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

President Donald Trump has signed an executive order directing federal agencies to challenge state-level AI laws, arguing that startups need protection from an increasingly fragmented regulatory landscape. But legal experts and industry founders warn the directive may instead prolong uncertainty — triggering court battles and leaving companies to navigate shifting state requirements while waiting for Congress to pass a unified national law.

The order, titled “Ensuring a National Policy Framework for Artificial Intelligence,” instructs the Department of Justice to establish a task force within 30 days to challenge select state AI laws on the basis that AI qualifies as interstate commerce and should therefore fall under federal oversight. It also gives the Commerce Department 90 days to identify “onerous” state AI regulations, a determination that could influence states’ eligibility for federal funds such as broadband grants.

In addition, the order directs the Federal Trade Commission and the Federal Communications Commission to explore federal standards that could override state rules and asks the administration to collaborate with Congress on a national AI policy.

The move comes amid broader efforts to push back against state-by-state AI regulation after congressional attempts to halt state action temporarily failed. Lawmakers on both sides of the aisle have argued that preventing states from regulating without offering a federal standard could leave consumers unprotected and companies largely unchecked.

Michael Kleinman, head of U.S. Policy at the Future of Life Institute, sharply criticised the order.

“This David Sacks-led executive order is a gift for Silicon Valley oligarchs who are using their influence in Washington to shield themselves and their companies from accountability,” he said.

David Sacks, the administration’s AI and crypto policy lead, has been a central advocate for federal preemption of state AI laws.

Even those who support a national AI framework acknowledge that the order does not establish one. Until courts block state laws or states pause enforcement, startups may face an extended transition period filled with legal ambiguity.

Sean Fitzpatrick, CEO of LexisNexis North America, U.K., and Ireland, told TechCrunch he expects states to defend their regulatory authority in court, with litigation potentially reaching the Supreme Court.

Supporters argue the order could streamline AI governance by concentrating regulatory disputes in Washington. Critics say the likely legal disputes will immediately complicate compliance for startups trying to meet competing state and federal requirements.

“Because startups are prioritizing innovation, they typically do not have robust regulatory governance programs until they reach a scale that requires a program,” said Hart Brown, principal author of Oklahoma Governor Kevin Stitt’s Task Force on AI and Emerging Technology recommendations. “These programs can be expensive and time-consuming to meet a very dynamic regulatory environment.”

Arul Nigam, co-founder of Circuit Breaker Labs, which conducts red-teaming for conversational and mental health AI systems, echoed the concern.

“There’s uncertainty in terms of, do AI companion and chatbot companies have to self-regulate?” he said. “Are there open source standards they should adhere to? Should they continue building?” Nigam hopes the executive order will prompt Congress to act more quickly on a federal AI framework.

Andrew Gamino-Cheong, CTO and co-founder of AI governance company Trustible, told TechCrunch the order could ultimately undermine innovation.

“Big Tech and the big AI startups have the funds to hire lawyers… The uncertainty does hurt startups the most, especially those that can’t get billions of funding almost at will,” he said.

He added that regulatory ambiguity makes it harder to sell AI products to risk-sensitive industries — including legal, finance, and healthcare — increasing sales cycles, integration demands, and insurance costs. “Even the perception that AI is unregulated will reduce trust in AI,” which is already low, he said.

Gary Kibel, a partner at Davis + Gilbert, said businesses would welcome a consistent national standard, but questioned whether an executive order is the proper mechanism to override state laws. The present uncertainty, he warned, opens the door to two extremes: a wave of restrictive rules or little action at all — either of which could create a “Wild West” that favours large tech companies capable of absorbing risk.

Meanwhile, Morgan Reed, president of The App Association, urged Congress to move quickly.

“We can’t have a patchwork of state AI laws, and a lengthy court fight over the constitutionality of an Executive Order isn’t any better,” he said. “We need a comprehensive, targeted, and risk-based national AI framework.”