Federal Government Challenges State AI Laws with New Task Force and Funding Threats

2025-12-22 data

Washington, Monday, 22 December 2025.
The Trump administration’s sweeping AI executive order establishes a litigation task force to sue states over their artificial intelligence regulations, specifically targeting Colorado’s AI Act and similar laws. The federal strategy includes withholding broadband funding from states with ‘onerous’ AI regulations and introduces unprecedented requirements like auditing algorithms for political bias in employment decisions. This regulatory consolidation replaces the complex patchwork of state-specific AI compliance requirements that businesses have been navigating, while creating new federal obligations for quarterly workforce impact reporting.

Immediate Federal Action Against State AI Regulations

The executive order, signed on December 11, 2025, directs the Attorney General to establish an AI Litigation Task Force within 30 days to challenge state AI laws that allegedly regulate interstate commerce unconstitutionally or conflict with federal policy [1][2][3]. The Department of Commerce has 90 days from the signing date to publish a comprehensive evaluation identifying ‘onerous’ state AI laws, with particular focus on regulations requiring AI systems to ‘alter truthful outputs’ or mandating disclosures that may violate First Amendment protections [2][3]. This aggressive timeline demonstrates the administration’s urgency in dismantling what it characterizes as a ‘patchwork of 50 different regulatory regimes’ [4] that hinder American AI competitiveness on the global stage.

Colorado AI Act Becomes Primary Target

Colorado’s pioneering AI Act, passed in May 2024, faces an existential threat as the executive order specifically names it as an example of harmful ‘excessive State regulation’ [2]. The Colorado legislation, originally scheduled for implementation on February 1, 2026, had already been delayed to June 30, 2026, following intense tech industry lobbying during an August 2025 special legislative session [2]. The Act was designed to prevent algorithmic discrimination in employment, housing, healthcare, and financial services [2], but now Colorado businesses preparing for compliance must navigate the uncertainty of potential federal litigation blocking enforcement before the June deadline.

Financial Leverage Through Federal Funding Restrictions

The administration employs financial pressure as a key enforcement mechanism, threatening to withhold federal broadband funding from states maintaining AI regulations deemed burdensome [2][6]. The Department of Commerce is instructed to issue a policy notice specifying that states with ‘onerous AI laws’ will become ineligible for funding under certain federal programs [4]. This approach builds on the White House’s July 2025 AI Action Plan, which directed the Office of Management and Budget to ‘consider a state’s AI regulatory climate when making funding decisions and limit funding if the state’s AI regulatory regimes may hinder the effectiveness of that funding or award’ [4]. The funding restrictions represent a significant escalation from previous unsuccessful congressional attempts to preempt state AI laws, including the failed ‘One Big Beautiful Bill Act’ and provisions rejected from the National Defense Authorization Act [3][4].

Revolutionary HR Compliance Requirements Under Federal Framework

The TRUMP AMERICA AI Act introduces unprecedented compliance obligations for human resources departments, fundamentally altering how companies audit employment-related AI systems [1]. Beyond traditional bias auditing for race, gender, and age discrimination, the new framework mandates evaluation of ‘High-Risk AI Systems’ for bias based on political affiliation—a requirement that will challenge existing validation datasets and audit methodologies [1]. Companies must now submit quarterly reports to the Department of Labor detailing AI-related job effects, specifically including data on layoffs and job displacement, transforming internal efficiency metrics into matters of public record [1]. HR technology vendors face elevated responsibilities under a new ‘duty of care’ standard requiring rigorous risk assessments covering psychological and financial harms before client renewals [1]. This shift from state-specific compliance geography to centralized federal requirements eliminates the administrative burden of tracking multiple state laws while introducing politically charged auditing specifications that reflect the current administration’s priorities.

Bronnen

AI regulation federal compliance