Texas Takes the Lead: New AI Consumer Protections Enacted
In this week’s episode of the In the Queue Podcast, where we delve into the intersections of technology, finance, and the evolving job market, we spotlight a significant development out of Texas that’s making waves in the realm of artificial intelligence and consumer rights.
On June 22, 2025, Texas Governor Greg Abbott signed House Bill 149 into law. It is officially known as the Texas Responsible Artificial Intelligence Governance Act, or TRAIGA. This landmark legislation positions Texas at the forefront of AI regulation in the United States.
TRAIGA sets forth comprehensive guidelines to ensure that AI technologies are developed and deployed responsibly. Key provisions include:
- Prohibition of Harmful AI Practices: The law bans AI systems that intentionally discriminate, promote self-harm, or encourage criminal behavior.
- Restrictions on Government Use: Government entities are barred from using AI to assign social scores based on personal characteristics or behaviors. Additionally, deploying AI for biometric identification without individual consent is prohibited.
- Protection of Constitutional Rights: AI systems designed solely to infringe upon constitutional rights or unlawfully discriminate against protected classes are expressly forbidden.
Encouraging Innovation with Oversight
Understanding the importance of fostering innovation, TRAIGA introduces a regulatory sandbox program. This initiative allows companies to test new AI systems without immediate regulatory repercussions, provided they obtain approval from the Texas Department of Information Resources and relevant agencies.
To oversee these efforts, the law establishes the Texas Artificial Intelligence Council. This body will monitor compliance and support the responsible advancement of AI technologies within the state.
Enforcement and Implications
Enforcement of TRAIGA falls under the exclusive authority of the Texas Attorney General. Violations can result in civil penalties of up to $100,000 per incident. Notably, the law specifies that enforcement actions cannot be taken against AI systems that have not been deployed.
For federally insured financial institutions, compliance with existing federal and state banking laws is deemed sufficient under TRAIGA, providing clarity and continuity for these entities.
Broader Impact and Future Outlook
TRAIGA’s enactment marks a significant step in balancing the rapid advancement of AI technologies with the imperative to protect individual rights and societal values. As AI continues to permeate various sectors, from finance to healthcare, such legislation serves as a blueprint for responsible innovation.
Other states and federal entities may look to Texas’s approach as a model for crafting their own AI governance frameworks.
Other States Protecting Consumers from AI
Several states have taken meaningful steps similar to Texas to protect consumers from AI-related risks. They focus on algorithmic discrimination, transparency, risk assessments, and enforcement. Here is an overview of leading state actions:
Colorado
- Colorado AI Act (SB 24-205): Enacted in May 2024, this is viewed as the most comprehensive state law to date. It regulates “high-risk” AI systems, requiring developers and deployers to use reasonable care to avoid algorithmic discrimination, particularly in consequential decisions related to education, employment, finance, healthcare, housing, insurance, and legal services.
- The law empowers the attorney general to enforce penalties for violations.
California
- Consumer Privacy Laws: California has two major privacy laws with AI provisions. The state’s consumer privacy law grants residents the right to opt out of AI-driven profiling that impacts employment, insurance, health, or other outcomes.
- California AI Transparency Act (SB 942): Effective January 2026, this law requires providers of widely used AI systems to disclose automatically generated content, with significant penalties for noncompliance. The state also prohibits using bots to incentivize sales without disclosure.
Utah
- The Utah Artificial Intelligence Policy Act mandates consumer disclosure for AI use cases, such as chatbots, impacting consumers’ awareness and protection when interacting with AI systems. Recent amendments extended its effect and focused the requirements through 2027.
New Jersey
- SB 332: Enacted in January 2024, this law requires companies to notify consumers and allow them to opt out when personal data is collected and used for automated decisions. The law prohibits use or processing of personal data in a discriminatory manner
Illinois
- Workplace Legislation: In August 2024, a law was enacted barring employers from using AI that considers an applicant’s race or zip code in hiring decisions. Additional proposed bills would require impact assessments on automated decision-making affecting employment, education, and housing, and reporting those assessments to state authorities.
Connecticut
- Connecticut has regulated government AI procurement and use since 2023 and is expected to soon expand protections into the private sector
Massachusetts, New Mexico, Vermont, Virginia, Georgia, Hawaii
- These states have introduced—and in some cases advanced—legislation requiring risk management, impact assessments, and prohibiting certain forms of algorithmic discrimination. Massachusetts’ and New Mexico’s pending acts closely mirror Colorado’s risk-based approach; Vermont’s proposal focuses on high-risk systems and transparency; Virginia passed a comprehensive bill through its legislature (though it was vetoed in 2024), and Georgia, Hawaii, and others are considering similar proposals.
Other Leading States with AI Consumer Protections
| State | Key Provisions | Status |
| Colorado | Broad ban on AI discrimination in critical sectors; penalties for violations | Enacted |
| California | Consumer opt-out for profiling; transparency for AI-generated content | Enacted |
| Utah | Disclosure mandates; consumer notifications for AI use | Enacted |
| New Jersey | Opt-out for automated data use; anti-discrimination in data processing | Enacted |
| Illinois | Ban on race/zip in AI hiring; proposed risk and impact assessments | Enacted/Proposed |
| Connecticut | AI safeguards in government procurement; broader protections pending | Enacted |
| Massachusetts | Risk management/disclosure for high-risk AI | Proposed |
| New Mexico | Risk-based regulation for AI, similar to CO | Proposed |
| Vermont | Transparency; anti-discrimination for high-risk AI | Proposed |
| Virginia | Comprehensive protections (vetoed 2024, may return in future) | Proposed |
Key Trends
- Comprehensive Laws: Colorado and California set the national standard for broad, cross-sectoral protections.
- Sector Focus: Employment, insurance, lending, and healthcare are commonly prioritized.
- Opt-Out and Transparency: Many states require consumer notification, opt-out mechanisms, and clear disclosures.
- Enforcement: Most laws or proposals grant enforcement power to state attorneys general, often with significant penalties for violations.
Texas is part of a rapidly expanding movement among states to regulate AI for consumer protection, with many adopting similar frameworks against discrimination, mandating risk assessment, ensuring transparency, and empowering consumers with actionable rights
References for this article
- https://www.lexisnexis.com/community/insights/legal/capitol-journal/b/state-net/posts/states-passing-laws-to-prevent-ai-discrimination-in-workplace
- https://www.brookings.edu/articles/states-are-legislating-ai-but-a-moratorium-could-stall-their-progress/
- https://www.mondaq.com/unitedstates/new-technology/1578160/guidance-on-managing-the-risks-of-ai-discrimination
- https://www.goodwinlaw.com/en/insights/publications/2024/09/insights-technology-aiml-how-states-are-stepping-in-to-regulate-ai
- https://www.whitecase.com/insight-our-thinking/ai-watch-global-regulatory-tracker-united-states
- https://www.legaldive.com/news/16-states-have-ai-laws-curb-profiling-BCLP-interactive-compilation-state-AI-laws/710878/
- https://www.fisherphillips.com/en/news-insights/congressional-republicans-propose-10-year-ban-on-state-ai-laws-what-it-could-mean-for-employers.html
- https://www.varnumlaw.com/insights/state-level-ai-regulations-enacted-in-2024/
- https://natlawreview.com/article/artificial-intelligence-ai-employment-discrimination-laws-proposed-six-states-what
- https://www.bclplaw.com/en-US/events-insights-news/overview-of-us-state-legislative-bills-on-ai-in-2023.html
- https://www.hinshawlaw.com/newsroom-updates-pcad-state-ai-laws-what-businesses-must-know.html
- https://www.workforcebulletin.com/states-ring-in-the-new-year-with-proposed-ai-legislation
- https://www.insideprivacy.com/artificial-intelligence/blog-post-state-legislatures-consider-new-wave-of-2025-ai-legislation/