Trump’s AI executive order promises ‘one rulebook’ — startups may get legal limbo instead

President Donald Trump signed one executive order On Thursday evening, it directs federal agencies to challenge state AI laws, arguing that startups need relief from a “patchwork” of rules. Legal experts and startups, meanwhile, say the order could prolong uncertainty, triggering lawsuits that will leave young companies navigating changing state requirements while they wait to see whether Congress can agree on a single national framework.

The order, titled “Ensuring a National Policy Framework for Artificial Intelligence,” directs the Justice Department to establish a task force within 30 days to challenge certain state laws on the grounds that AI is interstate commerce and should be federally regulated. It gives the Commerce Department 90 days to compile a list of “onerous” state AI laws, a review that could affect states’ eligibility for federal funds, including broadband subsidies.

The order also asks the Federal Trade Commission and the Federal Communications Commission to investigate federal standards that could violate state rules, and directs the administration to work with Congress on a uniform AI law.

The order comes amid a broader push to rein in AI regulations on a state-by-state basis, after congressional efforts to pause state regulation stalled. Lawmakers in both parties have argued that blocking states from taking action, without a federal standard, could leave consumers exposed and businesses largely unchecked.

“This David Sacks-led executive order is a gift to the Silicon Valley oligarchs who use their influence in Washington to shield themselves and their companies from liability,” Michael Kleinman, head of U.S. policy at the Future of Life Institute, which focuses on reducing the extreme risks of transformative technologies, said in a statement.

Sacks, Trump’s AI and crypto policy czar, has been a leading voice behind the administration’s push for AI preemption.

Even proponents of a national framework admit that order does not create one. With state laws still enforceable unless courts block them or states pause enforcement, startups may face a longer transition period.

Sean Fitzpatrick, CEO of LexisNexis North America, UK and Ireland, tells TechCrunch that states will defend their consumer protection authority in court, with cases likely escalating to the Supreme Court.

While supporters argue the order could reduce uncertainty by centralizing the fight over AI regulation in Washington, critics say the legal battle will create immediate headwinds for startups navigating conflicting state and federal requirements.

“Because startups prioritize innovation, they typically do not have robust regulatory governance programs in place until they reach a scale that requires a program,” Hart Brown, lead author of Oklahoma Governor Kevin Stitt’s Task Force on AI and Emerging Technology recommendations, told TechCrunch. “These programs can be expensive and time-consuming to comply with a highly dynamic regulatory environment.”

Arul Nigam, co-founder of Circuit Breaker Labs, a startup red-teaming AI chatbots in conversational and mental health, echoed these concerns.

“There is uncertainty in terms of: doing [AI companion and chatbot companies] be self-regulating?” Nigam told TechCrunch, noting that the patchwork of state AI laws is hurting smaller startups in his field. “Are there open source standards they have to adhere to? Should they continue building?”

He added that he is hopeful that Congress can now move more quickly to pass a stronger federal framework.

Andrew Gamino-Cheong, CTO and co-founder of AI governance company Trustworthytold TechCrunch that the EO will backfire on AI innovation and pro-AI goals: “Big Tech and the big AI startups have the money to hire lawyers to help them figure out what to do, or they can simply hedge their bets. The uncertainty is what hurts startups the most, especially the ones that can’t get billions in funding almost at will,” he said.

He added that legal ambiguity makes it more difficult to sell to risk-sensitive customers such as legal teams, financial firms and healthcare organizations, increasing sales cycles, system operations and insurance costs. “Even the perception that AI is unregulated will reduce trust in AI,” which is already low and threatens adoption, Gamino-Cheong said.

Gary Kibel, a partner at Davis + Gilbert, said companies would welcome a single national standard, but “an executive order is not necessarily the appropriate vehicle to override laws that states have properly enacted.” He warned that the current uncertainty leaves open two extremes: very restrictive regulations or no action at all, either of which could create a “Wild West” that favors Big Tech’s ability to absorb and wait out risks.

Meanwhile, Morgan Reed, president of The App Association, urged Congress to quickly enact a “comprehensive, targeted, and risk-based national AI framework. We can’t have a patchwork of state AI laws, and a lengthy court battle over the constitutionality of an executive order is no better.”