President Trump’s polarizing H.R.1, more popularly known as the “One Big Beautiful Bill Act” (OBBB), covers a range of GOP priorities from Medicaid cuts to the national deficit. Importantly, early versions of the bill also included significant provisions regarding the development and dissemination of artificial intelligence (A.I.) systems.
The A.I. Regulation Moratorium
Until recently, the bill contained a provision for a ten-year moratorium that would have prevented states from “enforc[ing] any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems.” The provision defined AI as “a machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations, or decisions influencing real or virtual environments.” This provision was pulled from the House Energy and Commerce Committee’s budget reconciliation bill, which was released on May 11, 2025. The measures passed the House of Representatives on May 22, 2025, notably amending the language so that indictment would not carry a criminal penalty.
Funding the B.E.A.D. Program
On June 5th, the Senate Commerce Committee, led by Senator Ted Cruz, released a revised version of their budget reconciliation that would provide 500 million dollars to implement the Broadband, Equity, Access, and Deployment (B.E.A.D.) Program. The 42 billion dollar federal grant for B.E.A.D. was signed into law as part of the Infrastructure Investment and Jobs Act in 2021. States eligible to receive funding from B.E.A.D. would be required to abide by the 10-year prohibition on A.I. regulation. Notably, all states and territories are “eligible entities,” so the moratorium would apply even if the state had not accepted funding. Despite the proposed moratorium surviving the scrutiny applied under the Byrd Rule, a rule that prohibits provisions that are “extraneous” to the federal budget in the reconciliation process, it ultimately proved to be wildly unpopular in the following weeks.
Final Bill Passage
On July 1st, the Senate passed an amendment to remove the proposal entirely in a 99-1 vote, after weeks of bipartisan criticism. The Senate later narrowly passed H.R. 1 by a 51-50 vote after stripping the A.I. moratorium entirely. While it is unlikely that House Republicans will try to revive an A.I. provision due to other H.R.1 bill issues taking higher priority, it is still possible and worthwhile to examine this provision’s development, advocates, and detractors.
Advocates for the Moratorium
Advocates for the moratorium have pushed that leaving regulations up to states, however well-intentioned, would result in “a compliance nightmare that stymies innovation.” Having a cohesive federal definition for A.I. and related terms would eliminate conflicting compliances that tech companies would have to abide by and evaluate on a state-by-state basis. Vice President J.D. Vance has emphasized the Trump administration’s focus on enabling technological innovation, stating that “to restrict [A.I.’s revolutionary] development now will not only unfairly benefit incumbents in this space, it would mean paralyzing one of the most promising technologies we have seen in generations.”
Along with incentivizing growth, proponents argue that a unified national framework is crucial for fostering innovation and ensuring consistency across the country. They contend that conflicting state laws would create significant compliance challenges, especially for smaller firms, research labs, and universities, which they believe would face disproportionate burdens compared to larger companies. Additionally, big tech companies like Meta have voiced their support for an artificial intelligence action plan pausing statewide regulations. They claim that “removing energy, infrastructure, and permitting barriers [will] enable timely and efficient advancement of energy infrastructure to support domestic data center investment and growth.”
Other prominent figures in the tech world, such as Open A.I.’s Sam Altman, have advocated for “sensible regulation that does not slow us down,” also insisting Washington should loosen the reins to promote American technological innovation. At the same Senate hearing where Sam Altman testified on AI competitiveness, Senator Ted Cruz brought up the historical example of the 1998 moratorium on internet taxes, contending that the United States saw a resulting boom in productivity gains and investment growth that would not have been possible otherwise.
If regulations slow down A.I. development, supporters of the moratorium claim regulations would divert valuable resources away from research. With states potentially enacting a variety of standards, such as differing definitions of “high-risk AI” or “algorithmic bias,” innovators would be forced to navigate a complex and ever-changing legal landscape, ultimately hindering progress. This complexity could disproportionately impact startups and academic researchers who lack the legal and financial resources to comply with 50 different regimes.
Deregulation, they argue, offers a window of opportunity, not a regulatory void. A ten-year pause on state AI laws is framed as a strategic move to preserve America’s global tech leadership. It allows time to streamline federal guidelines, invest in infrastructure like data centers and broadband, and ensure safety and accountability without prematurely stifling growth. As one supportive source optimistically notes, “It is a strategic pause—an opportunity to develop a coherent national framework for AI governance that promotes safety, ethics, and accountability while simultaneously unleashing the immense innovative potential of this technology,” which would ultimately preserve America’s dominance in global technology leadership.
Arguments Against the Moratorium
Critics argue that the proposed ten-year moratorium would block state-level regulations meant to address tangible harms, such as algorithmic bias in hiring, AI-generated deepfakes in elections, automated decisions in healthcare or insurance, surveillance technologies, and consumer transparency standards. This sweeping preemption could leave communities vulnerable, especially in the absence of robust federal alternatives. They point out that Congress has only passed one A.I.-related bill (the TAKE IT DOWN Act) so far, and that states are more adept at addressing the concerns of their constituents. Hailing from both sides of the aisle, opponents of the moratorium assert that state laws regulating AI are necessary in the absence of federal law codifying consumer protections and that the moratorium would irresponsibly wipe away state-level frameworks and deprive consumers of reasonable protections.
Other critics push against the argument that “patchwork” state-by-state laws are harmful, pointing out that “building codes, environmental regulations, road safety laws, and any number of other rules are decided by states.” Additionally, detractors of the bill note that larger federal legislations tend to model themselves after state laws.
In a letter signed by a bipartisan coalition of attorneys general, officials insisted that the bill “does not propose any regulatory scheme to replace or supplement the laws enacted or currently under consideration by the states, leaving Americans entirely unprotected from the potential harms of A.I.” Additionally, non-partisan economic analysts have voiced concerns that our current economic foundations and sparse regulatory policies “exhibit a clear tendency towards monopoly,” particularly in the realm of A.I. In July 2024, the Federal Trade Commission, the Department of Justice, the Competitions and Markets Authority, and the Competition Commissioner for the EU released a joint statement raising concerns about the tech industry’s structure enabling Big Tech to control A.I.’s development, with growing costs for data input and creating a barrier for industry entry that could only be broached by a few multi-billion-dollar corporations.
While Senator Ted Cruz pointed to the 1998 Internet tax moratorium as a success story, others argue that the comparison is flawed and that this example of historical deregulation occurred when Congress had specific actionable goals in place of state laws. Federal preemption in cases like Section 230 came after real legal conflicts, not in anticipation of them. Moreover, Section 230’s broad immunity has been criticized for enabling harmful behavior online and for shielding tech companies ’from liability, allowing for their near monopoly today. For these critics, the lesson from the 1990s is not to avoid regulation altogether, but to ensure it is smart, responsive, and capable of evolving alongside the technology it governs.
Conclusion
With the removal of the moratorium provision, the bill’s threat to state legislation being passed has dwindled. However, there is a reasonable possibility that Congress will attempt to pass a standalone federal bill later on since A.I. innovation is a priority of the Trump administration. Some pragmatic pundits have hypothesized that President Trump and his allies were willing to give up on the moratorium in H.R. 1 in order to pass the rest of the bill. The tech industry is likely to continue lobbying for policies that reduce friction or strip regulatory compliance rules. On June 27th, Reuters reported that the Trump administration will release an AI action plan that may include the creation of a nationwide Clean Water Act permit so that companies will not have to seek permits on a state-by-state basis. According to their anonymous sources, the executive actions will boost “energy supply to power the U.S. expansion of artificial intelligence.”