In 2024, Colorado enacted the Colorado Artificial Intelligence Act, establishing the nation's most comprehensive state-level frameworks for regulating high-risk AI systems. The law applies to AI used in consequential decision-making such as housing, employment, healthcare, education, and financial or lending services. The law was originally scheduled to take effect on February 1, 2026. However, recent legislative developments have altered that timeline and raised questions about the law's future scope and implementation.
On August 26, 2025, the Colorado General Assembly passed SB25B-004, formally delaying the effective date of the AI Act to June 30, 2026. Governor Jared Polis signed the bill into law August 28, 2025. The amendment is the sole outcome of a special legislative session convened by the Governor to address both fiscal issues and mounting concerns from industry stakeholders regarding the law's complexity and anticipated compliance costs.
Proposed Amendments: Scope and Substance
Although no substantive amendments were enacted, several proposals were introduced during the special session to revise the AI Act. These proposals aimed to clarify definitions, allocate liability more precisely, and reduce regulatory burdens, particularly for small and mid-sized businesses.
Senate Bill 25B-004 proposed repealing the original AI Act and replacing it with the Colorado Artificial Intelligence Sunshine Act. The bill was sponsored by Senate Majority Leader Robert Rodriguez and Representative Brianna Titone, both of whom sponsored the Colorado AI Act. The bill sought to distinguish the responsibilities of AI system developers from those of deployers, especially if those systems influence consequential decisions. The bill would shift the responsibility for conducting risk assessments to developers and require that they document intended use cases and disclose known risks. It would also require developers to provide deployers with technical documentation and mitigation strategies. Under the proposed changes, deployers would be accountable for notifying individuals when AI is used in consequential decisions in areas like housing, employment, education, healthcare, and finance. To enhance individual control over personal data used in AI systems, the bill also introduced rights for consumers to access, challenge, and correct inaccurate data used by AI systems.
Senate Bill 25B-008 sought to clarify that Colorado's existing anti-discrimination laws apply fully to conduct executed or facilitated by AI, algorithmic systems, or other digital technologies. The bill does not create new rights or obligations and reaffirms that discrimination based on protected characteristics is unlawful, regardless of whether it is carried out by a human or an AI system. The bill explicitly states that advances in software, automation, machine learning, or AI do not create legal loopholes for discriminatory conduct. It further clarifies that illegal discrimination through digital means such as algorithmic decision-making does not shield individuals or entities from liabilities.
To ease the burden of the AI Act, House Bill 25B-1009 sought to extend compliance timelines and provide relief to small businesses. The bill proposed pushing enforcement to August 1, 2027 and exempting businesses with fewer than 250 employees or less than $5 million in annual revenue.
House Bill 25B-1008 was also introduced during the special session. Its purpose was to enhance transparency and consumer protections when individuals interact with AI systems in Colorado. The bill required the disclosure by AI systems that they are not human at the beginning of any interaction with a consumer, unless obvious or during an emergency. The disclosure would need to contain the developer's name, trade name of the AI system, and contact information for the deployer.
Legislative Outcome and Industry Response
Despite bipartisan support for reform, the proposed amendments failed to gain sufficient traction. Industry stakeholders, especially small and mid-sized technology firms, have expressed concern that the law remained overly burdensome and lacked clarity. In the end, lawmakers opted to delay implementation rather than enact partial reforms.
Looking Ahead
The Colorado AI Act is now scheduled to take effect on June 30, 2006, with further legislative review anticipated during the regular session in early 2026. If no additional amendments are passed, the original provisions will become enforceable as written.
It is worth noting that a prior version of SB25B-004 substantially narrowed the definition of "consequential decision" to employment and public safety, limiting the scope of businesses who would be covered by the Act, effectively exempting sectors like housing, healthcare, insurance, education and financial services from the definition unless their AI systems directly impacted employment or public safety concerns. The same version of SB25B-004 also proposed exempting business with fewer than 250 employees and exempting those business with less than $5 million in annual revenue, signaling a legislative appetite for reducing compliance burdens on small and mid-sized businesses and focusing enforcement on areas with the highest public risk or civil rights implications.
Organizations operating in Colorado or deploying AI systems within the state should begin preparing for compliance, while monitoring legislative developments that may further shape the regulatory landscape. At a minimum, businesses in Colorado who deploy AI should catalogue their AI tools, make an initial assessment of whether their AI tools make or a substantial factor in making a consequential decision, and analyze measures to mitigate against discrimination in deployment of the tool.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
