AI regulation freeze could fracture US digital future

The fireworks that could soon go off across the US have nothing to do with July 4 celebrations, but are reaction to a double hit that every state in the union may soon face relating to a potential reduction of connectivity capabilities and a proposed 10-year ban on its ability to regulate AI.

Drastic legislative changes around both issues are contained in the Trump administration’s Reconciliation Tax Bill, which is now before the Senate.

In early June, 260 state lawmakers from both parties in all 50 states sent a letter to Congress voicing strong opposition to the AI regulation ban. The letter, which was spearheaded by Americans for Responsible Innovation (ARI), a nonprofit policy advocacy organization, stated, “the proposed 10-year freeze of state and local regulation of AI and automated decision systems would cut short democratic discussion of AI policy in the states with a sweeping moratorium that threatens to halt a broad array of laws and restrict policymakers from responding to emerging issues.”

ARI president Brad Carson said, “lawmakers from every state in the country are sending a clear message that the proposed ban on state AI laws would freeze a whole range of common-sense laws that voters depend on.”

There is, he said, “room for a debate on pre-emption of a targeted set of state AI laws with the passage of a federal framework for AI governance. But this proposal fails on all counts, with an overbroad scope and nothing to offer when it comes to federal governance.”

Moratorium would be ‘a historic mistake’

On Thursday, lawmakers from Utah, South Carolina, Ohio, Tennessee, Wisconsin and Montana held a press conference organized by the ARI to ask Congress to remove the moratorium. There has also been a major new twist since Trump’s so-called One Big Beautiful Bill moved to the Senate for final approval, in that Senator Ted Cruz, chair of the Senate Committee on Commerce, Science, and Transportation, inserted a clause that would preclude any state receiving funding under the Broadband, Equity, Access and Deployment (BEAD) program if they refused to introduce an AI law moratorium.

Satya Thallam, senior advisor with ARI, said in a release following the press conference, “state lawmakers are sending a clear message to Congress: the moratorium threatens a range of state laws, from kids’ online safety to pro-innovation measures, and it needs to be struck from the bill.”

He added, “preventing lawmakers back home from doing the hard work of legislating on AI issues for the next decade would be a historic mistake. Congress shouldn’t be working in opposition to state lawmakers, but hand-in-hand with state legislators to get AI policy right.”

Amba Kak, co-executive director of AI Now Institute, said Thursday in an email to Computerworld, “simply put, this ban on state AI law would leave American consumers and workers with even less protections than we have today against some of the worst forms of AI-related abuse and exploitation. The moratorium rolls back the clock on the protections that are in place, and prevents new rules from coming into place. Essentially [it’s] forcing state lawmakers to turn a deaf ear to their constituents.”

‘AI being used on us, not just by us’

Who might be most at risk? “It’s all of us, any of us, that will be at the receiving end of AI mediating our life and work, whether we choose to opt in or not,” she said. “AI is routinely being used on us, not just by us. But it is most unconscionable to unleash these risks on those least well positioned to fend for ourselves — children, seniors more susceptible to AI scams and manipulation, low income people subject to faulty and error ridden AI-mediated social services systems, and those working jobs that are being aggressively devalued or replaced.” 

Kak added, “I’d also flip that question to say: who has most to gain here? Big Tech: The same industry that, by increasingly bipartisan consensus, has gotten too big for its boots. And have proven themselves to be reckless custodians of this power. This moratorium drives that impunity further, in ways that send a truly dangerous message to the Big Tech AI firms: they’re in charge, no questions asked.”

On Wednesday, Cruz issued a release which said that he had published updated text for the Commerce Committee’s portion of the budget reconciliation bill.

A backgrounder accompanying the release states that the update involves the appropriation of  “$500 million to the National Telecommunications and Information Administration (NTIA) to support deployment of AI models or systems and underlying infrastructure. The proposal uses the administrative structure of the Broadband, Equity, Access, and Deployment (BEAD) program to streamline allocation of new funding.”

It goes on to say that, in order to receive “a portion of this new $500 million federal investment to deploy AI,” states must agree to several conditions, one of which is the temporary pause of “any enforcement of any state restrictions, as specified, related to AI models, AI systems, or automated decision systems for 10 years.”

US Senator Maria Cantwell, a Democrat and Ranking Member of the committee, reacted by saying, “the newly released language by Chair Cruz continues to hold $42 billion in BEAD funding hostage, forcing states to choose between protecting consumers and expanding critical broadband infrastructure to rural communities.”

Cementing the digital divide

Drew Garner, director of policy engagement at Benton Institute for Broadband & Society, a nonprofit organization whose focus is ensuring all people in the US have access to competitive, high-performance broadband, sided with Cantwell, saying, “[it] sounds insane even not tied to BEAD, but tied to BEAD is doubly insane.”

The Trump administration and Cruz, he said, are “treating [BEAD] like a piñata right now and it’s crazy. It is an awful time to be in a state broadband office.”

This new threat worsens an already bad situation. In March, US Department of Commerce secretary Howard Lutnick announced that he had launched a “rigorous review of the BEAD program. The Department is ripping out the Biden administration’s pointless requirements. It is revamping the BEAD program to take a tech-neutral approach that is rigorously driven by outcomes, so states can provide internet access for the lowest cost.”

And following the release of revised rules earlier this month, Garner wrote, “[Lutnick’s] actions will cement the digital divide for decades. He is hurting our economic competitiveness, our healthcare and education … Secretary Lutnick wants to invest in the ‘cheapest’ broadband infrastructure, not the best infrastructure. It’s a self-inflicted wound to American competitiveness.”