Newsom Veto Signals Growing Caution on Implementing AI Regulations

“We cannot prepare our youth for a future where AI is ubiquitous by preventing their use of these tools altogether,” Newsom wrote in his veto message.

The bill, the Leading Ethical AI Development (LEAD) for Kids Act (AB 1064) would have prohibited companies or state agencies from providing access to companion chatbots to minors if the chatbots were “foreseeably capable” of encouraging a child to engage in self-harm, suicidal ideation, violence, consumption of drugs or alcohol, or disordered eating.

The measure passed the state assembly and senate in September by wide markets. But tech companies, which are critical to California’s economy, pushed back hard against the legislation, warning it would encourage them to focus their expansion investments outside of the Golden State, including relocating their headquarters, depriving California of both jobs and economic activity.

“They threaten to hurt the economy of California,” Common Sense Media Chief Executive Jim Steyer told the Los Angeles Times. “That’s the basic message from the tech companies.”

The climb-down by Newsom was a blow to state lawmakers and outside organizations that have sought to use California’s economic strength and status as the leader in technology innovation among states to establish a de facto national regulatory framework for AI and social media in the absence of federal action. The state previously enacted AB 56, which requires platforms to display labels for minors that warn about social media’s mental health harms. Another law, Senate Bill 53, aims to make AI developers more transparent about safety risks and offers more whistleblower protections.

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But Newsom’s veto of AB 1064 comes as other states such as Texas are aggressively seeking to lure AI and tech companies away from Silicon Valley with promises of fewer regulatory restrictions and a friendlier legislative environment. It follows a decision by California Attorney General Rob Bonta not to oppose OpenAI’s recent restructuring plan, despite initial concerns, as OpenAI CEO Sam Altman promised not to leave the state, per the Times.

Newsom recently vetoed another bill opposed by tech companies, the No Robo Bosses Act (SB 7), which would have required employers to notify workers before deploying an “automated decision system” in hiring, promotions and other employment decisions.

The recent backtacks also come as several major California tech companies, including Google, Meta, OpenAI and Apple have strengthened their ties with the Trump administration, which has been at odds with the state. The president has sent federal troops into Los Angeles over Newsom’s objections, and has threatened to send troops to San Francisco. The administration’s AI Action Plan also calls for withholding federal funds from states with “overly burdensome” regulations.

Tech companies may not be completely off the hook for AI companions, however. Last month, a bipartisan quartet of senators introduced federal legislation to prohibit making AI companions accessible to minors and create new criminal penalties for companies whose products aimed a minors solicit or generate sexual content. With the House currently out of session and budget negotiations looming, action on the Senate bill is unlikely before 2026.