Introduction
A proposed budget reconciliation bill in the US House of Representatives seeks to impose a ten-year moratorium on state and local laws regulating artificial intelligence (AI) and automated decision-making systems. This initiative, part of HR 1 [10], aims to centralize regulatory authority at the federal level, creating a uniform national framework for AI governance and preempting state-level regulations.
Description
A proposed budget reconciliation bill has advanced in the US House of Representatives, which includes a provision imposing a ten-year moratorium on state and local laws regulating artificial intelligence (AI) and automated decision-making systems [7]. This significant federal effort [2] [4], part of HR 1 [10], aims to create national consistency amid a growing patchwork of regulations [1], effectively shifting regulatory authority to the federal level and preventing states from enforcing any laws that limit or regulate AI models and systems involved in interstate commerce. The bill was approved by a narrow margin of 215-214 and is expected to disrupt the more than 1,000 active AI-related bills at the state level, including those already enacted [7], as 45 states introduced AI-related legislation and 31 states enacted laws in the previous legislative session [1]. Currently, over 550 AI-related bills have been introduced across more than 45 states and Puerto Rico [3], with some states [3], including California [5] [9], Colorado [5] [9], Utah [3] [5] [9], Maryland [3], and Florida [3], already enacting their own oversight laws [3]. Notably, a bipartisan group of more than 260 lawmakers from all 50 states has expressed strong opposition to this federal freeze, arguing that it would impede state efforts to regulate rapidly evolving AI technology and leave constituents unprotected [8]. They emphasize the importance of state autonomy in policymaking [9], advocating for the ability to implement AI regulations tailored to their communities [9], especially in the absence of comprehensive federal legislation on AI [9]. Exceptions are made for state legislation that promotes the development and adoption of AI technology [1].
The bill allocates $500 million to the Department of Commerce for modernizing federal information technology systems through the deployment of commercial AI and automation technologies [7], enhancing operational efficiency and improving cybersecurity [7]. However, some House Republicans [2] [4] [8], including US Rep [8]. Marjorie Taylor Greene [8], have indicated they were unaware of the AI regulation freeze included in the bill [8], with Greene stating she would have opposed the legislation had she known about it [8].
Opponents argue that the moratorium infringes upon states’ traditional police powers to legislate on health [6], safety [6], and welfare concerning AI regulation [6]. While proponents maintain that states can still enforce generally applicable statutes and existing laws addressing AI-related harms [6], critics express concerns about the implications for internal oversight and long-term planning [1]. The moratorium effectively nullifies existing state protections against AI discrimination [10], algorithmic bias [10], and deepfake technology [10], while failing to establish a federal regulatory framework to replace these state guidelines [10]. Additionally, there are worries regarding the potential violation of the Byrd Rule, which restricts non-budgetary policy measures in reconciliation bills [7]. Some Senate Republicans echo these concerns [2] [4], emphasizing the importance of state authority to protect consumers, citing examples like Tennessee’s law that safeguards artists from unauthorized AI use of their voices and images [2] [4]. The Senate parliamentarian advises on Byrd Rule compliance [6], and if the AI moratorium is deemed extraneous, it could be removed unless 60 senators vote to waive the rule [6], undermining the simple-majority advantage of reconciliation [6].
The proposal also raises constitutional questions regarding the Commerce Clause [2] [4], Tenth Amendment state police powers [2] [4], and due process for AI systems impacting citizens [2] [4]. The presumption against preemption suggests that federal law should not override state police powers unless Congress clearly intends to do so [6]. Although the moratorium includes explicit preemptive language [6], ambiguities may lead courts to interpret its scope narrowly [6], preserving state authority where congressional intent is unclear [6]. The applicability of this presumption in express preemption cases remains debated [6].
A federal moratorium could prevent a conflicting patchwork of state laws [6], simplifying compliance for businesses [3] [6], particularly startups and small enterprises [6]. A unified regulatory environment may foster investment and development in AI technologies [6], as companies would avoid navigating multiple state regulations [6]. Venture capital firms support federal preemption for these reasons [6], aligning with the current administration’s strategy to reduce compliance hurdles for AI developers and deployers [1]. However, the moratorium could also hinder US competitiveness by stifling regulatory innovation that could shape international standards and diminish the democratic legitimacy of US AI governance [2] [4]. Organizations should anticipate ongoing tension between federal and state authorities over AI governance [2], regardless of the proposal’s outcome [2].
Importantly, the moratorium would not prevent governments from enforcing existing laws that address potential harms [6], including consumer protection statutes and various federal regulations [6]. While the moratorium targets state laws [6], existing federal laws would still apply to AI [6]. New federal AI laws or regulations could be enacted during the moratorium [6], but state-level AI-specific regulations would be significantly restricted [6]. Existing legal safeguards would remain applicable [6], and courts would still adjudicate claims under current laws [6], such as consumer protection statutes [6], despite the moratorium’s limitations on new state regulations [6]. Even in the absence of state AI laws [2], AI-driven decisions must still comply with existing anti-discrimination laws [2], such as the ADA and Title VII [2].
Organizations must prepare for regulatory uncertainty and implement strong AI governance practices [2] [4], closely monitoring both federal and state legislative developments related to AI while maintaining robust internal governance frameworks [2]. The interplay between federal preemption efforts and the rapid evolution of AI capabilities suggests a landscape of continued policy volatility [4], necessitating flexible compliance frameworks [2] [4]. The deadline for the current budget reconciliation bill is September 30, 2025 [7], when the instructions from the budget resolution will expire [7].
Conclusion
The proposed moratorium on state and local AI regulations represents a significant shift in the governance of AI technologies in the United States. While it aims to create a consistent national framework, it raises concerns about state autonomy, potential legal challenges, and the broader implications for innovation and consumer protection. Organizations must navigate this evolving landscape by adopting flexible compliance strategies and staying informed about legislative developments at both the federal and state levels.
References
[1] https://www.ciodive.com/news/trump-AI-regulation-moratorium-one-big-beautiful-bill/749358/
[2] https://natlawreview.com/article/us-house-representatives-advance-unprecedented-10-year-moratorium-state-ai-laws
[3] https://www.washingtonexaminer.com/news/senate/3424703/ai-provisions-could-be-deleted-senate-big-beautiful-bill/
[4] https://www.joneswalker.com/en/insights/us-house-of-representatives-advance-unprecedented-10-year-moratorium-on-state-ai.html
[5] https://www.pymnts.com/cpi-posts/ban-on-state-ai-laws-facing-mounting-opposition-from-state-policymakers/
[6] https://www.rstreet.org/AI-moratorium-questions/
[7] https://www.transparencycoalition.ai/news/guide-to-congress-proposed-10-year-moratorium-on-state-ai-laws
[8] https://www.usatoday.com/story/news/state/2025/06/05/bipartisan-letter-asks-congress-to-rethink-ai-provision-in-trump-budget/84051435007/
[9] https://statescoop.com/state-lawmakers-push-back-federal-proposal-limit-ai-regulation/
[10] https://www.businesstechweekly.com/technology-news/house-passes-ai-regulation-moratorium-implications-for-state-protections-and-oversight/
