Ted Cruz forces 10-year ban on state AI laws through budget blackmail

STSenator Ted Cruz's provision would have banned states from enforcing any AI regulation for 10 years, forcing them to choose between $42 billion in BEAD broadband funding and consumer protections.

The Senate voted 99-1 to strip Cruz's AI regulation freeze from Trump's budget reconciliation package on Jul. 1, 2025, after weeks of bipartisan opposition from states and advocacy groups.

More than 260 state legislators from both parties, 40 state attorneys general, and 17 Republican governors opposed the moratorium as federal overreach undermining state authority.

Cruz reframed the original House ban as a funding condition to satisfy Senate reconciliation Byrd Rule requirements, allowing simple majority passage rather than the usual 60-vote threshold.

The provision would have applied to the entire $42.45 billion BEAD program plus $500 million in new AI grants, despite Cruz claiming it only affected new funding.

In 2025, over 1,000 AI-related bills were introduced at state and local levels, with 28 states plus the Virgin Islands adopting at least 75 new AI measures addressing discrimination and consumer protection.

OpenAI's federal lobbying spending rose from $260,000 in 2023 to $1.76 million in 2024, while organizations lobbying on AI issues jumped from 158 in 2022 to 462 in 2024.

SMSenator Marsha Blackburn initially negotiated with Cruz to reduce the moratorium to five years with child safety exemptions, but withdrew support and joined Democrats to kill the provision entirely.