On December 22, 2025, the Federal Trade Commission (FTC) set aside its 2024 consent order against Rytr, a generative AI-powered company, concluding that the original complaint “failed to satisfy the legal requirements of the FTC Act” and that the order unduly burdened AI innovation in violation of the Trump Administration’s January 2025 AI Executive Order and America’s AI Action Plan, which prioritize fostering AI adoption.
Background: The 2024 Rytr Consent Order
In September 2024, the FTC brought an administrative complaint against Rytr as part of its “Operation AI Comply” enforcement sweep, alleging that Rytr’s “Testimonial & Review” tool generated false and deceptive online reviews. According to the FTC, the service —which allowed end users to use AI to draft and pre-populate product reviews which the user could edit—facilitated the creation of fabricated endorsement, violating Section 5 of the FTC Act by providing users the means and instrumentalities to make deceptive statements.
Rytr agreed to a consent order without admitting liability, which prohibited the company from offering any AI service dedicated to consumer reviews or testimonials. Then-Commissioner Andrew Ferguson dissented from issuing the complaint.
Why did the FTC Reverse the Rytr Consent Order?
Following Trump’s January 2025 AI Executive Order, the FTC was instructed to:
- Review all investigations initiated under the Biden administration to confirm they “do not advance theories of liability that unduly burden AI innovation”; and
- Review all orders and “seek to modify or set-aside any that unduly burden AI innovation.”
Pursuant to the order, now-Chair Andrew Ferguson and Commissioner Mark Meador determined that the original complaint against Rytr failed to meet the tests for an unfair business practice and means and instrumentalities liability under Section 5.
The FTC emphasized that technology with both lawful and unlawful uses is not inherently illegal simply because it could be misused. Potential misuse—without evidence of fraud or tangible consumer harm—does not justify sweeping prohibitions that effectively eliminate entire categories of lawful AI. As FTC Bureau of Consumer Protection Director Christopher Mufarrige stated, “Condemning a technology or service simply because it potentially could be used in a problematic manner is inconsistent with the law and ordered liberty.” Following the FTC’s review and conclusion that the order unduly burdened AI innovation and was therefore inconsistent with the Trump Administration AI policy, Rytr consented to vacating the order. In doing so, Rytr waived any further rights it may otherwise have had under Rule 3.72(b), which enables the FTC to reopen, modify, or set aside final orders at any time when the public interest or changed factual/legal conditions warrant such action.
New Executive Order: Federal Preemption of State AI Laws
On December 11, 2025, the White House issued an Executive Order (“EO”) on “Ensuring a National Policy Framework for Artificial Intelligence,” against the backdrop of increasing state AI legislative efforts, including in Colorado, California, New York, Utah and Texas. The EO signals a preference within the current administration for uniform federal AI standards and limiting state-level AI regulation. Our prior article outlining the AI Executive Order can be found here.
Yet before and after issuance of the EO, states continue to advance AI regulation. For example, as we noted in our prior article, New York enacted the Responsible AI Safety and Education (“RAISE” ) Act, which imposes new safety and disclosure requirements on large AI developers. Legislation has also been introduced to block the EO; if passed, it could set the stage for litigation over the scope of preemptive efforts taken under the EO.
These recent developments show that the current AI regulatory landscape remains unsettled. While the White House signals a federal push toward uniform standards, the EO itself does not invalidate existing state laws. State laws, even those conflicting with the EO, remain enforceable, and companies must continue to comply with applicable state AI regulations.
What to Expect Next for Trump Administration AI Policy
The FTC’s reversal in the Rytr matter underscores the agency’s emerging policy on AI enforcement: AI-related enforcement will only be pursued when the agency believes the record contains concrete evidence of actual unfair or deceptive practices, rather than indirect, speculative, or third-party dependent harm. The FTC emphasized in its press release that it will continue to hold accountable actors who use AI to violate the law or deceive consumers, and that the Rytr decision reflects a fact-specific reassessment of remedy and evidentiary support—not a retreat from AI enforcement overall.
