Trump Administration Rejects FDA-Style AI Regulator in Push for Market-Led Innovation
Former White House AI adviser confirms the Trump administration will not create an FDA-style licensing body for artificial intelligence, favoring market-driven innovation over bureaucratic gatekeeping to maintain U.S. leadership against China.
Sriram Krishnan stood before reporters last week and declared what many in Silicon Valley had been hoping to hear: the Trump administration will not create an FDA-style licensing body for artificial intelligence. The former White House AI adviser called such a move "burdensome, onerous, bureaucratic red tape" that would put "sand in the gears" of an industry America cannot afford to slow.
The deliberate rejection of centralized AI regulation represents a strategic choice to maintain American technological leadership against China through market-driven innovation rather than bureaucratic gatekeeping.
Krishnan, who served as Senior White House Policy Advisor on AI until his departure last week, told the Financial Times that establishing a centralized agency to license AI models "would put sand in the gears of the industry, requiring a team of lawyers before you can get a model out." The former Microsoft engineer emphasized that the administration has consistently opposed regulatory overreach, adding "that is never, never going to happen under President Trump."
That philosophical stance was codified in the June 2 executive order "Promoting Advanced Artificial Intelligence Innovation and Security," which explicitly prohibits mandatory governmental licensing. The order states "nothing in Section 3 authorizes the creation of a mandatory governmental licensing, preclearance, or permitting requirement for the development, publication, release, or distribution of new AI models." Instead, it establishes a voluntary 30-day pre-release review framework for covered frontier models and creates an AI cybersecurity clearinghouse led by the Treasury Department in voluntary collaboration with industry.
This voluntary framework did not emerge as the administration's first instinct. Internal debate and a brief reconsideration of FDA-style oversight preceded the final decision.
In May, White House National Economic Council Director Kevin Hassett told Fox Business the administration was "studying possibly an executive order" to create an AI model vetting process "just like an FDA drug." The suggestion followed reports that Anthropic's Mythos model could exploit software vulnerabilities. A draft executive order comparing AI regulation to FDA drug approval, reportedly floated by Hassett, was pulled just an hour before a scheduled signing in late May 2026. Weeks later, Trump signed the separate June 2, 2026 AI order.
The competitive threat from China ultimately drove the administration's final decision.
David Sacks, the former White House AI and Crypto Czar, warned on June 8 that "if you try to have an FDA for AI... we could lose this AI race to China." Sacks noted the U.S. is "only six to nine months ahead of China" and that "every month counts." He characterized the push for regulation as a moral panic, calling AI regulation the new climate change: this imminent catastrophe that is requiring all this government intervention with very little evidence to support it.
The administration's approach contrasts sharply with both Democratic-era regulation and state-level overreach. Trump revoked Biden's AI executive order on his first day back in office in January 2025 and rebranded the U.S. AI Safety Institute as the Center for AI Standards and Innovation, removing "safety" from its name. While California passed the Transparency in Frontier Artificial Intelligence Act in late 2025 and New York enacted similar legislation, Sacks criticized state-level AI regulations as "knee-jerk reactions" and said the administration opposes "blue states trying to insert their woke ideology in AI models."
Krishnan favors shifting oversight to an industry-run "clearinghouse" that works with intelligence and defense officials rather than formal regulation. CAISI, the rebranded safety institute, has completed 40-plus evaluations of frontier models in partnership with Google, Microsoft, and xAI, though it operates with approximately 30 staff and $30 million since its 2024 establishment — described as "chronically underfunded" by the America First Policy Institute. Congress approved $55 million for NIST AI research and up to $10 million for CAISI expansion in January.
The administration's philosophical framework reflects a conviction that market competition, not bureaucratic gatekeeping, will ensure American AI leadership. Sacks ruled out federal bailouts for AI companies in November 2025, stating the U.S. has "at least 5 major frontier model companies" and "if one fails, others will take its place." He pushed back on job displacement fears, citing the May 2026 jobs report of 172,000 new jobs — "twice what all the economists were expecting, and a lot of that is because of AI."
China's Z.ai released GLM-5.2, a 750-billion-parameter model with a 1-million-token context window, closing the frontier gap in coding and agent tasks at lower cost. With the U.S. lead narrowing to six to nine months according to administration estimates, policymakers view regulatory delays as compounding strategic risk in a race where months determine global leadership.
The administration's rejection of FDA-style AI regulation represents a calculated bet that speed and innovation will outpace safety preapproval in securing American technological dominance. As Krishnan noted, holding back AI tools for weeks "would probably be bad for American innovation" at a moment when Chinese competitors are rapidly closing the frontier gap.