Budget Bill’s Ban on Regulation of Artificial Intelligence Draws States’ Ire

Some Republican officials are sounding the alarm about a provision tucked into the Senate budget reconciliation bill that would potentially eviscerate state regulation of artificial intelligence.

The provision would prohibit states and localities from regulating artificial intelligence technologies for 10 years after the bill is enacted. It defines AI as “artificial intelligence models, artificial intelligence systems, or automated decision systems entered into interstate commerce.” The Senate provision has a legislative counterpart in the version of the budget reconciliation bill that passed the House of Representatives as well.

The Senate provision would enforce the regulation ban by withholding federal broadband funding from states that opt to enforce AI regulations that they’ve already signed into law. It would also withhold funding if the states or localities pass new legislation regulating AI during the next 10 years. 

That part of the budget bill is seen in some quarters as a gift to the Big Tech companies that spend tens of millions of dollars to lobby Congress and the executive branch. It would likely free the technology giants from having to deal with some of the state and local regulations currently governing AI.

Officials in both Republican and Democrat states have sought to ameliorate the potential harms of AI, and the Senate provision puts some of those protections at risk.

For example, Texas, the second-largest state in the country and the largest one under Republican governance, has passed laws that restrict the use of AI in viewpoint-based censorship on some internet websites and protect users’ privacy from AI-driven personal-data harvesting by requiring the right to opt out of such profiling. 

Several states—among them Tennessee, Arkansas, Florida, and Texas—have also passed laws banning AI-generated child exploitation material. The potential hindrance to law enforcement was raised by 40 states’ attorneys general in a letter to congressional leadership in May.

“In the absence of federal action to install this oversight, over the years, states have considered and passed legislation to address a wide range of harms associated with AI and automated decision-making. These include laws designed to protect against AI-generated explicit material, prohibit deep-fakes designed to mislead voters and consumers, protect renters when algorithms are used to set rent, prevent spam phone calls and texts, require basic disclosures when consumers are interacting with specific kinds of AI, and ensure identity protection for endorsements and other AI-generated content,” the state attorneys general wrote. 

The attorneys general went on to outline what they fear the AI provision of the “big, beautiful bill” as doing to AI regulation and enforcement.

“This bill does not propose any regulatory scheme to replace or supplement the laws enacted or currently under consideration by the states, leaving Americans entirely unprotected from the potential harms of AI. Moreover, this bill purports to wipe away any state-level frameworks already in place,” the top law enforcement officials concluded. 

Macarena Martinez, the communication’s director for Sen. Ted Cruz, R-Texas—who has led the effort to keep the provision in the budget bill as chairman of the Senate Commerce, Finance and Transportation Committee—told The Daily Signal:

“Senators need to ask themselves—do they really want their constituents subjected to the laws and mandates of California and Colorado? Imposing racist DEI mandates on AI developers is not just offensive, it’s corrosive to America’s global competitiveness.”

Critics of the provision have pointed out that it is unlikely it would rein in California’s laws, given that the state would likely just choose to opt out of broadband funding. California, with its approximately $327 billion annual budget, can afford to lose its $1.9 billion broadband funding.

Martinez continued, “You can be sure China is not worrying whether its AI uses the right pronouns like the state of California is. Despite fearmongering from naysayers, the AI section in President Trump’s One, Big, Beautiful Bill contains no prohibition against a state’s generally applicable law on privacy, child online safety, [child sexual abuse material] or other explicit content.”

That claim is also in contention. Tennessee’s attorney general posted on X Thursday that “[u]nfortunately, the moratorium’s broad definitions and broad preemption continue to create too much risk for existing Tennessee laws like the ELVIS Act and the Tennessee Information Protection Act, as well as our ability to confront as-yet unknown future challenges from AI.”

Tennessee’s ELVIS Act—the Ensuring Likeness Voice and Image Security Act—is intended to protect musicians and other artists from unauthorized use of their voice, image, and/or likeness, particularly in the context of AI. 

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