Republican Senator Ted Cruz has introduced a new bill that seeks to create a regulatory “sandbox” for artificial intelligence companies, allowing them temporary exemptions from federal rules to test and develop new technologies. The proposal aims to give the United States a competitive edge in AI development, particularly against China.
Speaking at a Senate subcommittee hearing, Cruz, who chairs the Senate Commerce Committee, emphasised the balance between flexibility and accountability. “A regulatory sandbox is not a free pass. People creating or using AI still have to follow the same laws as everyone else,” he said.
How the AI Sandbox Would Work
If passed by Congress, the bill would allow federal agencies to review applications from AI firms seeking exemptions from existing regulations for two years at a time. Companies would need to provide detailed plans outlining potential safety and financial risks along with strategies to address them.
This push comes after leading technology companies, including OpenAI, Google and Meta, called on the Trump administration to reduce regulatory barriers that they argue are slowing down innovation. In response, the White House’s Office of Science and Technology Policy announced that it would seek public input on which rules are proving most restrictive.
Federal regulations currently cover areas such as health data privacy, transportation safety and financial market stability.
Impact on State-Level AI Regulations
Cruz’s proposal does not prevent states from enacting their own AI rules, despite strong industry lobbying for federal pre-emption. A recent effort to include a ten-year freeze on state regulations in President Donald Trump’s tax and spending package was rejected by the Senate with a 99 to 1 vote in July.
Several states have already introduced their own AI laws. Some prohibit the creation of sexually explicit AI-generated images without consent. California has banned unauthorised deepfakes in political advertising and requires healthcare providers to disclose when patients are interacting with AI. Colorado has passed legislation to limit AI-driven discrimination in employment, housing, banking and other areas of consumer protection.
Michael Kratsios, Director of the Office of Science and Technology Policy, criticised these measures, saying, “These types of very anti-innovation regulations are a huge problem for our industry,” while expressing a willingness to work with Congress on addressing the issue.
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