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May 30, 2025 | Legal Advisory

On May 22, 2025, the House of Representatives passed its proposed budget reconciliation bill in a 215-214-1 vote. Although the bill has mostly generated headlines for its tax and spending provisions, it also features a proposed 10-year ban on any state law or regulation “limiting, restricting, or otherwise regulating artificial intelligence models, artificial intelligence systems, or automated decision systems entered into interstate commerce.” The moratorium features exemptions for AI-friendly state laws and regulations, such as those aimed at streamlining licensure and removing barriers to AI use. Additionally, the bill exempts states seeking to use generally applicable laws to enforce requirements on AI, so long as those laws apply to systems with comparable functions to AI.

Proponents of the moratorium argue it is crucial to establish and ensure U.S. superiority in the AI space, while opponents believe the moratorium prevents states from enforcing laws on the books and creates a regulatory vacuum. Among the opponents are 40 state attorneys general, who drafted a letter to Congress opposing the moratorium as “sweeping and wholly destructive.” The bill will likely face significant hurdles in the Senate due to Section 313 of the Congressional Budget Act – also known as the “Byrd Rule” – which prevents extraneous legislation from being included in a reconciliation bill. Moreover, the bill may face bipartisan opposition from Senators who wish to maintain state AI regulation in the absence of federal law on the issue. Senator Blackburn of Tennessee, for example, stated: “until we pass something that is federally preemptive, we can’t call for a moratorium.”

As demonstrated by the moratorium, laws and regulations concerning AI are constantly evolving. Both cross-border and domestic companies, whether implementing or developing AI, should be aware that the landscape is unclear, and action concerning AI should be taken on a case-by-case basis.

This advisory was prepared by Portia Keady in Nutter’s Corporate Department. If you would like additional information, please contact any member of the department or your Nutter attorney at 617.439.2000.

The author would like to thank Summer Associate Matthew Wolpe for his contributions to the article.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.