Early on July 1, the U.S. Senate voted to halt an effort to impose a 10-year moratorium on state regulation of artificial intelligence. The vote, 99-1, removed the AI provision from President Trump's "Big, Beautiful Bill" that had evolved from a full moratorium on state AI regulation for the next decade, to its most recent iteration that required states to adopt the ban in order to receive federal broadband funding over the next five years.
Yesterday, Sen. Marsha Blackburn of Tennessee and Sen. Ted Cruz of Texas attempted to revise the AI ban to address current regulations. According to media reporting, efforts toward banning state AI regulation broke down amidst concerns that the language was overly broad and could adversely impact existing laws concerning privacy, consumer protection, and child safety.
In the last year, states have taken the lead in AI regulatory efforts as the federal government steers toward deregulation. Several state legislatures are currently debating bills to regulate AI developers, distributors, and deployers. The most prominent AI laws on the books include the California AI Transparency Act, Colorado AI Act, Tennessee's Ensuring Likeness, Voice, and Image Security (ELVIS) Act, the Utah Artificial Intelligence Policy Act, and the Texas Responsible AI Governance Act (TRAIGA), which was signed into law last week. In addition, several of the 19 state consumer privacy laws currently in effect, or soon-to-be in effect, contain restrictions on algorithmic decision making.
The AI ban could potentially be resurrected in the U.S. House of Representatives as budget reconciliation efforts continue. However, given the decisive vote to remove the AI ban, we expect future deregulatory efforts would more likely manifest in a standalone federal preemption bill. Based on what we have learned from the most recent Senate negotiations, we expect any such effort would require sufficient federal protections as part of any compromise on state law preemption.
In the meantime, despite potential federal constraints, states will remain active players in AI regulation. As we have seen in California, Colorado, Tennessee, Texas, and Utah (and several states debating similar legislation), AI regulation is largely focused on emerging consumer protection needs and a demand for transparency and accountability in high-risk processing fields like employment, finance, health care, and education. Organizations can prepare now by adopting and improving AI governance, documenting risk assessment findings for AI tools in development or use, and working with legal counsel to evaluate how existing laws may impact AI activities.
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