AI Laws Gone Wild: How U.S. States Are Turning Compliance into a Full-Time Job

12/24/24

Editorial team at Bits with Brains

In 2024, the United States experienced a significant rise in state-level artificial intelligence (AI) legislation, with nearly 700 bills introduced across 45 states.

Key Takeaways

California and Colorado Lead: California emphasizes transparency in generative AI, while Colorado targets high-risk AI applications with accountability measures.
Fragmented Regulations: Businesses face challenges navigating varying requirements across states.
Compliance Costs: Adapting to new laws requires investments in legal, technical, and operational resources.
Opportunities for Leadership: Companies adopting ethical AI practices can gain a competitive edge.
Future Outlook: More stringent and harmonized regulations are expected in 2025 and beyond.

In 2024, the United States experienced a significant rise in state-level artificial intelligence (AI) legislation, with nearly 700 bills introduced across 45 states. This surge highlights the growing urgency among policymakers to address AI's societal and economic impacts amidst the absence of comprehensive federal regulation. From California’s transparency-focused mandates to Colorado’s pioneering regulation of high-risk AI systems, these state-driven initiatives are reshaping the regulatory framework for businesses reliant on AI technologies.

California’s Pioneering Transparency Laws

California has positioned itself as a leader in AI governance by enacting laws that demand accountability and transparency from businesses deploying generative AI (GenAI) systems.

Generative Artificial Intelligence Training Data Transparency Act (AB 2013):

Requires developers of GenAI systems to disclose detailed information about the datasets used for training models.
Applies retroactively to systems released after January 1, 2022, with compliance deadlines set for January 1, 2026.
Developers must update disclosures for significant modifications to their systems.

2. California AI Transparency Act:

Mandates GenAI providers with over one million monthly users to:
Offer free AI detection tools.
Embed visible and latent disclosures in AI-generated content.
Ensure third-party licensees adhere to these standards.
Non-compliance can result in civil penalties of $5,000 per day.

These measures aim to curb misinformation and enhance public trust but pose compliance challenges for businesses operating at scale or across multiple jurisdictions.

Colorado’s Comprehensive Regulation of High-Risk AI

Colorado broke new ground with the Colorado Artificial Intelligence Act (CAIA), enacted in May 2024. This law focuses on regulating high-risk AI systems—those that influence consequential decisions such as employment, housing, or financial services.

Key Provisions:

Developers and deployers must exercise "reasonable care" to prevent algorithmic discrimination based on race, gender, disability, or other protected characteristics.
Businesses are required to:
- Conduct annual impact assessments.
- Implement risk management policies to mitigate potential biases.
Employers must notify employees when using high-risk AI tools for decision-making processes.

The CAIA sets a rigorous standard for accountability and serves as a model for other states considering similar legislation.

Broader Trends Across States

The wave of state-level AI legislation mirrors earlier patterns seen with consumer data privacy laws. In 2024:

33 states established task forces or councils to study AI's impact across sectors.
Utah enacted seven AI-related laws, making it one of the most active states in this area.
Texas is deliberating the Texas Responsible Artificial Intelligence Governance Act (TRAIGA), which would impose strict requirements on high-risk AI systems used in employment decisions.

While some states focus on specific issues like deepfake technologies or algorithmic bias, others are exploring broader frameworks akin to Colorado's CAIA. This fragmented approach underscores the need for businesses to adopt agile compliance strategies.

Implications for Businesses

As with most things, the proliferation of state-level AI regulations presents both challenges and opportunities:

Challenges:

Regulatory Fragmentation: Companies must navigate varying requirements across states. For instance, California emphasizes transparency while Colorado prioritizes bias prevention.
Increased Costs: Compliance demands investments in legal expertise, technical tools, and operational adjustments.

Opportunities:

Ethical Leadership: Businesses that proactively adopt best practices—such as transparent data usage and robust bias mitigation—can position themselves as leaders in responsible AI deployment.
Competitive Advantage: Early compliance can enhance consumer trust and reduce future regulatory risks.

Looking Ahead

As state legislatures continue addressing gaps left by federal confusion and inaction, businesses should anticipate even stricter requirements in the coming years. Policymakers are closely monitoring trailblazers like California and Colorado to refine their own approaches. Meanwhile, industry groups are advocating for harmonized standards to reduce regulatory fragmentation.

Engaging with policymakers early and aligning with emerging regulations can help companies mitigate risks while shaping the future of AI governance in the U.S.

FAQs

1. Why is there no federal AI regulation yet?

The complexity of regulating rapidly advancing technology has delayed federal action. States have stepped in to address immediate concerns.

2. What industries are most affected by these laws?

High-risk sectors like employment, housing, financial services, healthcare, and consumer-facing applications are under closer scrutiny.

3. How can businesses prepare for compliance?

Businesses should conduct readiness assessments, implement risk management policies, and stay informed about evolving state laws.

4. Will federal regulation eventually replace state laws?

While federal regulation may harmonize standards in the future, state laws will likely continue playing a significant role due to their tailored approaches.

5. What happens if a business fails to comply?

Non-compliance can result in significant penalties, legal actions, and reputational damage depending on the state's enforcement mechanisms.

Sources:

[1] https://www.bclplaw.com/en-US/events-insights-news/us-state-by-state-artificial-intelligence-legislation-snapshot.html

[2] https://www.wilmerhale.com/-/media/files/shared_content/editorial/publications/wh_publications/client_alert_pdfs/20240305-state-governments-move-to-regulate-ai-in-2024.pdf

[3] https://www.mayerbrown.com/en/insights/publications/2024/09/new-california-law-will-require-ai-transparency-and-disclosure-measures

[4] https://www.cliffordchance.com/insights/resources/blogs/talking-tech/en/articles/2024/07/colorado-new-comprehensive-ai-legislation.html

[5] https://www.mwe.com/insights/ai-and-the-law-emerging-trends-in-enforcement/

[6] https://statescoop.com/ai-legislation-state-regulation-2024/

[7] https://www.goodwinlaw.com/en/insights/publications/2024/09/insights-technology-aiml-how-states-are-stepping-in-to-regulate-ai

[8] https://kpmg.com/us/en/articles/2024/ai-regulation-colorado-artificial-intelligence-act-caia-reg-alert.html

[9] https://project-disco.org/innovation/recapping-states-ai-policy-boom-in-2024/