Unfortunately, that is probably the answer. I would say technically the way you did it before with targeting the same field with conflicting rules isn't best practice, and the new forms just happen to be stricter on enforcing them.
The best structure is to show/hide a field in only one rule. So if in your example you need to show the field for KY and DE, then your rule would be if State = DE OR State = KY, show the field. Rinse and repeat for the fields that are specific to one or a subset of states.
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Chayce Duncan
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