From Steve Bannon to Elizabeth Warren, bipartisan backlash erupts over push to block states from regulating AI

A renewed push by House Republicans and the White House to federally pre-empt state AI regulation—led by Rep. Steve Scalise with plans to tuck language into the must-pass NDAA and publicly backed by Donald Trump, White House AI adviser David Sacks and prominent VCs—has provoked an unusual bipartisan backlash (including progressives, MAGA figures, Gov. DeSantis and state advocates), after a draft executive order leaked; a YouGov/Institute for Family Studies poll showed adults oppose congressional pre-emption by roughly 3-to-1 and New York’s state-level RAISE Act awaits gubernatorial signature. Critics warn pre-emption could create a regulatory vacuum that fails to replace state protections (children, deepfakes, discrimination, environmental and labor issues) and would be a major political win for Big Tech, while supporters argue a 50‑state patchwork would stifle innovation—making this a high-stakes fight that will shape U.S. AI policy and infrastructure decisions.

Analysis

Congressional and White House efforts this week to federally pre-empt state AI regulation — led by Rep. Steve Scalise with plans to insert language into the must-pass NDAA and publicly backed by President Trump, White House adviser David Sacks and prominent venture capital figures such as Marc Andreessen — have reignited a high-profile policy fight after a draft executive order leaked. Supporters argue a federal standard is needed to avoid a "50-state patchwork" that could stifle startups and U.S. competitiveness, while the draft order remains unsigned and the White House has not publicly commented.

The push has generated an unusual bipartisan backlash: a YouGov/Institute for Family Studies poll found adults oppose congressional pre-emption by about 3-to-1, New York’s RAISE Act awaits Gov. Hochul’s signature, and opposition has come from figures across the spectrum including Sen. Brian Schatz, Gov. Ron DeSantis, Steve Bannon, and Senators Warren and Markey. Critics warn that pre-emption could create a regulatory vacuum that fails to replace state protections on children, deepfakes, electricity costs, environmental impacts of data centers, algorithmic discrimination and worker safety.

For markets, the episode raises policy and political risk that could materially affect Big Tech, AI-focused startups and infrastructure investments: federal pre-emption would likely benefit centralized platforms and large cloud/data-center builders if enacted, whereas failure or fragmented state action would increase compliance costs and regulatory uncertainty for upstream investors and venture-backed companies. The net market impact is uncertain and timing-dependent, making legislative schedule and state-federal outcomes the primary short-term catalysts to monitor.

Key Decisions for Investors

• Monitor the NDAA amendment process, the leaked executive order timeline, and state-level acts such as New York’s RAISE Act as near-term catalysts that will drive regulatory clarity or uncertainty
• Tilt risk management toward hedges or position sizing for AI infrastructure and large-cap cloud/data-center exposure given the binary policy outcome that would either centralize regulation (favoring incumbents) or leave a costly patchwork
• Avoid making conviction calls on winners until federal action is finalized; maintain liquidity to react to rapid policy developments and watch venture and private-market sentiment for signs of capital reallocation