Artificial intelligence (AI) presents a tremendous opportunity to improve efficiency and grow our economy. America has a distinct advantage, with some of the leading technology firms in the world making breakthroughs every year.
Unfortunately, there is a great deal of confusion around what laws are needed to regulate emerging technologies like AI. The U.S. Chamber supports common-sense, targeted regulations that place appropriate guardrails around the use of AI, but many states have struck out on their own and begun enacting broad and sweeping AI regulations, causing a distressing ripple effect for Main Street businesses across the country.
When businesses operate nationwide, they’re effectively bound by the most restrictive state laws because they operate in all 50 states—no matter where they’re headquartered. This reality was underscored by President Donald Trump during the launch of his AI Action Plan, where he called for a unified regulatory framework, stating, “[w]e also have to have a single federal standard, not 50 different states regulating…”
Just look at the numbers: in 2025 alone, state legislators introduced over 1,100 AI-related bills. Without federal action, this growing patchwork of state regulations will continue to stifle businesses and undermine the nation’s innovation and leadership in the technology sector.
Quantifying the Patchwork’s Economic Toll
The U.S. Chamber recently conducted an economic analysis to determine the costs of imposing comprehensive AI regulations nationwide. Last year, Colorado passed SB-205, the nation’s first comprehensive AI law, set to take effect on June 30, 2026. Among other things, the law imposes highly subjective compliance requirements related to alleged “algorithmic discrimination” against forms of political expression. A study by the Common Sense Institute (CSI) projects the law will cost Colorado 40,000 jobs and $7 billion in economic output by 2030.
Drawing upon CSI’s methodology, the U.S. Chamber used a model from REMI, a provider of macroeconomic policy analysis models, to extrapolate the effects of SB-205 at the national level. Applying the impact of Colorado’s requirements nationwide could slow small businesses’ AI investment by 0.17%, potentially resulting in the loss of 92,000 jobs.
Moreover, CSI also projects a 1% decline in productivity in Colorado resulting from the law. On a national level, that decline could cost the U.S. economy up to 713,000 jobs and $53.7 billion in GDP by 2030. If these states pass additional regulations, or allow class action lawsuits against businesses that use these tools, opening the door to legal abuse, these numbers could skyrocket.
Fortunately, this past legislative session, states like New Mexico and Virginia also considered and ultimately rejected proposals similar to Colorado’s. However, the New York State Assembly recently advanced a bill to the Governor’s desk that aims to hamper AI investment. Other states may follow suit.
Just recently, CalPrivacy, California’s privacy regulator, took a single line from the California Consumer Privacy Act and expanded it into a 10-page rule on algorithms which is projected to cost businesses over half a billion dollars. Companies using AI in sectors like finance, healthcare, employment, and education must now navigate extensive red tape, including mandates to give consumers the choice to opt-out of critical automated functions in digital economy services, functionally breaking those services Americans already depend on.
The Data on Small Business: 65% Concerned About a Patchwork; One Third May Scale Back
In this regulatory environment, 65 percent of small businesses nationwide are concerned about rising litigation and compliance costs from conflicting AI laws and regulations at the state and local level. The data reveal why: small business owners are using AI to scale up and compete with larger companies, and 82 percent of those using AI increased their workforce last year. Yet when faced with having to comply with regulations like those in Colorado and California, one-third stated they would scale down AI use and another fifth of owners would be less likely to use AI at all, stymying their ability to keep up with the competition.
The compliance burdens these businesses face are measurable and steep. CalPrivacy’s rules, combined with new privacy and cybersecurity requirements, will saddle small businesses in California with nearly $16,000 in annual compliance costs. For the 29.2 million small businesses located outside California, this means absorbing significant costs just to operate in all markets—effectively imposing an “interstate innovation tax” that many of these companies cannot afford. This means a local coffee shop owner will think twice about using AI to grow their business across state lines.
Congress Can End This Regulatory Chaos
The rising costs of a state patchwork of laws are deeply threatening to small business growth, as well as the broad-based industry adoption of AI needed to maintain America’s technological edge. AI is a tool much like any other technology, and as with any tool, there should be responsible regulations and safeguards in place. States should continue to enforce their respective consumer protection, privacy, and discrimination laws.
Policymakers should also continue to enact targeted laws like the TAKE IT DOWN Act which helps protect Americans against exploitative deepfake images. At the same time, Congress needs to follow President Trump’s call for a single framework and prevent a patchwork of sweeping AI proposals like those in Colorado, California, and New York that threaten U.S. AI investment and adoption.
The path forward is clear: America cannot afford to let a fragmented regulatory landscape undermine its AI leadership. The solution isn’t to abandon oversight, but to establish smart, consistent federal standards that protect consumers while preserving the competitive advantage that has made America the global leader in AI. Congress has both the authority and the responsibility to act decisively, creating a unified framework that ends the regulatory chaos, protects small businesses from crushing compliance costs, and ensures that American innovation—not bureaucratic fragmentation—defines our technological future.
