Federal AI Preemption vs State Laws: Colorado Retreats, California Holds and Congress Stalls

There is still no federal law that overrides state AI rules in the United States. Twenty-one months into an administration that wants one, the score looks like this: one state law rewritten under pressure, one state law in force and untouched, and a federal bill that hasn’t been introduced.

The fight matters beyond America. The EU has one AI rulebook for 27 countries. The US could end up with fifty, or with one written by Washington, or with none. Which of those it gets will shape how AI is built for a large share of the world’s users.

The federal push

The administration’s plan, “Winning the Race: America’s AI Action Plan”, came out on 23 July 2025, framed around innovation, infrastructure and international security. It came with three executive orders, on data-centre permitting, on what AI the federal government buys, and on exporting American AI technology.

Congress had already tried preemption the direct way. A ten-year moratorium on state AI laws passed the House Energy and Commerce Committee in May 2025, then the Senate stripped it from the budget bill in July by 99 votes to 1.

So the White House tried another route. Executive Order 14365, signed on 11 December 2025, set up a Justice Department AI Litigation Task Force, which Attorney General Pam Bondi created in January 2026. It told the Commerce Department to list state laws it considers onerous, naming Colorado’s. It tied roughly $21 billion in remaining broadband funds to states not keeping such laws. And it asked for a legislative proposal on preemption. In March 2026 the White House followed with a non-binding National Policy Framework for AI that recommends preemption to Congress.

Colorado bends

Colorado was the target because it had gone furthest. Its AI Act of 2024 imposed a duty of care on developers and deployers of high-risk systems, with impact assessments. It was due to start in February 2026, then pushed to June.

In April 2026 Elon Musk’s xAI sued to block it, and the federal government moved to join the case. It was the first time Washington had stepped into a challenge against a state AI law. Colorado’s attorney general suspended enforcement.

On 14 May 2026 Governor Jared Polis signed a replacement. The new Automated Decision-Making Technology Act drops the duty of care and the impact assessments. It gives people rights instead: notice, access, correction and human review of automated decisions. Only the attorney general can enforce it, with fines up to $20,000 per violation and a 60-day cure period. It takes effect on 1 January 2027.

That’s a large retreat from the most ambitious state AI law in the country. It’s also still a law.

California holds

California’s SB 53, the Transparency in Frontier AI Act, was signed in September 2025 and has applied since 1 January 2026. It targets the biggest model developers with transparency and safety reporting duties. It’s in force and, so far, unchallenged in court by the federal government. There have been public disputes this year over one major developer’s compliance.

California matters more than Colorado for an obvious reason. Most of the frontier labs are based there.

Congress stalls

The legislative route has gone nowhere fast. On 4 June 2026 six House members from both parties released a discussion draft, the Great American AI Act, that would preempt state laws on AI model development for three years. It has no bill number and no committee vote. In July more than 200 state lawmakers wrote to oppose it. In mid-September Speaker Mike Johnson cast doubt on its prospects.

What this looks like from outside

Compare it with Europe. The EU settled the who-regulates question first, by putting AI under single-market law, and is now arguing about timing. The US is still arguing about who, with the federal government using funding conditions and lawsuits because it can’t get a statute.

For companies, the near-term result is a lighter version of a patchwork. Colorado’s softer law, California’s transparency rules and whatever other states pass, with a federal government that discourages them but can’t yet stop them. With the midterms on 3 November, nothing in Congress is likely to move before next year.