Startup News Digest 07/10/26

The Big Story: Congress, courts, states push ahead on age verification

The House, the Supreme Court, and state legislatures have all made moves in the last two weeks that could push Internet companies to collect or process more information about the age of their users. Under many proposals moving through Congress and state legislatures or being greenlit by courts, websites and apps will have to—either directly or indirectly—verify the age of all of their users and, in many cases, restrict young users’ access to features or products altogether. 

This week, the Supreme Court declined to step in and pause enforcement of a Texas law that requires app stores to verify users’ ages and requires app developers to rate their apps for different age groups and obtain parental consent when making significant changes to their apps. The Texas law had been paused by a federal court late last year, but that court’s ruling was reversed by a panel of judges on the Fifth Circuit Court of Appeals last month. The groups challenging the law—a tech industry group and a student advocacy group—asked the Supreme Court to step in and restore the pause, explaining that the state law violates the First Amendment and will cause irreparable harm while the challenge is litigated in lower courts, while states attorneys general urged the Supreme Court to let the law stand. Engine joined industry groups on an amicus brief to the Supreme Court arguing that allowing the law to stay in effect would harm app developers and users. The law will now be considered by the Fifth Circuit Court of Appeals in August.

Meanwhile, other states are forging ahead with their own frameworks that would either explicitly or effectively require age verification. Massachusetts is considering dueling proposals from its House and Senate with varying approaches to age verification. The House bill—passed in April—would require that platforms verify users’ ages, ban anyone under the age of 14, and obtain parental consent for 14- and 15-year-olds. The Senate bill is focused on banning specific design features—including infinite scroll and algorithmic recommendations—for minors and leaves the “daunting task” of figuring out how websites and apps have to verify users’ ages without collecting government IDs to a rulemaking process run by the state’s attorney general. Several other states remain active in this space too. California is considering amending a bill it passed last year—slated to go into effect this coming January—to require more broadly applicable and granular age verification requirements, and California and New York are working on implementing regulations for online safety laws they passed in recent years.

After years of debate, Congress has moved on online safety as well. Last week, the House passed the Kids Internet and Digital Safety (KIDS) Act, which contains versions of several online safety and privacy bills that had been considered earlier this Congress by a key House committee. Though earlier versions of some of the measures included in the package would not have required startups to implement age verification (instead, relying on the “actual knowledge” standard found in current children’s privacy law, where users declare their own age), the bill that passed the House includes the more vague standard that companies treat young users differently if they know or “should have known” the users were children. The House package varies from the Senate’s approach to online safety, including the Kids Online Safety Act (KOSA), complicating the path forward for both bills.

Much of the pushback to age verification requirements stem from concerns about the First Amendment-protected rights to access information and speak, including anonymously, online. For startups, age verification requirements create overwhelming costs and raise privacy and security concerns—which are less likely to be tolerated by users dealing with a new, small, and relatively unknown company. Policymakers rightfully looking to ensure young Internet users can have safe, healthy online experiences must consider the impacts age verification requirements will have on privacy, security, expression, and competition online.

Policy Roundup:

OMB sees pushback on sweeping federal funding overhaul. The Office of Management and Budget (OMB) is receiving criticism for its proposal to change the way federal grants are awarded, including prioritizing input from political appointees and deprioritizing peer review in the grant review process, allowing grants to be cancelled, and an overall focus on aligning federal grant programs with the President’s priorities. In a letter to OMB Director Russell Vought, Sen. Susan Collins (R-Maine) expressed concern that the changes will create “new, burdensome requirements on award recipients that would harm small and rural communities, undermine scientific and biomedical research, and conflict with Congress’ control over the federal funding process” and asked Vought to extend the comment period so more impacted communities can weigh in. As Engine has previously explained, these sweeping changes will impact several agencies that interact with the startup ecosystem, including those that administer grants to startups or startup ecosystem support organizations and those that fund inputs that are critical to innovation, including broadband.

Trump admin lifts limits on Anthropic model. The Commerce Department is no longer imposing export controls on Anthropic’s newest models, Claude Mythos and Claude Fable, allowing the company to bring those products back to the market. The administration had imposed export controls earlier in June after reports that the models’ guardrails could be bypassed, creating risks that the model could be used by bad actors to discover and take advantage of cybersecurity vulnerabilities—reports that Anthropic contested.

Site blocking proposals gain momentum. The House Judiciary subcommittee on courts, intellectual property, artificial intelligence, and the Internet convened a hearing last Tuesday to discuss a range of intellectual property issues, including proposals that would allow copyright holders to petition courts to block websites alleged to facilitate copyright infringement. The discussion follows the Supreme Court’s unanimous ruling earlier this year in Cox Communications v. Sony Music Entertainment, which affirmed that Internet service providers are not automatically liable for users’ alleged copyright infringement. The site blocking measures that are gaining popularity raise concerns about unintended consequences, including the risk of blocking legitimate websites, restricting lawful speech, and creating new compliance burdens for startups navigating site blocking orders.

U.S. kicks off 10 years of annual trade deal reviews with Mexico, Canada. The U.S. declined to renew the U.S. Mexico Canada (USMCA) trade agreement, which helped harmonize requirements and minimize trade barriers across North America, making it easier for U.S. startups to scale globally. While USMCA remains in force, the countries will have to negotiate every year for the remaining decade of the agreement’s life, creating uncertainty and making it difficult for companies looking to grow throughout the continent to plan ahead. This is the latest in the Trump administration’s moves to disrupt multilateral, long-term trade agreements—which create consistency for startups—in favor of bilateral negotiations and threats of tariffs.

NTIA gets heat on delayed $21 billion broadband expansion. During a National Telecommunications and Information Administration (NTIA) oversight hearing last week, the House Energy and Commerce subcommittee on communications and technology questioned NTIA Administrator Arielle Roth about when the $21 billion in funds from the Broadband Equity, Access, and Deployment (BEAD) Program will be distributed and why contracts were awarded to StarLink satellite service over fiber-optic infrastructure. The deployment of BEAD Program funding remains uncertain, even though states were previously allocated funds, leaving rural and underserved communities—including entrepreneurs and startups seeking to launch and scale their businesses—without adequate broadband infrastructure.

SCOTUS says ‘geofence warrants’ constitute a search. The Supreme Court ruled last week that “geofence warrants”—the sweeping warrants that law enforcement sends to tech companies holding users’ location data to gather data on anyone in a specific place at a specific time—is a search and, under the Fourth Amendment, requires probable cause and specificity. In the majority opinion, Justice Elena Kagan wrote that users have an expectation of privacy that their location information won’t be obtained by law enforcement from a third party.

On the Horizon:

TUE 07/14: The Senate Judiciary Committee will convene a hearing to examine patent eligibility at 10:15 AM ET.

Startup Roundup:

#StartupsEverywhere: New York, New York. ALCOVE, a New York City-based startup, designs productivity pods to help professionals find privacy and focus in high-traffic settings, such as hotels. We sat down with CEO and founder Helen Knight to discuss the complexities of scaling and multi-state hiring, the challenges of founder parenthood, and the need for accessible grant funding for diverse entrepreneurs.