Senate Removes the 10-Year Federal Ban on State AI Regulations from the “Big Beautiful Bill”

The AI provision, originally included in the House version of President Donald Trump’s sweeping tax and spending package, was a significant and controversial measure that proposed a 10-year moratorium on state AI regulations. It was later revised to make federal subsidies—such as those for broadband or AI infrastructure—contingent on states refraining from regulating AI or “automated decision systems.”

Republican Sen. Ted Cruz of Texas, a lead sponsor, argued the moratorium would prevent a “patchwork” of state rules that he and some industry leaders say hampers innovation and competitiveness. At a May hearing, OpenAI CEO Sam Altman told Cruz it would be “very difficult to imagine us figuring out how to comply with 50 different sets of regulation.”

But the effort quickly ran into bipartisan resistance.

Backlash From States—and Within the GOP

The revised five-year version of the moratorium—crafted in a compromise between Cruz and Sen. Marsha Blackburn (R-TN)—tried to carve out exemptions for state laws on child safety and protections for protecting artists’ names and voices. But the attempt collapsed after concerns were raised by conservative figures and state leaders.

Blackburn ultimately partnered with Sen. Maria Cantwell (D-WA) to introduce the amendment that stripped the provision entirely. On the Senate floor, Blackburn acknowledged Congress’s inaction on AI and digital privacy, but credited states for filling the gap.

“They’re the ones that are protecting children in the virtual space,” she said. “They’re the ones that are out there protecting our entertainers — name, image, likeness — broadcasters, podcasters, authors.”

The amendment passed during a 4 a.m. session amid a flurry of votes, as Republican leaders sought to secure support for the broader tax bill. Sen. Thom Tillis (R-NC) was the only senator to vote against removing the AI provision.

Cross-Partisan Resistance: Governors, AGs, and Parents

Opposition came from many quarters, including state officials—many of whom are Republicans. They warned the proposal would undermine their authority and override existing laws. For example, Tennessee enacted the ELVIS Act in 2024 to prevent AI tools from mimicking artists without consent.

Last week, 37 state attorneys general and 17 governors sent letters opposing the bill. Arkansas Gov. Sarah Huckabee Sanders, who served as Trump’s press secretary during his first term, praised Blackburn’s role in defending states’ rights and described the outcome as “a monumental win.”

Outside the Capitol, child safety advocates also lobbied against the measure. Megan Garcia, whose son died after interacting with an AI chatbot, wrote to lawmakers that the moratorium would give companies “a license to develop and market dangerous products with impunity.”

“A moratorium gives companies free rein to create and launch products that sexually groom children and encourage suicide, as in the case of my dear boy,” Garcia wrote.

Internal GOP Divide Exposed

The failed AI proposal laid bare divisions within the Republican Party—between pro-industry lawmakers and those skeptical of Big Tech and federal overreach. Early GOP defectors included Sens. Josh Hawley (R-MO), Susan Collins (R-ME), and Rand Paul (R-KY).

Some critics warned that even with exemptions, Cruz’s proposal would have allowed federal authorities to overrule any state AI law deemed to place an “undue or disproportionate burden” on AI companies.

While Cruz insisted the compromise could have passed and cited Trump’s support for it, Blackburn rejected the final version over concerns about its language. Cruz blamed the provision’s downfall on “outside interests” and “radical left-wing groups,” though he did not mention the large contingent of Republican state officials who also opposed it.

Despite the tensions, Cruz joined the near-unanimous vote to remove the moratorium.

What This Means

The Senate’s decision to strip the AI moratorium preserves states’ ability to regulate AI technologies, including tools that impact child safety, creative rights, and online conduct. It reflects growing discomfort with federal overreach in emerging tech policy—and a rare moment of bipartisan alignment on an issue where national standards remain unsettled.

For AI companies and developers, the vote signals a continued landscape of varying state laws, particularly on sensitive issues like data use, content generation, and user safety. But for state lawmakers and advocates, it affirms their ability to act in the absence of federal protections.

As national debates over AI oversight continue, the outcome underscores one reality: for now, many of the rules shaping AI’s future will be written in statehouses, not on Capitol Hill.

Editor’s Note: This article was created by Alicia Shapiro, CMO of AiNews.com, with writing, image, and idea-generation support from ChatGPT, an AI assistant. However, the final perspective and editorial choices are solely Alicia Shapiro’s. Special thanks to ChatGPT for assistance with research and editorial support in crafting this article.