US budget bill passes without controversial block on states regulating AI

And with some increases to rural broadband funds, fresh spectrum auctions, and wholesale dismantling of clean energy subsidies

Lawmakers have passed President Trump's budget reconciliation but removed one of its most tech-contentious measures - the ban of state-level AI regulation – meaning the law will have little effect on the tech industry.

House minority leader Hakeem Jeffries (D-NY) tried to delay a vote on the bill with a nine-hour speech but that couldn’t prevent its passage in a form that contains no apparent changes that could force it back to the Senate for additional revisions. It’s now up to President Trump to sign it into law, right on time with his July 4 deadline.

The part of the bill of most interest to the tech industry was its provision for a moratorium on state-level regulation of AI, which would have rendered all AI regulation that didn't come from the federal government unenforceable for 10 years. Lawmakers re-drafted the ban to cover five years, and then with the added caveat that states could enforce their own AI rules if they were willing to give up all access to rural broadband development funds available through the Broadband Equity, Access, and Deployment (BEAD) program.

The Senate killed that measure with a resounding 99-1 vote on Tuesday, leaving AI enforcement in the hands of the states.

But there are a few other relevant bits for the tech industry.

Forrester principal analyst in the security and risk space Alla Valente pointed to increased funding for rural broadband.

"The Senate bill adds an additional $500 million of broadband funding and broadens eligible projects to include AI infrastructure," Valente told us during a video call.

The bill also provides a potential win to Elon Musk – previously spurned by the Federal Communications Commission (FCC) for BEAD funding – by requiring the program to be tech-neutral, opening it up to SpaceX's Starlink satellite internet.

"The original BEAD program prioritized fiber-optic expansion," Valente said. "Now with the 'tech-neutral' approach, companies like Starlink will be able to secure funding."

Musk came out strongly against the bill, which cuts tax incentives for buying electric vehicles, potentially impacting Tesla's already declining sales.

The bill also opened up a bunch of new radio spectrum frequencies for commercial use and ordered the Federal Communications Commission to auction some of it off, so there's new opportunity there as well.

The bill grants the Department of Energy $150 million to consolidate its data and use it to develop new AI models that can enable "next-generation microelectronics that have greater capabilities beyond Moore's law while requiring lower energy consumption as well as being open source for the US scientific community's benefit."

Energy changes drain AI optimism

Laura Lin, a litigation partner at the Palo Alto office of law firm Simpson Thacher specializing in the tech space, told us clean energy incentive cuts concern some of her stakeholders.

"These are generally disfavored by the tech industry, including because of the massive energy demands of AI development and deployment," Lin said in an email to The Register.

Those cuts are numerous, with the Trump bill including the elimination of funding for things like Environmental Protection Act compliance (funding which includes IT system modernizations grants), the wholesale elimination of the Greenhouse Gas Reduction Fund, cuts to emissions rebates and zero-emissions vehicle incentives, and the gutting of what the Congressional summary bill describes as "various energy programs" that seek to promote commercial and residential clean energy usage.

Lin believes the big tech takeaway from Trump's bill is that it did not introduce federal AI regulations.

"There's been growing frustration with the current patchwork of state-level rules, which tech companies that operate across multiple states see as creating bureaucratic hurdles and demanding significant compliance investments," Lin told us. "The tech industry will likely keep pushing for federal AI legislation."

Valente agreed that Trump's bill makes acting on federal AI regulation a hard thing for lawmakers to ignore.

"It seems like the general consensus among AI companies is that sure, some don't want any regulation, but most definitely don't want fifty different sets," Valente said.

This is a political opportunity for the White House, Valente said: Take action to regulate AI with a light touch at the federal level and you make Silicon Valley happy, while pre-empting state-level laws.

As with most things in Washington, D.C., don't expect that federal AI regulation to appear anytime soon.

"Progress on the national front is likely to be slow," said Lin. ®