House Proposal Would Freeze State AI Rules for a Decade: What That Means for Employers
- Mark Addington
- Jun 15
- 3 min read

A little noticed rider in the House’s budget reconciliation measure, the One Big Beautiful Bill Act (H.R. 1), would bar states from enacting or enforcing any law “governing AI systems, AI models, or automated decision systems” for ten years. If enacted, the moratorium would wipe out the first generation of state AI statutes and halt more than one thousand pending bills, shifting the entire regulatory fight to Washington.
The provision pre-empts “any law, regulation, decision, or other requirement of a state or political subdivision relating to the design, development, deployment, or use of an automated decision system.” The ban would last for ten years beginning on the date of enactment. After that period, states could regulate again unless Congress extends the freeze. California’s DELETE Act data-broker rules, Colorado’s SB 169 governing “high-risk” AI, Illinois’ Biometric Information Privacy Act, New York’s AEDT audit statute, and Utah’s consumer AI disclosures would all be preempted by Federal law and become unenforceable.
Because the proposal sits inside a reconciliation bill, it must survive the Byrd Rule, a Senate test that limits reconciliation to taxing and spending provisions. The goal of the Rule is to keep reconciliation focused on taxing and spending provisions that help Congress meet the targets in the annual budget resolution. Some think the Senate may strike the moratorium as “extraneous.” Even if it survives that test, several Republican senators have signaled discomfort, and Democrats are uniformly opposed, making final passage uncertain.
The U.S. Chamber of Commerce, major AI vendors, and some national security experts support the passage, arguing that a single federal standard avoids a patchwork of laws, promotes innovation, and gives Congress time to craft durable rules. However, opponents, consisting of 40 state attorneys general, the National Conference of state Legislatures, as well as civil rights and consumer groups, argue that the states need flexibility to address local harms and to enforce existing laws that already protect privacy and civil rights. They argue that federal inaction could leave a regulatory vacuum.
If the moratorium becomes law, companies that have built compliance programs for state statutes could pause those efforts while they await federal rules. It is likely significant litigation would result as courts would need to decide whether federal pre-emption nullifies existing private rights of action. Plaintiffs might sue under older statutes while courts decide whether the moratorium fully preempts state private-right-of-action claims. Additionally, during the freeze, governmental agencies would rely on sector statutes such as Title VII and the Fair Credit Reporting Act, leaving enforcement gaps on algorithmic bias, transparency, and safety.
The rapid growth of AI and the unsettled legal landscape make compliance challenging. For now, businesses must continue complying with state AI laws that are in force today. Until the Senate acts, those state statutes remain valid. Moreover, businesses should be tracking any amendments to H.R. 1 and other stand-alone AI bills, it is likely that while while the Senate deliberates, the language could change quickly. Even if the moratorium passes and the state mandates disappear, existing anti-discrimination, privacy, product safety, and tort principles still apply to AI tools and will become likely agency enforcement strategies. Businesses should be prepared to pivot to a federal framework if Congress ultimately passes a pre-emption measure coupled with new national standards.
Most observers expect a court challenge on federalism grounds if the moratorium clears the Senate. Businesses therefore could face at least twelve to eighteen months of uncertainty. Until the dust settles, prudent employers will align their AI deployments with the strictest requirements now on the books and maintain robust records to defend against either state or federal scrutiny.
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