(TNS) — California’s tech companies, the state’s economic capital, sent a loud message to politicians this year: “Get out of restrictive artificial intelligence regulations or we’re out.”
Activists said the tactic appeared to be working, as some politicians weakened or eliminated guardrails to mitigate AI’s biggest risks.
California Governor Gavin Newsom has vetoed a bill aimed at making companion chatbots safer for children after opposition from the tech industry. In his veto message, the governor expressed concerns about placing broad limits on AI, which has sparked massive investment and created new billionaires overnight around the San Francisco Bay Area.
Assembly Bill 1064 would prohibit companion chatbot operators from making these AI systems available to minors unless the chatbot makes certain behaviors “foreseeable,” such as encouraging children to self-harm. Newsom said he supported this goal, but was concerned that it could unintentionally prevent minors from using AI tools or learning how to use technology safely.
“We cannot prepare our youth for a future where AI is omnipresent by completely blocking the use of these tools,” he said in his veto message.
The veto of the bill was a blow to child safety advocates who had been pushing the bill through the state Legislature, and a victory for technology industry groups fighting the bill. In social media ads, groups like TechNet urged the governor to veto the bill, saying it would stifle innovation and cause students to fall behind in school.
Organizations seeking to rein in the world’s largest technology companies that advance powerful technologies argue that the technology industry has become more empowered at the national and state levels.
Big tech companies like Meta, Google, OpenAI, and Apple are strengthening their relationships with the Trump administration. Companies are pouring money into lobbying efforts, as well as funding new organizations and political action committees to oppose national AI policies.
In Sacramento, AI companies are lobbying behind the scenes for more freedom. California’s abundance of engineering talent, high-tech investors and companies makes it an attractive location for high-tech industries, but companies are telling policymakers that other states are also interested in attracting these investments and jobs. Big tech companies are especially sensitive to regulations in the Golden State because so many companies are headquartered in the state and must comply with its rules.
“We believe California can better strike a balance between protecting consumers and enabling responsible technology growth,” Robert Boykin, TechNet’s executive director for California and the Southwest, said in a statement.
Jim Steyer, founder and CEO of Common Sense Media, said tech lobbyists are putting tremendous pressure on Newsom to veto AB1064. Common Sense Media, a nonprofit organization that evaluates and examines technology and family entertainment, sponsored the bill.
“They could have a negative impact on California’s economy,” he said. “That’s the basic message from technology companies.”
Advertising is one tactic that deep-pocketed tech companies use to persuade politicians to repeal or weaken legislation. Even if the governor signs the bill, businesses may file lawsuits to prevent the new law from taking effect.
“If you’re going to do something really bold with technology policy, you have to jump a lot of hurdles,” said David Evan Harris, senior policy adviser at the California Technology and Democracy Initiative, which supported AB 1064. The group focuses on finding state-level solutions to the threats to democracy posed by AI, disinformation, and emerging technologies.
Tech companies are threatening to move headquarters and jobs to other states and countries, and the risks are looming over politicians and regulators.
The California Chamber of Commerce, a broad-based business advocacy group that includes big tech companies, launched a campaign this year warning that overregulation could stifle innovation and hinder California’s progress.
“Increased competition could force California businesses to expand elsewhere, costing the state’s economy billions of dollars,” the group said on its website.
From January to September, the California Chamber of Commerce spent $11.48 million lobbying California lawmakers and regulators on various bills, according to filings with the California Secretary of State. During that period, Meta spent $4.13 million. Meta paid the bulk of the spending, $3.1 million, to the California Chamber of Commerce, according to lobbying disclosure reports. Google also paid $2.39 million to TechNet and the California Chamber of Commerce.
Tech companies like Amazon, Uber, and DoorDash each spent more than $1 million. TechNet spent about $800,000.
The threat that California businesses could be relocated has drawn the attention of some politicians.
California Atty. Gen. Rob Bonta, who has investigated tech companies over child safety concerns, said his office would not oppose ChatGPT maker OpenAI’s restructuring plan despite initial concerns. The new structure would give OpenAI’s nonprofit parent company shares in a for-profit public interest corporation, paving the way for OpenAI to go public.
Bonta celebrated the restructuring, citing OpenAI’s commitment to staying in the state.
“Safety is a priority, as is OpenAI’s commitment to stay here in California,” he said in a statement last week. The AG’s office, which oversees charitable trusts and ensures those assets are used for the public good, has been investigating OpenAI’s restructuring plan for the past year and a half.
OpenAI CEO Sam Altman said the company is happy to remain in California.
“California is my home and I love it here. When I spoke with Attorney General Bonta two weeks ago, I made it clear that we are not going to do what other companies do and threaten to leave if we are sued,” he wrote on X.
Critics include technology leaders such as Elon Musk, Mehta, former OpenAI executives, nonprofits and foundations, and have expressed concerns about OpenAI’s restructuring plans. Some warned that this would allow startups to take advantage of charitable tax exemptions, leading to OpenAI prioritizing financial gain over public interest.
Lawmakers and advocacy groups say it’s been a mixed year for technology regulation. The governor signed Assembly Bill 56, which requires platforms to display labels aimed at minors warning of the mental health harms of social media. Another signed bill, Senate Bill 53, aims to give AI developers more transparency about safety risks and strengthen protections for whistleblowers.
The governor also signed a bill requiring chatbot operators to take steps to prevent them from creating suicidal or self-harm content. But advocacy groups including Common Sense Media withdrew support for Senate Bill 243, saying the tech industry was pushing changes that would weaken those protections.
Newsom vetoed other bills opposed by the tech industry, including Senate Bill 7, which would require employers to notify workers before implementing “automated decision-making systems” in hiring, promotions and other employment decisions.
The bill, called the Roboboss Ban Act, failed to meet the views of the governor, who believed it was too broad.
“The legislative process has shown many nuances about the balance between fostering innovation while ensuring meaningful protections,” said Julia Powless, professor and executive director of the UCLA Institute for Technology, Law, and Policy.
The battle over AI safety is far from over. AB 1064 co-author Rep. Rebecca Bauer Kahan (D-Orinda) said she plans to revive the bill.
Child safety is an issue that both Democrats and Republicans are considering after parents sued AI companies like OpenAI and Character.AI for contributing to their children’s suicides.
“The harm these chatbots are causing feels so rapid and ferocious and so public and real that I thought there would be a different outcome,” Bauer-Kahan said. “I’m always intrigued when I feel that policy outcomes diverge from what I believe the public wants.”
Common Sense Media’s Steyer said the new voting plan includes AI safeguards that Newsom vetoed.
“It was a setback, but it wasn’t a total defeat,” he said of AB 1064’s veto. “This is a David and Goliath situation, and we are the David.”
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