President Donald Trump is moving to consolidate control over artificial intelligence regulation at the federal level, according to a draft executive order that would empower Washington to override state laws governing AI development and deployment.

Justice Department Would Challenge State AI Rules

The draft order, obtained by The Verge, establishes an AI Litigation Task Force within the Justice Department specifically designed to challenge state regulations that federal officials determine could stifle innovation or slow industry expansion.

The document singles out recent California legislation focused on AI safety and catastrophic risk prevention, along with Colorado's law addressing algorithmic discrimination. These state-level efforts, according to the draft, represent the kind of fragmented regulatory approach Trump wants to eliminate.

States Could Lose Funding for Non-Compliance

Under the proposed order, federal agencies would have 90 days to execute Trump's AI Action Plan. The Commerce Department would be responsible for identifying which states have regulations that conflict with federal priorities and determining whether those states should lose access to rural broadband funding as a consequence.

It's a pretty direct threat: align with the federal framework or face financial penalties.

The China Factor Driving Policy

Trump laid out his reasoning on Truth Social Tuesday, warning that China could "easily catch us" in the global AI competition if America continues operating under a patchwork of state-by-state regulations rather than a unified national standard.

His concerns echo warnings from prominent business figures. Investor Kevin O'Leary recently said China is "crushing" the U.S. on power capacity, noting that America's electrical grid is already running at capacity while China can rapidly deploy new coal plants with minimal regulatory friction.

Nvidia Corp. (NVDA) CEO Jensen Huang has raised similar points, highlighting China's lower energy costs and streamlined permitting processes as significant long-term competitive advantages in AI infrastructure development.

The stakes are real. AI requires enormous amounts of electricity, and whoever can build that infrastructure fastest has a genuine edge in the race to dominate the technology.