Debate Intensifies Over Federal Preemption of State AI Regulations

In March 2025, OpenAI, a leading artificial intelligence research organization, submitted policy proposals to the White House advocating for federal preemption of state-level AI regulations. The company argued that a unified national framework would prevent a fragmented regulatory landscape and maintain U.S. competitiveness in AI.

By May 2025, major technology companies—including Amazon, Google, Microsoft, and Meta—intensified lobbying efforts for a 10-year federal ban on state AI regulations. This initiative was incorporated into the House version of President Trump's budget bill, known as the "Big Beautiful Bill." The proposal aimed to establish a consistent national policy, avoiding a patchwork of state laws that could impede innovation.

The move sparked controversy, dividing both the AI industry and the Republican Party. Critics argued that the moratorium would strengthen Big Tech's dominance and undermine necessary safeguards to manage AI's societal impact. Opponents, including academics and AI safety advocates, warned against relying solely on industry self-regulation. Some Republican senators supported uniform federal oversight to maintain U.S. leadership, while others cautioned against restricting states' rights in the face of unpredictable AI advancements.

This development underscores the ongoing debate over AI regulation in the United States, highlighting tensions between federal and state authority, industry interests, and concerns about innovation and public safety.

The National Conference of State Legislatures (NCSL) expressed strong opposition to the proposed moratorium, stating that it would undermine states' ability to protect their residents. In a letter to the House Energy and Commerce Committee, the NCSL emphasized the importance of legislative flexibility in addressing the profound and continually evolving implications of AI on privacy, cybersecurity, fraud, workforce, education, and public safety.

State officials have also voiced concerns. California State Senator Scott Wiener criticized the proposal as "truly gross," emphasizing the need for state-level action in the absence of federal legislation. Similarly, a bipartisan group of 35 California lawmakers, including Governor Gavin Newsom, urged Congress to reject the provision, citing concerns over public safety and state sovereignty.

The National Association of Insurance Commissioners (NAIC) raised concerns that the moratorium would disrupt established processes for regulatory review of models and undermine existing protections against unfair or discriminatory insurance practices. The NAIC urged the Senate to reject the 10-year moratorium and support the existing collaboration between federal and state regulators.

The debate over federal preemption of state AI regulations reflects broader tensions between innovation, regulation, and governance in the rapidly evolving field of artificial intelligence. As stakeholders continue to advocate for their positions, the outcome will have significant implications for the future of AI development and deployment in the United States.