Overview
On July 4, 2025, US President Donald Trump signed into law the budget reconciliation bill, known as the One Big Beautiful Bill Act, after the US Senate voted to remove language that would have prohibited states from enforcing any law or regulation governing artificial intelligence (AI) models, AI systems, or automated decisions systems for a period after the bill’s enactment.
In Depth
Failed effort to deregulate
The version of the bill passed by the US House of Representatives on May 22, 2025, would have placed a 10-year moratorium on any state enforcing any law or regulation affecting “artificial intelligence models,” “artificial intelligence systems,” or “automated decision systems,” in an effort to remove legal impediments to the deployment or operation of AI.
While senators attempted to revise the moratorium to meet budgetary rules and make it more palatable for certain factions of the Republican party, ultimately the Senate voted almost unanimously to remove the moratorium from the bill. The House did not attempt to reintroduce the moratorium and eventually passed the Senate version of the bill on July 3, 2025.
State AI Regulation: Present and future
With the moratorium failing to pass and little indication of federal interest in meaningful AI regulation, state AI regulation is likely here to stay. According to the National Conference of State Legislatures, as of 2025 all 50 states, Puerto Rico, the Virgin Islands, and Washington, DC, have introduced legislation to regulate AI. Significant state AI legislation will go into effect in 2026, including:
- California’s Assembly Bill 2013, which mandates comprehensive transparency in AI training datasets
- Colorado’s Senate Bill 205, which requires detailed disclosures and guardrails against discrimination for “high-risk” AI
- The recently enacted Texas Responsible AI Governance Act, which categorically restricts deployment of AI for certain purposes
In addition to state legislative action, developers and deployers of AI should continue to pay close attention to state enforcement action. California’s attorney general issued two legal advisories in January 2025 making it clear that his office would seek to use existing laws, such as the California Consumer Privacy Act, to protect consumers in the AI space. Similarly, Oregon’s attorney general stated in a December 2024 guidance document that his office would utilize laws such as the Oregon Consumer Privacy Act to do the same.
What’s next?
AI developers and deployers should pay close attention to both state and federal action in the coming years. While the moratorium failed, there is bipartisan support for safety and privacy regulation of AI, and that likely will continue to grow in the years to come.
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To discuss the potential legal implications of state AI regulation for your business, reach out to one of the authors of this article or your regular McDermott lawyer.
