Senate Strips Out Landmark AI Moratorium from Trump’s Mega Budget Bill

1 July 2025

In a dramatic and near-unanimous decision on July 1, the U.S. Senate voted 99–1 to eliminate a 10-year federal ban that would have prevented individual states from regulating artificial intelligence. The provision was part of President Trump's sweeping “One Big Beautiful Bill” tax-cut and spending package, but it ignited bipartisan concern over the growing power of Big Tech, and prompted calls to preserve state autonomy on issues such as online safety and consumer protection.

Senator Marsha Blackburn, the primary sponsor of the amendment, had initially supported a compromise that would have reduced the moratorium to five years while permitting limited state regulation around areas like child privacy and content moderation. But she ultimately withdrew her support, arguing that such restrictions were insufficient to protect constituents and that overriding state-level authority would silence voices until federal laws like the Kids Online Safety Act became law.

The ban’s removal was not a fleeting moment. Opponents expressed concern that preventing states from legislating on AI could create a regulatory void, especially without federal oversight. Consumer advocates, educators, and digital rights groups welcomed the decision as a much-needed affirmation of democratic governance in technology policy.

Supporters of the bill initially argued that a uniform regulatory approach was essential to prevent a patchwork of conflicting state rules that could complicate compliance for U.S. tech pioneers and slow innovation. They also emphasized that the moratorium was designed to coincide with the rollout of a new $500 million federal fund dedicated to infrastructure supporting AI adoption. However, the overwhelming Senate vote indicates that lawmakers were not ready to surrender state oversight, despite concerns over market competitiveness.

Notably, only Senator Thom Tillis of North Carolina defended the moratorium, citing concerns about legal confliction and long-term economic stability. His position, however, stood alone amid a chorus of bipartisan opposition.

The removal of this clause leaves a significant regulatory gap. With a national framework still absent, states now retain the authority to enact their own laws governing areas like facial recognition, data transparency, worker protections, and algorithmic accountability until Congress steps in. Congressional leaders are under increasing pressure to advance federal AI legislation to ensure consistency and clarity.

This twist comes as the Senate continues its marathon “vote-a-rama” debate on the larger budget and tax provisions which include contentious changes to Medicaid, food stamps, and tariffs. The vote to strike the AI moratorium may provide momentum for additional amendments designed to temper elements of the package, potentially influencing its trajectory as it progresses toward a July 4 deadline.

For Big Tech, this marks a significant retreat. Companies like Google and OpenAI had backed the moratorium, arguing that national consistency was vital for investor confidence and international competitiveness especially amid the U.S.–China AI rivalry. Yet Senate leaders appear to have prioritized states’ right to regulate, especially in areas like children's safety and local innovation .

In sum, by removing a sweeping limitation on state authority over AI, the Senate has opened a new chapter in tech regulation. States now have room to lead on AI governance, even as national policymakers race to craft a unified federal approach. With further amendments in the Senate and later reviews in the House, the future of the “One Big Beautiful Bill” remains uncertain. What is clear, however, is that the AI policy landscape will be shaped as much in state capitals as in Washington.