U.S. order seeks to preempt state AI laws: federal leverage

President Trump signed an Executive Order on December 16, 2025. It was published in the Federal Register. The order directs federal agencies to identify state AI laws they call “onerous.” Agencies should seek federal preemption where appropriate. The order also asks agencies to consider conditioning federal grants, contracts, and procurement on compliance with a national AI framework. The White House framed preemption and funding conditions as tools to avoid a patchwork of state rules that could raise costs for interstate commerce and federal programs. It urged agencies to use administrative and funding levers instead of waiting for new legislation. California officials, including Governor Gavin Newsom, called the move an overreach. Expect rapid agency guidance and tighter procurement rules. States with stricter privacy or safety laws face legal and funding pressure. Vendors and state contractors should review contracts, monitor agency guidance, and prepare for likely state legal challenges.

Why It Matters

• Procurement risk: Federal agencies may require vendors to comply with the national AI framework as a condition for contracts and grants.
• Compliance scope: Multistate vendors may face centralized standards that could preempt stricter state privacy or safety rules.
• Legal exposure: States such as California have signaled legal pushback—expect litigation and shifting enforcement timelines.
• Immediate actions: Legal and procurement teams should inventory state AI obligations, map them to likely federal guidance, and update contract clauses and bid strategies.