Author: Christopher H. Casey

On December 19, 2025, a bi-partisan coalition of 23 state attorneys general submitted reply comments to the Federal Communications Commission (FCC) urging the agency not to issue any declaratory ruling purporting to preempt state and local laws that seek to govern or limit uses of Artificial Intelligence (AI).  The AGs stated that such a ruling would be beyond the FCC’s authority.

In its Notice of Inquiry, the FCC requested comment on the question “As [AI] begins to play a bigger role in the provision of communications services, should the Commission consider whether state or local laws seeking to govern or limit uses of AI are prohibiting or effectively prohibiting the provision of wireline telecommunications services?” Various commenters supported a declaratory rule preempting state or local laws regulating AI.  The state AGs’ comments were issued in reply to these comments. 

While acknowledging that AI is “a transformative technology with a number of promising uses,” the AGs claim that “[s]tates across the political spectrum are legitimately concerned about how businesses using AI may harm their citizens and/or interfere with their own core responsibilities.” 

The state AGs argue that AI is a broad and undefined term that encompasses a wide category of information services that are beyond the FCC’s jurisdiction to regulate and urge the FCC to “stand down and allow Congress to first decide what, if any, federal preemption of state (and local) regulation of AI is appropriate.” 

Examples of current or pending state and local laws that seek to govern or limit AI include laws involving:  AI-generated deepfakes and AI-generated explicit material; basic disclosures when consumers are interacting with specific kinds of AI; the setting of rents through the use of AI; new forms of consumer scams; ensuring identity protection for endorsements and other AI-generated content; and consumer opt-out of consequential automated decisions.

The state AGs argue that none of these laws is “remotely related to limiting the entry or operation of telecommunications networks.”

The reply comments follow a December 11 Executive Order by the President setting forth a national policy framework for AI and directing the FCC to initiate a proceeding to determine whether to adopt a federal reporting and disclosure standard for AI models that preempts conflicting State laws.

The reply comments are signed by the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Oregon, Rhode Island, Tennessee, Utah, Vermont, Washington and Wisconsin.

On November 13, 2025, Washington State Attorney General Nick Brown announced the formation of a unit in the state attorney general’s office focused on workers’ rights.  Attorney General Brown said the unit will help enforce already strong state laws protecting workers, including laws against wage theft.  The move is the latest effort by Democratic attorneys general to strengthen state enforcement of laws protecting workers in response to Trump Administration changes to federal enforcement that they allege have weakened worker protections. 

In September, Oregon Attorney General Dan Rayfield announced the formation of a “working families unit” in a new section of the state Attorney General’s Office designed to address “unfairness in the workplace,” in light of “federal rollbacks.”  At least 13 state attorney general offices now reportedly have such units, including California, Massachusetts, New York, the District of Columbia, Illinois, Michigan, Minnesota, New Jersey, Pennsylvania, Arizona and Colorado. 

Employers with operations in these states face potentially more significant enforcement threats from the state attorneys general than from private suits.  Attorneys general can pursue broad investigations and obtain consent orders requiring enhanced reporting or training in areas such as minimum wage, overtime pay, independent contractor classification, meal and rest breaks, recordkeeping and tipping compliance. 

On October 20, 2025, 20 Republican state attorneys general, led by Iowa’s Brenna Bird, wrote a letter to SEC Commissioner Hester M. Peirce, urging the SEC to provide “clear, narrowly tailored definitions regarding when a digital asset or related transaction constitutes a security under federal securities laws.”  The letter, sent in response to the SEC’s solicitation of public input on issues relating to cryptocurrency and digital assets, states that clarity is essential to prevent federal overreach which could negatively impact the AGs’ ability to enforce consumer protection laws in their states.

The AGs contend that the federal government has only limited powers to protect consumers, and that the states have primary responsibility over consumer protection and economic regulation.  In the absence of clear definitions, they argue, there is a risk of federal overreach, which could lead to preemption of important state laws that are specifically tailored to digital assets.  The AGs point out that at least 40 states have introduced or enacted legislation on digital assets–laws that provide regulatory certainty for businesses, allowing them to innovate, invest, and create jobs in their states.  The AGs argue that federal overreach could also preempt state money transmitter statutes, criminal laws, and consumer protection laws.

The AGs also argue that states’ unfair and deceptive acts and practices (UDAP) laws are better suited to protect consumers in the digital assets space than any federal law.  State UDAP statutes are broader than federal securities laws, they claim, allowing states to capture practices that may not qualify as securities violations. Finally, the AGs argue that clear definitions are necessary for states to determine whether it is lawful for them to enforce their unclaimed-property statutes.  Many states have laws that treat abandoned virtual currency as escheatable property that must be remitted to the state.  Because many states do not have digital wallets, they require the holder of unclaimed digital assets to “liquidate” those assets and then remit the cash to the state.  The AGs are concerned that such a transaction could constitute the unlawful sale of unregistered securities.

On October 1, 2025, the state attorneys general for Virginia, Arizona, Connecticut, New York, and Washington sued Zillow, Inc., and Redfin Corporation, two of the country’s largest online rental housing advertisers, over an agreement that the states claim eliminates competition for multifamily rental advertising between the two companies.  The complaint mirrors a complaint filed on September 30 by the Federal Trade Commission.

The states’ lawsuit, filed in the U.S. District Court for the Eastern District of Virginia, alleges that Zillow and Redfin executed an unlawful agreement to remove competition from the already highly-concentrated market for online apartment advertising.  Prior to the agreement, the complaint alleges, both Zillow and Redfin competed on online rental marketplaces—Internet Listing Services or “ILSs”—where consumers search for rental homes or apartments.  According to the complaint, on February 6, 2025, Zillow and Redfin entered into an agreement whereby Zillow paid Redfin $100 million to stop competing, to facilitate the transition of most of its multifamily rental advertising business to Zillow, and to shut down the remainder.  The complaint also alleges that Redfin fired most of its rentals salesforce, including those with key customer relationships, and agreed to help Zillow hire its pick of these employees.

The AGs allege that the agreement will result in reduced choice, higher prices, and reduced quality for multifamily rental advertising in their respective states.  According to the states, the agreement constitutes an illegal restraint of trade under Section 1 of the Sherman Act, and an illegal acquisition in violation of Section 7 of the Clayton Act.  The states seek an injunction providing structural relief such as “divestiture of assets, divestiture or reconstruction of businesses, and such other relief sufficient to restore the competition that would exist absent the anticompetitive conduct alleged.”

On August 18, 2025, attorneys general from 20 states and the District of Columbia sued the Trump Administration for tying the states’ receipt of crime victim funds to their assistance in the Administration’s immigration enforcement program.  The lawsuit, filed in the United States District Court for the District of Rhode Island, challenges recently imposed conditions on the states’ receipt of funds under grant programs established by the Victims of Crime Act, passed by Congress in 1984 to provide direct compensation and service programs to assist victims of crime.

The suit attacks conditions recently placed upon states’ receipt of funds by the Office for Victims of Crime (OVC), an agency housed within the United States Department of Justice.  In late July 2025, OVC issued notices to grant recipients specifying new immigration-related conditions on issuance of funding for FY 2025, including cooperation with, and assistance to, the United States Department of Homeland Security (DHS) in its immigration enforcement efforts. 

The states claim that these conditions are unlawful for a variety of reasons, including that they violate the separation of powers, the Spending Clause, the Administrative Procedure Act, and principles of federalism.  They claim that the conditions put the states in an untenable position: “either forfeit access to critical resources for vulnerable crime victims and their families, or accept unlawful conditions, allowing the federal government to conscript state and local officials to enforce federal immigration law and destroying trust between law enforcement and immigrant communities that is critical to preventing and responding to crime.”   Complaint, at 4.  The states seek an injunction against implementation of the conditions against them.

The lawsuit echoes the claims made in another suit by a group of 20 state attorneys general challenging similar immigration-related conditions on the state’s receipt of transportation grants.

The plaintiffs are the states of New Jersey, Rhode Island, California, Delaware, Illinois, Colorado, Connecticut, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New York, Oregon, Vermont and Washington and the District of Columbia.

On June 19, 2025, Chief U.S. District Judge John J. McConnell, Jr., of the District of Rhode Island granted a preliminary injunction to 20 states that had sued the U.S. Department of Transportation (DOT) and Secretary of Transportation Sean Duffy seeking to stop enforcement of an Immigration Enforcement Condition (IEC) that made transportation grants to the states conditional on their cooperation with federal officials in the enforcement of federal immigration law.  We previously posted a blog about the states’ lawsuit and a similar action against the U.S. Department of Homeland Security.

The states alleged that DOT has no statutory authority to impose the IEC as a requirement for federal funding that was appropriated for transportation; that the IEC violates the Spending Clause of the Constitution; and that, for various reasons, the DOT’s actions violate the Administrative Procedure Act (APA).  In granting the injunction, Judge McConnell held that the states were likely to succeed on the merits of some or all of their claims.  Specifically, the Court held that:

• The Defendants’ conduct violated the APA because they acted outside their statutory authority when Congress appropriated the funds for transportation purposes, not immigration purposes.
• The IEC is arbitrary and capricious and lacks specificity in how the states are to cooperate on immigration enforcement.
• The IEC violates the Spending Clause because “[t]he Government does not cite to any plausible connection between cooperating with ICE enforcement and the congressionally approved purposes of [the DOT].”
• The states will face irreparable and continuing harm–the loss of billions of dollars in federal transportation grant funds—if forced to agree to the IEC in order to receive the funds.
• The balance of the equities and the public interest favor granting the injunction, because without the injunction, there is a substantial risk that the states’ citizens will face a significant disruption in transportation services.

The Court’s order prohibits the Defendants from implementing or enforcing the IEC, or withholding or terminating federal funding based on the IEC.  The Court also denied the government’s request to stay the order pending appeal.

In separate lawsuits filed on May 13, 20 Democratic state attorneys general sued the Trump Administration for conditioning their states’ receipt of funding appropriated by Congress for the Department of Homeland Security (DHS) and the Department of Transportation (DOT) on the states’ enforcing the President’s immigration agenda.

The states claim that the Trump Administration is unconstitutionally holding billions of dollars in their share of funding for DHS and DOT “hostage” by conditioning the states’ receipt of those funds on whether the states comply with a set of conditions requiring them to assist in federal civil immigration enforcement.  The lawsuits claim that the conditions on the funding are unconstitutionally vague and violate the separation of powers by encroaching on Congress’ power to set funding requirements.

The complaint against the DOT alleges that the funding that is subject to the immigration-related conditions is “essential to sustain critical public safety and transportation programs, including highway development, airport safety projects, protections against train collisions, and programs to prevent injuries and deaths from traffic accidents.”  The complaint against DHS alleges that the plaintiff states rely on DHS funding to “prepare for, protect against, respond to, and recover from catastrophic disasters.”

The states seek a declaratory judgment that the conditions imposed on the funding are unlawful and prospective injunctive relief on enforcement of the conditions.  The states bringing the two lawsuits include California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Washington, Wisconsin and Vermont.

On April 10, a group of Democratic state attorneys general, along with Pennsylvania Governor Josh Shapiro, sued the Trump Administration over access to previously-approved funding to address the long -term effects of Covid-19 on elementary and high school students.  On March 28, the Department of Education sent a letter to the plaintiff states notifying them that they could no longer access the funds, totaling $1.1 billion, under programs enacted as part of the Biden Administration’s Covid relief plan.

The letter rescinding the funding had stated that “the COVID pandemic [has already] ended,” and therefore extending deadlines for COVID-related grants “is not consistent with the Department’s priorities and thus not a worthwhile exercise of its discretion.”  But the Complaint alleges that many of the areas of focus for the funding “are not tied to the duration of the public health emergency, including evidence-based interventions (such as summer learning, extended day programs, and afterschool initiatives) intended to mitigate the long-term effects of learning disruptions caused by the pandemic; addressing academic, social, emotional, and mental health needs, especially for marginalized groups like low-income students; and providing educational technology to enhance learning environments.” 

The Department of Education had previously said that the states could access the funds through March 2026.  The Complaint seeks an order vacating and setting aside the Department of Education’s rescission letter, and an injunction precluding the Department from taking any action to prevent the states from accessing the funds through March 2026.

The plaintiffs include New York, Arizona, California, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Pennsylvania (through Governor Shapiro, acting in his official capacity), and the District of Columbia.