California backs down on AI laws so more tech leaders don’t flee the state
California’s tech companies, the epicenter of the state’s economy, sent a loud message to politicians this year: Back off restrictive AI regulations or leave.
Activists said the tactic worked because some politicians were weakening or scrapping guardrails to mitigate AI’s biggest risks.
California Governor Gavin Newsom rejected a bill aimed at making companion chatbots safer for children after the tech industry fought back. In his veto message, the governor expressed concern about broad limits on artificial intelligence, which has created new billionaires overnight and sparked a massive investment frenzy in the San Francisco Bay Area.
House Bill 1064 would prohibit assistive chatbot operators from making these AI systems available to minors unless the chatbots are “foreseeably capable” of certain behaviors, including encouraging a child to self-harm. Newsom said he supported the goal but feared it would inadvertently prevent minors from using AI tools and learning to use the technology safely.
“We cannot prepare our youth for a future where artificial intelligence is everywhere by completely discouraging the use of these tools,” he wrote in his veto message.
The bill’s veto was a coup for child safety advocates who pushed the bill through the state Legislature and a win for tech industry groups fighting the legislation. In social media ads, groups like TechNet called on the public to tell the governor to veto the bill because it would hurt innovation and cause students to fall behind in school.
Organizations trying to rein in the world’s largest tech companies as they develop powerful technology say the tech industry is becoming more powerful at the national and state level.
Meta, Google, OpenAI, Apple and other major tech companies have strengthened their relationships with the Trump administration. Companies are funding new organizations and political action committees to oppose government AI policy while pouring money into lobbying.
In Sacramento, AI companies are lobbying behind the scenes for more freedom. California’s enormous pool of engineering talent, technology investors and companies make it an attractive destination for the tech industry, but companies are letting policymakers know that other states are also interested in attracting those investments and jobs. Big Tech is particularly sensitive to regulations in the Golden State because many companies are headquartered there and must comply with the rules.
“We believe California can strike a better balance between protecting consumers and ensuring responsible technology growth,” Robert Boykin, TechNet’s managing director for California and the Southwest, said in a statement.
Common Sense Media founder and Chief Executive Jim Steyer said tech lobbyists are putting tremendous pressure on Newsom to veto AB 1064. The bill was sponsored by Common Sense Media, a nonprofit organization that rates and reviews technology and entertainment for families.
“They are threatening to harm the California economy,” he said. “That’s the core message from tech companies.”
Advertising is among the tactics big-money tech companies use to persuade politicians to kill or weaken laws. Even if the governor signs a bill, companies have occasionally filed lawsuits to block new laws from taking effect.
“If you’re trying to do something really bold with technology policy, you have to jump through a lot of hoops,” said David Evan Harris, senior policy advisor at the California Technology and Democracy Initiative, which supports AB 1064. The group focuses on finding state-level solutions to the threats posed to democracy by artificial intelligence, disinformation, and emerging technologies.
Tech companies have threatened to move their headquarters and businesses to other states or countries; This poses a huge risk to politicians and regulators.
The California Chamber of Commerce, a broad-based business advocacy group that includes tech giants, launched a campaign this year warning that over-regulation could stifle innovation and hinder California.
“Making it harder to compete could cause California companies to expand elsewhere, costing the state economy billions of dollars,” the group said in a statement. website.
From January to September, the California Chamber of Commerce spent $11.48 million lobbying California lawmakers and regulators on various bills and filings submitted to the California secretary of state. During this period, Meta spent $4.13 million. A lobbying disclosure report shows Meta paid $3.1 million to the California Chamber of Commerce, the bulk of its expenses. Google, which also paid TechNet and the California Chamber of Commerce, spent $2.39 million.
Amazon, Uber, DoorDash and other tech companies spent more than $1 million each. TechNet spent about $800,000.
The threat that California companies could move away has caught the attention of some politicians.
California Adv. Gen. Rob Bonta, who has been investigating tech companies over child safety concerns, said his office would not oppose ChatGPT maker OpenAI’s restructuring plans despite initial concerns. The new structure gives OpenAI’s nonprofit parent company a stake in the for-profit public benefit company, paving the way for OpenAI to list its shares.
Bonta gave his blessing to the restructuring, in part because of OpenAI’s commitment to remaining in the state.
“Security will be prioritized and there will be a commitment that OpenAI will remain here in California,” he said last week. The AG’s office, which oversees charitable foundations and ensures those assets are used for the public good, had been investigating OpenAI’s restructuring plan for the past year and a half.
OpenAI Chief Executive Officer Sam Altman said he was pleased to remain in California.
“California is my home and I love it here, and when I spoke to Attorney General Bonta two weeks ago I made it clear that we will not do what other companies are doing and threaten to leave if lawsuits are filed,” he said on
Critics, including some tech leaders like Elon Musk, Meta, as well as nonprofits and foundations, have expressed concerns about OpenAI’s restructuring plan. Some have warned that this would allow startups to take advantage of charitable tax exemptions and allow OpenAI to prioritize financial gain over the public good.
Lawmakers and advocacy groups say it’s been a mixed year for technology regulations. The governor signed Assembly Bill 56, which requires platforms to display labels warning about the mental health hazards of social media for minors. Another bill signed, Senate Bill 53, aims to make AI developers more transparent about security risks and offers greater protections to whistleblowers.
The governor also signed a bill requiring chatbot operators to have procedures in place to prevent the production of suicide or self-harm content. But advocacy groups including Common Sense Media have dropped their support for Senate Bill 243 because they say the tech industry is pushing for changes that weaken its protections.
Newsom has vetoed other legislation opposed by the tech industry, including Senate Bill 7, which would require employers to notify workers before implementing an “automated decision system” in hiring, promotions and other employment decisions.
The law, called the “No Robo Bosses Act,” did not convince the governor, who thought the law was too broad.
“A lot of nuance has emerged in the lawmaking process about the balance between providing meaningful protections while also encouraging innovation,” said Julia Powles, professor and executive director of the UCLA Institute of Technology, Law, and Policy.
The battle over AI security is not over yet. Assemblywoman Rebecca Bauer-Kahan (D-Orinda), who co-authored AB 1064, said she plans to revive the legislation.
Child safety is an issue that both Democrats and Republicans are examining after parents sued AI companies such as OpenAI and Character.AI, alleging they contributed to their children’s suicides.
“The damage caused by these chatbots is so fast and furious, public and real, that I thought we would have a different outcome,” Bauer-Kahan said. “It’s always been fascinating to me to feel like the outcome of policy is disconnected from what I believe the public wants.”
Common Sense Media’s Steyer said a new ballot initiative includes AI security protections that Newsom vetoed.
“It was a setback, but not an overall defeat,” he said of the veto of AB 1064. “It’s a David and Goliath situation, and we are the Davids.”
