Navigating State AI Laws: Challenges for US Businesses


The landscape of artificial intelligence (AI) regulation in the United States is becoming increasingly fragmented, presenting a significant challenge for businesses seeking to harness the potential of AI technologies. A patchwork of state laws, characterized by varying requirements and priorities, is adding complexity and uncertainty to the AI regulatory environment.

Utah state lawmakers are currently deliberating legislation that would mandate certain businesses to disclose if their products utilize AI in consumer interactions without human involvement. Meanwhile, in Connecticut, legislators are considering a bill aimed at imposing stricter regulations on the transparency of AI systems deemed “high risk.”

These initiatives are part of a broader trend, with 30 states, along with the District of Columbia, either proposing or enacting laws that impose constraints on the design and use of AI systems. These laws cover a wide range of issues, including data transparency, bias reduction, and protection of consumer rights in various domains such as healthcare, housing, and employment.

Goli Mahdavi, a lawyer at Bryan Cave Leighton Paisner, describes the current state of AI legislation as “a mess” for businesses, citing the proliferation of bills and statutes that contribute to uncertainty in compliance efforts. The absence of comprehensive federal regulation is a key factor driving the patchwork of state laws, as policymakers at the federal level remain divided on the necessity of AI regulation.

In contrast to the US, other regions such as the European Union and China have adopted more comprehensive approaches to AI regulation. The EU, for instance, recently enacted the AI Act, while China has implemented laws targeting various aspects of AI technology.

However, despite the lack of federal action, state-level initiatives often reflect priorities outlined by the federal government. President Biden’s executive orders have emphasized responsible AI deployment, urging developers to disclose safety test results to the government.

While state laws share common themes, subtle differences in their provisions pose challenges for businesses striving for compliance. For example, states like California and Colorado have adopted consumer protection laws requiring notification and opt-out provisions for automated decision-making technologies. However, the definition of “automated decision-making” and the scope of opt-out requirements may vary between states.

Some states, such as New York, have implemented specific requirements, such as bias audits for AI-enabled employment tools, while others focus on risk assessments for entities using AI to process consumer data.

Despite the complexity of navigating state AI laws, the momentum for regulation is bolstered by a trend of single-party control in state legislatures. With a historic level of single-party dominance in many states, lawmakers are pushing through AI legislation with increasing frequency, reflecting growing awareness of the need to address AI’s societal impacts.

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