At a Glance

  • A bill proposing a 10-year moratorium on artificial intelligence regulation at the state level cleared a key procedural hurdle in the U.S. Senate on Saturday, according to an announcement from the senior member of the Senate Budget Committee.
  • Republican supporters are attempting to include the controversial provision in the Senate version of the major tax and spending bill, which the House calls the "One Big Beautiful Bill," laying the foundation for most of President Trump's domestic agenda.
  • Despite concerns raised by Democrats, the Senate parliamentarian has ruled that the AI provision does not violate the Senate's "Byrd Rule" and can remain in the bill. This was confirmed in a press release from Senator Jeff Merkley of Oregon, the ranking member of the Senate Budget Committee. The rule is designed to prevent the budget reconciliation process, used to streamline passage of priority tax and spending bills, from being used for unrelated policy changes.

In Depth

The push for this freeze comes as AI regulations and legislative proposals at the state level rapidly pile up, creating a complex regulatory environment for businesses.

"A patchwork of state and local regulations will hit small businesses hardest, as they lack the resources to navigate various conflicting state and local rules," said a coalition led by the U.S. Chamber of Commerce in a June 9 letter to senators.

The letter cited a recent Chamber report stating that one in four small business owners have not deployed AI tools due to concerns about legal or compliance issues.

The letter noted that more than 1,000 AI-related bills have been introduced at the state and local levels this year alone, and urged support for the regulatory freeze. Opponents of the proposed freeze include the National Conference of State Legislatures.

Last month, the House passed its version of the spending bill that includes the provision to pause state AI regulations. Before being sent to the president for signature, the massive tax and spending bill still needs to pass the Senate, and both chambers must resolve differences between their versions.

"We continue to see Republicans flagrantly disregard reconciliation rules in drafting this bill," Merkley said in the press release. "Republicans' constant attacks on middle-class families to give tax cuts to billionaires are a slap in the face to working families everywhere, and Democrats are fighting back."

The press release noted that Democrats have successfully blocked some provisions under the Byrd Rule, including a proposed restriction on certain grants to "sanctuary cities"—cities that have disagreements with the U.S. Department of Justice over immigration enforcement. Other items recently blocked include a provision aimed at abolishing the Public Company Accounting Oversight Board, though it could be modified to comply with the rule, CFO Dive previously reported.

Under the Byrd Rule, any U.S. senator can raise a procedural objection to a provision that violates the rule. If the parliamentarian rules the provision non-compliant, that ruling can be overridden by a 60-vote supermajority of senators. Republicans currently hold 53 seats in the Senate.

The parliamentarian's ruling on the AI provision was welcomed by Senator Ted Cruz of Texas, the Republican chairman of the Senate Commerce Committee and a leading proponent of the provision.

"The provision is very simple," he said in an emailed statement. "As a condition for receiving part of the new $500 million in federal AI deployment investment, states that voluntarily seek these funds must agree to temporarily pause AI regulation and use the funds in a cost-efficient manner. History shows that this light-touch regulatory approach to new technologies has been incredibly successful in promoting American innovation and jobs."

However, the AI provision faces opposition from bipartisan lawmakers, including Trump ally Senator Marsha Blackburn, a Republican from Tennessee.

"We cannot prohibit states across the country from protecting Americans, including Tennessee's vibrant creative community, from the harms of AI," Blackburn said in an emailed statement.