Trump AI Plan Directs Agencies to Consider Withholding State Funding

The plan directs the OMB to work with federal agencies to consider states’ “AI regulatory climate when making funding decisions and limit funding if the state’s AI regulatory regimes may hinder the effectiveness of that funding or award.”

In addition, it asks the FCC to assess “whether state AI regulations interfere with the agency’s ability to carry out its obligations and authorities under the Communications Act.” FCC Chairman Brendan Carr in a statement Wednesday said the plan "puts forward a series of actions that will ensure America’s AI remains the gold standard around the world. I look forward to supporting these national priorities.”

The plan has the FTC reviewing all investigations started under the Biden administration to ensure they don’t “advance theories of liability that unduly burden AI innovation.” It also directs the FTC to consider modifying or vacating provisions in existing orders and consent decrees that may "unduly burden AI innovation.”

President Donald Trump was scheduled to discuss his AI strategy during an event Wednesday evening, "Winning the AI Race," hosted by the All-in Podcast. White House Office of Science and Technology Director Michael Kratsios told reporters during a conference call that the administration expects the action plan to be carried out in six to 12 months.

Senate Republicans on Wednesday welcomed Trump’s plan. Senate Commerce Committee Chairman Ted Cruz, R-Texas, who said last week he anticipated a return to some form of the AI moratorium (see 2507210042), told us he’s “working hand in hand” with the White House on the topic. “I’m grateful for the president’s leadership," he said Wednesday.

Sen. Thom Tillis, R-N.C., said, “As being the only person in the Senate chamber who voted for the moratorium, I’m glad to see that the president recognizes how important it is for the federal government to preempt state law, get it right, protect children but also not put needless barriers to American AI innovators.” Tillis said he’d like to see a similar approach against state laws related to data privacy and data security.

Sen. Ed Markey, D-Mass., on Wednesday sent letters to Alphabet, Anthropic, Meta, Microsoft, OpenAI and xAI asking them to reject the action plan. He also condemned an associated executive order barring federal agencies from contracting for any AI-driven algorithm that’s not “free from top-down ideological bias.” Markey noted implementation of the plan and EO remain unclear. He told us Wednesday the action plan will have “catastrophic” impacts on states’ environmental laws to the benefit of Big Tech and broadband “barons.”

States Respond

The California Privacy Protection Agency also condemned the White House proposal. "The AI Action Plan creates a false choice between innovation and protecting Americans -- states like California have already proven we can and should have both,” said CPPA Executive Director Tom Kemp in a statement emailed to Privacy Daily. “While federal action stalled, states stepped up with common-sense safeguards, and now this plan potentially punishes them for filling the vacuum. Yet, penalizing states for providing privacy and safety protections leaves Americans more vulnerable to AI’s risks, while undermining AI’s promise."

Connecticut Sen. James Maroney (D) said in an interview that he sees the plan to possibly preempt states as “similar -- but a little less clear” than Congress’ proposed moratorium “because you’re relying on agencies now to make interpretations." The White House plan “leaves a lot to interpretation on what could be unnecessarily restricting innovation,” the state senator added. “It remains to be seen how this will play out. A lot of it appears to be tied to funding, which not many of the states are accessing right now.”

Unlike the Trump administration, the Connecticut senator doesn’t “believe that protecting people and promoting innovation are mutually exclusive,” he said. Maroney’s bill regulating AI failed in the state legislature earlier this year (see 2506040051). He said Trump's AI Action Plan’s release won't affect his pursuit of a state AI policy.

American Civil Liberties Union Senior Policy Counsel Cody Venzke said Trump’s plan “to restrict state AI regulations is not only harmful, it raises serious legal questions as the president is acting beyond any statute passed by Congress.” Venzke condemned directions for the FCC to “review and potentially override state AI laws, while cutting off ‘AI-related’ federal funding to states that adopt robust protections.”

Sen. Mike Rounds, R-S.D., told us the president’s plan is similar to the AI roadmap developed in 2024 by then-Senate Majority Leader Chuck Schumer, D-N.Y., and his AI working group. “Honestly I think we’re all on the same wavelength” in promoting U.S. innovation, he said. Rounds added that he doesn’t equate the provisions in the plan to those in the moratorium. The White House is moving forward because it doesn’t believe Congress has acted quickly enough to protect patents, copyrights, other IP rights and, to a lesser extent, privacy rights, he said.

Vermont Rep. Monique Priestley (D) said the “federal administration’s AI plan crosses a dangerous line by trying to strip independent agencies like the FTC and FCC of their objectivity, while also threatening state authority and using federal funding to silence oversight.”

“State lawmakers are on the front lines of protecting people from AI-driven harms like fraud, surveillance, and discrimination," she said in a text. "If Washington will not act independently, it should at least step aside and let states do their job." Priestley was announced Tuesday as co-chair of a bipartisan national task force on state AI policy (see 2507220025).

The sponsor of a Wisconsin comprehensive privacy bill, state Rep. Shannon Zimmerman (R), told us he hasn’t dug into details of the White House plan yet but applauds increased U.S. investment in AI. However, he noted that he previously signed a letter opposing Congress’ proposed 10-year moratorium on state AI policy. “States should have the freedom to do what they need to do,” said Zimmerman. However, the Republican added, “I don't think anybody should be rushing to legislate and put policy around AI just yet.” It’s “super early” and “could be premature.” That said, the legislator supported addressing “super obvious” AI problems like using deepfakes to manipulate an election.

Computer & Communications Industry Association Senior Counsel for Innovation Policy Josh Landau said it’s crucial for the U.S. to compete in AI: Trump’s plan includes “elements that instruct the government to remove barriers to AI infrastructure in the U.S. and the export of American AI, notes that open-source models have an important role to play, and tasks agencies with creating frameworks for improved AI security.”

Chris Chambers Goodman, professor at Pepperdine Caruso School of Law, said Wednesday during a Broadband Breakfast webinar that the U.S. is moving away from the Biden Administration’s focus on safety, security and privacy, to one of accelerating AI deployment. Goodman questioned whether “innovation unfettered” is more important than safe deployment.

“There are ways to innovate responsibly,” she said. "People say, 'I have to be able to do whatever I want, and then we’ll figure out what the parameters should be later.'” She said that approach seems to be part of the Trump focus.