice, states identified as having “onerous AI laws” will be “ineligible for non-deployment funds, to the maximum extent allowed by Federal law” (Sec. 5).
Defining “Deceptive” and “Truthful”
A pivotal and legally novel component of the order involves the Federal Trade Commission (FTC). The Chairman is directed to issue a policy statement clarifying that state laws requiring “alterations to the truthful outputs of AI models” may be preempted by the FTC Act’s prohibition on deceptive practices (Sec. 7).
The order suggests that state mandates forcing AI to modify outputs for bias mitigation could be construed as “mandating deceptive conduct” (Sec. 7).
This frames the modification of “truthful outputs” as a violation of federal consumer protection standards.
Exceptions to Preemption
While the order promotes broad preemption, Section 8 outlines specific exclusions where state authority may be preserved. Legislative recommendations for a federal framework “shall not propose preempting otherwise lawful State AI laws relating to” (Sec. 8):
Child safety protections;
AI compute and data center infrastructure (excluding permitting reforms);
State government procurement and use of AI.
Analysis: Benefits, Challenges, and Risks
Benefits:
A unified federal standard offers predictability. For IP owners and startups, navigating a single federal framework is significantly less resource-intensive than monitoring 50 distinct state regimes. This reduction in “compliance overhead” could accelerate the deployment of AI applications and reduce barriers to entry for smaller innovators.
Challenges:
The definition of “truthful outputs” in the context of AI is legally and technically complex. Large Language Models (LLMs) are probabilistic, not deterministic. They frequently generate “hallucinations”—outputs that appear plausible but are factually incorrect.
If a state law requires a model to be adjusted to prevent harm, and the federal framework protects the model’s “truthful” (or raw) output, litigation regarding what constitutes “truth” versus “hallucination” seems inevitable.
Risks:
Confidentiality and Privacy: Centralizing regulation may override state-level privacy protections that exceed federal standards. IP professionals should remain vigilant regarding trade secret protection and data privacy, as a “minimally burdensome” federal standard might not offer the same granularity of protection as specific state laws (e.g., California’s CCPA).
Bias and Liability: By preempting state laws focused on algorithmic discrimination, the order may reduce the immediate regulatory pressure to mitigate bias. However, this creates a long-term risk: if models produce discriminatory outputs that are protected under this EO as “truthful,” companies may still face reputational damage or federal civil rights challenges under other statutes.
Reliability: There is a risk that removing “barriers” to innovation could inadvertently encourage the deployment of models that are not fully vetted for accuracy, increasing the prevalence of hallucinations in commercial tools.
Conclusion
The December 11 Executive Order signals a new phase in AI regulation, characterized by aggressive federal preemption and a deregulation-first mindset. Legal professionals should prepare for immediate challenges to state statutes and monitor the Commerce Department’s upcoming evaluation of “onerous” laws.
Disclaimer: This is provided for informational purposes only and does not constitute legal or financial advice. To the extent there are any opinions in this article, they are the author’s alone and do not represent the beliefs of his firm or clients. The strategies expressed are purely speculation based on publicly available information. The information expressed is subject to change at any time and should be checked for completeness, accuracy and current applicability. For advice, consult a suitably licensed attorney and/or patent professional.