Executive Order Signals A Push Toward A Single, Federal "AI Rulebook" And A Retreat From The State Patchwork

Duane Morris Takeaways: On December 11, 2025, President Donald J. Trump signed Executive Order 14365 titled "Ensuring a National Policy Framework for Artificial Intelligence." The Order targets what it characterizes as a "patchwork" of State-by-State AI regulation and directs federal agencies to pursue a more uniform, national framework. Rather than serving as a technical AI governance roadmap, the Order focuses on limiting State AI laws through federal funding leverage, potential preemption, and expanded use of FTC enforcement authority. The discussion below highlights the Order's core objectives and key implications for companies and employers. The Executive Order is required reading for any organizations deploying AI or thinking of doing so.

The Executive Order's Core Objectives

Reduce State AI Regulation By Framing It As A Competitiveness Problem

The Order emphasizes U.S. leadership in artificial intelligence and asserts that divergent State regulatory regimes increase compliance costs, especially for startups, and may impede innovation and deployment. It also raises concerns that certain State approaches could pressure companies to embed "ideological" requirements into AI systems.

Create Leverage Through Federal Funding: BEAD Broadband Money As The "Carrot And Stick"

Within 90 days, the Secretary of Commerce is directed to issue a policy notice describing the circumstances under which States may be deemed ineligible for certain broadband deployment funding under the Broadband Equity Access and Deployment (BEAD) program if they impose specified AI-related requirements. The notice is also intended to explain how fragmented State AI laws could undermine broadband deployment and high-speed connectivity goals.

Move Toward A Federal Reporting And Disclosure Standard

Within 90 days after the Order's State-law "identification" process (discussed below), the Federal Communications Commission (FCC), in consultation with a Special Advisor for AI and Crypto, is instructed to consider whether to initiate a proceeding to adopt a federal reporting and disclosure standard for AI models that would preempt conflicting State requirements.

Use The FTC Act As An Enforcement Anchor And Tee Up Preemption Arguments

Within 90 days, the Federal Trade Commission (FTC) is directed, in consultation with other federal agencies, to issue a policy statement addressing how the FTC Act's prohibition on unfair or deceptive acts or practices applies to AI models, with the express objective of preempting conflicting State laws.

Establish A Federal AI Litigation Task Force To Challenge State AI Laws

The Executive Order goes beyond policy statements and funding leverage by directing the Attorney General, within 30 days, to establish an AI Litigation Task Force dedicated exclusively to challenging State AI laws that conflict with the Order's national policy objectives. The Task Force is authorized to pursue constitutional and preemption-based challenges, signaling an intent to bring coordinated, affirmative litigation against State AI regimes.

That enforcement effort is reinforced by a parallel State-law triage process. Within 90 days, the Secretary of Commerce must publish an evaluation identifying "onerous" State AI laws for potential challenge, particularly those that require AI systems to alter truthful outputs or compel disclosures that may implicate First Amendment or other constitutional concerns. Together, these provisions signal an intent to move quickly from policy articulation to test cases aimed at curbing State-level AI regulation.

Implications For Companies

Compliance Strategy May Shift, But Uncertainty Rises First

Although companies may welcome relief from conflicting State AI mandates, the Executive Order is likely to increase near-term uncertainty. Preemption disputes are likely, and the Order directs agency action rather than establishing a comprehensive statutory framework. Companies should avoid scaling back State-law compliance prematurely and should assume any federal override will be contested until resolved through rulemaking and litigation.

Class Action Exposure Will Shift, Not Disappear

Even if State AI laws are narrowed, plaintiffs' lawyers are likely to pursue claims under more traditional theories, including consumer protection (particularly AI marketing and disclosure claims), employment discrimination, privacy and biometrics statutes, and contract or misrepresentation theories. The Order's emphasis on FTC unfair and deceptive practices enforcement suggests that federal consumer protection standards may become the new focal point for both regulatory scrutiny and follow-on civil litigation.

Employment Risk Remains

Employers should expect ongoing scrutiny of AI use in hiring, promotion, and performance management, including disparate impact claims, vendor-liability arguments, and discovery disputes over model documentation, adverse impact analyses, and validation. Defensible governance, testing, and documentation remain critical.

Federal Contracting And Funding May Come With New AI Representations

If federal agencies adopt standardized AI disclosures, companies operating in regulated industries or participating in broadband initiatives may face new contract provisions governing AI use, along with enhanced reporting and audit obligations.

What Companies Should Do Now

Companies should begin by identifying where and how AI tools are being deployed, particularly in consumer-facing and employment-related contexts, and evaluating those uses under existing disclosure, privacy, and anti-discrimination laws. Public-facing statements about AI capabilities should be reviewed to ensure they are accurate and defensible, as increased regulatory and litigation focus on unfair or deceptive practices is likely to heighten scrutiny of AI-related claims. Companies should also review vendor relationships to confirm that contracts clearly address testing and validation obligations, incident response, audit rights, and appropriate allocation of risk for privacy and discrimination claims. Finally, organizations should remain prepared for continued regulatory change by maintaining State-law compliance readiness while monitoring federal agency actions that may shape a national AI framework.

Bottom Line

This Executive Order is a significant policy signal. The federal government is positioning itself to reduce State-by-State AI regulation and replace it with a framework centered on federal disclosure requirements and consumer protection enforcement. Companies should view the Order as an opportunity to prepare for a likely federal compliance baseline, without assuming State-law exposure will disappear in the near term.