U.S. President Donald Trump signs an executive order related to artificial intelligence during the "Winning the AI Race" Summit in Washington D.C., U.S., July 23, 2025. REUTERS/Kent Nishimura

By Karen Freifeld

(Reuters) -The White House has put on hold a draft executive order that would seek to preempt state laws on artificial intelligence through lawsuits and by withholding federal funds, two sources said on Friday.

The draft order, which Reuters reported on earlier this week, would have likely faced significant pushback from states. But its consideration shows how far Trump is willing to go to help AI companies overcome a patchwork of laws they say stifle innovation.

The White House did not have a comment on Friday. On Wednesday a White House official said that until officially announced, discussion of potential executive orders was speculation.

The draft order would have tasked Attorney General Pam Bondi with establishing an "AI Litigation Task Force whose sole responsibility shall be to challenge state AI laws, including on grounds that such laws unconstitutionally regulate interstate commerce, are preempted by existing federal regulations, or are otherwise unlawful," according to a document seen by Reuters earlier this week.

It would also direct the Department of Commerce to review state laws and issue guidelines that would withhold broadband funding in some cases.

The Senate voted 99-1 against an effort to block AI laws earlier this year. An initial version of that measure would have blocked states that regulate AI from the $42 billion Broadband Equity, Access and Deployment program, known as BEAD.

State lawmakers and attorneys general from both major political parties rallied against the measure at the time, calling it harmful to their ability to protect state residents from fraud, deepfakes and child abuse imagery.

The issue took on new life after Trump on Tuesday threw his weight behind a proposal by Republicans in Congress to add a similar provision to the National Defense Authorization Act (NDAA).

Major players in the industry including Google, OpenAI and Andreessen Horowitz have pushed for the federal government to preempt state laws, saying a patchwork approach hinders innovation.

News of the draft executive order led to a flurry of reactions. Marjorie Taylor Greene, a Republican member of the U.S. House of Representatives from Georgia, opposed the effort.

“States must retain the right to regulate and make laws on AI and anything else for the benefit of their state,” Greene said in a post on X on Thursday. “Federalism must be preserved.”

Amy Klobuchar, the Democratic senator from Minnesota, called the draft executive order "unlawful" and said it would "attack states for enacting AI guardrails that protect consumers, children, and creators -- including by threatening high-speed internet for rural communities."

Robert Weissman of Public Citizen, a nonprofit consumer advocacy organization, said in a statement that AI was already causing massive harms, making it "almost unfathomable" that the administration would work to block sensible state regulation.

"For all his posturing against Big Tech, Donald Trump is nothing but the industry's well-paid waterboy," Weissman said.

(Reporting by Karen Freifeld in New York; Additional reporting by Jody Godoy; Editing by Chris Sanders, Chris Reese and Daniel Wallis)