One of many provisions in the “One Big Beautiful Bill Act,” passed by the U.S. House of Representatives, would place a 10-year “temporary pause” on states’ ability to regulate artificial intelligence (AI). Initially called a moratorium, Senate Republicans changed the characterization of the prohibition to ensure the provision’s passage during the reconciliation process. The changes were at least partially successful, as the proposed “temporary pause” overcame a procedural hurdle when the Senate parliamentarian concluded that it satisfies the “Byrd Rule” and may remain in the bill. The bill now heads to the Senate floor. If enacted, the temporary pause would mark the most significant federal action (or inaction) related to AI.

The Proposed Temporary Pause

Contained within the One Beautiful Bill Act is a provision that would prevent a state or locality from enforcing any law or regulation that specifically targets AI models, AI systems, or automated decision systems. The prohibition would last for 10 years after the enactment date. If states decide to enforce AI regulations in violation of the provision, the federal government may withhold broadband grants under the Broadband Equity, Access, and Deployment (BEAD) program. The bill’s language specifies three categories of legislation that would be preempted:

• AI models: “[A] software component of an information system that implements [AI] technology and uses computational, statistical, or machine-learning techniques to produce outputs from a defined set of inputs.”
• AI systems: “[A]ny data system, hardware, tool, or utility that operates, in whole or in part, using [AI].”
• Automated decision systems: “[A]ny computational process derived from machine learning, statistical modeling, data analytics, or [AI] that issues a simplified output, including a score, classification, or recommendation, to materially influence or replace human decision making.”

The breadth of these definitions is purposeful, in part because AI is difficult to define and because the bill’s drafters desire to preempt as much state regulation of AI as possible.

The temporary pause is not without exceptions, as found in Paragraph (2) of the provision. Laws with the primary purpose and effect of “remov[ing] legal impediments to, or facilitate[ing] the deployment or operation of [AI],” or “streamlin[ing] licensing, permitting, routing, zoning, procurement, or reporting procedures in a manner that facilitates the adoption of [AI]” are permitted. Laws regulating AI that impose a fee or bond are allowed so long as the fee or bond is reasonable, cost-based, and regulates AI in the same manner as non-AI systems.

Further, states are allowed to pass laws that do not impose any substantive design, performance, data-handling, documentation, civil liability, taxation, fee, or other requirement on AI, unless such requirement is imposed under federal law or the requirement applies in the same manner as non-AI systems. A significant question going forward is whether the prohibition applies only to laws targeted toward AI regulation or to general laws incidentally affecting AI systems; this final exception seems to imply that states may regulate AI through existing general laws if the regulation applies to non-AI systems in the same way. Indeed, since early 2024, several state attorneys general have signaled that they will enforce consumer protection, privacy, and anti-discrimination laws against companies utilizing AI systems that potentially violate such laws.

Notably, state regulators and federal legislators on both sides of the aisle have objected to the 10-year “temporary pause.” In May, a bipartisan group of 40 state attorneys general sent a letter to Congress voicing their objections to the proposal as violative of state sovereignty and their efforts to protect consumers. And on June 18, a bipartisan group of U.S. senators and state attorneys general held a press conference to express their opposition, noting that the provision would hinder consumer protection efforts. The group included Republican Sen. Marsha Blackburn and Attorney General Jonathan Skrmetti from Tennessee, and Democratic Senator Maria Cantwell and Attorney General Nick Brown from Washington.

Embracing their role as the laboratories of democracy, states have been at the forefront of developing legislation to combat AI abuses. Thus far, the absence of superseding, federal AI governance legislation has allowed states to fill the void. Four states, California, Colorado, Texas, and Utah, have enacted forms of AI governance laws with dozens of other states considering similar legislation. And in March, Tennessee legislators adopted the “Elvis Act” to prohibit the duplication or mimicry of music industry professionals’ voices through AI. Skrmetti, in commenting on the states’ role in AI regulation, noted that while “technology moves fast, unfortunately the federal government does not.” Significantly, the proposed federal provision would effectively nullify these state laws, unless a state is willing to forgo the aforementioned broadband funding.

In support of the provision, however, Republican Speaker of the House Mike Johnson of Louisiana has expressed concern over allowing states to trailblaze in the field of AI regulation. While Johnson describes himself as “a fierce guardian of states’ rights and federalism,” he believes this issue should be addressed at the federal level. Although no federal standard is yet in place, he claims “[i]t would be a very dangerous thing, we feel, for all 50 states to have a patchwork of regulations on AI.” Not only is Johnson concerned about the volume of AI legislation and potential conflicts it may create, but he is also concerned that certain states will set the national standard. He specifically expressed concern about California, claiming that its tendency to “hyperregulate[]” would “stifle innovation.” Other supporters of the provision have generally noted that one law is much easier to comply with than 50 separate laws.

Why It Matters

Considering AI’s countless use cases, cheap operating costs, and ease of use, it is a natural consequence that the technology has fundamentally changed the operations of many businesses. And given this proliferation, federal and state governments will assuredly continue to address the tension of allowing for innovation and enacting an appropriate level of regulation. The adoption of the federal, 10-year temporary pause would prevent states from enforcing their AI-specific laws to prevent abuses. While this would hinder states in their ability to enforce laws that specifically address the unique issues that arise with AI, state regulators will continue to scrutinize AI use under existing consumer protection, privacy, and anti-discrimination laws. Certainly, businesses utilizing AI should keep a close eye on the federal provision’s passage, as it will fundamentally alter this technology’s future use. In the meantime, however, companies should ensure they are employing defensible AI policies and practices to mitigate regulatory exposure under existing state laws.

Troutman Pepper Locke State Attorneys General Team

	Ashley Taylor – Co-leader and Firm Vice Chair Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation.
	Clay Friedman – Co-leader Clay co-leads the firm’s State Attorneys General practice and is nationally ranked by Chambers USA for AG Government Relations and in Best Lawyers for Advertising Law. He has dedicated his entire career to state attorney general and federal work, serving for nearly a decade in a senior role and more than 25+ years in private practice. Clay focuses his practice on helping industry-leading companies mitigate the risks associated with state and federal regulatory investigations and associated litigation.
	Chris Carlson Chris advises clients on regulatory, civil, and criminal investigations and litigation. With a background as an assistant attorney general, he provides practical guidance to clients with matters involving state attorneys general and federal regulatory agencies.
	Lauren Fincher Lauren has vast experience handling state attorneys general investigations, navigating complex regulatory compliance matters, and providing strategic counsel in enforcement actions across various industries. She helps clients manage high-stakes regulatory matters and guides them through complex legal landscapes.
	Stephen Piepgrass Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, representing clients in single and multistate enforcement actions, including inquiries and investigations, as well as litigation involving state attorneys general and other state and federal governmental enforcement bodies. He has significant experience handling actions with federal agencies, including the CFPB and FTC, as well as single plaintiff and class action litigation for clients in highly regulated sectors such as financial services, health care, pharmaceutical, and education.
	Michael Yaghi Mike handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
	Samuel E. “Gene” Fishel Gene is a former regulator with two decades of experience who has overseen state privacy and cybersecurity regulation enforcement, led national, multistate attorneys general privacy investigations, and prosecuted computer crimes at the state and federal levels. He has served at the forefront of state attorney general and federal enforcement, and utilizes this experience to proficiently represent client interests.
	Jay Myers Jay assists clients in heavily regulated industries, including health care, energy, insurance, emerging industries, and data privacy. He provides both regulatory legal advice and government relations strategies. Jay’s past and current clients include Fortune 10 companies, startups, nonprofits, industry associations, and advocacy groups. Recognizing that state government matters are often complex and multifaceted, he utilizes regulatory guidance, government advocacy, or both in tandem to deliver tailored solutions for each client’s unique needs.
	Jessica Birdsong Jessica is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. She received her J.D. from the University of Richmond School of Law, magna cum laude, where she served as associate articles editor of the Journal of Law & Technology.
	Blake R. Christopher Blake collaborates with clients on matters related to government contracting, investigations, and disputes. His senior-level government experience generates valuable insights and strategies for clients across a variety of industries.
	Nick Gouverneur Nick is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. He received his J.D. from the University of Illinois College of Law, where he served as a member of the Journal of Law, Technology & Policy.
	Troy Homesley Troy is an accomplished litigator who has represented and defended clients across a wide range of complex, high-stakes disputes at both the trial and appellate levels. He has represented technology companies, business executives, law firms, investment funds, high-ranking federal officials, international non-profits, and asylum seekers. Troy draws on his broad litigation experience to advise clients before litigation arises, while claims are pending or threatened, and leading up to and through trial and appeals.
	Natalia Jacobo Natalia is an associate in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based on the West Coast. She routinely counsels clients on a variety of state and federal regulatory matters, with a particular emphasis on consumer protection and data privacy matters.
	Namrata Kang Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising. Nam’s experience transcends multiple industries, including financial services, telecommunications, media, and sports betting.
	Michael Lafleur Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general.
	Lane Page Lane specializes in federal and state regulatory investigations and complex civil litigation. He focuses on representing financial institutions and other businesses, with a particular emphasis on consumer protection and fair lending issues.
	Dascher Pasco Dascher is an attorney within the Regulatory Investigations, Strategy, and Enforcement practice, based in the Richmond office. She joined our firm after working in personal injury and medical malpractice for a Virginia trial law firm. Dascher brings varied legal experience to the firm with strong litigation and regulatory strategy capabilities.
	Kyara Rivera Rivera Kyara is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. She received her J.D. from the University of Richmond School of Law, cum laude, where she served as publications and online editor of the Public Interest Law Review.
	Trey Smith Trey focuses his practice on representing and advising regulated utilities before state public utility commissions. He routinely helps clients obtain certificates of public convenience and necessity for transmission infrastructure. In this role, Trey works with his clients’ subject-matter experts to manage administrative proceedings, including by preparing initial filings; responding to discovery requests; drafting rebuttal testimony; and litigating any disputed issues.
	Daniel Waltz Dan helps clients navigate all aspects highly regulated relationships between industry participants and federal, state and local governments. Whether engaging with regulators, negotiating transactions or representing clients in the courtroom, he delivers solutions that help his clients achieve their strategic goals.
	Cole White Cole is a member of the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) group. He has a decade of experience working in the attorney general community, having joined the firm from the Wyoming Office of the Attorney General, where he was assistant attorney general.
	Stephanie Kozol Stephanie is Troutman Pepper Locke’s senior government relations manager in the state attorneys general department.