Feeling that nine months of talks could not produce consensus, Senate Majority Leader Robert Rodriguez decided to kill his bill Monday to loosen artificial-intelligence regulations, leaving business leaders and AI developers behind the eight ball as rulemaking is set to begin.
Senate Bill 318 was a follow-up to the Denver Democrat’s 2024 law that created the most comprehensive regulation of the booming technology sector of any state in the country — rules that industry leaders have said could force AI developers to relocate to other places. Drawing on concerns from Gov. Jared Polis that the original framework of laws, intended to protect people from discriminatory actions by decision-making AI systems, is too onerous, the new bill sought to clarify definitions and exempt small businesses from some rules.
However, technology and business leaders complained that what Rodriguez offered not only did not make compliance with the law easier but increased their burdens in some instances, and they asked for major amendments to the bill. Meanwhile, consumer groups pushed back, warning that letting AI developers dictate the scope of their regulation was akin to having few enforceable rules, and they put Rodriguez into a tough position.
As he began to explain his dilemma to the Senate Business, Labor and Technology Committee on Monday, Rodriguez hinted he would scrap all the provisions in the new bill and seek only to delay implementation of the 2024 law from February to April of next year. But after testimony from about a dozen groups and business owners on both sides of the debate, he seemed to surprise members by instead asking them to kill the bill, leaving the 2024 law as the framework for rules the Colorado Attorney General must draft.
Why sponsor threw in towel on AI bill
Rodriguez said that he had planned to spend the off-season talking through issues with the interested parties, regardless of the outcome of Monday’s hearing, as he expects there will be more changes to come. But leaving the Feb. 1 implementation date in place over calls from the industry to push it back to January 2027 means there will be little time to debate legislative fixes next session before definitive action must be taken.
“We got to the point a couple of weeks ago where I realized the bill wasn’t reaching a consensus,” Rodriguez told the committee on Monday about SB 318, which he still introduced on April 28 while hoping for a last-minute breakthrough. “While I was disappointed when we couldn’t get to a place where we would proceed with a bill … I am still committed to doing the stakeholdering of this work.”
Colorado Senate Majority Leader Robert Rodriguez speak about his AI bill on the Senate floor in 2024.
That, however, means that the AG’s office will have to begin developing rules for what could be a fluid framework around the regulation of this sector. And that means that everyone involved now must be prepared to come to the Legislature with a fully fleshed-out plan when it begins its 2026 session in January rather than with debates still looming.
Origins of the debate
The 2024 law requires developers of AI systems to disclose how the systems were “taught”, provide documentation assessing discrimination risks, publish a statement summarizing risk management of systems and inform the AG’s office of any major risk of discrimination. It also requires deployers to implement comprehensive risk-management policies, conduct annual reviews to prevent algorithmic discrimination, notify consumers when AI is making consequential decisions and offer appeals processes to affected consumers.
Shortly after Polis said in his signing statement that he was penning the law “with reservations,” he put together a task force of developers, deployers, business leaders, consumer groups and labor advocates to discuss how it could be improved. Business leaders said the appeals was untenable and definitions like “consequential decisions” were too vague — provisions that could lead high-paying AI firms to move operations out of state where they are not subject to as many regulations.
SB 318 added more protections and exemptions specifically for small businesses, reduced the scope of the right to appeal and gave greater clarity around deployers’ ability to use an affirmative defense when they acted quickly to fix discrimination problems. It also eliminated the need to proactively report algorithmic risks, clarified trade-secret protections and clarified how and when companies must disclose when AI is making a decision affecting someone, Rodriguez explained.
But the bill left many groups representing both developers and deployers saying that the changes it proposed didn’t go far enough to make Colorado a friendly place for the sector, despite Polis’ overtures to try to draw such companies to the state.
Business concerns about AI fix
Ruthie Barko, Colorado executive director for industry group TechNet, said there remained too much ambiguity around one of the core definitions in the bill — how to determine when AI plays a “substantial factor” in a critical decision, requiring its role to be revealed to consumers and potentially launching an appeals process or complaints to the AG. Her members had been hoping for specific guardrails, such as narrowing those instances to when there is not human review of decisions, but felt the lack of them would leave many developers worried about whether they were in compliance.
In addition, the right to cure in the bill was narrowed to seven days, which seemed a very small window of time to correct issues, and the language around safe-harbor protections was murky. There was no exemption for fraud-protection AI systems that are critical in stopping the spending on potentially stolen credit cards — a concern echoed by the Colorado Bankers Association — and protections for trade secrets were lacking, she said.
Barko noted during Monday’s committee hearing that since Polis signed the original bill last year, six other states stalled similar legislation, and a Virginia bill got vetoed because of concerns that such rules would hurt their artificial-intelligence sector. And with Colorado’s tech sector being responsible for $106 billion in gross domestic product and 10% of all state jobs, the Centennial State has even more than others to lose if the new law caused a tech exodus, business leaders said.
“We will be putting Colorado at a severe disadvantage if we allow it to remain the only state in the country to do this,” said Barko, who worked closely with the Colorado Chamber of Commerce and Colorado Technology Association to suggest changes. “Our members can build the tech, but Colorado needs to build the legislation in a way that allows it to be a leader in technology.”
What happens next
But, demonstrating the crossfire in which Rodriguez was caught, Colorado AFL-CIO lobbyist Kjersten Forseth testified Monday that her group and other labor advocates had given business interests 90% of what they wanted and found it still wasn’t good enough. Consumer and labor groups mostly wanted to make sure that patients, loan applicants and others know when it is an AI system rather than a human making a decision crucial to them and have the opportunity to appeal it and examine how the system was taught.
“If we continue to approach new technology in a ‘Mother, may I?’ fashion, asking (developers and deployers) to decide what they should be allowed to do … we have ceded too much power to big tech companies.”
When Sen. Mark Baisley, R-Woodland Park, realized that Rodriguez was not going to offer his amendment to push back implementation of regulations by two-and-a-half months, he offered one to delay it until Jan. 1, 2027. However, Democrats killed that along party lines and then followed Rodriguez’s request and killed his bill.
That outcome means that there will be continued uncertainty around which regulations the industry will face. But it also means the conversations that have been going since last summer around how to improve Colorado’s pioneering AI regulatory law will continue during this off-season, possibly at an even greater pace.