FTC Proposes Policy Statement Declaring State AI Laws Preempted Under Section 5, Singling Out Colorado's AI Act
The FTC voted 2-0 to open comment through July 31 on a proposed statement treating undisclosed ideological AI output-steering as deception and calling Colorado's AI Act impliedly preempted.
Overview
The Federal Trade Commission has released a proposed policy statement warning that AI companies which steer their systems’ outputs toward undisclosed ideological objectives, rather than toward what consumers request or reasonably expect, may be engaging in deceptive acts or practices in violation of Section 5 of the FTC Act, according to the Consumer Financial Services Law Monitor. The Commission opened a public comment period that runs through July 31, 2026, as reported by AI Weekly.
The proposed statement, titled “Suppression of Accuracy in Artificial Intelligence Systems” according to AI Weekly, passed on a 2-0 vote by the FTC’s two Republican commissioners, as reported by Frankfurt Kurnit. Its most consequential passage argues that a state law such as Colorado’s Artificial Intelligence Act is impliedly preempted where it conflicts with federal consumer-protection authority.
What We Know
The full document is the “Federal Trade Commission’s Proposed Policy Statement Concerning the Suppression of Accuracy in Artificial Intelligence Systems,” according to PPC Land. Its central legal theory is that steering an AI model’s output away from a correct answer, without telling users, can amount to deception under Section 5 of the FTC Act, as reported by Frankfurt Kurnit. Section 5 of the FTC Act prohibits unfair or deceptive acts or practices in commerce, according to PPC Land.
The statement was mandated by an executive order. According to PPC Land, President Trump signed Executive Order 14365, “Ensuring a National Policy Framework for Artificial Intelligence,” on December 11, 2025, directing the FTC to clarify how Section 5 applies to AI models and to address conflicts with state AI laws. The Consumer Financial Services Law Monitor likewise traces the statement to Executive Order 14365, signed December 11, 2025.
The Commission approved the document by a 2-0 vote, and identifies Andrew N. Ferguson as its chair, according to PPC Land. Ferguson framed the comment period as a chance for the agency to hear from businesses and consumers about their concerns regarding “the subversion of AI systems for ideological ends,” according to AI Weekly.
The Colorado Preemption Signal
The document takes direct aim at Colorado’s revised Artificial Intelligence Act as a law that could force exactly the kind of hidden manipulation the FTC describes, according to PPC Land. The statement characterizes Colorado’s law as one that could pressure companies into altering outputs to avoid disparate impact liability, as reported by Frankfurt Kurnit.
On that basis, the statement concludes that such a state law is “impliedly preempted to the extent it conflicts with a federal regulatory scheme,” according to AI Weekly. The move continues the federal effort to override state AI regulation that The Machine Herald previously reported, which itself grew out of Executive Order 14365. It also arrives alongside a separate legislative push, the bipartisan “Great American AI Act” draft that would freeze state AI laws for three years.
The FTC does offer a compliance pathway. An AI company can avoid Section 5 liability by making “clear, conspicuous, and adequate disclosures” that its system is designed to prioritize certain objectives over what users request or would otherwise expect, according to the Consumer Financial Services Law Monitor. A company is allowed to prioritize objectives other than pure correctness, but only if it makes that clear and conspicuous to users, as reported by Frankfurt Kurnit.
What We Don’t Know
The statement is a proposal, not a final rule: the public comment period closes July 31, 2026, according to the Consumer Financial Services Law Monitor, and the Commission has not indicated how it will treat the comments it receives. FTC policy statements set out the agency’s enforcement views but do not carry the force of legislation, and the preemption theory would ultimately be tested through enforcement actions or litigation rather than settled by the statement itself. Whether courts would accept that Section 5 impliedly preempts a state anti-discrimination measure like Colorado’s remains an open legal question that the document does not resolve.