How a Federal Ban on State AI Laws Could Leave Americans Unprotected for a Decade

A Ban on State AI Laws Could Undermine Legal Protections Against Big Tech

Senate Commerce Republicans have proposed a ten-year moratorium on state AI regulations as part of the latest version of a massive budget package originally from former President Donald Trump. This provision would condition broadband infrastructure funding on states agreeing not to enact AI-related laws. While supporters argue this prevents a confusing patchwork of state rules that could hinder AI companies, critics warn it could strip away crucial consumer and worker protections without guaranteeing federal safeguards.

Opponents highlight that the moratorium's broad language could block state efforts to regulate social media, prevent discriminatory algorithms, or limit harmful AI-generated deepfakes. Representative Ro Khanna (D-CA) emphasized that the ban would essentially give corporations free rein to develop AI systems without accountability to consumers, workers, or minors.

The Moratorium’s Unclear and Expansive Reach

The exact scope of the moratorium remains vague by design. Jonathan Walter, senior policy advisor at the Leadership Conference on Civil and Human Rights, points out that its language on automated decision-making is so broad that it could affect laws beyond AI — including facial recognition standards and data privacy regulations in states like Colorado and Washington.

For example, New York’s “Stop Addictive Feeds Exploitation for Kids Act,” a law aimed at regulating social media content for minors, could be unintentionally nullified. The Center for Democracy and Technology warns that even states’ restrictions on their own AI use might be blocked. The Senate version adds complexity by linking state broadband funding to compliance with the moratorium and extending coverage to criminal laws, expanding the potential impact further.

Legal and Policy Concerns from Multiple Fronts

Public Citizen’s Big Tech accountability advocate J.B. Branch notes that skilled attorneys will likely argue this moratorium applies broadly, reflecting its intended purpose. Some lawmakers themselves may not fully grasp how far-reaching the provision is. Even Rep. Marjorie Taylor Greene (R-GA), a Trump ally, expressed regret for supporting the bill once she realized the AI moratorium was embedded within it.

California’s SB 1047, which sought to impose safety guardrails on large AI models, serves as a cautionary example. After intense lobbying from OpenAI and others, Governor Gavin Newsom vetoed the bill. Notably, OpenAI’s CEO Sam Altman has shifted from advocating regulation to opposing rules perceived as hindering U.S. competitiveness against China.

Risks of a Moratorium Without Federal Alternatives

Khanna acknowledges some state AI regulations have flaws and agrees that maintaining U.S. leadership in AI is critical. However, he insists the answer lies in developing well-crafted federal rules rather than blocking states from acting. Without state laws for a decade, Congress faces less pressure to regulate, potentially leaving the AI industry unchecked.

Khanna warns this moratorium could create a “Wild West” environment where a few corporations control AI development and profits without accountability. This could have profound effects on jobs, social media algorithms, and daily life.

Widespread Opposition from Lawmakers and Advocates

Before the Senate text was released, dozens of California Democrats led by Rep. Doris Matsui urged Senate leaders to remove the AI provision from the budget package. They warned it exposes Americans to risks across sectors like healthcare, education, and transportation. Over 250 state lawmakers nationwide echoed these concerns, emphasizing that state and local governments are more agile in responding to AI challenges than Congress.

The coalition stressed that cutting off state-level policy innovation at a critical time would hinder the development of effective AI governance.

What Legal Professionals Should Consider

• The moratorium could preempt state laws aimed at AI transparency, fairness, and consumer protection.
• Its broad and vague language increases legal uncertainty for companies and regulators alike.
• Without clear federal AI regulations, this moratorium risks leaving a regulatory vacuum for an extended period.
• Lawmakers and advocates urge a balanced approach that allows states to innovate while developing comprehensive federal standards.

Legal experts advising clients in technology, telecommunications, and consumer protection should monitor developments around this moratorium closely. Understanding the interplay between state initiatives and federal policy is critical for compliance and risk management in AI deployment.

For those seeking to deepen their expertise in AI policy and legal frameworks, exploring specialized courses on AI governance and compliance can be valuable. Resources like Complete AI Training’s curated courses offer targeted content for legal professionals navigating this evolving landscape.