After extensive discussions, Congress recently decided to exclude a proposed plan from the federal budget that would have imposed a 10-year moratorium on state regulation of artificial intelligence (AI). This plan, if enacted, would have barred states from enforcing any AI-related rules if they accepted federal funds for broadband. The moratorium faced significant opposition, including a rare bipartisan alliance, ultimately leading to a Senate vote of 99-1 in favor of its removal. The broader budget bill still aims to extend favorable tax cuts while also implementing cuts to essential services like Medicaid and SNAP. Republican leaders are pressing to finalize the budget for President Trump’s signature by July 4.
Supporters of the moratorium, which included numerous tech companies as well as many Congressional Republicans, argued it would prevent a fragmented and inconsistent regulatory environment that could stifle AI development domestically, especially as competition with countries like China intensifies. In contrast, critics, such as consumer advocacy groups, contended that states should retain the authority to protect their residents from the potential risks associated with AI. Senator Maria Cantwell expressed the need for states to maintain consumer protection laws to combat issues like deepfakes and ensure the safety of autonomous vehicles while calling for national cooperation to create a cohesive federal framework for AI.
Despite the moratorium’s removal from the budget, the discourse surrounding the regulatory balance between consumer protection and fostering technological innovation remains pertinent. Industry experts believe that dialog at both the national and state levels is essential in addressing the complexities posed by AI. Anjana Susarla, a Michigan State University professor specializing in AI issues, emphasized the need for a multi-faceted approach that incorporates both state and federal perspectives to tackle the challenges of AI governance effectively.
Several states have already initiated their own regulatory frameworks for AI. This includes Colorado, which enacted consumer protection laws set to take effect in 2026, and California, which has passed numerous AI-related legislation in the previous year. Other states are exploring regulations targeting specific issues such as deepfakes or the transparency of AI developers regarding their training data. As noted by legal expert Arsen Kourinian, the legislative landscape is diverse, with over 550 AI-related proposals introduced across state legislatures in 2025 alone, indicating a proactive approach to regulation before the federal response catches pace.
In discussions about a potential federal moratorium, AI developers expressed a desire for a unifying standard governing their sector. Alexandr Wang, the CEO of Scale AI, advocated for clarity in federal regulations to avoid the chaos that could arise from a patchwork of state-based rules. Sam Altman, CEO of OpenAI, highlighted concerns regarding stringent regulations similar to those in the EU, which he believes would be counterproductive. However, some companies, such as Anthropic, argued for targeted transparency standards rather than a blunt federal moratorium, promoting clarity for both consumers and lawmakers.
Looking ahead, there are significant concerns about how limiting state regulatory powers might impact consumer protections. Experts indicate that without state regulations, any issues that arise could lead to legal disputes managed by state attorneys general under existing consumer protection laws. Moreover, while a federal preemption could centralize regulation, it risks losing sight of nuanced consumer protection needs. Senator Marsha Blackburn expressed that states must maintain the ability to safeguard vulnerable populations until comprehensive federal laws are enacted. Advocates for strong state regulations hope Congress will focus on creating clear federal guidelines for AI in upcoming legislation, emphasizing the need for balanced governance that acknowledges both innovation and consumer safety.
