Senator Marsha Blackburn (R-Tenn.) and Senate Commerce Chair Ted Cruz (R-Texas) have reached a deal to revise a controversial piece of President Donald Trump’s expansive tax reform legislation. The focus of the compromise is a provision that temporarily blocks states from implementing their own artificial intelligence (AI) regulations — a move tied to $500 million in federal funding for AI infrastructure and development.
The revised proposal now limits the moratorium to five years, a notable reduction from the original 10-year freeze. In return, states would gain access to substantial federal funding intended to accelerate AI-related innovation across the country. The updated plan is an effort to find common ground between those pushing for national standards and others advocating for state autonomy in regulating emerging technologies.
Blackburn had previously objected to the initial version, citing concerns that it would override crucial safeguards implemented at the state level. Her collaboration with Cruz appears aimed at preserving some of that authority while still supporting a unified national framework for AI.
Exemptions Preserve State Oversight in Critical Areas
The compromise includes several exceptions that would allow states to continue legislating in key areas despite the federal moratorium. These carve-outs cover:
- Protections against unfair or deceptive business practices
- Safeguards related to children’s online safety
- Regulation of content involving child sexual abuse
- Enforcement of publicity rights, such as preventing misuse of someone’s image or likeness by AI
These exceptions address growing concerns about the potential misuse of AI to exploit vulnerable populations, particularly children and content creators. They aim to prevent the sweeping federal policy from undercutting important state-level laws designed to address pressing digital harms.
States like Tennessee, which have taken early action on regulating AI’s misuse, would retain their ability to enforce laws in these areas. While the federal moratorium would delay broader state-led efforts to govern AI technologies, the exemptions ensure that states are not entirely sidelined when it comes to protecting citizens from serious risks.
Blackburn’s Broader Efforts on Child Safety and Tech Accountability
This legislative development fits into a larger pattern of Blackburn’s ongoing work on internet safety for children. She is among the key sponsors of the bipartisan Kids Online Safety Act (KOSA), recently reintroduced with Senator Richard Blumenthal (D-Conn.). The legislation has also gained backing from Senate Majority Whip John Thune (R-S.D.) and Senate Minority Leader Chuck Schumer (D-N.Y.).
KOSA seeks to make digital platforms more accountable by mandating stronger parental controls, greater algorithm transparency, and additional safeguards to reduce harm to minors online. It also complements emerging calls for a federal online privacy framework to give users more control over their personal data.
These parallel legislative efforts reflect a broader push among lawmakers to rein in the power of Big Tech and establish national standards that protect the most vulnerable — especially in the age of AI.
Not All Lawmakers Are On Board
Despite the revised provision, skepticism remains within the Republican ranks. Senators like Ron Johnson (R-Wis.) and Josh Hawley (R-Mo.), along with Representative Marjorie Taylor Greene (R-Ga.), have previously raised concerns about restricting state authority over new technologies. Some lawmakers worry that even a five-year pause could slow down efforts to address rapidly evolving threats from AI misuse.
However, the provision recently cleared a critical procedural review. Senate Parliamentarian Elizabeth MacDonough ruled that it complies with the Byrd rule, meaning it can remain in the broader reconciliation bill — giving it a pathway to passage without requiring bipartisan support.
With President Trump’s July 4 deadline approaching, the Senate is preparing for key votes on the full package. Officially known as the “One Big Beautiful Bill Act,” the legislation combines major tax cuts, incentives for domestic manufacturing, and measures to strengthen America’s edge in AI development.
