Colorado Scales Back AI Law Ahead of 2027 Launch, While FTC Proposal Clouds Compliance Outlook
By CU Today Staff —
WASHINGTON—Colorado has significantly narrowed what was set to become the nation’s first comprehensive artificial intelligence governance law, replacing broad compliance mandates with a framework focused on transparency, consumer rights and disclosure, according to PYMNTS, citing an analysis by McDermott Will & Schulte.
PYMNTS also reported that a recent Federal Trade Commission policy proposal has added uncertainty by suggesting some state AI laws could conflict with federal consumer protection standards.
Under Senate Bill 26-189, signed by Gov. Jared Polis in May, the revised Colorado Artificial Intelligence Act abandons many of the original law's risk management requirements while continuing to regulate automated decision-making technology (ADMT) used in consequential decisions involving areas such as employment, housing, education, credit, insurance, healthcare and government services, PYMNTS reported. The law is scheduled to take effect Jan. 1, 2027, although enforcement remains on hold pending rulemaking by the Colorado attorney general and ongoing constitutional litigation.
According to PYMNTS, the revised law broadly defines ADMT as technology that uses personal data to generate predictions, scores, rankings or recommendations that influence significant decisions, potentially covering many automated analytics tools beyond traditional AI. Routine technologies such as antivirus software, firewalls, conventional spreadsheets, information-organizing tools and consumer chatbots not used for consequential decisions are excluded.
Rather than requiring extensive risk assessments and governance programs, organizations using covered systems will be required to notify consumers when ADMT is used, explain its role in adverse consequential decisions and provide opportunities for meaningful human review, PYMNTS reported. McDermott advised companies to begin inventorying AI and automated decision-making tools, establish disclosure and review procedures, and monitor Colorado's rulemaking process as the FTC weighs whether some state AI requirements could create conflicts under the federal FTC Act, according to PYMNTS.
Originally reported by CU Today.