Data centers are rapidly expanding across the United States, prompting a flurry of legislative activity at the state and local levels. In 2025, more than 200 bills aimed at regulating in-state data centers were introduced across all 50 states, resulting in over 40 becoming law. This wave of legislation addresses a wide array of issues, including energy procurement, water usage, environmental concerns, labor standards, and national security. As these measures continue to evolve in 2026, the lack of federal oversight may intensify state-level initiatives, especially in light of anticipated federal actions. The implications of these regulations could significantly affect businesses in the artificial intelligence (AI) sector and related industries, given the central role of data centers in the AI boom.
As states navigate the opportunities and challenges presented by the data-center surge, many are exploring various regulatory frameworks to address the perceived externalities associated with this growth. For instance, legislative proposals increasingly target energy use by imposing distinct rate classes or special tariffs on large-load customers, which typically include data centers. California lawmakers have proposed legislation directing the state’s Public Utilities Commission to create a specific tariff for customers with energy demands exceeding 75 megawatts. While many data centers may fall below this threshold, large operations, such as those run by hyperscalers, could be significantly impacted. Texas and Minnesota have already enacted similar measures.
Governors are also weighing in on the issue. In New York, Governor Kathy Hochul has suggested requiring large-load projects without exceptional job creation to cover interconnection and grid upgrade costs or generate their own power. Florida’s Governor Ron DeSantis proposed shifts in cost burdens, preventing utility companies from passing on higher energy costs driven by data-center development to retail consumers.
Alongside energy use, states are focusing on water consumption, particularly in drought-prone areas. In Florida and Arizona, governors have suggested mandating that data centers not diminish public water access and pay higher rates for significant usage. Minnesota has enacted a law requiring data centers to disclose estimated water usage and sources, although California recently vetoed a similar measure, highlighting political disputes over water regulation.
Environmental regulations are also gaining traction. New Jersey has introduced legislation mandating that new data centers rely exclusively on newly built clean or nuclear power, while New York’s proposed laws would phase in renewable power purchase agreements for data centers. This includes strict environmental reporting requirements, as noise and pollution levels from data centers become focal points of governance discussions.
In addition to operational considerations, zoning and siting regulations are increasingly utilized as tools for controlling data center locations. Maryland’s Frederick County imposed a six-month moratorium on new data centers, followed by zoning restrictions, while Baltimore County has enacted a similar freeze pending further studies. Local governments in Arizona are also considering zoning limitations due to water stress. Florida’s governor has proposed empowering localities to outright prohibit data center construction.
Security concerns are emerging as a rationale for limiting data center operations, with proposals in Florida aiming to restrict approvals for facilities controlled by foreign entities. Similar measures have been enacted in other states for industries like cryptocurrency, potentially indicating broader regulatory intentions targeting data centers.
As states ramp up their regulatory scrutiny, a variety of plausible legal challenges may arise in response to laws that impose unique burdens on data centers. Legal disputes could focus on utility-rate differentials, with challenges potentially invoking the Equal Protection Clause or the Federal Power Act (FPA). Opponents of new rate structures may argue they are unduly discriminatory or not justifiable based on actual costs. A challenge could also emerge under the Dormant Commerce Clause, framing state-specific surcharges or prohibitions as burdens on interstate commerce.
Furthermore, challengers may invoke the Telecommunications Act of 1996, arguing that certain data centers provide telecommunications services, thus triggering protections against state measures that inhibit service provision. The Federal Communications Commission (FCC) is currently exploring this theory, as it relates to emerging AI services and the regulatory landscape surrounding them.
Litigation could extend beyond utility and environmental regulations, encompassing First Amendment claims that liken data centers to media service providers, potentially arguing that siting bans impede access to infrastructure essential for expressive activities. Other potential legal avenues include challenges under the Takings Clause or Contract Clause, particularly if new regulations apply retroactively to existing data centers.
As regulatory frameworks around data centers continue to evolve, the patchwork of state legislation is likely to give rise to considerable litigation. Businesses involved in data centers and related sectors must stay attuned to these developments and prepare for the complexities that could define the legal landscape in the coming years. With the increasing focus on data centers across various regulatory domains, the intersection of technology and law remains an essential area for ongoing scrutiny and engagement.
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
