Trump’s AI Order: ‘One Rulebook’ or Startup Limbo?
▼ Summary
– President Trump signed an executive order directing federal agencies to challenge state AI laws, aiming to relieve startups from a complex “patchwork” of regulations.
– The order instructs the Justice Department to form a task force to legally contest state laws and directs Commerce to compile a list of “onerous” state rules, potentially affecting federal funding.
– Critics argue the order will create prolonged legal uncertainty and court battles, disproportionately harming startups that lack resources to navigate conflicting regulations.
– Supporters of a national AI framework acknowledge the order does not create one, leaving startups in a difficult transition period as state laws remain enforceable.
– Many experts and industry figures urge Congress to pass a comprehensive federal AI law, arguing that neither a state-by-state approach nor a contested executive order provides the needed clarity.
A new executive order on artificial intelligence aims to create a single national regulatory framework, but critics argue it may instead plunge startups into a prolonged period of legal uncertainty. The directive, signed by President Donald Trump, instructs federal agencies to challenge state-level AI laws, arguing that a “patchwork” of conflicting rules stifles innovation and burdens emerging companies. However, legal experts and startup founders warn that the resulting court battles could leave young companies navigating shifting requirements for years, with no clear rules in place until Congress potentially acts.
The order, formally titled “Ensuring a National Policy Framework for Artificial Intelligence,” sets several federal actions in motion. It directs the Department of Justice to establish a task force within a month to legally contest certain state laws, asserting that AI constitutes interstate commerce and thus falls under federal regulatory authority. The Commerce Department is given ninety days to compile a list of state laws deemed “onerous,” a classification that could influence those states’ access to federal funding programs, including broadband grants. Furthermore, the order calls on the Federal Trade Commission and the Federal Communications Commission to explore federal standards that could override state rules, while the administration is instructed to collaborate with Congress on crafting a uniform national AI law.
This move occurs against a backdrop of stalled legislative efforts in Congress to pause state-level AI regulation. Lawmakers from both major parties have expressed concern that blocking states from acting without a federal standard in place could leave consumers unprotected and companies without sufficient oversight. Supporters of a national framework acknowledge that the executive order does not itself create one, leaving state laws fully enforceable unless courts intervene or states voluntarily pause their implementation. This scenario creates what many fear will be an extended and confusing transition period for businesses.
“The uncertainty does hurt startups the most, especially those that can’t get billions of funding almost at will,” said Andrew Gamino-Cheong, CTO of AI governance firm Trustible. He argues that the order could backfire on innovation, as large technology firms have the resources to hire legal teams and navigate ambiguity, while smaller startups are left in limbo. This legal fog also complicates sales to risk-averse clients in sectors like finance, healthcare, and legal services, potentially increasing costs and lengthening sales cycles.
The policy has drawn sharp criticism from some advocacy groups. Michael Kleinman of the Future of Life Institute described it as “a gift for Silicon Valley oligarchs who are using their influence in Washington to shield themselves and their companies from accountability.” The order is closely associated with David Sacks, who serves as the administration’s AI and crypto policy lead and has been a vocal proponent of federal preemption of state rules.
For startup founders, the immediate challenge is operational. Arul Nigam, co-founder of Circuit Breaker Labs, which tests AI chatbots, pointed to the practical dilemmas. “There’s uncertainty in terms of, do [companies] have to self-regulate? Are there open source standards they should adhere to? Should they continue building?” he asked, noting that the current patchwork disproportionately harms smaller players in his field. He expressed hope that the order might spur Congress to move faster on a cohesive federal law.
Legal experts anticipate a protracted fight. Sean Fitzpatrick, CEO of LexisNexis for North America, the U.K., and Ireland, predicts states will vigorously defend their consumer protection authority in court, with disputes likely reaching the Supreme Court. Attorney Gary Kibel noted that while businesses desire a single standard, “an executive order is not necessarily the right vehicle to override laws that states have duly enacted.” He warned the current approach risks creating a regulatory “Wild West,” a situation that inherently benefits larger corporations capable of absorbing risk and waiting out legal resolutions.
The call for congressional action is growing louder from within the industry. Morgan Reed, president of The App Association, urged lawmakers to swiftly enact a “comprehensive, targeted, and risk-based national AI framework.” He stressed, “We can’t have a patchwork of state AI laws, and a lengthy court fight over the constitutionality of an Executive Order isn’t any better.” The central question remains whether this executive action will pave the way for clarity or simply deepen the uncertainty it seeks to resolve.
(Source: TechCrunch)
