As artificial intelligence reshapes industries, both mid-sized companies and AI startups face growing pressure to adopt AI technologies responsibly. For board members and startup legal teams, understanding the evolving AI regulatory landscape is no longer optional—it’s a strategic imperative.
Federal Deregulation: A Green Light?
In early 2025, the U.S. released its AI Action Plan under Executive Order 14192, “Unleashing Prosperity Through Deregulation.” Led by the Office of Management and Budget (OMB), the initiative directs all federal agencies to:
“Identify, revise, or repeal regulations, guidance documents, or interagency agreements that unnecessarily hinder AI development or deployment.”
For AI founders and boards, this sounds like a green light: less federal red tape, faster deployment, and pro-innovation momentum.
But the Big Beautiful Act Leaves State AI Regulation Intact
Here’s where the picture gets more complicated.
The recently passed Big Beautiful Act—intended to bolster America’s AI leadership—did not include a moratorium on state-level AI regulation. That means states remain free to set their own AI rules, many of which are already diverging significantly in scope and enforcement.
So while Washington is pulling back, states are stepping forward—introducing a growing patchwork of AI compliance obligations.
What This Means for Boards and AI Startup Leaders
This federal–state split is more than a compliance challenge. It’s a governance issue that affects fundraising, sales, legal strategy, and risk exposure.
1. Dual Compliance Is the New Normal
Even if your AI product or workflow aligns with federal standards, it may conflict with state-level rules on data privacy, bias mitigation, or algorithmic decision-making.
2. Less Regulation = More Responsibility
With federal agencies pulling back, boards and founders must build their own guardrails. That includes contracts, internal oversight, and risk reporting frameworks that investors and customers trust.
3. Governance Is Now a Competitive Advantage
Regulatory readiness is becoming a differentiator. Buyers and VCs expect clear answers:
- Is your AI legally defensible?
- Is your governance scalable?
- Is your oversight structure board-driven?
Questions to Ask at the Board or Founder Level
To prepare for the increasingly fragmented regulatory landscape, boards and startup leaders should be asking:
- Are we tracking both federal and state AI regulations in real time?
- Do our contracts address AI-specific legal risk and shifting standards?
- How do we document and govern AI decisions internally?
- What happens if one state challenges our AI tool—even if others allow it?
📣 Join Us This September: Webinar for Boards & AI Startup Leaders
We’ll be exploring these issues in our September webinar:
“AI is Evolving Fast — Your Oversight Better Keep Up”
Led by LouAnn Conner (SagaciousThink) and Svetlana Kamyshanskaya (Primum Law), the session will deliver clear, actionable guidance on:
- How AI regulations are fragmenting
- What legal teams and boards must do now
- How to scale AI responsibly in this environment
✅ Registration details coming soon.