OpenAI's Footnote Problem: Why the Imminent AI Preemption Executive Order May Face Immediate Legal Headwinds
A presidential Executive Order to preempt state AI laws now looks imminent. The reported plan: a "one rule" order that clears away state-level AI regimes in one stroke. For AI companies, that sounds like relief. For courts, it looks like a separation-of-powers fight in the making.
The footnote that undercuts the case for executive preemption
In a March 13, 2025 submission to the White House Office of Science and Technology Policy (OSTP), OpenAI included a line that could define the litigation ahead: "Federal preemption over existing or prospective state laws will require an act of Congress."
That statement wasn't offhand. It sat inside a formal policy proposal asking for national consistency and preemption. Translation: OpenAI asked for federal preemption and, in the same breath, acknowledged that only Congress can provide it. If the forthcoming Executive Order claims to preempt state AI laws, expect challengers to quote that sentence on page one of the complaint.
What an Executive Order can (and can't) do
Executive Orders can direct federal agencies and set federal procurement policy. They cannot, by themselves, nullify state statutes. Preemption flows from the Supremacy Clause and typically requires congressional action or valid agency rules grounded in a clear delegation from Congress.
Courts will likely assess any preemption claim through familiar frames: express preemption, field preemption, and conflict preemption. Without a statute or duly promulgated federal rule to anchor it, a naked claim that an Executive Order displaces state AI laws is vulnerable. See the basic constitutional hook in the Supremacy Clause and the limits on unilateral presidential power underscored in Youngstown Sheet & Tube Co. v. Sawyer.
States have built real regimes-and will defend them
California, Colorado (via the Colorado AI Act), New York, Texas, and Tennessee have enacted AI laws with effective dates looming. These laws touch private sector deployments, public procurement, education, and state agency use. A federal attempt to suspend or void that work by Executive Order alone almost guarantees a fast trip to court.
Expect states to file for immediate injunctive relief. The theories are straightforward: ultra vires action, separation-of-powers violations, possible major questions doctrine concerns if agencies lean on old statutes to claim sweeping preemption, and Tenth Amendment/anti-commandeering arguments if the federal government attempts to control state regulatory machinery.
How OpenAI's prior stance will be used
Opponents will cite OpenAI's OSTP footnote as persuasive evidence that even key industry beneficiaries understood the constitutional limits. It's not binding law, and it's not dispositive. But as a practical matter, it's a clean, credible admission that aligns with black-letter doctrine: preemption is a congressional job unless an agency acts within a clear statutory mandate.
What the Executive Order could still do
- Direct agencies to assert preemption positions in guidance or enforcement. Courts, however, will decide preemption.
- Set federal procurement and contractor standards under FPASA-like authority. That influences vendors but does not erase general state statutes.
- Trigger new rulemakings at FTC, DOJ, NIST, or sectoral regulators. Preemption would then rise or fall on the underlying statutes and regulatory text.
Litigation posture to anticipate
- Plaintiffs: States; possibly municipalities or public universities; industry actors harmed by uncertainty.
- Defendants: Federal agencies tasked with implementing the order; potentially the United States for declaratory relief.
- Venues: D.D.C., Ninth Circuit district courts, and state-friendly forums with quick PI/TRO practices.
- Relief sought: TRO/PI to block enforcement, declaratory judgment on invalidity, and vacatur of any implementing guidance or rules under the APA.
Practical playbook for in-house and outside counsel
- Maintain a two-track plan: Continue building compliance programs for California, Colorado, New York, Texas, and Tennessee while preparing for federal shifts. Assume a court may freeze the EO early.
- Inventory exposure: Map where your products, data flows, and ops intersect with state AI statutes taking effect in 2026. Flag high-risk obligations (disclosures, impact assessments, audits, notice/consent).
- Contract hygiene: Update reps, warranties, and state-law compliance clauses. Consider fallback provisions that survive an EO whipsaw.
- Monitor rulemaking dockets: If agencies pivot to regulations under existing statutes, comment early and preserve objections for judicial review.
- Engage state regulators: Clarify expectations and timing. States will keep enforcing until a court tells them otherwise.
- Board briefing: Explain that an EO is not a statutory shield. Emphasize litigation timelines, likely stays, and budgeting for parallel compliance.
Counterarguments you'll hear-and the short answers
- "The EO preempts because AI is interstate commerce." Commerce Clause power belongs to Congress. Agencies can act if Congress delegated; the President cannot preempt state law by proclamation.
- "Procurement authority can reach everything our contractors do." Procurement policy can condition federal contracts but doesn't void state statutes for all market actors.
- "Agency guidance says state law is displaced." Guidance without notice-and-comment and clear statutory footing rarely carries preemptive force.
Bottom line
National uniformity may be the right policy. But unless Congress acts-or agencies promulgate rules under clear statutory authority-an Executive Order that purports to erase state AI laws is poised for immediate and serious legal challenges. OpenAI's own footnote will be Exhibit A.
If your organization needs to level up internal AI governance skills while this plays out, see curated training by role at Complete AI Training.
Your membership also unlocks:
