Cruz Seeks to Block State AI Regulations with Federal Fund Restriction

U.S. Sen. Ted Cruz is moving to stop Texas and other states from regulating artificial intelligence technology, saying the industry should be able to develop quickly without having to navigate a patchwork of rules.

On Wednesday, Cruz, who chairs the Senate Commerce, Science and Transportation Committee, released a revised provision of the federal budget reconciliation bill that would restrict access to a newly created $500 million AI deployment fund to states that don't regulate artificial intelligence for the next 10 years.

The move could hamstring efforts to put guardrails on the burgeoning industry, including in Texas, where Gov. Greg Abbott recently signed a new law that would ban the use of artificial intelligence technology to manipulate human behavior and produce child pornography. The legislation passed the Texas Legislature overwhelmingly.

State Sen. Angela Paxton, R-Allen, likened the provision to a "10-year freeze on state AI laws," in a social media post Tuesday.

"If the bill passes in its current form, Texas wouldn’t be able to enforce the common-sense protections to protect our kids from things like deepfake AI child pornography, and other bipartisan AI regulations that were just signed into law," she wrote. "This is a federal overreach that strips states of our duty to protect children."

Cruz's office declined to comment for this story. The Republican has pushed the provision as a means to allow AI companies to develop more quickly so they can stay ahead of China in what is considered a critical technology for the future.

"A single state should not have the power to set AI rules for the entire country," said a one-pager released by his committee. "Instead, the U.S. should take steps to prevent an unworkable patchwork of disparate and conflicting state AI laws and to encourage states to adopt commonsense tech-neutral policies."

But he is also facing opposition from some Republicans in the U.S. Senate who are worried the provision infringes on states' autonomy, including Marsha Blackburn, of Tennessee, and Ron Johnson, of Wisconsin.

"I’m only for AI if it’s good for the people,” Sen. Josh Hawley, R-Mo., told reporters, citing AI’s potential disruptive impact on the job market. “I think we’ve got to come up with a way to put people first."

The budget bill is currently up for debate in the U.S. Senate, with Republican leadership pushing to pass the legislation before a self-imposed July 4 deadline. The chamber must reach agreement with the U.S. House before sending it to President Donald Trump.

Cruz's provision would create a $500 million fund for the deployment of AI technology and underlying infrastructure, to be administered by the National Telecommunications and Information Administration.

Some Democrats are worried the provision could have much larger consequences, potentially allowing the U.S. Department of Commerce to claw back more than $40 billion in federal funding for the expansion of broadband into rural areas. Texas is slated to receive $3.3 billion of that funding, more than any other state.

Sen. Maria Cantwell, D-Wash., ranking member on the Senate Commerce Committee, said the provision forced states to "to choose between protecting consumers and expanding critical broadband infrastructure to rural communities."

This legislative session, Texas passed several laws limiting the use of artificial intelligence technology. One piece of legislation will hold website owners liable for allowing so-called "deepfake" images and videos in which minors are made to appear naked or performing sexual acts.

Another, the AI Governance Act signed by Abbott this week, not only puts limits on the use of artificial intelligence technology but creates a state AI council to advise the legislature on the creation of additional regulation, following similar laws in California, Utah and Colorado.