Can States Fill Good Governance Gaps?

Since January 2025, the federal government has seemingly stepped back from a range of good governance, transparency, and anti-corruption measures, from the February 2025 executive order pausing FCPA enforcement, to the March 2025 rule by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) exempting nearly all US companies from Corporate Transparency Act beneficial-ownership reporting, to the shifting enforcement priorities of the Foreign Agents Registration Act (FARA), including a focus on domestic groups with foreign-linked funding deemed to be engaged in “terrorism.” However, against that backdrop, there is some evidence that states may fill emerging gaps.

First, a number of states have enacted their own versions of FARA, such as Arkansas, Louisiana, Nebraska, Oklahoma and Texas, and more recently Indiana, with legislation pending elsewhere. These join Utah, which enacted its own law in 2022. It has been pointed out that these laws lack certain exemptions that are in FARA, including treating “advocating for a US subsidiary of a foreign company or other foreign-owned US entity… the same as advocating for the foreign parent or foreign owner.” Florida and Maine have taken a related but distinct approach, restricting foreign-linked political and charitable spending rather than requiring agent registration; Maine’s law has been enjoined on First Amendment grounds.

Second, the New York State Bivens Act was signed into law by Governor Kathy Hochul in May 2026 as part of the FY 2027 state budget, creating a state-law cause of action for individuals to sue federal, state, or local officers, including immigration agents, for violating their constitutional rights. The Act was supported by the New York City Bar Association, through its State Courts of Superior Jurisdiction Committee, Council on Judicial Administration, Civil Rights Committee, Immigration and Nationality Law Committee, and Rule of Law Task Force. Bivens is the 1971 decision that allows citizens to hold federal agents accountable for severe misconduct. The Association said that the New York Act responds to what it called the Supreme Court's "near-abandonment of Bivens," leaving federal officials with "functional impunity for many violations of the Constitution.”

Third, states have started to step up on artificial intelligence (AI) transparency regulation. With no comprehensive federal AI statute in place, California and Colorado have each built out disclosure-driven regimes. California’s 2025 SB 53, the Transparency in Frontier Artificial Intelligence Act, requires AI model developers to publish safety frameworks, conduct risk assessments, and report safety incidents. Colorado replaced its 2024 Consumer Protections for AI Act with SB 26-189, adding “new requirements regarding the use of automated decision-making technology in consequential decisions.” Unsurprisingly, this state-driven approach faces federal pushback: the December 2025 Executive Order, "Ensuring a National Policy Framework for Artificial Intelligence," directs federal agencies to evaluate and challenge conflicting state laws found to be inconsistent with President Trump’s January 2025 EO on “Removing Barriers to American Leadership in Artificial Intelligence.”

Taken together, these efforts suggest that where the federal government has stepped back, whether on tracking foreign influence, accountability of officials, or in the technology sector, states increasingly see themselves as backstops. Whether that amounts to a genuine substitute for federal enforcement at full strength, or simply a patchwork that invites federal challenges, remains to be seen.

Marc Schleifer

Governance, Democracy and Economic Development Expert