Core Summary

  • U.S. President Donald Trump's recently unveiled "AI Action Plan" grants federal agencies broad discretion to withhold AI-related funding from states that impose "burdensome" regulations on AI technology, a move that has raised concerns among legal analysts and consumer advocates.
  • The plan does not specify how the government will define "burdensome" state AI regulations, nor which types of "AI-related funding" might be affected.
  • "This is a significant threat. Because the AI action plan is drafted so broadly, a large amount of funding could be targeted," Cody Venzke, senior policy advisor for the American Civil Liberties Union's National Political Advocacy Department, said in an interview.

In-Depth Analysis

The plan, released on July 23, outlines multiple measures the administration intends to take to promote U.S. AI innovation, including cutting "bureaucratic red tape" that could hinder the emerging market.

The plan states that federal AI-related funding should not go to states that implement burdensome AI regulations that "waste these funds." At the same time, the document emphasizes that the federal government should avoid interfering with states' rights to pass laws that are "prudent and not overly restrictive of innovation."

Lawyers at Crowell & Moring, analyzing the plan, noted: "The government must develop clearer guidelines to implement such a broad statement, and if federal agencies attempt to withhold congressionally appropriated funds, they are likely to face legal challenges."

Trump's stance is even more aggressive than the plan itself, as he has called for a federal AI standard that "supersedes all states." At an AI summit in Washington held hours after the plan's release, the president said: "If you operate under 50 different state laws, the most restrictive state will dominate."

Trump has taken some limited steps to address AI risks. In May, the president signed the Take It Down Act, criminalizing the distribution of non-consensual intimate images, including AI-generated deepfakes and revenge porn. However, Congress has so far failed to pass comprehensive AI legislation.

Lawyers at Crowell & Moring said: "There is no indication that recent legislative efforts will achieve greater success, and federal agencies are likely to be the primary mechanism for developing and enforcing AI-related federal rules. States, international bodies, and courts will also enforce their own AI-related rules and remedies."

The lawyers wrote that the plan "creates a challenging and uncertain compliance environment for businesses, as states are currently implementing the most far-reaching AI laws and regulations."

The plan directs the White House Office of Science and Technology Policy (OSTP) to seek public input on how current federal regulations hinder AI innovation and adoption, and to work with relevant federal agencies to take appropriate action. The Office of Management and Budget (OMB) is expected to work with federal agencies that have AI-related discretionary funding programs to ensure they consider states' AI regulatory environments when making funding decisions.

Lawyers at Wilson Sonsini Goodrich & Rosati analyzed that under the plan, federal agencies have "broad authority" to consider state AI regulatory environments when allocating funds. The authors noted: "The plan does not detail which regulations would be considered 'burdensome' rather than 'prudent,' nor does it specify which federal funds might be withheld."

They mentioned that multiple states, including Colorado, New York, and Texas, have already enacted legislation on AI safety and high-risk uses.

Venzke said that "AI-related funding" under the plan is an "extremely broad category" that could encompass funding for broadband deployment, K-12 education, and state and local cybersecurity programs.

Grace Gedye, an AI policy analyst at the consumer advocacy group Consumer Reports, echoed similar concerns. "The plan puts states in a bind; it is unclear which state laws would be considered 'burdensome' and which federal funds are at risk," Gedye said in a statement.