President Trump's executive order targeting state AI laws faces long odds in the courts, setting the stage for the real battle to play out on Capitol Hill.

Why it matters: Trump's order relies on a flimsy interpretation of the Constitution that is ripe for lawsuits, legal experts say.

• It calls on Trump's AI advisers to put together a legislative framework that Congress can get over the finish line.
• But any enforcement of the order could further antagonize lawmakers on the Hill, who are skeptical of the administration's aggressive stance and long gridlocked on tech policy.

Friction point: The order could immediately face legal hurdles around separation of powers as the president tries to override states without explicit congressional authorization.

• The executive order aims to gut state AI laws by launching legal challenges through a new "AI Litigation Task Force" and conditioning federal grants on compliance. It's not yet clear how any of those processes will work in practice.

The order relies on the Dormant Commerce Clause, a doctrine that prohibits states from enacting laws that unduly burden interstate commerce.

• "The core of the dormant commerce clause argument they seem to have in mind requires discrimination by one state against other states — laws designed to benefit in-state companies at the expense of out-of-state companies," Jed Stiglitz, director of the Center for Law and AI at Cornell University, said in an email.
• Stiglitz wrote that it's "difficult" to see discrimination as the purpose behind state regulations that are "driven by concerns such as public safety, consumer protection, and bias."

It also threatens to withhold internet access grants as leverage for a potentially unrelated AI policy goal — a strategy that could clash with the Constitution's Spending Clause, which gives Congress, not the executive branch, the power to allocate funds, per legal experts.

• The First Amendment could also become an issue, as the order takes aim at laws that infringe on "truthful outputs," a content-based regulation.

The order also directs agencies to take actions that could go beyond their statutory authority, legal experts note.

• For example, it directs the Federal Trade Commission to preempt state laws through the FTC Act's prohibition on deceptive commercial practices, when Congress has not granted that authority.
• It also directs the Federal Communications Commission to take a role over AI when it historically is a telecom agency.
• "People have been trying to shoehorn pretty expansive legal theories into [the FTC Act] the last few generations and they typically fail," Americans for Responsible Innovation's Doug Calidas said during a webinar hosted by the tech advocacy group.

Between the lines: The executive order singles out Colorado's algorithmic discrimination law.

• "I'm not concerned about the recent executive order because it doesn't apply against the states directly, and I don't think we're going to be doing anything that would even give rise to a Dormant Commerce Clause lawsuit from [the Justice Department]," Florida Gov. Ron DeSantis said during a roundtable on Monday.
• If there was a lawsuit, DeSantis said, "I'm confident that we'd be able to win that, because clearly we're legislating within the confines of our 10th Amendment rights as states."

The bottom line: Both Republican and Democratic local lawmakers say they have no plans to stop passing AI laws, so how effective the executive order will be is up to the interpretation of the courts for now.

Senate Democrats are starting to push back against Trump's executive order.

Why it matters: Democrats' opposition to the order highlights the difficult task for Congress — coming up with their own plan to regulate AI and agreeing on how far it should go.

Driving the news: Sen. Ed Markey (D-Mass.) introduced the States' Right to Regulate AI Act on Wednesday to prohibit the Trump administration from using federal funds to implement the executive order.

• Sens. Chris Van Hollen (D-Md.), Adam Schiff (D-Calif.), Cory Booker (D-N.J.), Peter Welch (D-Vt.), Ron Wyden (D-Ore.), Bernie Sanders (I-Vt.), Ben Ray Luján (D-N.M.), Amy Klobuchar (D-Minn.), Alex Padilla (D-Calif.) and Dick Durbin (D-Ill.) are also co-sponsoring the bill.

What they're saying: "While I am confident that the courts will strike down Trump's illegal power grab, Congress has a responsibility to assert its legislative authority," Markey said in a statement.

• "I will be pushing for a vote on this legislation as part of any appropriations legislation and urge my colleagues to join me in defending the right of states to regulate AI."
• Markey also filed the bill as an amendment to the Senate appropriations package.

Sen. Brian Schatz (D-Hawai'i) is working on a separate effort to try to block the executive order with Rep. Don Beyer (D-Va.), Schatz spokesperson Mike Inacay told Maria.

Reality check: Even though many Republicans in Congress agree that states should be able to regulate AI in the absence of federal standards, these Democratic-led efforts are unlikely to garner support from across the aisle.

A security review of 10 popular internet toys found "widespread security and privacy weaknesses," per a new report shared first with Axios from Mozilla Foundation and cybersecurity consultant 7ASecurity.

Why it matters: Connected toys like tablets, smartwatches, and robots now store everything from a kid's photos to their location, raising serious privacy concerns and creating new vulnerabilities for hackers and other bad actors.

What's inside: "Across the smart toys audited for this report, 7ASecurity found widespread security and privacy weaknesses," the report reads.

• "In practical terms, that means many toys marketed for children could be misused to spy on families, manipulate what kids hear or see, or expose sensitive data."

The big picture: The report comes at a time when lawmakers are raising serious concerns about smart toys.

• Sens. Marsha Blackburn (R-Tenn.) and Richard Blumenthal (D-Conn.) wrote to the CEOs of six companies this week demanding answers on safeguards for children using AI-enabled toys.
• "Not only are these products potentially dangerous, but they also collect sensitive data on American families," the senators wrote.

Keep reading.

Here's our guide to catch you up on the AI policy news you may have missed this week:

🔦 Colorado spotlight: Colorado is moving ahead with its law to regulate AI, our Axios Denver colleague John Frank reports.

🎳 Like a wrecking ball: The U.S. is "demolishing its scientific leadership with a wrecking ball," said a chief EU research diplomat, per Science|Business.

📫 $100k H-1B feedback: The App Association and several small tech companies sent a letter to the White House yesterday urging the administration "to reverse the $100,000 H-1B fee and consider balanced alternatives."

🇨🇳 Chips chatter: House China Select Committee Chair John Moolenaar (R-Mich.) wants a briefing from the Commerce Department on the analysis underlying the H200 decision by Jan. 15, he wrote in a letter to Secretary Howard Lutnick.

🧠 Genesis update: The Office of Science and Technology Policy yesterday announced 24 private sector partnerships — including with Anthropic, Amazon Web Services, Google, Microsoft, Nvidia and Oracle — to advance the "Genesis Mission" aimed to boost AI development.