On December 12, 2025, U.S. President Donald Trump signed an executive order titled “Ensuring a National Policy Framework for Artificial Intelligence,” aiming to consolidate AI governance and bolster America’s leadership in the sector. The order was characterized as a pivotal move to harmonize regulations at the federal level, countering what the administration termed as detrimental state-level fragmentation that could hamper U.S. competitiveness and inflate compliance costs, particularly for startups.
According to a accompanying fact sheet from the White House, the order’s intent is to foster a “coherent and minimally burdensome” policy environment for AI innovation. However, while it emphasizes a deregulatory approach, it falls short of creating an all-encompassing federal AI law. Rather, it instructs federal agencies to discourage state-level regulations that conflict with national objectives, thereby igniting debates over its enforceability and implications for AI startups.
For those operating in the AI landscape, the pressing inquiry is whether this executive action provides much-needed clarity or complicates the compliance landscape further. While the administration indicates a desire to streamline regulations, questions linger about the real-world impact of this order.
Examining the Executive Order
As outlined in the White House fact sheet, the executive order directs federal agencies to align on a unified national AI strategy, with a particular focus on curtailing “overly burdensome” state laws. The Department of Justice has been tasked with identifying and potentially challenging state legislation that could hinder the administration’s goals. Legal assessments following the order’s release indicate it does not nullify state laws outright but rather establishes a framework for federal agencies to contest them.
The order also encourages major agencies, such as the Federal Trade Commission (FTC) and the Federal Communications Commission (FCC), to develop guidance or reporting standards pertaining to AI systems. This could pave the way for new federal transparency requirements while existing state regulations remain intact, pending legal evaluations. Furthermore, the order links compliance with federal funding eligibility, potentially pressuring states reliant on federal grants to align their AI legislative frameworks with federal standards.
Significantly, the executive order does not articulate specific rules around AI safety, liability standards, or data privacy obligations, leaving much of the substantive regulation vague while advocating for innovation and economic competitiveness.
The response from state governments has been varied, with some states, including Colorado and New York, moving ahead with their own AI regulations despite federal directives. Legal experts suggest that the constitutional limits of federal authority may complicate enforcement, indicating that executive orders alone cannot override state laws without explicit congressional backing. As a result, many anticipate protracted legal disputes if the Department of Justice attempts to halt or contest state AI legislation.
This creates a paradox for startups, which are caught between the administration’s desire to lower regulatory hurdles and the reality of navigating both active state laws and ongoing federal oversight efforts. This evolving landscape further complicates the compliance environment, making it more intricate than before.
Experts in the field have varying perspectives on the order’s ramifications. Lindsey Mignano, co-founder of SSM, noted that while proponents argue the consolidation could ease compliance burdens for startups, critics point out that it does not establish a comprehensive regulatory framework. Instead, it opens the door to a complex landscape of federal challenges against existing state laws, which could lead to additional financial strain on early-stage companies.
Jeff Watkins, Chief AI Officer of NorthStar Intelligence, echoed these sentiments, highlighting that despite potential advantages for startups, the lack of clarity around compliance may create obstacles that could stifle innovation. The situation is further exacerbated by the expectation of responsible and ethical AI development amidst regulatory uncertainty, especially in sensitive sectors like healthcare and education.
Ahmed Elsayyad, President of Ostro, remarked that while the executive order signals a preference for a unified national framework, it also introduces a layer of unpredictability regarding which regulations will ultimately prevail in the courts. Meanwhile, Stanislav Sedov, founder at Leo Books, expressed concerns that the focus on federal grant eligibility could shift the emphasis for startups from talent acquisition to compliance navigation, complicating their operational strategies.
Russel Twilligear, Head of AI R&D at BlogBuster, noted the positive aspect of the order, asserting that it signals the federal government’s commitment to AI, which could spur investment. However, he cautioned that the responsibility for compliance is now increasingly placed on smaller companies, potentially hindering their growth. Jeff Le, Managing Principal at 100 Mile Strategies, highlighted the paradox of the administration’s approach, suggesting that while deregulation could simplify the environment, the absence of a cohesive federal framework might lead to a more complicated compliance landscape for startups, favoring larger incumbents with more resources.
Ultimately, the executive order has provided a clear intent to promote AI innovation, but it has left many questions unanswered regarding the governance framework. As startups navigate this evolving regulatory environment, the broader implications for AI development in the U.S. and its competitive standing globally remain to be seen.
See also
OpenAI’s Rogue AI Safeguards: Decoding the 2025 Safety Revolution
US AI Developments in 2025 Set Stage for 2026 Compliance Challenges and Strategies
Trump Drafts Executive Order to Block State AI Regulations, Centralizing Authority Under Federal Control
California Court Rules AI Misuse Heightens Lawyer’s Responsibilities in Noland Case
Policymakers Urged to Establish Comprehensive Regulations for AI in Mental Health
