Senate Overwhelmingly Rejects AI Regulation Moratorium with 99-1 Vote

Washington D.C. – The U.S. Senate decisively voted 99-1 in early July 2025 to remove a proposed moratorium on state-level artificial intelligence (AI) regulation from a federal budget bill, effectively ending a contentious legislative effort to centralize AI oversight. The move marks a significant victory for consumer advocates and state lawmakers who argued against federal preemption in the rapidly evolving AI landscape.

The provision, initially proposed as a 10-year ban and later revised to five years, was embedded within the "One Big Beautiful Bill Act," a broader tax and spending package. Proponents, primarily led by Senator Ted Cruz (R-TX) and supported by major tech industry figures like OpenAI CEO Sam Altman, contended that a federal moratorium was necessary to prevent a "patchwork" of state laws that could stifle AI innovation and growth. They drew parallels to the Internet Tax Freedom Act, which aimed to foster the early internet.

However, the moratorium faced widespread bipartisan opposition. Critics, including a coalition of consumer groups like the Consumer Federation of America, civil rights organizations, and a bipartisan group of state attorneys general and legislators, argued that it would create a dangerous regulatory vacuum. They warned that it would leave consumers vulnerable to unchecked AI harms, such as algorithmic bias in employment and housing, deepfakes, and privacy violations, while stripping states of their ability to protect citizens. Senator Marsha Blackburn (R-TN), who initially worked on a compromise, ultimately withdrew her support, stating that the language was "not acceptable to those who need these protections the most."

The moratorium's demise came during a marathon "vote-a-rama" session, where it was ultimately stripped from the bill due to procedural challenges under the Byrd Rule, which targets extraneous policy provisions in budget reconciliation measures. As Logan Kolas, writing for the Consumer Federation of America, noted in a recent tweet, "It's been exactly two weeks since the AI moratorium died in the Senate. In a new long-form blog for @consumerpal, I discuss my big takeaways."

With the federal preemption attempt now off the table, states are expected to continue leading the charge in AI regulation. Several states, including California, Colorado, and New York, have already enacted or are advancing legislation addressing AI transparency, algorithmic discrimination, and developer liability. State attorneys general have also indicated they will use existing consumer protection laws to address AI-related issues. This outcome suggests a future where AI governance will be shaped by a diverse set of state-level regulations, prompting businesses to adapt to a varied compliance environment rather than a single federal standard.