U.S. AI Regulation Explained: FTC, NYC Law & the AI Bill of Rights
Artificial intelligence is transforming American business, but navigating U.S. AI regulations can feel overwhelming. Unlike the European Union's comprehensive AI Act, the United States takes a fragmented approach—combining federal guidelines, state laws, and aggressive agency enforcement. In 2026, businesses operating in the U.S. face mounting compliance challenges as AI regulations evolve rapidly across federal, state, and local levels.
The Federal Framework: How the U.S. Regulates AI
The United States currently lacks comprehensive federal AI legislation. Instead, AI governance relies on a patchwork of executive orders, agency guidelines, and existing laws adapted to emerging technologies. President Trump's January 2025 "Removing Barriers to American Leadership in AI" executive order signaled a pro-innovation approach, rescinding many Biden-era AI restrictions while emphasizing American competitiveness over regulatory constraints.
Despite the deregulatory shift, several federal frameworks continue to shape AI compliance requirements. The National Institute of Standards and Technology (NIST) AI Risk Management Framework provides voluntary guidelines for developing trustworthy AI systems. Meanwhile, proposed legislation like the AI Research Innovation and Accountability Act aims to establish mandatory testing standards for high-risk AI systems, though congressional passage remains uncertain.
Understanding the AI Bill of Rights
The White House Blueprint for an AI Bill of Rights, issued in October 2022, established five core principles for ethical AI development. While not legally binding, these principles influence state legislation and corporate policies nationwide:
- Safe and Effective Systems: AI systems must undergo rigorous testing before deployment to prevent harm to users and protect civil rights
- Algorithmic Discrimination Protections: Systems must be designed and tested to prevent discriminatory outcomes based on race, gender, age, or other protected characteristics
- Data Privacy: Built-in privacy protections and user control over personal data collection and usage
- Notice and Explanation: Clear disclosure when AI systems are being used and accessible documentation about their functionality
- Human Alternatives: The right to opt out of automated systems and access human review for important decisions
Although the Trump administration has not explicitly revoked the AI Bill of Rights, enforcement priorities have shifted toward innovation-friendly policies rather than rights-based frameworks. Nevertheless, these principles continue to influence state-level AI regulations and corporate best practices.
FTC AI Enforcement: What Businesses Need to Know
The Federal Trade Commission has emerged as the primary federal enforcer of AI-related consumer protections. Under its broad authority to prevent unfair and deceptive practices, the FTC has taken action against companies deploying AI systems that:
- Make unsubstantiated claims about AI capabilities or benefits
- Deploy AI tools with discriminatory impacts on consumers
- Fail to assess and mitigate known AI risks before deployment
- Use AI to generate false or misleading content, including fake reviews
In September 2024, the FTC announced enforcement actions against five companies for allegedly using AI in unfair or deceptive ways. However, in December 2025, following the Trump administration's AI Action Plan, the FTC reopened and set aside its 2024 order against Rytr LLC, signaling a potential shift toward less aggressive AI enforcement. Companies should monitor this evolving enforcement landscape carefully as priorities continue to shift.
NYC Local Law 144: The Nation's First AI Hiring Regulation
New York City's Local Law 144, effective since July 2023, pioneered municipal AI regulation in the United States. This groundbreaking law requires employers and employment agencies using automated employment decision tools (AEDTs) in New York City to:
- Conduct Independent Bias Audits: Annual third-party evaluations must assess whether AEDTs produce discriminatory outcomes based on race, ethnicity, or gender
- Publish Audit Results: Summary findings must be publicly posted on company websites, including statistical data on selection rates across demographic groups
- Provide Candidate Notice: Job applicants and employees must be notified at least 10 days before AEDT usage, with information about the data inputs and evaluation criteria
- Offer Alternative Processes: Candidates must have the option to request alternative accommodation or review
Violations can result in civil penalties up to $1,500 per day. NYC Local Law 144 applies to any employer or employment agency making hiring or promotion decisions affecting New York City residents, regardless of where the company is headquartered. This jurisdictional reach means that businesses nationwide using AI hiring tools must comply if they recruit or evaluate NYC-based candidates.
State-Level AI Laws: Colorado, California, and Beyond
In the absence of comprehensive federal legislation, states have become laboratories for AI regulation. The Colorado AI Act, taking effect February 1, 2026, represents the nation's first comprehensive state AI law. It requires developers and deployers of "high-risk AI systems"—those making consequential decisions in areas like employment, education, healthcare, housing, insurance, and legal services—to implement safeguards against algorithmic discrimination.
California has enacted multiple AI laws addressing different sectors. The California AI Transparency Act (effective January 1, 2026) mandates that AI systems with over one million monthly users disclose when content has been AI-generated or modified. Assembly Bill 2013 requires developers of generative AI systems to publish summaries of training datasets, including information about copyrighted materials and personal data usage.
Other active state legislation includes Texas's TRAIGA (effective January 1, 2026), which prohibits AI systems designed for behavioral manipulation or unlawful discrimination, and Utah's Artificial Intelligence Policy Act, which requires disclosure when consumers interact with generative AI in regulated occupations like healthcare and legal services.
AI Compliance Strategies for U.S. Businesses
Navigating America's fragmented AI regulatory landscape requires a strategic, multi-jurisdictional approach. Businesses should:
- Implement Geographic Monitoring: Track AI regulations in states where you operate, recruit employees, or serve customers
- Conduct Regular Impact Assessments: Evaluate AI systems for potential discriminatory outcomes, particularly in high-risk decision-making contexts
- Establish Transparency Protocols: Clearly disclose AI usage to customers, employees, and stakeholders
- Document Training Data: Maintain comprehensive records of datasets used to train AI systems, including third-party content sources
- Build Human Oversight Mechanisms: Ensure meaningful human review for consequential automated decisions
- Stay Current on Federal Guidance: Monitor FTC guidance and enforcement priorities, which continue to evolve under the Trump administration
The Future of AI Regulation in America
The United States faces a critical juncture in AI governance. While the Trump administration prioritizes innovation and deregulation, states continue enacting protective measures. This tension between federal permissiveness and state restriction creates compliance complexity but also drives innovation in responsible AI development.
Congressional proposals like the Algorithmic Accountability Act and the American Privacy Rights Act may eventually establish federal standards, but passage remains uncertain. Until then, businesses must navigate state-by-state requirements while preparing for potential federal preemption.
The most effective approach combines proactive compliance with flexible adaptation. Companies investing in transparent, fair AI systems today will be best positioned for whatever regulatory framework emerges tomorrow.
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Frequently Asked Questions About U.S. AI Regulations
Is AI regulated in the United States?
Yes, but not comprehensively. AI is regulated through a combination of federal guidelines (like the AI Bill of Rights), agency enforcement (particularly by the FTC), and state-specific laws in Colorado, California, New York, and other jurisdictions. There is no single federal AI law covering all applications.
What is the AI Bill of Rights and is it legally binding?
The AI Bill of Rights is a voluntary framework issued by the White House in 2022 outlining five principles for ethical AI development: safe systems, anti-discrimination protections, data privacy, transparency, and human alternatives. While not legally binding, it influences state legislation and corporate practices.
What does NYC Local Law 144 require for AI hiring tools?
NYC Local Law 144 requires employers using automated employment decision tools to conduct annual independent bias audits, publish results publicly, notify candidates at least 10 days before use, and provide alternative accommodation options. It applies to all hiring decisions affecting NYC residents.
How does the FTC enforce AI regulations?
The FTC uses its authority to prevent unfair and deceptive practices to regulate AI. It can take enforcement action against companies that make false AI claims, deploy discriminatory systems, or fail to assess risks. However, enforcement priorities have shifted under the Trump administration toward less aggressive oversight.
Which states have the strictest AI laws?
Colorado, California, and New York have the most comprehensive AI regulations. Colorado's AI Act (effective February 2026) covers high-risk systems across multiple sectors. California has enacted numerous AI laws addressing transparency, data disclosure, and sector-specific requirements. NYC Local Law 144 pioneered AI hiring regulations.
Do I need to comply with AI laws in states where I don't have offices?
Yes, potentially. Many state AI laws have broad jurisdictional reach. For example, NYC Local Law 144 applies if you evaluate NYC residents for jobs, regardless of where your company is located. Similarly, Colorado's AI Act applies to systems affecting Colorado consumers. Businesses should assess multi-state compliance obligations based on where customers and employees are located.