Colorado is on the verge of enforcing one of the nation’s most sweeping artificial intelligence laws — but not if Elon Musk and the Department of Justice can stop it.
The Colorado Artificial Intelligence Act passed in 2024 and is scheduled to take effect on June 30. It seeks to prevent bias on the basis of gender or ethnicity in “high risk” AI systems used in areas such as employment and healthcare, even if the AI’s output is unintentional.
The Trump administration intervened in the case this week, backing Musk’s claim that the law is unconstitutionally “woke,” violating the Fourteenth Amendment’s Equal Protection Clause.
“Laws that require AI companies to infect their products with woke DEI ideology are illegal,” Assistant Attorney General Harmeet Dhillon, who heads the Justice Department’s civil rights division, said in a statement.
In court documents, the DOJ alleged the law illegally requires AI companies “to prevent unintentional disparate impact that their products could have based on protected characteristics like race and sex, and by exempting liability for certain forms of discrimination designed to advance ‘diversity.’”
Musk’s lawsuit — and the federal government’s intervention — put Colorado’s AI Act at the center of a legal battle involving freedom of speech and emerging technology. The outcome could determine whether governments can force companies to prevent certain AI outcomes, even if there is no intent to discriminate.
Legal showdown
Even though AI technology has developed at a stunning pace in recent years, few regulations exist at the federal level, and Colorado was the first state to enact its own rules. Its law outlaws algorithmic discrimination, in which AI programs automatically treat some people differently than others because of certain characteristics. It intends to prevent bias in AI-generated “consequential decisions” involving education, employment, financial and legal services, housing and healthcare.
But last December, President Donald Trump signed an executive order discouraging state AI regulation. The order authorized the Justice Department to challenge “onerous and excessive” state regulations that stifle innovation, restrict truthful AI outputs or violate the First Amendment.
Musk’s company xAI filed a lawsuit last month in federal court in Denver seeking to block implementation of the new law. When the Justice Department joined the case, it elevated the matter from a business dispute between one company and one state into a major legal showdown between the state and the federal government.
The outcome could have far-reaching consequences.
“Essentially the issue at play here is when we think about AI, we often think about how the users of AI can express themselves,” David Inserra, a fellow for free expression and technology at the Cato Institute, a libertarian think tank, told Straight Arrow. “But we less often think about what are the expressive choices that the developer of the AI tool makes. Those expressive choices are what xAI is suing Colorado over.”
Free speech debate
Some critics say Colorado is biased in the way it determines what is biased. Others say that while the law may be well-intentioned, it violates the First Amendment.
Colorado has passed several laws in recent years that attempt to regulate emerging technologies. It has also enacted anti-discrimination policies and protections that have made the state a legal testing ground involving some of the era’s most divisive issues. In March, for example, the Supreme Court struck down a Colorado law that banned therapists from encouraging so-called “conversion therapy,” which aims to convert LGBTQ+ children and teens into heterosexual or cisgender.
Conservatives and other critics say the AI law is another instance in which Colorado has pushed too far to impose a particular point of view.
“Colorado is putting its thumb on the scales by saying that certain types of content that is discriminatory will not be allowed, but other types of discriminatory content will be allowed,” Inserra said. “This will force AI tools to remove anything that even resembles what Colorado views as illegal discrimination, but will allow tools that Colorado views as good discrimination. This is not viewpoint neutrality as demanded by the First Amendment, and Colorado has lost multiple lawsuits before the Supreme Court on this very issue.”
‘A strong first step’
A spokesperson for the Colorado attorney general’s office declined to discuss the new law or the lawsuit challenging it, telling Straight Arrow that the office “does not comment on active litigation.”
However, the law has the support of officials from other states that have not adopted AI regulations.
“Because algorithmic discrimination laws are so new, Colorado’s approach could serve as a model for other states and influence future federal legislation or regulation,” according to the National Association of Attorneys General. “[T]he bill is a strong first step toward ensuring continued human control and human verification over automated decisions that affect people, and toward mitigating forms of bias and discrimination that may exist in AI systems.”
But the association also notes that the “bill imposes new restrictions and state-of-the-art requirements on all businesses regarding a still-emerging field of technology that is highly dynamic and not perfectly understood by the general public.”
Patchwork problem?
While other states are considering laws to regulate AI, some see the patchwork approach as more of a problem than a solution.
“This case underscores why the country urgently needs a clear federal AI framework that provides real common-sense guardrails for the American people while allowing for innovation to flourish,” Autumn Dorsey, a visiting research associate at the conservative Heritage Foundation, told Straight Arrow.
The Cato Institute’s Inserra said that if each state adopts its own regulations, “then it becomes nearly impossible for new AI tools to successfully develop.”
He said the legal issues are similar to those from the early days of the internet.
“We’re seeing all these lawsuits because, just like at the beginning of the internet in the ’90s, we saw a variety of lawsuits around: who’s liable for speech?” Inserra said.
In that era, he said, “Congress created baseline laws for the internet to create an environment to allow these new technologies to flourish. We’re in that same moment now for AI.”
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