Senate Republicans tweak AI regulation ban in Big Beautiful Bill, but opposition persists

Senate Republicans aim to keep state and local governments from regulating artificial intelligence for the next decade as part of President Trump’s One Big Beautiful Bill Act — but with a notable change from the House version.

Instead of an outright ban, like in the House bill, the Senate Commerce, Science and Transportation Committee update would prevent state and local governments that don’t adopt the 10-year AI regulation moratorium from receiving federal Broadband, Equity, Access and Deployment program funding.

All 50 states and the District of Columbia are participating in the $42 billion BEAD program, which seeks to expand high-speed internet access, and would stand to risk losing federal funding.

“You see state legislatures right now proposing ridiculous legislation,” Senate Commerce Chairman Ted Cruz, Texas Republican, said on CNBC. “If we have a 50-state patchwork … that will drive AI development out of America to other countries, and it will cause America to lose the AI race to China. That would be catastrophic.”

Mr. Cruz compared the proposed ban on AI regulations to the “light touch” regulatory approach to the internet that President Bill Clinton mandated in the 1990s, which helped expand America’s economy.

But the moratorium has drawn fierce opposition, including from 40 state attorneys general who argue it would affect hundreds of existing and pending state laws from Republican and Democratic legislatures that seek to mitigate AI’s potential harm.

“These include laws designed to protect against AI-generated explicit material, prohibit deepfakes designed to mislead voters and consumers, protect renters when algorithms are used to set rent, prevent spam phone calls and texts, require basic disclosures when consumers are interacting with specific kinds of AI, and ensure identity protection for endorsements and other AI-generated content,” the attorneys general wrote in a letter to congressional leaders last month.

Senate Republicans tweaked the House ban to better comply with their chamber’s rules for budget reconciliation, a process they’re using to advance the president’s agenda along party lines, without the threat of a Democratic filibuster.

Under the Senate’s Byrd rule, policy provisions enacted in budget reconciliation must have more than a “merely incidental” impact on federal spending or revenues.

Mr. Cruz acknowledged that even with the Senate’s tweaks to the AI regulation moratorium, it’s “an open question” whether it will pass muster under the Byrd rule.

Sen. Ed Markey, Massachusetts Democrat, said in a floor speech this week that he planned to challenge the House language banning states from regulating AI as “a policy change that has no impact on the federal budget.”

He doubled down on his promise to “fight it with everything I have” after Senate Republicans tweaked the language to tie the regulatory moratorium to BEAD funding.

“The AI language supposedly gives states a choice: broadband money or AI rules,” Mr. Markey posted on X. “But under the current text, this choice is a false one. The AI moratorium language is binding on its own.”

The Senate parliamentarian will ultimately decide whether the provision is in compliance with the Byrd rule.

If it survives, Senate Republicans will then have to determine whether they have enough support among their ranks to pass the bill with the AI regulation ban.

They can’t afford more than three defections on the bill, and Republican Sens. Marsha Blackburn of Tennessee and Josh Hawley of Missouri have already expressed opposition to preventing states from regulating AI.

“Until we pass something that is federally preemptive, we can’t call for a moratorium on those things,” Ms. Blackburn said during a hearing last month on legislation to protect individuals’ voice and visual likeness from AI-generated deepfakes.

Tennessee enacted similar legislation, protection she said that’s needed for artists in Nashville, nicknamed the Music City.

Mr. Hawley pushed back on proponents’ arguments that the AI regulation ban is needed to encourage further development of the technology.

“The problem isn’t a lack of AI development,” he said. “The problem is protecting the rights of normal people in the midst of that development. AI is going to be developed because it’s worth billions of dollars, and people are going to get filthy rich off of it.”

Mr. Hawley said he is concerned about AI displacing human jobs, infringing on copyrights and stealing personal information.

“We’re just going to say for a decade that nobody can protect people? That’s just nuts,” he said, calling the regulatory ban “very hostile.”

Sen. Elizabeth Warren, Massachusetts Democrat, said the moratorium could embolden real estate software companies, like RealPage, that use AI to get around price-fixing laws and help landlords hike the cost of rent.

“State and local governments saw this happening and were trying to put a stop to this scheme, but Republicans just threw the software companies a lifeline,” she said in a video posted to social media about the AI regulation ban.

Senate Commerce ranking Democrat Maria Cantwell told The Washington Times she agrees with the goal of not stifling AI development but believes broadly preempting states from regulating the technology isn’t the right approach.

“We passed bills out of committee that furthered AI, and then Senator Cruz held them up last year,” the Washington senator said.

Some House Republicans who voted for the budget reconciliation package were unaware of the AI regulation ban until after the bill passed their chamber.

Rep. Marjorie Taylor Greene, Georgia Republican, has said she will vote against the measure if it comes back to the House with the ban on states regulating AI, which she called an “unprecedented federal power grab.”