The federal government has found an effective lever for shaping state AI policy - and it does not require passing a single law.
A December executive order signed by President Trump makes states with "onerous" laws on AI companies ineligible for the non-deployment portion of their Broadband Equity, Access, and Deployment program allocations. That non-deployment pool has grown to more than $22 billion of the program's $42.45 billion total budget, according to an analysis by Broadband Marketers - largely due to Trump administration cost-cutting measures that reduced the deployment portion. For Missouri, the number at stake is $900 million.
What Is Happening in Missouri
Missouri Senator Joe Nicola, a Republican from Grain Valley, is sponsoring a bill that would ensure a person or company is always ultimately held liable for harms caused by an AI model. The legislation also includes amendments restricting AI use in prescribing medication and limiting minors' access to AI systems - the kind of consumer protection legislation that has moved through multiple state legislatures in recent cycles.
During Senate debate last week, colleagues raised the funding threat directly. "It will literally cost us $900 million in non-deployment funds," said Representative Louis Riggs, R-Hannibal. Senator Jason Bean, R-Holcomb, said he found the prospect "very, very concerning." Nicola told the Missouri Independent he would seek feedback from the White House in an effort to ease opposition to his bill.
Missouri Is Not Alone
The pattern is repeating across states. Louisiana pulled or stopped work on four AI bills after Governor Jeff Landry's office communicated that the White House opposed them. California dropped a bill that would have put price caps on broadband for low-income households after NTIA indicated that BEAD participants would need to be exempt, putting the state's funding at risk.
The National Telecommunications and Information Administration was supposed to define which AI laws would be considered "onerous" last month but delayed that guidance. NTIA Chief of Staff Brooke Donilon said the agency is targeting only a "handful" of laws - those that "directly impact the development and success of AI," not legislation that "tangentially, maybe impacts AI."
That distinction matters, but it has not been published in formal guidance, leaving state lawmakers to guess which bills cross the line and which do not.
The Broader Tension
The executive order creates a direct conflict between two legitimate policy priorities: expanding rural broadband access and establishing consumer protections around AI. States that need the broadband funding most - rural, lower-income states - are also the ones with the least political leverage to push back on federal pressure.
From an AI governance perspective, this approach is notable. Rather than federal AI legislation - which has stalled repeatedly in Congress - the administration is using broadband funding eligibility as an indirect mechanism to limit state-level AI regulation. Whether the states ultimately fall in line, find exemptions, or mount legal challenges will shape the AI regulatory landscape for years.
