Patchwork 2.0: FAQs on Emerging US State AI Laws and What to Do About Them
The metaphor of a “patchwork” often describes the complex landscape of privacy regulations in the United States. This patchwork approach now seems to extend to the realm of AI regulation as states begin to implement their own legal frameworks. Recently, Colorado enacted An Act Concerning Consumer Protections in Interactions with Artificial Intelligence Systems, and Virginia has passed the High-Risk Artificial Intelligence Developer and Deployer Act, which awaits gubernatorial approval.
This article provides an overview of these legislative efforts and offers guidance for businesses on how to navigate this evolving regulatory environment.
Applicability to Businesses
Should your business be involved in the development of AI systems, it is likely to fall under the requirements set forth by the Colorado Act. The Virginia legislation similarly applies to developers but is limited to those handling “high-risk” AI systems.
Organizations using AI systems also need to be aware of the criteria defining “high-risk” situations, as both sets of legislation impose obligations based on this classification.
Understanding AI Systems and High-Risk Designation
According to the Colorado Act, an AI system is any machine-based system that uses inputs to generate outputs, impacting physical or virtual environments. The Virginia Bill has a comparable definition, excluding models intended solely for development or research phases.
Both legislative acts converge on the notion that a high-risk AI system significantly impacts “consequential decisions.” However, specific tasks designed to perform procedural functions or security operations may be exempt.
Identifying “Consequential Decisions”
Under both the Colorado Act and Virginia Bill, a “consequential decision” affects substantial aspects of a consumer’s life, such as educational opportunities, employment, financial services, government services, healthcare, housing, insurance, and legal services.
The Virginia Bill extends this to decisions regarding judiciary-related matters like parole or probation. This is primarily relevant to government entities, which fall outside the scope of the Virginia legislation.
Compliance Requirements
The obligations differ depending on whether your business develops, deploys, or does both with AI systems. Key mandates outlined by both the Colorado Act and Virginia Bill are as follows:
- Developers and deployers must ensure compliance with established guidelines regarding data protection and transparency.
- Regular auditing of AI systems for potential risks is required.
It should be highlighted that the definition of “consumer” varies: the Colorado Act considers it broadly as any Colorado resident, whereas the Virginia Bill narrows it down to exclude those acting in a commercial or employment role.
Enforcement Mechanisms
Both laws assign enforcement responsibilities to the state attorney generals. Violations of the Colorado Act are considered unfair and deceptive trade practices, carrying penalties up to $20,000 per infraction. Under the Virginia Bill, violations attract fines of $1,000, rising to $10,000 for willful breaches.
Implementation Timeline
The Colorado Act is set to come into effect on February 1, 2026. The Virginia Bill is slated for July 1, 2026, pending the governor’s approval.
Preparation Tips
For businesses operating in Colorado or Virginia—assuming the Virginia Bill is enacted—proactive measures are recommended:
- Conduct a comprehensive review of AI technologies in use or development.
- Initiate internal policies that align with forthcoming state requirements.
- Engage with legal experts to interpret the potential impacts on your operations.
Adapting to these state-specific AI regulations requires careful planning and strategic realignment. Businesses are urged to develop robust compliance programs that address the nuances articulated in these new laws.
Understanding and preparing for these changes will be crucial as organizations strive to align with the imminent regulatory shifts. Addressing these challenges will not only ensure compliance but also foster trust and accountability in AI applications.
