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, have sent a strong message to politicians this year: Drop restrictive regulations on artificial intelligence or they will leave.

This tactic appears to have worked, activists say, as some politicians have weakened or removed safeguards to mitigate AI’s greatest risks.

California Governor Gavin Newsom rejected a bill to make companion chatbots safer for children after the tech industry fought it. In his veto message, the governor raised concerns about imposing broad limits on AI, which triggered a wave of massive investments and created new billionaires overnight in the San Francisco Bay Area.

Assembly Bill 1064 would have prohibited operators of companion chatbots from making these AI systems available to minors unless the chatbots were not “foreseeably capable” of certain behaviors, including encouraging a child to self-harm. Newsom said he supported the goal, but worried it could unintentionally prevent minors from using AI tools and learning how to use the technology safely.

“We cannot prepare our young people for a future where AI is omnipresent by completely preventing them from using these tools,” he wrote in his veto message.

The veto of the bill was a blow to child safety advocates who pushed it through the state Legislature and a victory for the tech industry groups who fought it. In social media ads, groups such as TechNet had urged the public to tell the governor to veto the bill because it would harm innovation and cause students to fall behind academically.

Organizations trying to rein in the world’s biggest tech companies as they advance this powerful technology say the tech industry has become more self-reliant at the national and state levels.

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 fight national AI policy, while also investing money in lobbying.

In Sacramento, AI companies have lobbied behind the scenes for more freedom. California’s huge pool of talented engineers, investors and technology companies makes it an attractive location for the tech industry, but the companies are letting policymakers know that other states are also interested in attracting these investments and jobs. Big Tech is particularly sensitive to the Golden State’s regulations because many companies are headquartered there and must follow its rules.

“We believe California can strike a better balance between consumer protection and responsible technology growth,” Robert Boykin, TechNet’s executive director for California and the Southwest, said in a statement.

Common Sense Media founder and CEO Jim Steyer said tech lobbyists are putting enormous pressure on Newsom to veto AB 1064. Common Sense Media, a nonprofit that rates and reviews technology and entertainment for families, sponsored the bill.

“They threaten to harm California’s economy,” he said. “That’s the fundamental message of tech companies.”

Advertising is one of the tactics used by deep-pocketed tech companies to convince politicians to remove or weaken legislation. Even if the governor signs a bill, businesses have sometimes filed lawsuits to prevent new laws from taking effect.

“If you’re really trying to do something bold in technology policy, you have to jump through a lot of hurdles,” said David Evan Harris, senior policy adviser at the California Initiative for Technology and Democracy, which supported AB 1064. The group is focused on finding state-level solutions to the threats that AI, disinformation and emerging technologies pose to democracy.

Tech companies have threatened to move their headquarters and jobs to other states or countries, a risk that weighs on 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 excessive regulation could stifle innovation and hamper California.

“Making competition tougher could incentivize California businesses to expand elsewhere, costing the state’s economy billions,” the group said in its report. website.

From January to September, the California Chamber of Commerce spent $11.48 million lobbying California lawmakers and regulators on a variety of bills, filed with 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, accounting for 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 of California companies leaving has caught the attention of some political leaders.

California Atty. Gen. Rob Bonta, who has investigated tech companies over child safety concerns, indicated that despite initial concerns, his office would not oppose restructuring plans by ChatGPT maker OpenAI. The new structure gives OpenAI’s nonprofit parent a stake in its for-profit public benefit corporation and paves the way for OpenAI to list its shares.

Bonta blessed the restructuring in part because of OpenAI’s commitment to staying in the state.

“Security will be a priority, along with the commitment that OpenAI will remain right here in California,” he said in a statement last week. The AG’s office, which oversees charitable trusts and ensures those assets are used in the public interest, had been investigating OpenAI’s restructuring plan for a year and a half.

OpenAI CEO Sam Altman said he was happy to stay 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 are not going to do what these other companies are doing and threaten to leave if we get sued,” he posted on X.

Critics – including some technology leaders such as Elon Musk, Meta and former OpenAI executives as well as nonprofits and foundations – have expressed concerns about OpenAI’s restructuring plan. Some have warned that this would allow startups to exploit charitable tax exemptions and let OpenAI prioritize financial gain over the public good.

Lawmakers and advocacy groups say it’s been a mixed year for tech regulation. The governor signed Assembly Bill 56, which requires platforms to display labels for minors warning about the mental health harms of social media. Another signed bill, Senate Bill 53, aims to make AI developers more transparent about security risks and provides more protections for whistleblowers.

The governor also signed a bill requiring chatbot operators to have procedures to prevent the production of suicidal or self-harm content. But advocacy groups, including Common Sense Media, withdrew their support for Senate Bill 243 because they said the tech industry was pushing for changes that weakened its protections.

Newsom has vetoed other laws that the tech industry has opposed, including Senate Bill 7, which requires employers to notify workers before deploying an “automated decision system” in hiring, promotions and other employment decisions.

Called the “No Robo Bosses Act,” the legislation did not exonerate the governor, who deemed it too broad.

“Many nuances were demonstrated in the legislative process about the balance between ensuring meaningful protections while encouraging innovation,” said Julia Powles, professor and executive director of the UCLA Institute of Technology, Law and Policy.

The battle for AI safety is far from over. Assemblymember Rebecca Bauer-Kahan (D-Orinda), who co-authored AB 1064, said she plans to revive the legislation.

Child safety is an issue Democrats and Republicans are examining after parents sued AI companies such as OpenAI and Character.AI for allegedly contributing to their children’s suicides.

“The harm caused by these chatbots seems so fast and furious and public and real that I thought we would have a different outcome,” Bauer-Kahan said. “It’s always fascinating to me when the outcome of a policy seems disconnected from what I think the public wants.”

Common Sense Media’s Steyer said a new ballot initiative includes the AI ​​safety 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 versus Goliath situation, and we are David.”