States Lead the Charge in AI Regulation as Federal Government Lags Behind

3 Sources

U.S. states are taking the initiative in regulating AI technologies across various sectors, including government use, healthcare, facial recognition, and generative AI, as federal regulation remains limited.

State-Led AI Regulation Gains Momentum

In the absence of comprehensive federal regulation, U.S. states are taking the lead in establishing guardrails around artificial intelligence (AI) technologies. The defeat of a proposed moratorium on state-level AI regulation in Congress has paved the way for states to continue their legislative efforts 12. As of 2025, all 50 states have introduced various AI-related bills, with several already enacting legislation 123.

Source: Fast Company

Source: Fast Company

Key Areas of State AI Regulation

State legislatures are focusing on four primary aspects of AI regulation:

  1. Government Use of AI: States are introducing bills to oversee the public sector's use of AI, particularly in predictive AI applications. These bills emphasize transparency, consumer protections, and risk assessment 12. For instance, the Colorado Artificial Intelligence Act mandates transparency and disclosure requirements for AI systems involved in consequential decisions 12.

  2. AI in Healthcare: In the first half of 2025, 34 states introduced over 250 AI-related health bills 12. These bills address four main categories:

    • Disclosure requirements
    • Consumer protection
    • Insurers' use of AI
    • Clinicians' use of AI
  3. Facial Recognition and Surveillance: By the end of 2024, 15 states had enacted laws to limit potential harms from facial recognition technology 12. These regulations often require vendors to publish bias test reports and data management practices, and mandate human review in the use of these technologies 12.

  4. Generative AI and Foundation Models: States are addressing concerns related to generative AI and foundation models. Utah's Artificial Intelligence Policy Act requires disclosure of AI use in certain interactions 12. California's AB 2013 mandates that developers post information about the data used to train their AI systems, including foundation models 12.

Source: The Conversation

Source: The Conversation

Implications and Challenges

While state-led regulation provides needed oversight on privacy, civil rights, and consumer protections, it also creates a patchwork of laws that may complicate compliance efforts for AI developers 12. However, many experts believe that states can play a crucial role in addressing the regulatory gap left by the federal government 12.

Federal Response

The Trump administration announced its AI Action Plan on July 23, 2025, which includes a controversial stance on state-level AI regulation. The plan states, "The Federal government should not allow AI-related Federal funding to be directed toward states with burdensome AI regulations" 1. This approach may create tension between federal and state-level AI governance efforts.

As AI technologies continue to evolve and permeate various sectors, the interplay between state and federal regulation will likely remain a critical issue in shaping the future of AI governance in the United States.

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