Startup News Digest 09/11/26

The Big Story: Congress returns with consequential startup policy fights unresolved

For startups, the policy fights awaiting lawmakers this fall could shape everything from their ability to access federal funding and critical technology to how they build products and interact with users online. Congress will return to Washington next week with a crowded agenda that includes must-pass legislation, including defense authorization and an end-of-year government funding deadline. As lawmakers work through these issues, they should consider how decisions across a wide range of policy areas could create unintended consequences for startups, particularly when those decisions affect the resources, tools, and markets startups rely on. 

Two must-pass legislative debates this fall could have implications for startups. Before Dec. 11, Congress must pass another government funding bill. Last week, the House passed a Senate-approved short term funding bill that includes a provision that temporarily blocks the federal government from implementing proposed changes to grantmaking programs that would have made them more politicized and less consistent and reliable. For startups that rely on federal innovation programs, uncertainty around grant decisions can affect research timelines, hiring plans, and access to critical non-dilutive capital. Congress is also facing a shot clock on the National Defense Authorization Act (NDAA), a bill usually passed in the fall that attracts amendments unrelated to defense. Earlier this year, the Senate moved a version of NDAA reauthorization that included several restrictions on advanced chip exports as well as a measure to make Internet platforms liable if a user shares child sexual abuse material.

There’s also a growing list of tech-related issues that lawmakers have said are a priority for the remainder of the year, including online safety and broadband subsidy reform, as well as a recently renewed push to regulate frontier AI models. On online safety, the House and Senate remain divided over their approaches to kids’ online safety, though both bills include requirements that could push Internet companies to determine users’ ages and change how they design their products. (At the same time, many of those provisions have been passed by state legislatures in the last year, leaving a patchwork of age verification, parental consent, and product-design requirements that startups have to navigate.) Lawmakers are also still awaiting a proposal from the bipartisan congressional working group on reforming the Universal Service Fund, which is intended to make broadband affordability programs more sustainable and efficient. As that work moves forward, policymakers should ensure these critical programs remain successful and sufficiently funded without raising the cost of doing business for U.S. startups. As Congress works through these debates—either as standalone measures or as part of must-pass legislation—policymakers should ensure efforts to address legitimate policy concerns do not inadvertently make it harder for startups to get capital, launch companies, and grow.

Policy Roundup: 

U.S. government backs fair use for AI training. In a filing with a federal court in New York last week, the Justice Department supported OpenAI’s position that its use of copyrighted content in training data is protected by the fair use doctrine in copyright law, which would mean OpenAI can train on that content without permission from copyright holders. The filing is part of litigation brought by The New York Times and other publishers and authors, arguing that training data ingestion should be considered infringing, regardless of what the model produces. The government’s position aligns with recent court decisions recognizing AI training as fair use. A ruling in favor of fair use in this case could help reinforce a legal framework that allows startups to access the large and diverse datasets needed to build and compete in AI without facing prohibitive licensing costs or litigation risk.

California lawmakers move to curb website privacy lawsuits. California lawmakers passed SB 690, which would limit private lawsuits under the California Invasion of Privacy Act involving common website and app technologies like cookies, pixels, and analytics tools. If signed by California Gov. Gavin Newsom (D), the measure would narrow an avenue of privacy litigation that currently allows private plaintiffs to seek $5,000 per violation without demonstrating actual damages, a meaningful change for startups, which are particularly vulnerable to the costs and risks associated with privacy litigation.

Trump Administration plans another restriction on immigration pathways. The Trump administration is planning to eliminate work authorization for certain spouses of H-1B workers, adding to a series of recent changes restricting pathways for high-skilled foreign talent. The planned rule follows a proposed $103,265 fee for cap-subject H-1B petitions and a separate proposal to eliminate the 60-day grace period for workers to find new sponsorship after losing a job. DHS has also sent the White House a proposed rule on a 100,000 fee for Optional Practical Training, the program that lets international graduates work in the U.S. after school. Together, these changes could make it harder for startups to recruit and retain high-skilled workers and further tighten the talent pool startups rely on.

House panel advances revised social media age restrictions. The House Energy and Commerce Subcommittee on commerce, manufacturing and trade advanced a significantly amended version of the bill aimed at limiting young Internet users’ experience online. The bill—now known as the Governing Underage Access and Requiring Data Consent in All Networks (GUARDIAN) Act—requires verifiable parental consent before users under the age of 16 can create accounts. While the change eliminates the previous version’s outright ban on users under the age of 16, the bill still uses a “knows or should have known” standard that could effectively push Internet platforms to verify users’ ages, creating high costs and privacy and security trade-offs for startups.

House advances bills to strengthen broadband networks. Last week, the House Energy and Commerce subcommittee on communications and technology advanced six bills aimed at strengthening communications networks, including the Proper Leadership to Align Networks for Broadband Act, also known as the PLAN for Broadband Act. The bill would direct the National Telecommunications and Information Administration to develop a national strategy in coordinating federal broadband programs for unserved and underserved areas, though efforts to reduce or consolidate broadband programs could limit resources supporting reliable, affordable high-speed connectivity.

On the Horizon: 

TUES 09/15: The House Small Business subcommittee on innovation, entrepreneurship, and workforce development will convene a hearing on how digital assets and cryptocurrency are affecting small businesses and entrepreneurs at 11:00 AM ET. 

WED 09/16: The Senate Commerce, Science, and Transportation Committee will hold an executive session to consider several bills, including legislation addressing government pressure on companies to remove user speech at 10:00 AM ET.

Startup Roundup:

#StartupsEverywhere: Coupeville, Washington. AETHEON, a Washington-based startup, is an AI-powered workforce platform that helps individuals turn their work, education, military, and life experiences into structured, verified skill profiles. It also helps employers identify talent based on demonstrated skills and competencies rather than traditional resumes or degree requirements. We sat down with founder Marie Gill to discuss AETHEON’s mission to reshape the broken talent marketplace, the strategic decision to prioritize trade secrets over patents, and the critical policy reforms needed to support transitioning military veterans.