Senate Pushes Forward on AI Regulation Moratorium
Update: On July 1, the Senate voted 99–1 to strike the ban from the budget reconciliation bill.
The Senate is advancing a controversial 10-year prohibition on state-level artificial intelligence regulations, a move that could leave AI governance in a state of uncertainty. This provision, embedded in a substantial budget bill under Congressional review, aims to restrict states from implementing laws that control AI technologies without offering alternative federal protections.
This legislative stance threatens states with the loss of billions in federal assistance for AI infrastructure and broadband expansion in rural areas if they defy the moratorium. However, a recent ruling limits the provision’s impact to $500 million in new AI-related federal funding.
With Senate Republicans eyeing a July 4 deadline for the budget bill passage, the window to remove the AI clause is closing. The House will review the bill next, which, if enacted, could suspend over 149 state laws established across more than 40 states and the District of Columbia since 2019, many with bipartisan support.
Opposition from advocacy groups, state attorneys general, and lawmakers is mounting, highlighting potential risks to residents from unchecked AI technologies. The absence of federal regulation leaves states vulnerable to emerging AI threats, particularly in sectors from education to law.
The Current Landscape of AI Regulation
Federal action on AI has been limited. While the “Take It Down Act” addresses the distribution of AI-generated nonconsensual images, comprehensive AI legislation remains elusive. Consequently, states have pursued their regulatory initiatives, passing over 100 AI-related bills in 2024 alone, with more than 1,000 introduced in 2025 sessions. These measures include election-related laws to mitigate deceptive media and deepfake threats.
The proposed federal ban could halt such state efforts, making existing and future AI regulations unenforceable.
Debunking Anti-Regulation Myths
Proponents of the regulation freeze argue that uniform federal laws are needed to avoid a complex patchwork of state regulations that could impede AI innovation. However, historical precedence, such as California’s data privacy law and Illinois’s biometric legislation, demonstrates that state-led innovation oversight does not hinder technological development.
Analysis of state AI laws shows they typically target the misuse of AI rather than its development, suggesting that the regulatory burden on developers is minimal. Despite this, deregulation advocates, including key figures like venture capitalist David Sacks, continue to push for the moratorium, framing it as a competitive necessity against nations like China.
Anticipating Legal Challenges
The provision’s broad language could lead to legal challenges, as courts will need to discern federal-state jurisdiction. Historically, federal overrides of state laws have been accompanied by new federal regulations, but in AI, no such framework exists, leaving a regulatory vacuum.
Uncertainty surrounds whether the ban targets AI developers or users, potentially shielding tech companies from accountability and allowing AI misuse. Critics suggest this aligns with broader agendas to weaken AI safety standards.
Without federal oversight, private entities could dominate AI regulation, posing risks particularly in electoral contexts where AI could influence voter outreach and misinformation. States have both the authority and responsibility to safeguard electoral integrity, and removing the AI provision is crucial to maintaining democratic protections.
