AI Executive Order Calls for Changes, But the Need for Good Governance Remains

On December 11, 2025, President Donald Trump issued Executive Order 14365, titled “Ensuring a National Policy Framework for Artificial Intelligence,” aimed at curtailing state regulation of artificial intelligence (AI). Asserting that “excessive” state regulation interferes with the need for innovation in the AI space, the order calls for congressional legislation adopting a “minimally burdensome national standard.” Until a legislative standard is in place, the order directs certain departments and agencies to take specified steps to identify and challenge state AI laws and regulations that are deemed onerous, as well as to take certain actions that would preempt those laws and regulations.

The order directs various agencies and departments to take the following actions:

• The U.S. Department of Commerce (DOC) must compile a list of “onerous” state AI laws, including those that require AI models to “alter truthful outputs” or require the disclosure of information that would violate the First Amendment, and issue a policy notice making those states ineligible for certain funds appropriated to promote rural broadband infrastructure under the Broadband Equity, Access, and Deployment Program;
• Other federal agencies and departments must consider conditioning funds under their discretionary grant programs on not enforcing or enacting onerous AI laws;
• The U.S. Department of Justice must establish an AI litigation task force for challenging onerous state AI laws as unconstitutionally regulating interstate commerce;
• The Federal Communications Commission and the Federal Trade Commission must consider actions such as adopting a reporting and disclosure standard for AI models and clarifying the extent to which state AI laws would be preempted by the Federal Trade Commission Act’s prohibition on deceptive practices affecting commerce; and
• Offices within the White House must prepare a recommendation for federal legislation adopting a “uniform federal policy framework” on AI that preempts state AI laws.

It further states: “My Administration must act with the Congress to ensure that there is a minimally burdensome national standard — not 50 discordant State ones.  The resulting framework must forbid State laws that conflict with the policy set forth in this order.” This is a significant counter-current to discussions among state insurance regulators, who have been looking for more ways to direct and oversee AI use. The NAIC has already reacted sharply to the order, stating that it “introduces legal uncertainty, which may weaken the insurance market by delaying business decisions, deterring investment, and postponing essential consumer protections,” and called on the administration to “affirm state regulation of AI in the business of insurance to avoid damaging uncertainty.” 

Part of the uncertainty results from potential McCarran-Ferguson reverse preemption. As an executive order, the order is not “an act of Congress,” a necessary component for triggering McCarran-Ferguson reverse preemption that would preserve state regulation of the business of insurance unless specifically preempted. The called-for legislation, however, would be an act of Congress, but if the legislation is sufficiently specific about its intent to preempt the business of insurance, it could impose federal AI law, even upon the business of insurance. The next uncertainty would become which existing state AI regulations should be preempted. After all, adoptions of the NAIC’s model bulletin cite non-AI-specific laws as their basis, which could be argued as outside the scope of the intended federal preemption over state AI regulation. If unclear, the industry could be left questioning (and litigating) the scope of the new legislation’s reach and straddling two very different regimes.

Time will tell which laws are deemed “onerous,” what type of federal policy framework develops, and what litigation outcomes will ensue. Ultimately, however, even if the order reduces regulatory requirements on AI use, it does not create a safe harbor against private litigation, including class actions, so good AI governance remains good business.