American AI Industry Threatened by Failure of AI Moratorium in the Senate

The future of AI looked bright last week when the Senate Parliamentarian Elizabeth MacDonough ruled that the provision could be passed through reconciliation. Thanks to the efforts of Senate Commerce Chair Ted Cruz, who altered the moratorium to tie it to BEAD funding, the final draft had a substantial budgetary impact.

But once the vote-a-rama began, the future looked bleaker. Early Tuesday morning, the Senate adopted an amendment to remove the AI state moratorium from OBBBA altogether. While there were a few high-profile GOP opponents to the provision, the fiercest critic was Senator Marsha Blackburn (R-Tenn.) who worked to kill the future of the moratorium. Senators Maria Cantwell, Ed Markey, and Susan Collins cosponsored the amendment.

On Sunday night Senator Blackburn announced that she had reached a compromise with Commerce Chair Ted Cruz who wrote the original provision in the Senate bill. This compromise was an amendment to ban states from regulating AI for five years instead of the original 10 years. The new amendment also featured language to exempt child safety and publicity rights from the moratorium. The one caveat to this exemption was that the state law could not put “undue or disproportionate burden” on companies. It is predicted that this language was the friction point that eventually led to Blackburn pulling her support for the compromise on Monday night. Senator Blackburn released a statement Tuesday explaining her decision.

“While I appreciate Chairman Cruz’s efforts to find acceptable language that allows states to protect their citizens from the abuses of AI, the current language is not acceptable to those who need these protections the most.”

Senator Blackburn’s amendment to drop the moratorium passed Tuesday morning 99-1, with only Senator Tillis voting against it. Even the provision’s supporters agreed to remove it rather than threaten the overall package’s chances of success.

Senator Blackburn did not just attribute her decision to the current amendment, but also to the federal government’s inaction on Artificial Intelligence up to this point.

“Until Congress passes federally preemptive legislation like the Kids Online Safety Act and an online privacy framework, we can’t block states from making laws that protect their citizens.” 

Allowing states to continue to haphazardly regulate AI will produce an unnavigable patchwork of laws and make American companies globally uncompetitive. The moratorium provided a decade of relief from this patchwork and could have shifted AI innovation for the better. When states are given this power over what is a clear interstate commerce issue, big states will strangle the industry however they see fit and smaller states will be forced live with the consequences. California will dominate, essentially setting all the rules AI companies must abide by.

The AI state moratorium didn’t make the cut this time through reconciliation, but there is still a possibility that it could be passed in the future. Hopefully, lawmakers will reconsider the moratorium from a more pragmatic view down the line.