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The Trump administration's tax bill -- also called its "big, beautiful bill," which is facing a vote today -- includes a rule that would prevent states from enforcing their own AI legislation for five years, and would withhold up to $500 million in funding for AI infrastructure if states don't comply.
Over the weekend, senators also added exemptions for state laws targeting unfair or deceptive practices and child sexual abuse material (CSAM). The initial version of the rule -- which banned states from enforcing AI regulation for 10 years and made broadband internet funding dependent on states' compliance -- did not account for those cases.
How the moratorium works
If passed, the rule would constitutionally prohibit states from enforcing AI legislation for five years and simultaneously put AI funding for states in limbo. It wouldn't only impact in-progress legislation; laws that states have already passed would stay intact in writing but would effectively be rendered useless, lest states want to put their AI funding on the line.
Also: What 'OpenAI for Government' means for US AI policy
In practice, this would effectively create a patchwork imbalance across the country: Some states would have thorough legislation but no funding to advance AI safely, while others have no regulation but plenty of funding to keep up in the race.
"State and local governments should have the right to protect their residents against harmful technology and hold the companies responsible to account," said Jonathan Walter, a senior policy adviser at The Leadership Conference's Center for Civil Rights and Technology.
Federal AI policy remains unclear
The administration is due to release its AI policy on July 22. In the meantime, the country is effectively flying blind, which has prompted several states to introduce their own AI bills. Under the Biden administration, which took some steps to regulate AI, states were already introducing AI legislation as the technology evolved rapidly into the unknown.
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