The Trump administration has found a creative way to kill state AI laws: threaten to take away their internet money.

The legislative route failed first. Senator Ted Cruz proposed a 10-year moratorium on all state AI laws last May, tucked into the budget reconciliation bill. The House passed it 215-214. The Senate stripped it out 99 to 1. Republican Senators Marsha Blackburn and Josh Hawley voted against it. Blackburn's reason was specific: it would override Tennessee's deepfake protections. When your own party's senators won't back your preemption play by a margin of 99-1, the legislative strategy is dead.

The states made their position clear before the White House even responded. In November, thirty-six attorneys general, led by New York's Letitia James, wrote to Congress opposing federal preemption. The coalition includes Idaho, Indiana, Kansas, Louisiana, Mississippi, South Carolina, Tennessee, and Utah alongside the blue states you'd expect. Republican state lawmakers have been even more blunt. Angela Paxton, a Republican Texas senator, put it plainly: "When you have no regulation, what you have is the wild west." Doug Fiefia, a Republican Utah representative and former Google employee, said Congress "not only will not act, they can't act."

Then came the executive order. Signed in December 2025, it established three enforcement tools. A DOJ litigation task force to challenge state laws in court. A Commerce Department review to label state regulations "onerous." And the sharpest blade: conditioning $42.5 billion in BEAD broadband infrastructure funding on states agreeing not to enforce their AI laws. Texas alone received $1.27 billion in broadband grants. That's a lot of leverage disguised as telecommunications policy.

The order's legal footing looks precarious. John Bergmayer of Public Knowledge pointed to the 2023 Supreme Court decision in National Pork Producers Council v. Ross, noting that states routinely regulate interstate commerce. Congress has now rejected preemption twice. Without an actual federal regulatory framework in place, the argument that state laws "conflict with federal law" doesn't have much federal law to conflict with.

Meanwhile, states keep passing bills. Washington's governor signed chatbot and provenance laws the last week of March. Colorado's AI Act, delayed once already, finally takes effect this summer. California's transparency requirements for frontier AI developers are already on the books. The state-by-state picture suggests the administration faces a whack-a-mole problem it created for itself by rescinding Biden's executive order on inauguration day without replacing it with anything substantive. The vacuum invited exactly the fragmentation they're now scrambling to contain.

I keep thinking about the broadband angle. It's a genuinely novel tactic, using infrastructure money as a regulatory weapon against an entirely different policy domain. Whether courts let it stand is one question. Whether it signals a pattern of using federal funding as coercive leverage against AI dissent is a more uncomfortable one.

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