New push for national AI rules likely after state ban fails

The demise of a controversial proposal in Republicans' budget bill that blocked state-level regulation of artificial intelligence is fueling fresh pressure for federal action, advocates told Axios Wednesday.Why it matters: Congress' reluctance to set national AI rules for privacy, safety and intellectual property rights has left states to forge ahead with their own rules.Driving the news: Senator Ted Cruz (R-Texas) and some of his allies in the administration fought until the last minute to keep an industry-backed 10-year ban on state-level regulation in the budget bill. They failed — for now."We hope that this unequivocal rebuke to the idea of saying that states can't regulate AI is a lot of political motivation for the folks who do want to regulate AI on Capitol Hill," said Eric Kashdan, Campaign Legal Center's senior legal counsel for federal advocacy.Catch up quick: The Senate early Tuesday voted nearly unanimously to remove the proposed moratorium on state-level AI regulations from the budget bill.It would have prevented states that want certain government grants from enforcing legislation on AI regulation."The reconciliation package was the best possibility for something this bad to get through," said Alix Fraser, the vice president of advocacy for Issue One.The House passed a version of the budget bill that included the state AI moratorium, and the Senate's version, which dropped it, now faces resistance from some House Republicans.Friction point: President Trump's aides and advisers were split on the moratorium. While many have favored a light hand with AI to bolster U.S. efforts to keep ahead of China, others are concerned that the moratorium rules would also make it harder for states to regulate social media, particularly around protecting kids.Former Trump adviser Steve Bannon helped fuel opposition, the Wall Street Journal reported, and many in the MAGA movement still believe Big Tech has stifled conservative voices."Bannon has never been a fan of this sort of techno utopia that a lot of Silicon Valley-ites desire, and the idea of a moratorium was antithetical to that approach," Fraser said.Zoom out: More than 20 Democratic- and Republican-led states have passed AI regulation legislation. An April Pew study found the public is worried the government won't go far enough in regulating AI. Most Americans support a national AI standard and think a patchwork of state laws will make it harder for the U.S. to compete with China, according to a June Morning Consult and TechNet poll."There's a huge public demand for AI to be regulated, a bipartisan demand for AI to be regulated," Kashdan said. "And not only will they give up on trying to start states from stepping up but they'll recognize that this means they really need to get their act together and pass federal AI regulations."Yes, but: Congress has always had a hard time passing laws regulating tech, and the mood in Washington right now is favoring innovation over regulationEfforts to regulate AI at the federal level are unlikely to go as far as consumer protection measures in the states. What's next: The battle over a moratorium is not over, said Chris MacKenzie, vice president of communications for Americans for Responsible Innovation. Advocates expect standalone legislation to try to preempt state AI laws. Go deeper: GOP revolt delays House vote on Trump's "big, beautiful bill"

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