Startup News Digest 08/07/26
The Big Story: Senate committee advances bills that will require age verification
A key Senate Committee considered several bills this week that would either effectively or explicitly require Internet companies to verify all users’ ages in an attempt to minimize young Internet users’ access to certain features and types of content. During a markup Wednesday, the Senate Commerce Committee advanced the long-debated Kids Online Safety Act (KOSA) and two bills that would create obligations for chatbot developers, while the committee failed to advance an age verification bill that is ostensibly aimed adult websites but would impact any Internet company that hosts user content. For startups, the bills moving forward would change how companies design their products and interact with users and require expensive and imperfect age verification systems that create risks for users’ privacy and security.
Ahead of the markup, Engine raised concerns about specific requirements under the proposals as well as the bills’ shared push towards age verification requirements by creating new obligations on services based on whether they know—or should know—if a user is young. In practice, those standards would push companies to collect information data from users they do not otherwise need or rely on costly age-verification tools, we explained. Beyond the age verification requirements, the Children’s Health, Advancement, Trust, Boundaries, and Oversight in Technology (CHATBOT) Act would require companies to build and maintain new parental-access and data-retention systems that create ongoing engineering costs and privacy and cybersecurity risks. And the Shielding Children's Retinas from Egregious Exposure on the Net (SCREEN) Act would have created age verification requirements that apply broadly to websites hosting user content and discouraged the use of virtual private networks, which help protect users’ privacy and security. (The SCREEN Act passed the committee on a 15-13 party-line vote, but not enough Senators voted in person to advance the bill.)
The committee’s passage of KOSA sets up the upper chamber to be in tension with the House, which passed its own version of the bill as part of a broader package earlier this summer. The House-passed version does not contain the Senate’s “duty of care” language, a sweeping requirement to prevent harm to young users that would, in practice, push Internet companies to limit young users’ access to legal user content. During Wednesday’s markup, Senate supporters of KOSA reiterated their opposition to the House-passed bill, teeing up a showdown between the two chambers. As lawmakers continue to tackle the important but complex question of protecting young Internet users, it’s critical they balance privacy and security concerns as well as the ability of young people to access and participate in online communities, including those facilitated by startups.
Policy Roundup:
White House moves ahead with model review framework. The Trump administration met with leading AI companies this week to discuss a voluntary framework for giving the federal government early access to certain advanced models before release so officials can evaluate cybersecurity and national security risks. Reports surrounding the framework suggest it would apply to closed models but could exclude open-weight systems—and that the framework would not be publicly released. For startups, clarity about which models are covered and how reviews will work will be critical to creating certainty needed about the tools available to build and innovate with.
California training data bill threatens AI innovation. The California Senate Appropriations Committee teed up a vote next week on an AI training data transparency bill, which would require developers to identify, track, and record registered copyright holders of works used to train generative AI models. Engine submitted a letter opposing the bill ahead of the hearing, warning that requiring startups to track potentially billions of data points under the threat of financial penalties would hinder competition and innovation in California.
Senators examine small business capital barriers. The Senate Banking Committee held a hearing this week on expanding access to capital for small businesses and investors, particularly outside traditional financial and technology hubs. Witnesses and lawmakers discussed broadening the accredited investor definition and improving disclosures and consistent enforcement to strengthen investor confidence and capital access for underserved entrepreneurs. Also this week, the Senate Small Business and Entrepreneurship Committee considered how long development timelines and limited funding pathways can prevent early-stage technology companies from bringing new products to market. Witnesses called for more risk-tolerant capital, accessible federal contracting pathways that small firms can realistically navigate, and sustained public investment to help startups finance research and development that may take years to generate returns.
NSF launches regional AI infrastructure hubs. The National Science Foundation announced a $100 million program to support up to 10 state and regional hubs that will expand access to computing power, data, and other AI resources for scientific research and workforce development. Through partnerships across universities, governments, industry, and philanthropy, the hubs could give startups and researchers outside established technology centers greater access to both the capital-intensive tools and AI-skilled workers needed for AI-enabled research and development.
Startup Roundup:
#StartupsEverywhere: New York, New York. After an idea conceived and prototyped in business school went viral, founder and CEO Chris Lucas raised a $2 million pre-seed round for his company Secondsense, a platform that aggregates data across resale listings to determine the fair market value of commercial goods on the secondhand market. We sat down with Chris to talk about his company, the perception of algorithms versus their actual use, and more.