The Big Story: Innovation advocates warn states on AI bills
Policymakers in key states are poised to reopen conversations about the rules governing AI, threatening to create a patchwork of complex and expensive rules for startups to navigate. This week, members of the innovation ecosystem sounded the alarm about a state patchwork of AI laws that will burden startups with conflicting, duplicative, and expensive rules that slow innovation and drain resources. Startups are key stakeholders in AI policy and need clear rules in order to develop and deploy new models.
On Wednesday, Engine warned New York Governor Kathy Hochul (D) that the Responsible AI Safety and Education (RAISE) Act should be vetoed as its approach to regulation remains harmful to startups and innovation. By holding foundation model developers liable for end-user behavior, the bill will disincent availability of foundation models—especially for open-source models, where developers have even less control over how models are used. Startups rely on these models to build unique companies in a cost-effective way, and the RAISE act currently threatens to restrict the availability of models, endanger startups’ success, and harm their ability to serve their users. Also this week, the Consumer Technology Association sent a letter urging California Governor Gavin Newsom to oppose several bills regulating AI development, explaining how they would harm AI innovation in the state. The California legislature will return from their summer break next week and begin quickly acting on many of the debated bills.
The letters come as state lawmakers in Colorado are set to convene next week for a special session, where a key focus may be amendments to the state’s first-in-the-nation AI rules set to come online early next year. Many startups innovating in key sectors—like finance, healthcare, education, or employment—will find themselves subject to the law’s most stringent obligations, and some are considering leaving the state. Congress comes back into session in September and should pursue legislation to create a uniform national standard for AI to support innovation and increase consumer trust.
Policy Roundup:
Forthcoming Senate bill to create sandboxes for AI. Senate Commerce Chair Ted Cruz (R-Texas) is preparing draft legislation that would let companies working with AI apply for waivers from regulations that pose barriers to their work. Regulatory sandboxes in other sectors have been helpful for promoting innovation, but how they are structured greatly impacts their efficacy and value to startups with limited resources.
Court ruling shows broad impact of UK online safety rules. A court in the United Kingdom rejected the Wikimedia Foundation’s challenge to the country’s Online Safety Act (OSA), opening the door for British regulators to scope a wide universe of companies to the strictest parts of the law’s complex and evolving compliance burdens. While this week’s ruling directs British regulators to be flexible in interpreting how the OSA applies to Wikipedia, it declined to preemptively keep regulators from treating Wikipedia as a “Category 1” company—or like a large social media company—which would effectively require it to verify the identity of Wikipedia contributors. The Wikimedia Foundation has said it may need to limit access to Wikipedia for UK users if British regulators classify it as “Category 1” when it announces categorization decisions later this summer.
EU’s digital rules undermine startup success. A new paper warned that the EU’s broad regulations—including the Digital Markets Act, Digital Services Act, and AI Act—are at odds with its goal of ensuring a successful startup ecosystem, with overregulation, fragmented capital markets, and low startup activity already driving Europe’s economic challenges. The rules both make it harder for U.S. startups to compete in the bloc and serve as a cautionary tale for replicating onerous rules at home that will stifle innovation.
Startup Roundup:
#StartupsEverywhere: Wilmington, Delaware. Dunya Analytics is providing digital tools to help businesses measure, manage, and report on biodiversity and nature-related risks. We sat down with their founder and CEO, Megan Pillsbury, to talk about her startup, her experience applying for Small Business Innovation Research (SBIR) grants, and more.
