1. What’s in the Bill?
The moratorium clause—tucked into a larger budget reconciliation package—would bar states from passing or enforcing new laws that regulate artificial intelligence until January 2035. It mirrors previous federal moves like the 1998 Internet Tax Freedom Act, which prevented states from imposing taxes on internet access for over two decades.
Backed by House Republicans, the measure claims to “preserve a unified national framework for AI innovation” and prevent a patchwork of state laws that could “confuse businesses and chill investment.”
2. Who’s Pushing Back?
The opposition is growing fast. Attorneys general from Colorado, California, and New York are among those calling the bill “an unprecedented overreach”. The National Association of State Chief Information Officers (NASCIO) warned it would “undermine years of digital trust-building” by local governments.
Privacy advocates argue the proposal could derail meaningful consumer protections—particularly around algorithmic bias, facial recognition, and AI decision-making in hiring, lending and policing.
3. What Laws Would Be Frozen?
If the moratorium passes, it would nullify or delay enforcement of several pending and passed state bills, including:
- Colorado SB 205: Requires AI vendors to disclose risk mitigation processes for high-risk systems
- California AB 331: Introduces AI audit standards for government contractors
- Massachusetts Act to Promote Responsible AI: Proposes an AI oversight board and mandatory impact assessments
- Illinois Biometric Privacy Expansion: Would cover AI-powered image and emotion recognition tools
With 17 states drafting their own AI bills, the moratorium would pause a groundswell of decentralised regulation.
4. Legal and Constitutional Concerns
Critics say the bill could face constitutional challenges under the Tenth Amendment, which reserves powers not granted to the federal government to the states. The precedent for federal pre-emption exists in areas like aviation and environmental law—but AI, many argue, is too broad and fast-evolving for a one-size-fits-all approach.
A lawsuit from state attorneys general or civil society groups is likely if the bill is signed into law without amendment.
5. What This Means for Businesses Using AI Agents
For enterprises building or deploying AI agents—especially in customer service, HR, or finance—the moratorium creates both opportunity and risk:
- Pro: A single federal framework could simplify compliance across all US operations
- Con: Delayed state oversight means fewer clear standards on ethical deployment, especially in sectors like healthcare and education
- Action: Businesses should not assume this means a free pass. Investors, customers and EU regulators may still demand transparent, auditable AI pipelines—especially in cross-border applications.
Final Thought
The proposed 10-year freeze on state AI regulation isn’t just a procedural detail—it’s a pivotal moment in the shaping of America’s AI landscape. While some see it as a path to innovation, others view it as a regulatory vacuum that benefits Big Tech at the expense of accountability. For organisations deploying AI agents, it’s a call to act pre-emptively: document, audit, and prepare for eventual scrutiny—because regulation is coming, whether now or in 2035.
Anjin Digital supports enterprises in navigating the evolving regulatory terrain of artificial intelligence—ensuring AI agents are deployed responsibly, transparently, and strategically across all jurisdictions.
