A proposed federal moratorium on state artificial intelligence (AI) laws was a surprising and significant sticking point in discussions of the recently passed One Big Beautiful Bill Act (BBB). The moratorium was ultimately left out of the final bill, but it raised a pivotal question of who should be regulating AI.
It is a policy imperative to prevent state officials from enacting a patchwork of reckless rules that place America at a competitive disadvantage.
Defenders of the moratorium had correctly identified this as falling within the legal umbrella of interstate commerce, enabling Congress to create a federal framework. Congress preempting state AI regulations is far more than a narrow constitutional question. It is a policy imperative to prevent state officials from enacting a patchwork of reckless rules that place America at a competitive disadvantage. With BBB in the rearview mirror, Congress can and must pass the regulatory moratorium into law.
As experienced in the privacy and telecommunications policy processes, negotiations in Congress have largely been sabotaged by the passage of state-level statutes. These bills typically grant one side excessive leverage by establishing a “regulatory floor” through passing a law in a friendly jurisdiction that grants them most of their demands. At that point, getting a compromise solution that incorporates the other side’s demands becomes practically impossible.
Comprehensive nationwide regulatory frameworks take time to craft and refine. Policymakers need to account for the multiple uses a technology could have and all the potential tradeoffs, especially with emerging technologies like AI. As these negotiations take place and policymakers search for the correct balance of regulation, backers of state-level rules usually claim that Congress is taking “too long” and push for a patchwork approach. This status quo creates a perverse incentive for Congress: either rush to pass any sort of federal framework and risk it being a massive blunder, or forfeit any realistic expectation of passing a national law.
The recently-discussed AI moratorium tried to tackle both of those issues. Seeing the massive sprawl of state-level AI-related regulations and the nightmarish compliance standards these rules were creating, the moratorium sought to provide Congress with a blank canvas once again by establishing a sweeping pause on most state bills. By erasing any unfavorable advantage that any particular group can gain by essentially forum-shopping legislation, the pause made a compromise, an agreeable solution more likely.
A multi-year pause would give Congress a window to appropriately address necessary nuances and let AI technology mature. The AI hype cycle has led to significant overestimation of both benefits and risks, which do not always materialize. Any serious attempt at a national AI framework needs time to develop, and a moratorium needs to account for that reality. If the blank canvas that makes these negotiations possible is gone after a year or two, then the pause will either have little to no practical effect or will force Congress to pass a rushed and potentially industry-crushing law. (RELATED: The Thinking Machines That Weren’t)
Supporters of a federal AI moratorium have already ably articulated the economic, legal, and practical benefits of the proposal. But most importantly, passing a moratorium would be a strategic win for Congress. Allowing states to take the lead in regulating tech products and accepting harmful regulatory spill-over effects is granting any individual state the power to set a de facto national standard that will render any federal negotiation virtually impossible. That approach has been lamented by both sides of the aisle, as it fails to give consumers and companies clarity over their rights and responsibilities. If Congress wants to pass any sort of comprehensive AI law, it unequivocally needs to pass a state-level moratorium first. (RELATED: The Big Beautiful Bill’s Moratorium on AI Regulation Is Dangerous)
Ordinarily, states play a key role in implementing policies, and it’s generally important for the federal government to enable experimentation with different approaches. However, for truly borderless technologies such as the internet and AI, restrictive regulations in one state stifle — not enable — rival approaches in other jurisdictions. This limiting factor of federalism makes a national approach important in the digital domain.
The removal of the moratorium from the reconciliation bill could actually prove helpful. Congress now has the opportunity to bring back the moratorium without the complicated constraints of the reconciliation process and pass a more straightforward and cleaner bill. However, members of Congress need to act quickly and decisively to make this opportunity a reality. To ensure America’s global competitiveness, lawmakers must pave the way for a national light-touch regulatory framework for AI.
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Juan Londoño is the Chief Regulatory Analyst at the Taxpayers Protection Alliance.