Calls for requiring licenses for advanced artificial intelligence by OpenAI CEO Sam Altman and several senators Tuesday sparked immediate pushback from outsiders warning that federal regulation could harm innovation and hurt smaller companies.

Critics argued that the quickly forming bipartisan support for regulation enforced by a new federal agency could hurt startups and put the U.S. at a disadvantage to China.

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"Creating a new agency would be extremely costly for new AI companies and any startups," Matthew Mittelsteadt, a research fellow and technologist at the Mercatus Center, told the Washington Examiner. "They may not have time or cash to go through the legal process necessary."

Licensing requirements could also be immensely limiting for the open source community, Mittelsteadt said, whose work has quickly caught up in strength and quality with leading competitors such as Google and OpenAI.

Many free-market advocates fear calls from business for regulation on the grounds that it could be used to limit competition by saddling would-be rivals with paperwork and compliance costs. OpenAI, which partners with Microsoft, has quickly established itself as a leading AI company.

Mittelsteadt was one of a number of experts weighing in after Altman's call Tuesday for license requirements met with approval from senators on both sides of the aisle of the Senate Judiciary Committee. Altman suggested that the licenses should not be required of all AI-powered products but merely those that could persuade or manipulate a person's beliefs, such as the chatbot ChatGPT maintained by his company or the image generator Midjourney.

"A one-size-fits-all regulator makes no sense given AI touches so many complex industries," tweeted Daniel Castro, vice president of the Information Technology and Innovation Foundation. "AI in healthcare is different than AI in transportation. A general purpose AI regulator is not going to understand intricacies of different industries."

NYU professor Gary Marcus, one of the three witnesses, spoke out in favor of creating a federal-level agency akin to the Food and Drug Administration to handle any reining in and licensing of the development of the technology. “The number of risks is large. The amount of information to keep up on is so much,” he told the committee.

"You don't build a nuclear reactor without getting a license. You don't build an AI system without getting a license," Sen. Peter Welch (D-VT) said.

One factor leading some senators to favor an expeditious approach to legislation is a sense that Congress failed to take action early enough in response to the spread of social media years ago. "The result is predators on the internet, toxic content, exploiting children, creating dangers for them. Congress failed to meet the moment on social media," Sen. Richard Blumenthal (D-CT) said in his remarks. "Now we have the obligation to do it on AI before the threats and the risks become real."

Some committee members hesitated to embrace a full-on regulator, claiming it would hinder the United States's efforts to compete with other foreign nations. The Chinese are creating AI to “reinforce the core values of the Chinese Communist Party and the Chinese system,” Sen. Chris Coons (D-DE) said during his questioning. “And I’m concerned about how we promote AI that reinforces and strengthens open markets, open societies, and democracy.”

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It was Altman's first appearance before Congress, a day after he had dinner with more than 60 House lawmakers on Monday to help them better understand the technology.

While Congress proposed that a new agency be founded, current agencies claim they have the tools to regulate AI chatbots properly. "Although these tools are novel, they are not exempt from existing rules," FTC Chairwoman Lina Khan wrote in a New York Times op-ed, "and the FTC will vigorously enforce the laws we are charged with administering, even in this new market."