Any hopes the Trump administration harbored about persuading lawmakers to override the growing wave of state AI regulations now appear increasingly remote. And Democrats in Congress, many of whom ran on curbing data centers and AI overreach, will soon have the power to investigate technology companies, grill federal regulators and pass legislation around AI safety, privacy and consumer protection.
While President Donald Trump could veto those efforts, AI companies may also face much stronger regulatory and enforcement actions in the states. Surprise wins in GOP strongholds like Texas, where both the governor and attorney general flipped to Democrats, may open new fronts in the battle over who gets to regulate AI.
Indeed, corporate legal departments and their outside counsel should be prepared for increased AI compliance obligations, as well as investigations and litigation. The Trump administration may object and has threatened lawsuits against new state laws. But the political winds have been quickly shifting. According to CNBC, voters on Nov. 3 approved restrictions in 40 of 41 local ballot measures on data center development, many of them in deep red locales.
- AI regulation is shifting quickly, creating new compliance, investigation and litigation risks for companies.
- States enacted 109 AI laws and 28 data center laws across 29 states in the first half of 2026. Voters also approved restrictions in 40 of 41 local data center measures.
- New congressional oversight and state enforcement may increase demands for document preservation, response planning and policy reviews.
- Read the full article for practical steps to prepare before inquiries arrive and identify emerging business risks.
Trump’s Executive Order
The Trump administration has been pushing for a national approach to AI regulation. In December 2025, President Trump issued an executive order directing the U.S. Department of Justice to create a litigation task force to challenge state AI laws. The Justice Department launched the task force in January. The goal, the administration said, was to prevent a “patchwork of 50 different regulatory regimes” and to check what it described as “the most onerous and excessive laws” targeting AI.
Trump’s order also directed officials to prepare a legislative recommendation for a uniform federal policy preempting state AI laws that conflicted with the administration’s light-touch regulatory approach. Congress has resisted. Last year, the Senate voted 99-1 to remove a proposed 10-year moratorium on state-level AI regulations from a budget bill. And a bipartisan House bill that would have overridden some state laws has failed to pick up support. In June, Politico noted that the legislation was “the last realistic chance” for federal rules on AI before the midterms.
Meanwhile, the states are continuing to legislate. A midyear analysis by Tech Policy Press counted 109 new AI-related laws and another 28 data center laws enacted in 29 states during the first six months of 2026, slightly behind last year’s pace, according to data from NYU’s Center on Technology Policy. That report noted two “distinct trends” in the legislation: Both parties are aligning on AI legislation, and legislation is focusing on child safety, data centers and consumer protection. Last year, California and New York also established new requirements for companies developing advanced AI models, including new safety procedures and reporting for serious incidents.
Many of those priorities are likely to port over to Congress. In a post-election review, the International Association of Privacy Professionals (IAPP) identified AI governance, consumer privacy, and children’s online safety among potential Democratic priorities. Congressional oversight committees led by Democrats are also likely to focus on key AI regulators like the Federal Trade Commission and the U.S. Department of Justice.
The election results suggest, the association wrote, that “the environment has swung from a brief era of tech deregulation to more oversight and potential guardrails to rapidly evolving AI and digital technology.”
Congressional Shakeup
The election also reshuffled the cast of lawmakers who will shape the legislative debate over AI. Rep. Frank Pallone, D-N.J., is expected to chair the House Energy and Commerce Committee, which has jurisdiction over technology, privacy and consumer protection. In announcing that he would seek the chairmanship, Pallone promised to “rein in Big Tech,” Bloomberg reported.
One of Pallone’s fellow committee members, Republican Rep. Gabe Evans lost his reelection bid. His replacement in the House happens to be one of the House sponsors of Colorado’s landmark AI law, Democrat Manny Rutinel. As the IAPP noted, Rutinel may take Evans’ Energy and Commerce seat and “bring his focus on AI oversight with him to Washington.”
The election results do not mean, however, that the Trump administration will drop its efforts to dissuade the states from passing AI laws. For instance, Rutinel’s Colorado legislation has been a key target for Trump officials and tech companies aligned with the White House.
In April, Elon Musk-led xAI sued Colorado over the law, which as Colorado Newsline reported, is aimed at preventing discrimination by businesses using AI to help decide loans, employment, insurance coverage and school admissions. In its suit, xAI said the law was unconstitutional on First Amendment grounds. Two weeks later, the Justice Department intervened, arguing that the law violated the 14th Amendment’s Equal Protection Clause and was, in the words of Assistant Attorney General Harmeet Dhillon, then head of the Justice Department’s Civil Rights Division, a product of “woke DEI ideology.” (In one of the first post-election Trump administration departures, Dhillon resigned from her role on Nov. 5.)
On April 27, a federal magistrate judge in Colorado approved an agreement under which the state would hold off on enforcing the law while the case proceeds.
In July, the Federal Trade Commission proposed a policy statement warning that the recently revised Colorado act may tempt AI companies to “deceive consumers” and violate Section 5 of the FTC Act by altering or steering “the output of its systems contrary to consumers' reasonable expectations.”
New Players in the States
While the Trump administration has ramped up pressure, it appears to have fewer state-level allies to support its enforcement priorities. In Texas, for instance, Democrat Nathan Johnson won an upset victory over Republican Mayes Middleton in the race for state attorney general. The Texas AG’s office has, as the Texas Tribune reported, “played an outsized role” in backing Republican administrations in the courts and has served as a counterweight to more liberal AGs in states like California and New York.
Johnson has vowed to conduct, during his first month in office, “a systematic and comprehensive audit” of existing consumer protection, fair competition and employment laws, to combat “a marketplace rife with generative AI, algorithmic pricing, and synthetic voice scams.” He said he would then work with his lawyers and the state legislature to “craft and pass new legislation that fills in the identified gaps in the law.”
In other key states, Democratic wins suggest that AI enforcement will continue apace. In California, Attorney General Rob Bonta won reelection and Democrat Xavier Becerra won the governor’s race. Colorado elected Democrat Jena Griswold, who campaigned on stronger AI safeguards and will enforce the state’s revised AI law. And in New York, Attorney General Letitia James won another term. In September, James led a bipartisan coalition of 26 attorneys general urging Congress to pass a comprehensive AI framework without preempting state laws.
Doing the Prep Work
All of this means that in-house teams should be preparing for additional state-level AI regulations and enforcement and, in the case of tech companies, assessing their potential exposure to congressional investigations. Covington & Burling, on Nov. 4, issued a checklist for companies to prepare before the new Congress is sworn in on Jan. 3.
Among the questions the firm posed: Have you already received outreach from Congress? Have you preserved documents in the wake of requests from ranking Democrats earlier this year? Even if you have not received a letter from Congress, is your company a potential target? Have you assessed whether an investigation focused on another company, the administration or a business partner could end up ensnaring your business? Are you prepared for responses to a committee to be made public?
Preparation, Covington advised, is key. “The first 24 hours after a congressional inquiry arrives are critical,” the firm wrote. “Unprepared organizations often make avoidable mistakes.”
A Boost in Business?
For law firms, the rapidly changing political environment is likely to create opportunities across practice areas. On election night, newly reelected Sen. Ed Markey, D-Mass, posted on X, “They are going to need to plant new forests for all of the subpoenas we’ll be printing.” Rep. Robert Garcia, D-Calif., expected to chair the House Committee on Oversight and Government Reform, issued a two-word statement after the Democrats won a majority: “Lawyer up.”
That should prove a boon to D.C.-based congressional investigations practices at firms like Covington, Hogan Lovells, King & Spalding, Wilmer Cutler Pickering Hale and Dorr, Jenner & Block, Cooley, Akin Gump Strauss Hauer & Feld, Latham & Watkins, Kirkland & Ellis and Simpson Thacher & Bartlett, among others. (You can find a full list of D.C.-based government relations practices ranked by Best Law Firms here.)
State and local enforcement actions should keep firms busy as well. As Bloomberg Law wrote in October, lawyers for Fortune 500 tech companies see the states as the “primary regulators” for the technology industry because of inaction in Washington and states’ “robust consumer protection and antitrust powers.”
Firms with established regulatory enforcement practices are touting their AI, privacy and cybersecurity expertise. Troutman Pepper Locke, for instance, has been tracking AI enforcement activities by state attorneys general. Its data shows AI-related actions by state AGs rose from nine in 2024 to 14 in 2025, a 56% jump, and 2026 had logged 12 through April, “pacing well above” the 2025 total. And in October, Goodwin launched an AI governance program that it said would assist businesses in staying current on rapid regulatory change.
Litigation practices could also see an uptick as companies challenge state laws or defend against suits. One example: Bloomberg Law reported in March that WilmerHale is representing AI giant Anthropic in its suit challenging the Defense Department’s decision to designate the company a supply chain risk.
Don’t expect the work to ebb anytime soon. Washington and the states will likely remain at odds over who gets to set AI rules for the remainder of Trump’s term in office. The midterms simply raised the stakes for the tech industry and opened a potentially rich vein of work for lawyers to mine.
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David L. Brown is a legal affairs writer and consultant, who has served as head of editorial at ALM Media, editor-in-chief of The National Law Journal and Legal Times, and executive editor of The American Lawyer. He consults on thought leadership strategy and creates in-depth content for legal industry clients and works closely with Best Law Firms as senior content consultant.