Trump's budget bill would kill state-level AI regulations

State attorneys general and activists are sounding the alarm over a provision of President Trump's budget proposal, which passed out of committee over the weekend and is headed to the House for a potential vote that would strip states of the ability to regulate AI. 

The "One Big Beautiful Bill Act," Trump's proposed budget reconciliation bill for FY 2025, has spurred 40 state AGs, as well as more than 140 separate organizations, to write congressional leaders urging them to reconsider a particular passage about AI regulation. 

Buried 291 pages into the 1,116-page bill as passed out of committee, Section 43201(c) describes a 10-year moratorium on state-level enforcement of "any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems." 

Exceptions to the rule are few, and only allow for state-level rules that "remove legal impediments" to operating AI systems and streamlining their adoption. State laws that impose any substantive restrictions or requirements on AI models will be considered unenforceable under the decade-long moratorium. 

State AGs are understandably concerned.

"This bill will affect hundreds of existing and pending state laws," the attorneys general wrote in their letter to House and Senate leadership. 

At least 45 states and US territories introduced AI-related legislation last year, according to the National Conference of State Legislatures. Thirty-one states, along with Puerto Rico and the US Virgin Islands, passed legislation or adopted resolutions that regulate AI in 2024. 

The AGs predict chaos should the provision make it to passage.

"In the face of Congressional inaction on the emergence of real-world harms raised by the use of AI, states are likely to be the forum for addressing such issues," the AG letter argued. "This bill would directly harm consumers, deprive them of rights currently held in many states, and prevent State AGs from fulfilling their mandate to protect consumers."

This moratorium would mean that even if a company deliberately designs an algorithm that causes foreseeable harm ... the company making that bad tech would be unaccountable to lawmakers and the public

The Demand Progress signatories, which include Mozilla, the Distributed AI Research Institute, the Electronic Privacy Information Center (EPIC), and a range of labor and political groups, agree.

"Congress's inability to enact comprehensive legislation enshrining AI protections leaves millions of Americans … vulnerable to existing threats … and all of us exposed to the unpredictable safety risks posed by [AI]," the letter states. 

"This moratorium would mean that even if a company deliberately designs an algorithm that causes foreseeable harm ... the company making that bad tech would be unaccountable to lawmakers and the public," the letter argued. 

But despite this and previous pleading, AI regulation hasn't gained much traction in the federal government. Previous efforts to introduce rules have stalled - even an effort to spin up a commission to look at AI regulation failed to make it out of committee. 

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Regardless, the Big Beautiful Bill is not a sure thing.

Republicans in the House haven't been overly thrilled with Trump's proposal, with the conservative caucus somewhat fractured on whether to pass the measure. While the House Budget Committee did advance the bill, it did so by a narrow margin after four Republicans who had voted "no" on Friday switched to "present," allowing it to move forward without endorsing it. 

We've asked the White House and Congressional leadership for comment on the matter, but haven't heard back. 

It's not clear when the House of Reps will vote - it's only on this week's agenda as a possibility. If it passes the House, the Senate will still need to okay the matter. Trump has said he wants the bill passed by the US Memorial Day holiday on Monday, May 26. ®