Federal “Hands-Off” AI Policy: The Illusion of Reduced Risk
The Executive Order’s Aim: Centralizing AI Policy
A federal executive order proposed on December 11, 2025 would, in effect, push for a unified national AI framework and discourage varied state rules. The objective would be to limit a patchwork of state laws by promoting federal standards and directing agencies to coordinate guidelines and enforcement. Treated as a potential policy direction, this approach seeks regulatory certainty for industry and a single point of reference for compliance.
Why Deregulation Doesn’t Equal Immunity for AI Risks
Reduced federal intervention does not remove exposure to liability. Several established legal channels remain available to plaintiffs and regulators even if states yield to federal standards. Courts, state attorneys general, and federal agencies can still pursue claims based on existing law.
Common Legal Pathways for AI Liability
- Product liability and torts – Harm from model outputs can trigger negligence, design defect, or failure-to-warn claims under state law.
- Privacy and data protection – FTC enforcement, state privacy statutes, and consumer suits can arise from misuse of personal data.
- Intellectual property – Copyright, trade secret, and licensing disputes may follow from training data and content generation.
- Consumer protection – The FTC and state regulators can challenge deceptive or unfair AI practices.
- Antitrust – Market conduct, data access restrictions, and M&A tied to AI assets attract DOJ and FTC scrutiny.
- Disclosure and securities – Public companies face liability if AI risks are material and not properly disclosed or controlled.
Strategic Considerations for Businesses in an Uncertain AI Landscape
Practical steps reduce legal exposure even if federal policy is permissive. Conduct legal and technical audits of models. Maintain detailed development and testing records. Strengthen contractual protections with vendors and customers, including clear liability and indemnity clauses. Build privacy-by-design and robust governance processes. Monitor agency guidance from the FTC, FCC, Commerce Department, and DOJ. Consider insurance and engage counsel early when launching high-risk applications.
Key takeaway: A federal hands-off posture may simplify rulemaking, but it does not erase existing pathways to liability. Companies should treat regulatory signals as a reason to tighten risk controls, not to relax them.
