As states rush to regulate artificial intelligence, a fundamental legal problem is emerging: judges don't have the evidence they need to determine whether these laws are constitutional. The issue centers on the dormant Commerce Clause, a constitutional principle that prevents states from passing laws that unfairly burden interstate commerce. When a state AI law is challenged in court, judges are supposed to weigh its costs against its benefits to see if the burden is excessive. The problem is, they almost never have the data to do this analysis properly .

Why Can't Courts Balance State AI Laws Fairly?

The dormant Commerce Clause has three main components designed to protect interstate commerce. States cannot discriminate against out-of-state businesses, cannot regulate conduct that happens entirely outside their borders, and cannot impose burdens on commerce that are clearly excessive compared to the law's local benefits. The third prong, known as Pike balancing after a 1970 Supreme Court case, is where the evidence problem becomes critical .

Pike balancing requires courts to conduct a cost-benefit analysis. But as legal scholars have noted, "cost-benefit analysis under Pike is much more demanding than current judicial practice contemplates, and it cannot be done by federal courts with any rigor absent a sea change in the way they assess dormant commerce clause problems" . Judges are asked to weigh economic costs against benefits like cybersecurity or consumer protection, yet the court records rarely contain systematic data on either side. Without clear metrics, judges struggle to answer basic questions: Is a law with three dollars in costs and one dollar in benefits unconstitutional? What about four dollars in costs? How do you compare economic fragmentation against cybersecurity improvements?

This evidence gap matters because the consequences are real. Unconstitutional laws with high compliance costs may survive judicial review, making it harder for startups and smaller companies to compete against deep-pocketed platforms that can afford to navigate a complex patchwork of state regulations. Meanwhile, well-designed laws that serve legitimate state interests and impose minimal costs on businesses might be struck down simply because judges lack the evidence to support them .

What's Driving the Urgency Around This Issue?

The problem has moved from theoretical to urgent. In 2025, more than 1,000 state-level AI bills were introduced across all 50 states. In 2026, the pace accelerated dramatically: as of March, lawmakers in 45 states had already introduced over 1,500 AI-related bills, surpassing the total for all of 2025 . This explosion of state-level legislation means dormant Commerce Clause challenges are no longer hypothetical. Last week, xAI filed a federal lawsuit challenging Colorado's AI Act, in part on dormant Commerce Clause grounds, signaling that companies are ready to test these laws in court .

The challenge is particularly acute because states are increasingly regulating conduct that occurs entirely outside their borders. For example, a disclosure law in one state might burden open-source developers in another state, regardless of whether those developers specifically intend to offer their products in the first state. How courts interpret this extraterritorial reach, and whether they understand AI technology and business operations across state lines, will shape how they apply dormant Commerce Clause principles in future cases .

How Can Policymakers Help Courts Make Better Decisions?

• Build Better Evidentiary Records: Policymakers should enact laws and implement regulations that give judges better tools for conducting cost-benefit analysis. This includes gathering systematic data on the burdens, benefits, and alternatives associated with state AI laws so courts have something concrete to evaluate.
• Develop Analytical Frameworks: Governments should equip judges with clear methodologies for interpreting and applying evidence. The federal Office of Information and Regulatory Affairs (OIRA) has conducted cost-benefit analysis of federal regulations across every presidential administration since the Reagan administration, demonstrating that rigorous analysis is possible even for complex values like health and environmental protection.
• Leverage Executive Branch Resources: The White House's "Ensuring a National Policy Framework for Artificial Intelligence" Executive Order tasked the Commerce Department with identifying burdensome state laws and created a Justice Department task force to challenge state laws that may violate the dormant Commerce Clause. These efforts will necessarily involve assessing costs and benefits, and the data and analytical tools developed could help judges make better decisions.

The core insight is that Pike balancing demands empirical assessment, but current judicial practice provides no framework for making those assessments rigorously. Cost-benefit analysis is not without controversy, and critics have argued that it cannot meaningfully quantify values like human life or health. However, decades of government practice demonstrate that cost-benefit analysis can work in practice, even in areas that seem to resist quantification .

Without better evidence and clearer analytical tools, the regulatory landscape for AI will be shaped by judicial guesswork rather than rigorous analysis. That's bad news for startups trying to navigate a patchwork of state laws, and it's bad news for states trying to protect their citizens with well-designed regulations. The solution requires policymakers to institutionalize practices that produce the data and analysis the judicial branch needs to do its job properly.