August 4, 2025
The Trump Administration’s recent AI Action Plan signals a fundamental shift in how the federal government approaches artificial intelligence. The 28-page document assigns clear responsibilities for executive agencies to accelerate innovation, modernize infrastructure, and assert global leadership. While federal agencies will play a crucial role in implementing this vision, the plan’s success ultimately depends on state lawmakers embracing Washington’s resolve.
Thus far, that’s been difficult. State and local governments have introduced more than 1,000 AI-related laws in 2025 alone, up from an already astounding 635 last year. Much of this legwork can be attributed to just four states that account for nearly a quarter of the bills introduced this year. Regardless of their source, a patchwork of regulations threatens to undermine the president’s AI agenda and strangle innovation at its most critical moment. State lawmakers should treat the federal plan as their blueprint or risk ceding technological supremacy and its transformative potential to foreign competitors.
As President Trump warned in a keynote address Wednesday evening, “We also have to have a single federal standard, not 50 different states regulating this industry of the future,” he explained. Operating under multiple state regulatory regimes means “the most restrictive state of all will be the one that rules.”
The White House has historically influenced how states approach emerging technologies. When the Biden Administration’s 2023 Executive Order warned of AI’s “peril” and embraced precautionary regulation, state legislators predictably pursued innovation-crushing ideas in their capitals. California, Colorado, New York, Virginia, and Connecticut introduced sweeping measures in the following months. These measures ranged from requiring algorithmic impact statements to holding developers liable for potential harms.
One California law previously sought to prevent catastrophic risks from frontier models by imposing broad liability on developers for any misuse of their tools. Connecticut and Colorado attempted to mandate preemptive audits to ensure AI systems would never discriminate—a technically infeasible requirement that would have buried small developers in compliance costs while providing little practical benefit.
Governors across party lines vetoed these bills after recognizing their potential to stifle innovation. Virginia’s Governor Glen Youngkin noted when vetoing Virginia’s HB 2094 that such frameworks fail “to account for the rapidly evolving and fast-moving nature of the AI industry” while placing “an especially onerous burden on smaller firms and startups that lack large legal compliance departments.”
The new AI Action Plan embraces a fundamentally different regulatory philosophy. Where the Biden approach sought to constrain AI development through preemptive restrictions, the Trump Administration trusts market forces and technological advancement to guide development. This shift from permission-based regulation to progress-oriented deregulation provides the model that states should follow.
The federal government plans to encourage this innovation model through financial leverage. States that implement overly burdensome regulations for AI developers are at risk of losing “AI-related Federal funding”. This approach echoes a moratorium on state AI legislation that was stripped from the One Big Beautiful Bill, which could have withheld billions in broadband funding from states imposing AI-specific regulations rather than focusing on AI outputs. The federal government successfully used similar conditions on highway funding in the 1980s to encourage states to raise the drinking age. While the amount of AI-related federal funding is still unspecified, state policymakers should carefully consider the financial stakes before pursuing onerous restrictions.
The administration’s action plan demands active participation from states to clear the runway for innovation. Just as the failure of the moratorium was not a green light for state lawmakers to overregulate AI systems, the action plan is not a red light for policymakers to sit idly. State lawmakers hold the power to accelerate AI progress, leading alongside Washington, not against it.
Turner Loesel is a policy analyst at The James Madison Institute.
