Strangling AI, One State at a Time

JUST HOURS BEFORE its passage, the Senate version of the One Big Beautiful Bill Act (OBBBA) cut a proposed moratorium on states enforcing their own AI regulations. Though some regard this as a win for federalism, others argue that the current patchwork represents an abdication of the federal government's jurisdiction over interstate commerce, permits excessive compliance costs to be imposed on the American AI industry, and may ultimately sacrifice the U.S. lead in the field to geopolitical adversaries.

- By Jack Nicastro

Federalism works best when state-level policy experiments stay contained. "Once the fumes escape the hood, it's no longer an experiment," says Neil Chilson, head of AI policy at the Abundance Institute. "It's environmental spillover that can choke innovation across the country." Chilson cites the California Privacy Protection Agency's rulemaking on automated decision-making technology as a prime example of one state's AI regulation forcing nationwide companies to reengineer their products.