2026 State Legislative and Policy Preview
12 things I'll be watching at the state level this year.
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Happy 2026 everyone! The calendar flipping to January means that state legislative sessions — which is when state legislatures meet to propose and debate new laws and adopt state budgets — will start across the country in the coming weeks. Thus, it’s time for my annual state legislative and policy preview, where I try to lay out the trends and priorities that state legislators, governors, and attorneys general will be working on this year.
This preview is informed by discussions I’ve had with various lawmakers, staff, and advocates in a diverse set of states over the previous few months, as well as my experience watching and participating in state politics, generally. You can check out my previews from the last four years here, here, here and here to see how I did — pretty well, I think!
2026 sessions will be affected by two federal items: The impending 2026 midterms and the political jockeying ahead of them, along with the drastic changes the Trump administration is implementing to tax and spending policies. States will have to deal with fewer federal dollars for certain programs, potentially less revenue, and also a White House that treats state-level issues as an opportunity to ferret out political retribution, such as when President Trump last week vetoed a bipartisan bill funding a water project in Colorado.
But states are very much political arenas all their own, distinct (and in many ways better, as I always say) from the federal one, with issues that need addressing regardless of which way the national winds blow or whatever cultural brouhaha is dominating social media or cable news. Predicting what states will do based solely on whatever is happening at the federal level is to miss the bulk of the action.
State legislators are also leaders on emerging issues, often forcing the federal government to catch up later or highlighting areas in which the feds are simply stagnant. Nowhere is that dynamic more apparent than on artificial intelligence, as you’ll read about below.
With all that in mind, here are 12 things that I will be watching with particular interest at the state level this year. My annual caveats apply: Circumstances can change quickly, and with them political and policy priorities, so nothing here should be treated as if it’s carved in stone. And I inevitably missed some things, because this is a big country and a relatively short newsletter.
Let me know in the comments what else you think is coming down the pike or what I may have overlooked.
The AI wars take center stage: States across the political spectrum have been steadily rolling out new efforts to protect their residents against abusive artificial intelligence for several years, but now they have an active foil in the White House and many members of Congress who are embracing and encouraging a deregulated AI dystopia. I expect this dynamic to accelerate efforts to regulate AI at the state level, as state legislators embrace taking on an increasingly unpopular industry and the threat of AI taking away jobs, harming kids, and obliterating the creative arts. This will take many forms, and will look different depending on the political leaning of the state, but broad strokes will including regulating AI chatbots, restricting the use of AI in important decision making (such as medical authorizations or job-seeking) and regulating the use of AI in election communications and on social media. State legislators and attorneys general will welcome the federal government attempting to come in and bigfoot those protections, because it’s a fight they can definitely win on the politics and likely win on the substance too.
Data center opposition keeps growing: The frontline of the AI wars is in the increasing number of communities pushing back against data centers that support AI operations. As big tech firms advocate for more AI-related data centers to be brought online quickly, often using nondisclosure agreements and other shady tactics to avoid community input while at the same time sucking up public subsidies, I feel that the politics have shifted and state legislators, mayors, and city or county councillors will see an opportuniy to build political capital off of standing against these projects and their downstream effects, whether that is higher utility bills, increased noise pollution, or the powering of AI slop nobody asked for or wants. Legislation will move from studies and transparency measures to concrete plans to slow development, require public input, and make data center operators pay their own way for power and infrastructure.
States face budget woes tied to federal changes: Tax and spending changes trickle down from the federal level to the state in most places, and combined with a slowing economy, will make state budget outlooks for 2026 and 2027 much bleaker than the last several years, when states were flush with COVID recovery cash. States can mitigate some of these effects by decoupling from federal tax changes — meaning refusing to adopt those same changes into their state tax codes — and I expect many states will decouple on the corporate part of the ledger, especially. I also expect a set of showdowns over increasing taxes on the wealthy and over so-called “sin taxes,” such as those on gambling and alcohol, as state lawmakers look to fill new revenue holes and compensate for expired federal health insurance subsidies. While I’d love to say that worthless corporate subsidies will also be on the chopping block everywhere, I do think some places — perhaps Michigan chief among them — can get some wins in a policy area where the hopes of the good guys generally go to die.
Legislators look to lower grocery costs: The next few sections all have to deal with prices, as “affordability” is the new political watchword and high costs an undeniable political liability for any incumbent. First up is food: New York City Mayor Zohran Mamdani’s may have made 2025’s most-high-profile promise on grocery prices with his proposal for public grocery stores, but it won’t be the last (or the most likely to make an impact, since I think it misdiagnoses the problem). With food prices still sky high, expect legislators to propose various fixes, including eliminating food taxes, adopting price discrimination protections for independent grocers, eliminating restrictive land deeds big box stores employ to reduce competition, and fighting the ever-increasing reach of dollar stores. I’d also expect state attorneys general to fight any proposed grocery mergers, after successfully stopping the merger of Kroger and Albertsons. I’m also interested to see whether any state legislators — particularly in red states — piggyback off the Trump administration’s allegations regarding price-fixing in meatpacking to meaningfully address that consolidated industry.
The fight against price-fixing picks up: Speaking of price-fixing, I’ve already written about how the war on algorithmic price fixing and collusion is here, and I’d expect that to very much continue throughout 2026. Many cities, as well as th state of New York, have adopted laws aimed at reining in algorithmic collusion on rental housing markets, while California adopted a more wide-ranging algorithmic price-fixing law last year. This is a logical policy step to pair “affordability” rhetoric with the rampant suspicion that AI is being used to hose regular people. I also think we’ll learn that tools facilitating pricing collusion are lurking in some unexpected corners of the economy.
More dystopian pricing tactics are exposed: I’d also expect the “affordability” concern to inform a serious policy push against other potentially abusive pricing tactics, particularly surveillance pricing (the use of personal data to set individualized prices) and dynamic pricing (prices that aren’t fixed in any way, but constantly shift in real-time). A recent report showing that Instagram is allegedly engaging in rampant AI-driven dynamic price discrimination — giving different customers different prices for the same item, though bought at the same time and location — will fuel these efforts, which already had some life thanks to widespread hatred of dynamic pricing practices connected to live events such as concerts and the World Cup. Again, I think we’ll learn significantly more about how pervasive these practices are — especially if state AGs start investigating or looking to apply old price discrimination or price gouging laws to new technologies.
Junk fee bans continue to gain popularity: One pricing area that policymakers certainly have enough information to act on is junk fees, those pervasive, undisclosed mandatory fees attached to, well, almost everything. In the last three years, six states — Virginia, Connecticut, Minnesota, Colorado, Massachusetts, and California — have mandated all-in pricing disclosures across the economy, and I expect more to follow, especially now that Virginia Gov. Glenn Youngkin broke the partisan monopoly Democrats held on these laws. Already, Republican-backed legislation has been introduced in Ohio for this year.
Monopoly utilities and their regulators face the music: Rounding out my several sections on costs, I expect a significant policy and communications effort this year directed at monopoly utilities and the regulators who have uncritically allowed them to relentlessly raise rates in recent years. Several states will advance reforms aimed at reining in what utilities are allowed to charge for and how those rates are calculated, as well as to mitigate any potential effects of data center expansion on residential ratepayers, while governors will seek to follow the lead of new New Jersey Gov Mikie Sherrill by implementing a rate freeze. Public utility takeovers will also increase in popularity. Those regulators, or the governors who appoint them, who fail to get costs under control will face electoral consequences, with voters recreating what already occurred in Georgia.
Gambling finally hits some headwinds: For years, states have been expanding gambling options as a revenue booster and economic development tool (based on faulty evidence and lies, to be clear), but I think 2026 is the year the backlash to ubiquitous gambling begins in earnest. This is due to the effect daily sports gambling is having on professional and college sports, as well as increasing evidence that young people — and particularly young men — are wracking up debt due to easy, online gambling being available in their pocket. I don’t think a sea change in policy will happen this year, because these things take time, but I do think the rhetoric shifts and new gambling options aren’t as universally celebrated as they have been previously. It also seems inevitable to me that the fusion of professional sports leagues with gambling operations and “daily prediction market” scams will end in a massive, Black Sox-type scandal.
Sports streamers earn the antitrust spotlight: As more sports leagues fracture their viewing options across multiple streaming services and pure streamers such as Netflix and Amazon bid on more marquee events, I’d expect more antitrust scrutiny to come down on all of them. Congress has rightly gotten involved here, but folks tend to forget states have antitrust powers too, and have plowed significant sums of money into the facilities where most pro sports teams play, so enterprising legislators and state antirust enforcers are going to seize on the palpable discontent over scattered sports offerings to try to bring leagues and the streaming services to heel.
Crypto policy heads all over the place: Cryptocurrency industry players have been throwing tons of money around in federal and state elections, winning themselves not only boosters in the political arena, but the benefits of pliant state politicians plowing public money into crypto and boosting their holdings. At the same time, some state attorneys general are starting to crack down on crypto scams and warn their constituents about the most unsavory practices in which the industry has engaged. I expect this whiplash will continue, with the crypto industry’s money and political heft keeping many political actors from admitting that they’re going to bat on behalf of a giant scam, but plenty of others finding some political benefit in trying to eliminate the industry’s worst tactics.
Governors stake out 2028 lanes on everything above: Yes, I know 2026 is a congressional midterm year, and that many state legislators want to run for Congress for some reason. (Seriously, it’s a worse gig, don’t do it.) But this year will also be one in which various governors jockey for position ahead of running for president in 2028, and the ways in which they handle everything I’ve detailed above will go a long way toward determining their viability, as well as which factions of their respective parties back them in primaries. I’m especially interested in how someone like California Gov. Gavin Newsom — who is very vulnerable on cost-of-living issues — handles any ambitious legislation that comes to his desk.
If you’re interested in advancing one of these efforts in your state or want to learn how to get plugged into policy generally, drop a comment below or send me a message. If you’re a state legislator who wants to learn more about any of these policy areas, send me an email: pgarofalo@economicliberties.us.
Thanks for reading and subscribing, and here’s to a productive 2026.
SIMPLY STATED: Here are links to a few stories that caught my eye this week.
How Minnesota cities are abusing tax increment financing districts.
“Kansas is paying millions for a Barbie and Hot Wheels theme park.”
The Michigan legislature approved no new corporate subsidies in 2025, the first time that occurred in at least 25 years.
“How Dolly Parton politics and budget bickering warped California’s Google news deal.”
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— Pat Garofalo
Well I love being informed by Jud Matt and Pat of the a e l u, I would have to say my view on the future is quite pessimistic. Most of the good legislation passed by the Biden people has either been rescinded by some pro monopoly/ pro corporation judge or voided by the trump administration. The corporations and billionaires completely own us right now, and I don't see how it changes until we get money out of politics and stop the gerrymandering in the states. Why would the politicians do anything for the working class when they are supported by the higher-ups. To even begin the process of taking our government back we would have to elect leaders who don't accept billionaire and corporate money. Only then would they be working for working class people and putting them first. And that's a LONG ways away.
I'm definitely interested in the anti-gambling movement (or at least combating the explosion of new gambling options), whether that be on a national level or state level (in North Carolina).