If you operate a business that develops artificial intelligence (“AI”) technology, integrates AI into products you sell, use AI in providing services to your clients or rely upon AI in running your business, then you will want to know about several new laws regulating the use of AI that will go into effect in 2026.
- Effective January 1, 2026, California will introduce the California Transparency in Frontier Artificial Intelligence Act (TFAIA) (SB 53); the California Generative Artificial Intelligence: Training Data Transparency (AB 2013); and the California AI Content Transparency Act (SB 942).
- Effective January 1, 2026, Texas will implement the Texas Responsible Artificial Intelligence Governance Act (HB 149).
- Effective January 1, 2026, Illinois will begin enforcing its amendment to the Illinois Human Rights Act under House Bill (HB 3773).
- Effective June 30, 2026, Colorado will put into effect the Colorado AI Act (SB 24-205).
These new laws will primarily impact companies that develop AI, incorporate AI into their products or services, use AI in hiring or human resource functions, or distribute AI-generated content. In other words, any use or deployment of AI in California, Colorado, or Texas will need to comply with these new laws. Employers in Illinois using AI to make HR decisions will need to ensure their hiring and treatment of employees does not run afoul of Illinois’s new AI law.
California
California Transparency in Frontier Artificial Intelligence Act (TFAIA) (SB 53)
TFAIA establishes significant oversight and reporting requirements for “frontier” developers who train or develop the largest and most advanced AI models. This law will apply to developers in California who build models with computing power of 10^26 FLOP or greater or developers with gross revenues of $500 million or more in the prior calendar year.
The primary obligations under this law will require annual public safety disclosures and incident reporting of “critical safety incidents” to the California Governor’s Office of Emergency Services. The act will also include whistleblower protections for employees who report safety concerns or non-compliance. Businesses who meet these “frontier” thresholds should take steps to ensure compliance with all disclosure requirements. Failure to comply may result in civil actions brought by the California Attorney General’s office with penalties of up to $1 million per violation.
California Generative Artificial Intelligence: Training Data Transparency (AB 2013)
AB 2013 requires developers of public generative AI systems to provide a high-level summary to Californians about the datasets used to train their models. The goal is to increase transparency about what data informs generative outputs and what risks (including copyright infringement, privacy exposure, and bias) may impact users of the model and the outputs they receive.
Developers should audit their training datasets for all generative AI systems developed or substantially modified on or after January 1, 2022, and be able to disclose information such as the sources and owners of the data, the categories of data used, whether the data set includes protected intellectual property or personal information. While AB 2013 does not specify enforcement penalties, analysis provided by the assembly committee suggested enforcement would occur under California’s Unfair Competition laws.
California AI Content Transparency Act (SB 942)
SB 942 regulates consumer-facing media content (i.e., images, video, audio, and audiovisual content) that is generated or materially altered using AI. The bill would, among other things, (1) require covered providers (defined as a person or entity who produces AI-generated content that has over 1 million monthly visitors and is accessible within California) of AI-generated or modified media to provide clear, conspicuous and appropriate disclosures that the content was AI-generated or modified, (2) offer users the ability to include a disclosure in content that is created or altered by the covered provider’s generative AI system, and (3) require covered providers to give users an AI detection tool to assess whether content was created or altered by generative AI.
Penalties for violating SB 942 include civil action by the California Attorney General’s office or city/county counsel of $5,000 per violation. Exemptions exist for providers of non-user-generated video games, tv shows, streaming content, movies, or interactive experiences.
Colorado
Colorado AI Act (SB 24-205)
SB 24-205 establishes requirements for developers and deployers of “high-risk” AI systems that make or significantly influence consequential decisions about employment, housing, credit, education or healthcare affecting Colorado residents. The bill, which was amended by SB25B-004, will take effect June 30, 2026. Colorado’s AI Act is significant because it has very narrow exceptions, requiring even small businesses to comply. The act will require (1) businesses to conduct annual impact assessments; (2) developers to document and disclose to deployers the risks and limitations of their AI systems; and (3) deployers to provide consumers with notice and opt-out rights for these high-risk AI systems. The ultimate goal of the act is to create transparency and accountability to combat algorithmic discrimination when consequential decisions are being made by an AI system.
Violations of the act will be deemed a deceptive trade practice under Colorado’s Consumer Protection Act enforceable by Colorado’s attorney general.
Illinois
Amendment to the Illinois Human Rights Act (HB 3773)
HB 3773 amends the Illinois Human Rights Act by prohibiting employers in Illinois from using AI for recruitment, hiring, promotion, or other employment-related decisions that may result in discrimination against a protected class. Employers who use AI in their employment processes must notify employees and job applicants that AI is used in the employment decisions.
Beginning January 1, 2026, the Illinois Department of Human Rights and the Illinois Human Rights Commission will have the authority to enforce the act, and individuals will have the option of filing claims with the Human Rights Commission, or through a private right of action in Illinois Circuit Court.
Texas
Texas Responsible Artificial Intelligence Governance Act (HB 149)
HB 149 establishes new requirements for responsible use of AI in Texas in the public sector as well as places limitations on the use of AI in the private sector. State agencies must adopt governance frameworks for procuring and using AI, including impact assessments, risk mitigation plans, and oversight measures. The act also prohibits the development of AI by any entity for activities such as social scoring, certain manipulation of human behavior, creation of pornography, and discrimination. The act calls for the creation of a unique “Sandbox” administered by the Department of Information Resources allowing approved participants to test new AI systems while being temporarily exempt from certain regulatory requirements such as required licensing or permits.
The act will be enforced by the Texas attorney general and has a 60-day cure period. Failure to cure any violations may result in penalties of up to $200,000 per violation, with additional penalties for continued violations.
Additional Note about the European Union
European Union Artificial Intelligence Act
U.S. companies that make AI systems available on the market in the European Union or whose use of an AI systems affects people located in the EU need to be aware of the restrictions and obligations imposed by 2024 European Union Artificial Intelligence Act, most of which will go into effect on August 2, 2026 after a two-year phase-in period. For more information about the EU AI Act, read our client alert here.
Key Take Aways
With compliance requirements for many of these new AI laws only weeks away, businesses should ensure they have a clear understanding of whether their use or deployment of AI may be affected by any of these new laws. Even if your business is not subject to these state laws now, you can prepare for a future of increasing AI regulation by maintaining documentation and control over your company’s use of AI.
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If you have any questions about these legal developments or would like assistance in assessing your company’s use or development of artificial intelligence in view of these new laws, our AI law team can help. Please reach out to Taylor Osher at or Kevin DeBré at .
**This Client Alert does not create an attorney-client relationship with any person. The information contained in this Client Alert is provided for general informational purposes only and should not be construed as legal advice. The content is not intended to be a substitute for professional legal counsel or services.
