When people talk about the Executive Order on the Regulation of Artificial Intelligence (or a similar executive framework), they usually focus on massive compliance lists, deep technology audits, or national security restrictions.

But there’s another, high-stakes battleground you might not expect: the regulatory arbitrage war waged through infrastructure funding.

Recent government moves in the AI ​​field have a unique characteristic: governments are not only telling tech companies what to do, but also actively forcing local governments to align with the government using completely unrelated infrastructure funding.

This is often overlooked because we traditionally view AI policy as an academic debate about ethics, bias, and algorithms.

We rarely see it as a brutal fiscal tug-of-war between the federal and local governments over broadband or the power grid.

For example, consider some recent developments: the federal government has threatened to withhold billions of dollars in unused Broadband Deployment (BEAD) funds that were originally allocated to states that have passed stringent local AI regulations.

It has turned AI regulation into an economic game.

This means that a country’s digital infrastructure could be frozen overnight simply because it attempts to regulate algorithmic bias. The real power isn’t in the code, but in the belts of the moneybags!