State AI Consumer Protection Enforcement Analysis

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The rise of artificial intelligence (“AI”) in nearly every sector of work and life has brought with it questions about how to balance new efficiencies from novel technologies with federal and state consumer protection priorities. While Department of Justice (“DOJ”) and federal cases involving AI and algorithmic pricing have been front and center, there has been a smaller spotlight on the states’ efforts to strike this balance.

Political Landscape: A Federalism Fight to Shape AI Regulation

Before considering the various approaches states have taken in addressing recent AI developments, it is important to understand the political landscape in which the state legislatures and attorneys general are operating.

In November 2025, a bipartisan coalition of 36 state attorneys general wrote Congress to preserve states’ rights to address what they perceived as the “significant risks” AI poses in “numerous fields.” The attorneys general called for state action to “complement longstanding consumer protection statutes prohibiting unfair and deceptive conduct” that state attorneys general have long been accustomed to enforcing. Though the attorneys general “remain hopeful that this technology will be used to make people healthier, wealthier, happier, and safer” as it becomes applied in industries ranging from healthcare to education, the attorneys general asked Congress to leave “regulatory innovation” to the states “so we can all learn from what works and what does not.”

Then, on December 11, 2025, the White House issued an executive order aimed at “ensuring a national policy framework” for AI and blamed “excessive state regulation” for thwarting AI innovation. Among other things, through the executive order, the White House: (1) tasked the U.S. Attorney General with establishing an AI Litigation Task Force to challenge state AI laws inconsistent with the federal policy of “sustain[ing] and enhance[ing] AI dominance through a minimally burdensome national policy framework for AI;” (2) tasked the Secretary of Commerce with evaluating state AI laws inconsistent with federal policy; and (3) placed restrictions on certain state funding for states with onerous AI laws.

Although the Secretary of Commerce report was due on March 11, 2026, no such report has yet been publicized. The future of federal preemption of state AI laws remains unclear, but in the meantime, states are likely to continue to use their regulatory powers in a myriad of ways.

I. Recent Trends

Despite the current challenging political landscape, states have taken a number of different approaches so far, including:

• Using Traditional Enforcement Regimes. Amid the looming threat of federal preemption, the Connecticut Attorney General issued a February 26, 2026 statement entitled “The Application of Existing Laws to Artificial Intelligence to Protect Connecticut Residents.” Connecticut Attorney General William Tong acknowledged that businesses use AI for “a range of reasons” bearing on recent consumer protection hot topics including, “tenant screenings for rentals, employment decisions, credit risk and loan decisions, insurance claims, and targeted consumer ads.” The advisory statement stated that businesses and individuals deploying AI systems should comply with Connecticut’s existing laws, including Connecticut’s Unfair Trade Practices Act and Antitrust Act. “Despite its complexity,” the advisory statement notes that “the AI industry is no different” than any other industry that could be held accountable under Connecticut’s existing consumer protection and antitrust regimes.

The Massachusetts Attorney General issued a similar advisory in April 2024, stating that AI and algorithmic decision-making systems could run afoul of existing state consumer protection laws while also recognizing that “AI has tremendous potential benefits to society.”
- Joining Federal Enforcement Actions. Nearly every state has joined into various DOJ AI cases, which have largely relied on existing state and federal antitrust and consumer protections statutes. States can benefit from joining federal lawsuits that allow them to take advantage of federal resources while still pursuing their own enforcement priorities. Even amid shifting political landscapes, Tennessee Attorney General Jonathan Skirmetti has encouraged states to join into federal antitrust suits, explaining that states can also add “legal muscle” and “continuity when federal administrations change.”
- Enacting New Laws and Regulations. Several states have enacted new laws and regulations. Of particular note is the Colorado AI Act. The act imposes, inter alia, a general duty of care on developers and AI implementers to protect consumers from “algorithmic discrimination,” which is defined as “any condition” in which the use of AI “results in unlawful differential treatment or impact that disfavors an individual or group of individuals” based on enumerated classifications, as well as those protected under Colorado or federal law.

One particular focus of state legislation is algorithmic pricing models. In October 2025, California enacted a law prohibiting the use or distribution of a common pricing algorithm as a part of a contract or conspiracy in violation of its antitrust laws. California defined “common pricing algorithm” as “any methodology, including a computer, software, or other technology, used by two or more persons, that uses competitor data to recommend, align, stabilize, set, or otherwise influence a price or commercial term[.]” Other states, including New Mexico, New York, Pennsylvania, and Texas have introduced bills requiring the disclosure of dynamic or algorithmic pricing, and a handful of others have, or will, introduce legislation involving algorithmic pricing.

A number of states have also introduced and enacted consumer protection legislation concerning AI chatbots or companions, as well as transparency.
- Opening Investigations and Enforcement Actions. States have continued to bring their own investigations and enforcement actions against companies using AI in a way that might violate consumer protection laws.

In July 2025, the Massachusetts Attorney General reached a $2.5 million settlement with Earnest Operations LLC, a student loan company the Attorney General’s office alleged used AI algorithmic models to make lending decisions in an unfair and deceptive manner.

The Pennsylvania Attorney General in May 2025 announced a settlement with property management company, Home365, after it used an AI platform customers complained led to delays and leasing of unsafe housing in violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law.

And even before that, in 2024, Texas Attorney General Ken Paxton reached a settlement with AI healthcare and technology company, Pieces Technologies, after allegations that the company made false and misleading statements about the accuracy and safety of its products.
- Creating New Offices and Task Forces. Before and after the White House’s executive order, states have formed new offices and task forces to assess the benefits and threats of AI.

New York Governor Kathy Hochul announced the creation of the Office of Digital Innovation, Governance, Integrity & Trust (“DIGIT”) in January 2026. This new office is intended to address New York’s efforts to “keep kids safe on social media, regulate frontier AI model developers, stop AI companion chatbots from encouraging suicide and self-harm, outlaw AI-generated child sexual abuse material, and bring transparency to AI-enabled corporate pricing practices.”

Other state attorneys general, such as Utah’s Attorney General Derek Brown and North Carolina’s Attorney General Jeff Jackson are partnering to tackle the evolving AI landscape. Attorneys General Brown and Jackson created a bipartisan AI task force in November 2025, in partnership with AI developers that will:

1. work with law enforcement, experts, and stakeholders to identify emerging AI issues so attorneys general are equipped to protect the public;
2. develop basic safeguards that AI developers should follow to protect the public and reduce the risk of harm, especially to children; and
3. create a standing forum to track developments in AI and coordinate timely responses as new challenges emerge.

II. Looking Ahead

The continuing evolution of AI technology and adoption means that the federal and state governments will need to strike the right balance between innovation, competition, and consumer protection. This balance is further complicated by the threat of federal preemption and the potential for a patchwork of potentially inconsistent regulatory regimes that could discourage the implementation of AI technologies.

Endnotes

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Erica Reichman

Committees

This content was produced by:

• Advertising Disputes & Litigation Committee

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