The U.S. Senate voted 99-1 early Tuesday to kill a controversial provision in President Donald Trump’s sweeping “Big Beautiful Bill” that would have blocked states from passing any laws regulating artificial intelligence for the next decade.
The amendment’s defeat was a major blow to Big Tech and its allies, who had lobbied hard for a national freeze on AI rules.
The vote followed mounting backlash from both parties, with lawmakers concerned the measure would strip states of their ability to protect consumers and respond to fast-moving developments in AI.
What Was at Stake
The original proposal, quietly introduced in the House by Rep. Brett Guthrie (R-Ky.), stated that “no State or political subdivision thereof may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems during the ten-year period beginning on the date of the enactment of this Act.”
If it had passed, the ban would have voided existing state-level AI rules, such as California’s transparency laws around generative AI in healthcare and New York’s bias audits of AI hiring tools.
Critics said it could have stalled years of regulatory progress and prevented states from responding to AI-related harms.
“This provision could allow Big Tech to continue to exploit kids, creators, and conservatives,” said Sen. Marsha Blackburn (R-Tenn.) in a statement late Monday.
Blackburn later introduced the amendment that stripped the language from the bill entirely.
Sen. Ted Cruz (R-Texas) and OpenAI CEO Sam Altman had both supported the moratorium.
Altman testified in May that a “patchwork regulatory framework” of state laws “will slow us down at a time where I don’t think it’s in anyone’s interest for us to slow down.”
Venture capitalist Joe Lonsdale echoed that view, writing that while he didn’t have “total faith in the wisdom of Congress,” state-by-state regulation would “sabotage innovation.”
But Blackburn and other Republicans pushed back. The bill could not pass the Senate with the AI ban still in it. At around 4:30 a.m. Tuesday, the chamber overwhelmingly voted to strike the provision.
“Federalism is preserved and humans are safe for now,” Rep. Marjorie Taylor Greene (R-Ga.) posted on X after the vote.
Wall Street Reacts
The Senate’s decision rattled AI stocks. Shares of Nvidia Corp. dropped nearly 3%, while Palantir Technologies fell more than 4% by Tuesday’s close.
Investors had bet on a more stable national regulatory landscape.
The amendment’s removal now raises the prospect of inconsistent state laws, making it harder for AI companies to operate nationwide.
Industry Influence and Ongoing Debate
Critics say the provision was heavily influenced by major tech players and Trump allies like Elon Musk, Marc Andreessen, and David Sacks.
One watchdog group, Americans for Responsible Innovation, warned the proposal “could have devastating consequences,” especially as states work to protect minors, workers, and personal data.
The bill also includes $500 million over 10 years to support federal AI development, funding that will remain intact even without the moratorium.
Though the Senate passed the broader bill 50-50 with Vice President JD Vance casting the tie-breaking vote, the House still has to weigh in.
Whether more AI-related language makes it into the final law remains to be seen.