The Federalism War Is Here

On March 20, 2026, the White House released its National Policy Framework for Artificial Intelligence, outlining legislative recommendations for Congress to establish a unified federal approach to AI regulation.

This sounds technical, but it's a power grab. "Preemption must ensure that State laws do not govern areas better suited to the Federal Government or act contrary to the United States' national strategy to achieve global AI dominance," the framework reads.

What California Is Doing Instead

The broader purpose of Newsom's order was to place guardrails on the use of AI by state employees while at the same time encouraging them to accelerate their use of the technology. Many of the largest AI companies in the world are based in California, and the state also leads the nation in volume of AI regulations.

The bigger backdrop is a clash between state-led regulation and efforts in Washington to create a single national framework that could override state rules. For tech companies and startups, California matters because its market size often turns state rules into de facto national standards. Firms that want to sell into government, education, healthcare, or consumer-facing services increasingly have to design for California first. That dynamic gives Sacramento outsized influence over product policy, model governance, procurement controls, and child-safety rules, even before federal law fully arrives.

The Litigation Time Bomb

The Executive Order directs the Executive branch to coordinate federal action and encourage federal legislation for a uniform standard. The Executive Order directs the Attorney General to establish an AI litigation task force (the "Task Force") to challenge state AI laws deemed inconsistent with the Executive Order's language, including on the grounds of unconstitutional regulation of interstate commerce and federal preemption. The Executive Order calls for an evaluation of state AI laws, including those that compel disclosures or alter model outputs in ways that may raise constitutional concerns, underscoring potential federal-state conflict across an existing and growing slate of state AI laws.

My View: This is heading to the Supreme Court. California will defend its AI regulations as consumer protection and child safety (areas where states have clear authority). The Trump administration will argue preemption under the Commerce Clause. The legal battle will take 3-5 years, but in the meantime, companies need to plan for both scenarios: California regulations + federal framework. Smart companies are already building compliance systems that can support both, betting they'll coexist rather than one entirely preempting the other. Watch for a wave of "regulatory compliance as a service" startups to emerge.

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