Should Libertarians Support Federal AI Regulation?

Executive Order 14365, issued on December 11, 2025, marks the federal government’s first comprehensive attempt to coordinate artificial intelligence policy across all states. While the order rescinds a number of pre‑existing state and agency restrictions, it also establishes a national framework that could reshape competitive dynamics for technology firms, investment flows, and market entry strategies. For libertarian stakeholders—who prize limited government intervention, market‑driven innovation, and decentralized experimentation—the question is whether to endorse this federal push or defend state autonomy.

• Policy Context: The 2025 order replaces a fragmented patchwork of state laws with a single national framework that emphasizes voluntary compliance, industry representation, and existing consumer‑protection statutes.

• Economic Rationale: A projected $12 billion annual GDP boost underscores the order’s pro‑growth stance, aligning with libertarian goals of maximizing economic output without ideological mandates.

• Regulatory Architecture: No new AI‑specific enforcement agency is created; instead, existing bodies (FTC, DOJ) retain oversight, and a National AI Advisory Board (NAAB) provides advisory input.

• Strategic Implications: Firms can anticipate reduced regulatory uncertainty, streamlined cross‑state operations, and clearer investment signals—benefits that outweigh the loss of local experimentation in most cases.

• Recommendation: Libertarian business leaders should support federal coordination as long as it remains de‑regulatory, monitors unintended centralization, and preserves market‑driven standards.

The Executive Order’s core objective is to “ensure a National Policy Framework for Artificial Intelligence” while simultaneously rescinding prior restrictive measures such as FTC bias guidance. By doing so, the order signals a shift from prescriptive mandates toward a coordination model that relies on existing privacy, discrimination, and consumer‑protection laws. From an economic standpoint, this approach reduces compliance costs associated with multi‑jurisdictional regulation—an outcome directly aligned with libertarian free‑market principles.

Quantitatively, the White & Case analysis projects a $12 bn annual GDP contribution if the framework is fully implemented by 2027. This figure reflects increased productivity from AI deployment in manufacturing, logistics, and services sectors. For firms, this translates into higher demand for AI solutions, larger customer bases, and potential market expansion—especially for those operating across multiple states.

The removal of state‑by‑state restrictions eliminates the “innovation silos” that have historically fostered niche breakthroughs. However, this consolidation also reduces the risk of regulatory arbitrage—where companies shift operations to jurisdictions with lax rules. The net effect is a more level playing field:

• Reduced Compliance Fragmentation: Firms no longer need separate compliance teams for each state’s AI transparency or bias standards.

• Enhanced Cross‑Border Operations: A single framework simplifies data flow across state lines, lowering transaction costs and accelerating time‑to‑market.

• Investor Confidence: The clarity of a national policy reduces regulatory risk premiums in capital markets, potentially lowering the cost of equity for AI startups.

Case study: A mid‑size fintech company that previously navigated California’s AI Transparency Act and New York’s data privacy law can now align its compliance efforts under the federal framework. This consolidation is expected to cut annual regulatory expenses by 15–20%, freeing capital for R&D and expansion.

Libertarians often argue that regulation stifles innovation by imposing arbitrary constraints. The Executive Order’s emphasis on voluntary guidelines, industry representation through the NAAB, and reliance on existing consumer‑protection statutes suggests a model that respects market forces while providing coordination.

The order explicitly states that “risk‑based enforcement is left to existing agencies such as the FTC and DOJ.” This avoids creating an additional AI watchdog, thereby preserving the libertarian preference for minimal administrative overhead. Firms can continue to rely on established legal frameworks for addressing privacy breaches or discriminatory outcomes.

The order’s clause that “AI systems should be free from ideological bias and social agendas” directly addresses libertarian concerns about value‑laden regulation. By excluding “social agenda” framing, the policy safeguards against state mandates that could impose moral or political standards on AI development.

The projected $12 bn GDP boost provides an empirical anchor for evaluating the order’s success. Libertarian leaders can benchmark this figure against alternative scenarios—such as continued state patchwork—to assess whether federal coordination delivers superior economic outcomes.

While the policy framework is relatively light on prescriptive rules, firms must still navigate several practical steps to align with the new national standard:

• Policy Alignment Review: Conduct an audit of existing compliance programs against the Executive Order’s requirements and identify gaps.

• NAAB Engagement Strategy: Develop a plan for participating in or monitoring NAAB recommendations, ensuring that industry‑driven standards remain influential.

• Cross‑State Data Governance: Update data handling protocols to reflect the unified framework, particularly for firms operating in states with previously stringent AI transparency laws.

• Capital Allocation Adjustments: Reallocate savings from reduced regulatory fragmentation toward scaling operations or exploring new AI applications.

Using the $12 bn GDP projection as a baseline, we can model potential ROI for firms that adopt the federal framework early:

• Cost Savings: Assume a 20% reduction in compliance expenses for a company with annual AI regulatory costs of $50 million—yielding $10 million in savings.

• Revenue Growth: A 5% increase in AI adoption across clients, driven by streamlined operations, could add $25 million to annual revenue for a mid‑size firm.

• Net Present Value (NPV): Discounting these cash flows over five years at a 7% rate produces an NPV of approximately $30 million, indicating substantial value creation.

Despite the favorable outlook, several risks warrant attention:

• Centralization Concerns: Critics argue that a single federal framework could suppress local innovation ecosystems. To mitigate this, firms should lobby for explicit provisions that allow state-level experimentation within the national umbrella.

• Enforcement Ambiguity: Relying on existing agencies may lead to inconsistent enforcement across jurisdictions. Companies can establish internal compliance teams that monitor agency actions and adjust policies proactively.

• Market Concentration: A unified framework could inadvertently favor large incumbents with greater lobbying power. Small firms should seek coalition advocacy through industry groups represented on the NAAB.

Looking ahead, the Executive Order sets a precedent for incremental federal coordination without overreach. Key trends likely to shape the next five years include:

• Data Sovereignty Debates: As AI models increasingly rely on large datasets, discussions around data residency and cross‑border flows will intensify.

• AI Ethics Standardization: The NAAB may evolve into a de facto standard‑setting body, influencing industry best practices even without formal regulatory power.

• Public Trust Metrics: Consumer confidence in AI systems could become a new economic indicator, affecting investment and adoption rates.

For libertarian business leaders, staying ahead of these trends involves continuous monitoring of NAAB outputs, active participation in standard‑setting discussions, and maintaining agile compliance frameworks that can adapt to evolving interpretations of existing laws.

• Conduct a Compliance Gap Analysis: Map current state‑level AI regulations against the federal framework to identify savings opportunities.

• Engage with NAAB: Secure representation or at least active monitoring of advisory outputs to ensure that industry perspectives shape future guidance.

• Reallocate Savings: Direct cost reductions from regulatory consolidation toward R&D, talent acquisition, and market expansion initiatives.

• Advocate for Decentralized Experimentation: Lobby for clauses that preserve state‑level pilot programs within the national framework to maintain innovation diversity.

• Monitor Enforcement Trends: Track FTC and DOJ actions related to AI to anticipate regulatory shifts and adjust internal policies accordingly.

In sum, the 2025 federal AI regulation represents a pragmatic compromise between centralized coordination and market freedom. By strategically aligning with this framework—while vigilantly protecting local experimentation and avoiding bureaucratic overreach—libertarian business leaders can harness significant economic benefits without sacrificing core ideological principles.