President Trump pulled the plug on an AI executive order signing ceremony on May 21 after a last-minute phone call from David Sacks convinced him the proposed regulations could kneecap American innovation. The order, which would have established federal oversight for powerful AI systems, never made it to the president’s desk.

Sacks, who previously served as Trump’s AI and crypto czar, argued that the draft contained oversight measures amounting to something like an FDA-style approval process for AI. His core pitch was simple: regulate too aggressively, and China wins the race.

How a phone call derailed an executive order

Early on the morning of May 21, Sacks called Trump directly to flag his concerns about the executive order’s regulatory framework. Elon Musk, whose xAI venture is one of the most prominent players in frontier AI development, also reached out to Trump before the scheduled ceremony. Mark Zuckerberg of Meta made contact as well.

Trump appeared to take the feedback seriously. In explaining the postponement, the president said he wasn’t comfortable with certain aspects of the draft.

“We’re leading China, we’re leading everybody, and I don’t want to do anything that’s going to get in the way of that lead.”

The postponement is widely viewed as a win for the deregulation camp within Trump’s orbit. Sacks, who co-chaired the President’s Council of Advisors on Science and Technology, has consistently argued against heavy-handed government intervention in emerging tech sectors.

The broader fight over AI regulation

The proposed executive order’s FDA-like approval framework reflected the view that once a sufficiently powerful system is released, the damage from misuse or unintended consequences could be catastrophic, and retroactive regulation won’t cut it. Companies like xAI, Meta, and others in the frontier AI space argue that bureaucratic approval processes would create bottlenecks, with Chinese competitors like Baidu, Alibaba, and various state-backed labs able to close the gap or pull ahead.

What this means for investors

For anyone with exposure to AI-related equities, the short-term signal is straightforward: the regulatory ceiling just got higher, or at least got pushed further into the future. Companies developing frontier AI models now have more runway to operate without new federal oversight requirements.

Meta has been pouring resources into AI development across its platforms. Musk’s xAI is competing directly with OpenAI for dominance in large language models. Sacks’ dual role as both AI and crypto adviser means his policy preferences tend to flow across both sectors simultaneously, and a deregulatory posture on AI often correlates with a similar stance on digital assets.

When federal regulation can be derailed by a morning phone call, the policy environment becomes inherently unpredictable. Smart money will be watching not just what the administration ultimately signs, but who’s on the phone the morning it happens.