Navigating the New Federal AI Landscape: Implications for Businesses and the Role of Trust​

In April 2025, the White House’s Office of Management and Budget (OMB) issued two sweeping memoranda—M-25-21 and M-25-22—setting a new precedent for how the federal government evaluates, adopts, and procures artificial intelligence (AI). While these directives are aimed at public agencies, they reflect a deeper shift in how institutions—both public and private—are being asked to prove trustworthiness in their AI operations. 

The memos mandate agency-specific governance of “high-impact AI” and strongly favor U.S.-developed solutions, signaling that the era of ungoverned AI experimentation in government is over. For enterprises navigating evolving compliance landscapes, these changes offer a window into the future of AI oversight—and a compelling reason to take their own governance infrastructure seriously.

Understanding the New Directives

M-25-21, titled “Accelerating Federal Use of AI through Innovation, Governance, and Public Trust,” mandates that agencies identify and manage AI systems whose outputs significantly affect areas like civil rights, access to essential services, health, safety, critical infrastructure, or strategic assets. Agencies must implement minimum risk management practices tailored to their specific contexts, moving beyond a one-size-fits-all approach. This nuanced strategy, while allowing flexibility, could lead to a fragmented compliance landscape, as different agencies interpret “minimum practices” according to their unique missions and risk tolerances. Non-compliant high-impact AI systems must be discontinued by April 3, 2026, if risks cannot be adequately mitigated.​

M-25-22, “Driving Efficient Acquisition of Artificial Intelligence in Government,” focuses on procurement practices. It directs agencies to prioritize and “maximize the use of” American-developed AI products and services, potentially influencing investment patterns and posing challenges for international vendors seeking federal contracts. The guidance also strengthens contractual requirements for AI vendors, including terms that prevent vendor lock-in, protect government intellectual property and data rights, ensure compliance with privacy requirements, mandate ongoing testing and monitoring, and require vendor disclosure if an AI system constitutes a high-impact use case. These provisions aim to grant the government greater control and flexibility over its AI investments.​

Implications for Businesses

For businesses developing or deploying AI systems, these directives introduce a more complex compliance environment. The agency-specific risk management practices and the emphasis on domestic AI solutions mean that vendors must be adaptable and transparent. Companies will need to navigate varying interpretations of “minimum practices” and ensure that their AI systems can meet diverse requirements. Additionally, the focus on preventing vendor lock-in and protecting government data rights will require businesses to revisit their contractual terms and data handling practices.

Just as past federal mandates like FedRAMP and FISMA set templates that private-sector industries later mirrored, these new AI policies are likely to shape broader regulatory expectations beyond government. When the U.S. government establishes standards around AI accountability—especially those tied to risk scoring, usage transparency, and ongoing performance monitoring—it signals to the wider market where compliance and audit expectations are heading. Private companies that want to stay ahead of the curve would be wise to align their AI governance models with these standards early, building internal trust and reducing exposure to future regulatory whiplash.

Moreover, major federal contractors and technology vendors will increasingly treat these new rules as a baseline across all clients, not just government ones—creating de facto standards for anyone operating in the same software ecosystem. This shift reinforces the need for organizations to invest now in governance infrastructure that can accommodate policy diversity, support permissioned data access, and deliver traceable AI decisioning. With privacy, governance, and AI risk management converging, platforms like Ethyca—which provide unified control across all three—are becoming essential not only for compliance, but for scalable AI adoption in a tightening policy climate.

The Role of Trust and Governance

In this evolving landscape, trust becomes paramount. Enterprises must not only develop innovative AI solutions but also ensure that these solutions are trustworthy, secure, and compliant with varying regulatory requirements. The regulatory changes in the above directives demonstrate the direction that AI implementation may continue heading in not just for government agencies, but for the private sector in the US as well. This necessitates a robust governance framework that can adapt to different regulatory needs and provide transparency into AI decision-making processes.​

In short, it is essential to be building infrastructure today that can accommodate regulatory changes around the use of AI in the US. Ethyca, as the trusted data layer for enterprise AI, offers a platform that unifies privacy compliance, data governance, and AI oversight. Our solutions enable businesses to confidently and responsibly scale AI, ensuring that they can meet the diverse requirements of any region or state as they continue to evolve. By embedding privacy into infrastructure and automating compliance workflows, Ethyca helps organizations transform compliance from a hurdle into an operational advantage.​

Looking Ahead

As the federal government redefines its approach to AI procurement and usage, businesses must adapt to a more fragmented and stringent compliance environment. This will require a proactive and constructive approach to governance, transparency, and adaptability. By investing in robust governance framework, enterprises can navigate the complexities of the new directives and harness the full potential of AI—safely, responsibly, and in full compliance with evolving standards in both the public and private sectors. ​