States must choose between AI regulation and $500 million in federal funding as Senate Parliamentarian Elizabeth MacDonough approves a controversial 10-year moratorium on state AI laws in the One Big Beautiful Bill.
Key Takeaways
- A Republican-backed provision in the One Big Beautiful Bill would suspend state-level AI regulation until 2035, making those states ineligible for $500 million in federal technology funding.
- Senator Ted Cruz’s proposal was approved by the Senate Parliamentarian to be included in the reconciliation bill, meaning it can pass with a simple majority vote.
- The measure has created unusual political alliances, with both Republicans and Democrats divided on the issue of state versus federal AI regulation.
- Critics argue the provision undermines states’ rights and removes protections for Americans, while supporters claim it prevents regulatory fragmentation and promotes innovation.
- The proposal has been scaled back from affecting the entire $42 billion broadband fund to only impacting a $500 million AI-specific fund.
Federal Control vs. State Regulation
The One Big Beautiful Bill now includes a controversial provision that would effectively halt state-level artificial intelligence regulation for a decade. Senate Parliamentarian Elizabeth MacDonough announced on June 21 that the Republican-backed measure to temporarily block states from regulating AI can remain in the bill and move forward through the budget reconciliation process, requiring only a simple majority to pass rather than the typical 60-vote threshold for major legislation. This decision marks a significant victory for those advocating a federal approach to AI oversight rather than a patchwork of state regulations.
“History has shown that this light-touch regulatory approach to new technologies has been incredibly successful in promoting American innovation and jobs,” Senator Ted Cruz, Texas.
The provision would make states that implement their own AI regulations ineligible for a portion of federal funding – specifically $500 million designated for modernizing and securing information technology systems. Senator Cruz, the primary architect of the proposal, had to scale back his original plan, which would have denied states access to the much larger $42 billion broadband fund. The modified version rebrands the initiative as a “temporary pause” rather than a complete moratorium, seemingly in an effort to make it more palatable to hesitant lawmakers.
Unusual Political Alliances
This AI regulation provision has created strange bedfellows in Washington, with significant dissent emerging from both sides of the political aisle. The issue doesn’t break cleanly along party lines, with several Republicans, including Senator Marsha Blackburn of Tennessee, opposing the measure on the grounds that it undermines states’ rights to protect their citizens. Meanwhile, some Republicans strongly support the measure as a way to prevent regulatory fragmentation that could hamper technological development and American competitiveness in the AI sector.
“We cannot prohibit states across the country from protecting Americans, including the vibrant creative community in Tennessee, from the harms of AI,” Senator Marsha Blackburn, Tennessee.
The division extends beyond lawmakers to include conservative advocacy groups. Some populist conservatives and the House Freedom Caucus have voiced strong opposition to the moratorium, suggesting it gives too much power to technology companies. Mike Davis, a conservative tech critic, has been particularly vocal against the provision, framing it as a potential threat to conservative voices online. This unusual coalition of opponents highlights how the issue transcends traditional political boundaries, centering instead on questions of federalism, innovation, and corporate power.
• Americans, please review the list below. Anything that you think should be changed/trimmed? The document link is at the bottom. @senategop, please consider improving the bill with the suggestions from House Freedom Caucus that didn’t get adopted.
• “Here are 50 reasons… https://t.co/ovO50zxFav pic.twitter.com/sKIl0Q1tnc
— Conservatism Prevents Tyranny (@SaveLibertyUS) June 8, 2025
State Protections vs. Innovation
At the heart of this debate is a fundamental question about how America should approach regulating emerging AI technologies. Currently, 24 states have already begun implementing their own AI regulations to address potential harms and protect citizens. Opponents of the federal moratorium argue that eliminating these state-level protections would leave millions of Americans vulnerable while waiting for comprehensive federal action that may be slow to materialize or influenced by powerful tech industry lobbying.
“This ten-year moratorium in the Big Beautiful Bill gives Big Tech the green light to censor conservatives,” Mike Davis, Conservative Tech Critic.
On the other side, supporters of the moratorium, including Trump’s AI adviser David Sacks, argue that preventing a patchwork of state regulations is essential to promote American innovation and prevent what they term “AI Doomerism” – excessive regulation based on theoretical future harms. They maintain that a unified federal approach would provide clarity to developers while still protecting Americans from genuine AI threats. As the provision heads toward a final vote, its fate remains uncertain, with amendments expected from both supporters and opponents seeking to either strengthen or eliminate the controversial measure.
