Trump's 10-Year Freeze on State AI Rules: Implications for the Future

Published Date : 26/05/2025 

The United States is moving closer to a federal measure that would strip states of the power to regulate AI. This 10-year ban, part of Trump's 'One Big Beautiful Bill Act 2025,' has drawn criticism from various stakeholders, including tech leaders and civil society groups. 

The United States is inching closer to enacting a sweeping federal measure that would strip individual states of the power to regulate artificial intelligence (AI). This move has drawn pushback not only from lawmakers and civil society groups but also from some tech industry leaders. The ten-year state ban on AI regulation and oversight has been inserted into US President Donald Trump’s 1,000-page-long ‘One Big Beautiful Bill Act (OBBBA) 2025’ that narrowly passed the House of Representatives by a razor-thin 215-214 vote.

The Bill, also known as HR.1, is a budget reconciliation Bill that includes a range of legislative items on taxes, immigration, and healthcare. If approved by the US Senate and signed into law by Trump, the proposed ten-year moratorium on state AI laws would mark a major shift in US tech policy and potentially influence AI regulation in other countries like India.

### What Does the Bill Say About AI?

The AI moratorium has been inserted under Section 43201 of the OBBBA. This section orders the Commerce Department to deploy funds to modernize and secure federal information technology systems through the deployment of commercial artificial intelligence. It mandates the adoption of AI to increase operational efficiency, service delivery, automation, and cybersecurity. The relevant provision states: “...no state or political subdivision may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems during the 10-year period beginning on the date of the enactment of this Act.”

This means that US states would be blocked from enforcing laws regulating AI and ‘automated decision systems’ for 10 years. The proposed pause could affect more than 60 AI-related state laws enacted so far, according to the National Conference of State Legislatures (NCSL). These laws aim to address a range of issues, from algorithmic discrimination to government use of AI. There are also hundreds of other AI-related bills currently being considered by states.

### Who Is Supporting the Moratorium?

Republican lawmakers, tech companies, business groups such as the US Chamber of Commerce, and free-market think tanks like R Street Institute have supported the measure. They argue that a temporary pause on state-level AI regulation is necessary to promote innovation among US companies and help them stay ahead of Chinese competitors in the high-stakes AI race. OpenAI, the company behind ChatGPT, largely echoed these arguments in its submission to Trump’s AI Action Plan. It even pushed for models released by Chinese AI lab DeepSeek to be banned in the US to prevent alleged privacy and security risks.

Proponents have further said that the moratorium would address the confusing patchwork of AI laws being enforced by states while giving the US Congress sufficient time to draft its own AI legislation at the federal level.

### Who Is Opposing the Measure and Why?

Democrats and some Republicans have opposed the AI moratorium, along with dozens of other state lawmakers, attorneys general, AI experts, civil society organizations focused on tech policy and consumer rights. A key concern is that the temporary pause could give AI firms greater leeway and leave consumers, especially those from vulnerable communities and children, exposed to AI-related dangers. Detractors have also argued that the loose definition of ‘automated decision systems’ could roll back a flurry of state-level laws currently in place to protect people from deepfakes, hiring discrimination by automated systems, etc.

“We certainly know that in Tennessee we need those protections,” Marsha Blackburn, a Republican Senator, was quoted as saying by The Washington Post. Others have pushed back against the state law’s pause on the basis of federal overreach. “I would think that, just as a matter of federalism, we’d want states to be able to try out different regimes that they think will work for their state. And I think in general, on AI, I do think we need some sensible oversight that will protect people’s liberties,” Josh Hawley, another Republican Senator from Missouri, US, was quoted as saying by Business Insider.

Meanwhile, an open letter by state lawmakers and AI expert Gary Marcus said the moratorium could potentially violate the Tenth Amendment of the US Constitution, which separates powers between the federal and state governments. “The federal government should not get to control literally every aspect of how states regulate AI — particularly when they themselves have fallen down on the job — and the Constitution makes pretty clear that the Bill as written is far, far too broad,” the letter read, as per a report by Politico.

### How Have Tech Companies Reacted? What Is Their Stance?

Appearing before a US Senate Commerce Committee earlier this month, OpenAI CEO Sam Altman said that emulating the European Union’s regulatory system would be disastrous for the tech industry. Instead, Altman batted for a unified approach to AI regulation. “It is very difficult to imagine us figuring out how to comply with 50 different sets of regulations. One federal framework that is light touch, that we can understand, and it lets us move with the speed that this moment calls for, seems important and fine,” he said.

Alexandr Wang, founder and CEO of data company Scale AI, also came out against state laws on AI. “We need, as an industry and as a country, one clear federal standard, whatever it may be. But we need one, we need clarity as to one federal standard and have pre-emption to prevent this outcome where you have 50 different standards,” he said in a hearing last month.

American AI startup Anthropic’s CEO Dario Amodei, however, has hinted that he opposes the AI moratorium. “If you’re driving the car, it’s one thing to say ‘we don’t have to drive with the steering wheel now.’ It’s another thing to say ‘we’re going to rip out the steering wheel, and we can’t put it back in for 10 years,’” Amodei was quoted as saying by Wired during the Amazon-backed startup’s first developer conference last week.

### What’s Next

The fate of OBBBA is considered to be uncertain as it advances to the US Senate, where Democrats as well as a few Republicans are expected to challenge the inclusion of the AI moratorium in the budget package on the grounds of the Byrd Rule. This rule specifically prohibits the addition of “extraneous” provisions in the budget reconciliation Bill. Aside from the pause on state AI laws, OBBBA also proposes to phase out green energy tax credits for those who purchase eligible electric vehicles and undertake other renewable energy projects like home refuelling infrastructure. The budget package further includes funds amounting to billions of dollars to secure US borders through “ground detection sensors, integrated surveillance towers, tunnel detection capability, unmanned aircraft systems (UAS), and enhanced communications equipment.” 

Frequently Asked Questions (FAQS): 

Q: What is the 'One Big Beautiful Bill Act (OBBBA) 2025'?

A: The 'One Big Beautiful Bill Act (OBBBA) 2025' is a 1,000-page-long budget reconciliation Bill that includes a range of legislative items on taxes, immigration, healthcare, and a ten-year moratorium on state AI regulation. It was narrowly passed by the House of Representatives and is now under review by the US Senate.

Q: What does the AI moratorium in the OBBBA propose?

A: The AI moratorium in the OBBBA proposes a ten-year ban on state and political subdivisions from enforcing any laws or regulations related to artificial intelligence models, systems, or automated decision systems. This would give the federal government exclusive authority over AI regulation during this period.

Q: Who supports the AI moratorium and why?

A: Republican lawmakers, tech companies, business groups like the US Chamber of Commerce, and free-market think tanks support the AI moratorium. They argue it promotes innovation, helps US companies stay competitive with Chinese firms, and addresses the confusing patchwork of state AI laws.

Q: What are the main concerns of those opposing the AI moratorium?

A: Opponents, including Democrats, some Republicans, and civil society groups, are concerned that the moratorium could leave consumers and vulnerable communities exposed to AI-related dangers, roll back existing state protections, and violate the Tenth Amendment of the US Constitution.

Q: What is the next step for the OBBBA?

A: The OBBBA is now under review by the US Senate. Democrats and some Republicans are expected to challenge the inclusion of the AI moratorium in the budget package on the grounds of the Byrd Rule, which prohibits extraneous provisions in budget reconciliation Bills. 

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