Congress proposes 10-year ban on state AI regulations
House Republicans have proposed banning states from regulating AI for the next ten years. The sweeping moratorium, quietly tucked into the Budget Reconciliation Bill last Sunday, would block most state and local governments from enforcing AI regulations until 2035 if passed.
The proposed legislation stated that “no State or political subdivision thereof may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems,” for 10 years.
Industry experts warn that this potential regulatory vacuum would come precisely when AI systems are becoming more powerful and pervasive across the US society.
Oversight gap raises concerns
The moratorium would create an unprecedented situation: rapidly evolving AI technology would operate without state-level guardrails during what may be its most transformative decade.
“The proposed decade-long moratorium on state-level AI regulations presents a double-edged sword,” said Abhivyakti Sengar, practice director at Everest Group. “On one hand, it aims to prevent a fragmented regulatory environment that could stifle innovation, on the other hand, it risks creating a regulatory vacuum, leaving critical decisions about AI governance in the hands of private entities without sufficient oversight.”
The proposed legislation includes specific exceptions. According to the bill text, states would still be allowed to enforce laws that have “the primary purpose and effect of which is to remove legal impediments to, or facilitate the deployment or operation of, an artificial intelligence model, artificial intelligence system, or automated decision system.”
States could also enforce laws that streamline “licensing, permitting, routing, zoning, procurement, or reporting procedures” for AI systems.
However, the bill explicitly prohibits states from imposing “any substantive design, performance, data-handling, documentation, civil liability, taxation, fee, or other requirement” specifically on AI unless such requirements are applied equally to non-AI systems with similar functions.
This limitation would prevent states from creating AI-specific oversight frameworks that address the technology’s unique capabilities and risks.
State AI regulations threatened
If enacted, the impact could be significant. Several states have been developing AI oversight frameworks that would likely become unenforceable under the federal provision.
Various state-level efforts to regulate AI systems — from algorithmic transparency requirements to data privacy protections for AI training — could be effectively neutralized without public debate or input.
The moratorium particularly threatens state data privacy protections. Without these state laws, consumers have few guarantees regarding how AI systems use their data, obtain consent, or make decisions affecting their lives.
Global standards diverge
The US approach now stands in stark contrast to the European Union’s comprehensive AI Act, which imposes strict requirements on high-risk AI systems.
“As the US diverges from the EU’s stringent AI regulatory framework, multinational enterprises may face the challenge of navigating conflicting standards,” Sengar noted. This divergence potentially leads to “increased compliance costs and operational complexities.”
Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research, sees a splintering global AI landscape ahead.
“America’s moratorium will likely deepen the regulatory divergence with Europe,” said Gogia. “This will accelerate the fragmentation of global AI product design, where use-case eligibility and ethical thresholds vary dramatically by geography.”
Enterprises face a new reality
For businesses, the regulatory clarity comes with difficult strategic decisions. Companies must determine how aggressively to implement AI systems during this regulation-free decade.
Many large companies aren’t waiting for government guidance. “Even before public oversight being put on hold, large enterprises have already launched internal AI governance councils,” Gogia explained. “These internal regimes — led by CISOs, legal, and risk teams — are becoming the primary referees for responsible AI use.”
But Gogia cautioned against over-reliance on self-regulation: “While these structures are necessary, they are not a long-term substitute for statutory accountability.”
Legal uncertainty remains
Despite the moratorium on regulations, experts warn that companies still face significant liability risks.
“The absence of clear legal guidelines could result in heightened legal uncertainty, as courts grapple with AI-related disputes without established precedents,” said Sengar.
Gogia puts it more bluntly: “Even in a regulatory freeze, enterprises remain legally accountable. I believe the lack of specific laws does not eliminate legal exposure — it merely shifts the battleground from compliance desks to courtrooms.”
While restricting state action, the legislation simultaneously expands the federal government’s AI footprint. The bill allocates million to the Department of Commerce for AI modernization through 2035.
The money targets legacy system replacement, operational efficiency improvements, and cybersecurity enhancements using AI technologies.
This dual approach positions the federal government as both the primary AI regulator and a major AI customer, consolidating tremendous influence over the technology’s direction.
Finding balance
Industry observers emphasize the need for thoughtful governance despite the moratorium.
“In this rapidly evolving landscape, a balanced approach that fosters innovation while ensuring accountability and public trust is paramount,” Sengar noted. Gogia offers a succinct assessment of the situation: “The 10-year moratorium on US state and local AI regulation removes complexity but not risk. I believe innovation does need room, but room without direction risks misalignment between corporate ethics and public interest.”
#congress #proposes #10year #ban #state
Congress proposes 10-year ban on state AI regulations
House Republicans have proposed banning states from regulating AI for the next ten years. The sweeping moratorium, quietly tucked into the Budget Reconciliation Bill last Sunday, would block most state and local governments from enforcing AI regulations until 2035 if passed.
The proposed legislation stated that “no State or political subdivision thereof may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems,” for 10 years.
Industry experts warn that this potential regulatory vacuum would come precisely when AI systems are becoming more powerful and pervasive across the US society.
Oversight gap raises concerns
The moratorium would create an unprecedented situation: rapidly evolving AI technology would operate without state-level guardrails during what may be its most transformative decade.
“The proposed decade-long moratorium on state-level AI regulations presents a double-edged sword,” said Abhivyakti Sengar, practice director at Everest Group. “On one hand, it aims to prevent a fragmented regulatory environment that could stifle innovation, on the other hand, it risks creating a regulatory vacuum, leaving critical decisions about AI governance in the hands of private entities without sufficient oversight.”
The proposed legislation includes specific exceptions. According to the bill text, states would still be allowed to enforce laws that have “the primary purpose and effect of which is to remove legal impediments to, or facilitate the deployment or operation of, an artificial intelligence model, artificial intelligence system, or automated decision system.”
States could also enforce laws that streamline “licensing, permitting, routing, zoning, procurement, or reporting procedures” for AI systems.
However, the bill explicitly prohibits states from imposing “any substantive design, performance, data-handling, documentation, civil liability, taxation, fee, or other requirement” specifically on AI unless such requirements are applied equally to non-AI systems with similar functions.
This limitation would prevent states from creating AI-specific oversight frameworks that address the technology’s unique capabilities and risks.
State AI regulations threatened
If enacted, the impact could be significant. Several states have been developing AI oversight frameworks that would likely become unenforceable under the federal provision.
Various state-level efforts to regulate AI systems — from algorithmic transparency requirements to data privacy protections for AI training — could be effectively neutralized without public debate or input.
The moratorium particularly threatens state data privacy protections. Without these state laws, consumers have few guarantees regarding how AI systems use their data, obtain consent, or make decisions affecting their lives.
Global standards diverge
The US approach now stands in stark contrast to the European Union’s comprehensive AI Act, which imposes strict requirements on high-risk AI systems.
“As the US diverges from the EU’s stringent AI regulatory framework, multinational enterprises may face the challenge of navigating conflicting standards,” Sengar noted. This divergence potentially leads to “increased compliance costs and operational complexities.”
Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research, sees a splintering global AI landscape ahead.
“America’s moratorium will likely deepen the regulatory divergence with Europe,” said Gogia. “This will accelerate the fragmentation of global AI product design, where use-case eligibility and ethical thresholds vary dramatically by geography.”
Enterprises face a new reality
For businesses, the regulatory clarity comes with difficult strategic decisions. Companies must determine how aggressively to implement AI systems during this regulation-free decade.
Many large companies aren’t waiting for government guidance. “Even before public oversight being put on hold, large enterprises have already launched internal AI governance councils,” Gogia explained. “These internal regimes — led by CISOs, legal, and risk teams — are becoming the primary referees for responsible AI use.”
But Gogia cautioned against over-reliance on self-regulation: “While these structures are necessary, they are not a long-term substitute for statutory accountability.”
Legal uncertainty remains
Despite the moratorium on regulations, experts warn that companies still face significant liability risks.
“The absence of clear legal guidelines could result in heightened legal uncertainty, as courts grapple with AI-related disputes without established precedents,” said Sengar.
Gogia puts it more bluntly: “Even in a regulatory freeze, enterprises remain legally accountable. I believe the lack of specific laws does not eliminate legal exposure — it merely shifts the battleground from compliance desks to courtrooms.”
While restricting state action, the legislation simultaneously expands the federal government’s AI footprint. The bill allocates million to the Department of Commerce for AI modernization through 2035.
The money targets legacy system replacement, operational efficiency improvements, and cybersecurity enhancements using AI technologies.
This dual approach positions the federal government as both the primary AI regulator and a major AI customer, consolidating tremendous influence over the technology’s direction.
Finding balance
Industry observers emphasize the need for thoughtful governance despite the moratorium.
“In this rapidly evolving landscape, a balanced approach that fosters innovation while ensuring accountability and public trust is paramount,” Sengar noted. Gogia offers a succinct assessment of the situation: “The 10-year moratorium on US state and local AI regulation removes complexity but not risk. I believe innovation does need room, but room without direction risks misalignment between corporate ethics and public interest.”
#congress #proposes #10year #ban #state
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