The Big Story: Engine highlights rules holding back AI innovation
As the Trump administration looks to smooth the pathway for AI innovation, Engine submitted comments this week to the Office of Science and Technology Policy (OSTP), highlighting how rules across capital formation, talent access, and intellectual property are holding back startups, including those developing and deploying AI. In addition to pursuing AI policy that supports innovation and startups, the administration should take a comprehensive approach to policy and regulatory barriers that make it unnecessarily difficult for AI startups to launch and grow.
Policy that drives AI innovation should start by improving access to capital, including expanding the Securities and Exchange Commission’s (SEC) definition of “accredited investor” to consider more than wealth or income to broaden who can invest in startups. Additionally, policymakers could increase access to capital changing regulations that currently place limits on the formation and growth of funds that are exempt from certain SEC registration requirements. Modifying those regulations, including by enacting the Improving Capital Allocation for Newcomers Act, would expand venture capital formation, unlocking opportunities for AI startups, particularly outside traditional funding hubs.
Unlike larger companies, startups typically rely on flexible employment models—like independent contractors—as they scale. To support AI startups, policy frameworks should recognize the crucial role independent contractors play in the startup ecosystem, including by enabling portable benefit offerings and clarifying the independent contractor definition. The U.S. also needs stronger AI education, skilling programs, and expanded immigration pathways to attract foreign talent. Current immigration changes, such as the administration’s new $100,000 H-1B fee and wage-weighted lottery system, only make an already costly and uncertain process harder for startups to navigate.
Startups also depend on a balanced intellectual property system that protects innovation while preventing abuse. The administration should protect tools that startups need to prevent the weaponization of low-quality patents, including the U.S. Patent and Trademark Office’s (PTO) Patent Trial and Appeal Board which provides a vital, affordable alternative to federal court for challenging low-quality patents. Recent procedural changes and proposals—such as the PTO Director determining all review institutions and reducing access to this avenue—will make it harder for innovators to challenge invalid patents, which ultimately increases litigation costs and discourages investment in AI.
AI innovation depends on policymakers modernizing outdated regulations, improving capital access, closing talent gaps, and creating a uniform, startup-friendly policy environment that lets founders focus on building great companies. OSTP should work with Congress to prevent a fragmented patchwork of state and federal AI rules, as well as remove obstacles to model training. Startups play a big role in AI innovation, and policymakers should recognize the unique ways that federal regulations across policy areas shape the success of U.S. innovators.
Policy Roundup:
Senate adopts resolutions rejecting Trump tariffs. A handful of Senate Republicans joined Democrats to adopt a series of resolutions disapproving President Trump’s tariffs on Brazil, Canada, and the global “reciprocal tariffs.” Engine has repeatedly underscored that tariffs ultimately cause harm to startups by creating higher costs, inciting retaliatory measures, and contributing to ongoing uncertainty that makes it harder for U.S. companies to expand to markets abroad. The symbolic votes come as a bipartisan group of lawmakers also filed a brief with the Supreme Court opposing the tariffs ahead of oral arguments next week.
AI Essentials: The role of data centers in the AI ecosystem. Data centers play an integral role in AI innovation as the infrastructure that underlies how AI tools are developed and deployed. In a new blog post in our AI essentials series, we explore how the growth of AI innovation has increased demand for these data centers, leading to renewed policy conversations about energy, natural resources, and competitiveness.
Engine highlights trade barriers impacting startups. On Thursday, Engine submitted comments as the United States Trade Representative compiles the 2026 National Trade Estimate Report on foreign trade barriers. Digital trade barriers—such as digital-specific levies, restrictions on cross-border data flows, or discriminatory regulatory measures—create significant hurdles for startups, imposing unjustifiable costs, constraining their scalability, and limiting their ability to compete internationally. Policymakers should address digital trade barriers to ensure startups can thrive in the global market.
TikTok deal still unfinished. Despite a rosy outlook from administration officials early in the week, President Trump and Chinese President Xi Jinping left their meeting Thursday without a finalized plan to have TikTok transfer control of the U.S. version of the app to a new owner. After years of uncertainty and delayed deadlines, the platform’s future remains tied to unresolved tensions between the two countries. Policies that help shape the Internet should be built through thoughtful, transparent processes that take into account the impact they’ll have on users and startups.
On the Horizon:
WED 11/05: The Senate Small Business and Entrepreneurship Committee will convene a hearing featuring testimony from the Chief Counsel for Advocacy at the U.S. Small Business Administration at 2:30 PM ET.
Startup Roundup:
#StartupsEverywhere: San Juan, Puerto Rico. In the aftermath of Hurricane Maria, Jonathan Gonzalez saw firsthand the failures of both disaster response systems and the traditional insurance industry. After spending over a year and a half navigating an ultimately unsuccessful insurance claim for his mother, he decided to take action. That experience led him to found Raincoat, a company building the technology to power faster, smarter, and better insurance for disaster recovery. We sat down with Jonathan to talk about his journey, the role of AI in transforming disaster insurance, and the unique challenges of building a startup from Puerto Rico.
