If you run a business that develops artificial intelligence (“AI”) technology, integrates AI into the products you sell, uses AI in servicing your clients, or relies on AI to operate your business, you may want to know about some new laws that will go into effect in 2026 regulating the use of AI.
- Effective January 1, 2026, California will implement the California Transparency in Frontier Artificial Intelligence Act (TFIA) (SB 53). California Generated 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 implementing amendments to the Illinois Human Rights Act under House Bill (HB 3773).
- Effective June 30, 2026, Colorado will implement 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 recruiting or human resources functions, or distribute AI-generated content. In other words, if you want to use or deploy AI in California, Colorado, or Texas, you will need to comply with these new laws. Illinois employers who use AI to make human resources decisions will need to ensure that their hiring and treatment of employees does not violate Illinois' new AI law.
California
California Frontier Artificial Intelligence Transparency Act (TFIA) (SB 53)
TFAIA establishes important monitoring and reporting requirements for “frontier” developers who train or develop the largest and most advanced AI models. This law applies to developers in California who build models with 10^26 FLOPs or more of computational power or who had gross revenues of $500 million or more in the previous calendar year.
The primary obligations under this law require annual public safety information disclosure and incident reporting of “serious safety incidents” to the California Governor's Office of Emergency Services. The law also includes whistleblower protections for employees who report safety concerns or compliance violations. Companies that meet these “frontier” criteria must take steps to ensure compliance with all disclosure requirements. Failure to comply may result in civil litigation by the California Attorney General's Office and penalties of up to $1 million for each violation.
Generative Artificial Intelligence in California: Training Data Transparency (AB 2013)
AB 2013 requires developers of public generative AI systems to provide Californians with an overview of the datasets used to train their models. The goal is to increase transparency about what data informs the outputs produced and what risks (such as copyright infringement, privacy exposure, bias, etc.) may affect the users of the model and the outputs they receive.
Developers must be able to audit all generative AI system training datasets developed or significantly modified after January 1, 2022, and disclose information such as the source and owner of the data, the categories of data used, and whether the data set contains protected intellectual property or personal information. Although AB 2013 does not specify enforcement penalties, analysis provided by a Congressional committee suggested that enforcement would be based on California's Unfair Competition Law.
California AI Content Transparency Act (SB 942)
SB 942 regulates consumer media content (i.e., images, video, audio, and audiovisual content) that is generated or significantly modified using AI. The bill would, among other things, (1) require a covered provider of AI-generated or modified media (defined as a person or entity with more than 1 million monthly visitors and who produces AI-generated content that is accessible within California) to provide a clear, conspicuous and appropriate disclosure that the content is generated or modified by AI; (2) provide users with the ability to include the disclosure in content created or modified by a covered provider's generated AI systems; and (3) For example, requiring covered providers to offer AI detection capabilities to users. Tools to assess whether content was created or modified by generative AI.
Penalties for violating SB 942 include civil action by the California Attorney General's Office or city/county attorney, with a penalty of $5,000 for each violation. Exceptions exist for providers of video games, television shows, streaming content, movies, or interactive experiences that are not user-generated.
colorado
Colorado AI Act (SB 24-205)
SB 24-205 establishes requirements for developers and implementers of “high-risk” AI systems that make or significantly impact employment, housing, credit, education, or health care decisions affecting Colorado residents. The bill, as amended by SB25B-004, is scheduled to take effect on June 30, 2026. Colorado's AI law is important because it provides very narrow exceptions that require compliance even by small businesses. The Act would (1) require companies to conduct annual impact assessments; (2) Developers document and disclose the risks and limitations of AI systems to adopters. (3) Employers provide consumers with notice and the right to opt-out of these high-risk AI systems; The ultimate goal of this law is to establish transparency and accountability to combat algorithmic discrimination when consequential decisions are made by AI systems.
Violations of this law are considered deceptive trade practices under the Colorado Consumer Protection Act, enforced by the Colorado Attorney General.
illinois
Illinois Human Rights Law Amendment (HB 3773)
HB 3773 would amend the Illinois Human Rights Act to prohibit Illinois employers from using AI in recruiting, hiring, promotion, and other employment-related decisions that could lead to discrimination against protected classes. Employers who use AI in the hiring process must notify employees and job applicants that AI is being used to make employment decisions.
Starting January 1, 2026, the Illinois Department of Human Rights and the Illinois Human Rights Commission will have the authority to enforce this law, and individuals will have the option of filing complaints with the Commission or through a private right of action in the Illinois Circuit Court.
texas
Texas Responsible Artificial Intelligence Governance Act (HB 149)
HB 149 establishes new requirements for the responsible use of AI in the public sector in Texas and places limits on the use of AI in the private sector. State agencies must implement a governance framework for the procurement and use of AI, including impact assessments, risk mitigation plans, and oversight measures. The law also prohibits the development of AI by any entity for activities such as social scoring, certain manipulations of human behavior, creation of pornography, and discrimination. The law calls for the creation of a unique “sandbox” managed by the Department of Information Resources that would allow approved participants to test new AI systems while temporarily exempting them from certain regulatory requirements, such as necessary licenses and permits.
The law is enforced by the Texas Attorney General and includes a 60-day cure period. Failure to correct a violation may result in a fine of up to $200,000 for each violation, and additional fines may be imposed if the violation continues.
Additional notes regarding the European Union
European Union Artificial Intelligence Law
U.S. companies that make AI systems available on the European Union market, or whose use impacts people in the European Union, should be aware of the limitations and obligations imposed by the European Union Artificial Intelligence Act of 2024. Most will take effect on August 2, 2026, following a two-year phase-in period. For more information on EU AI law, please read this client alert.
Important points
With compliance requirements for many of these new AI laws just weeks away, companies need a clear understanding of whether their use or deployment of AI may be affected by these new laws. Even if your business is not currently subject to these state laws, you can prepare for future increases in AI regulation by maintaining documentation and control over your company's use of AI.
