Last week, Senate Republicans released the latest text of their tax and budget bill—often referred to as the “One Big Beautiful Bill.” The bill will reportedly include the largest cuts to Medicaid ever seen and major reductions to federal funding for the Supplemental Nutrition Assistance Program, changes that would reduce lifesaving benefits for millions. Most notably for technology policy, it amends the Broadband Equity, Access, and Deployment Program (BEAD), a grant program created by the 2021 Infrastructure Investment and Jobs Act to expand high-speed internet access for Americans by adding $500 million in new funding and establishing a new federal moratorium on state and local regulation of artificial intelligence (AI). Since its release, some confusion has emerged over how the AI moratorium would function. Republicans’ materials on the Senate Committee on Commerce, Science, and Transportation describe it as a condition on BEAD funding, implying that states can avoid the restriction simply by declining the money. In reality, per a plain text reading of the proposed language, the Senate’s AI moratorium is not tied to BEAD requirements and would function as a decadelong preemption of state and local AI regulations that broadly applies to all jurisdictions once the bill becomes law. While the provision includes limited exceptions for laws that facilitate AI deployment, it would otherwise prohibit most efforts to regulate the technology. Its effect is nearly identical to the version passed by the House. Sen. Ed Markey (D-MA) raised concerns last week about the true scope of the provision, warning that it would block state regulation of AI entirely.
The mistaken interpretation that the moratorium is optional has gained traction because the moratorium text appears next to funding-related provisions that explicitly refer back to it. That proximity, combined with a lack of accurate public explanation from the bill’s authors, has led many to assume the moratorium only applies to states that seek BEAD funding.
But a plain-text reading of the Senate tax and budget draft reveals a standalone, 10-year federal preemption that immediately prohibits or nullifies most state and local regulation of AI systems in interstate commerce once the bill becomes law. This means that the moratorium is not conditioned on whether a state or local government receives or seeks BEAD funds. While other sections of the bill related to BEAD funding mention the moratorium, they function as enforcement mechanisms rather than prerequisites for the moratorium’s legal effect.
It is essential to understand exactly what the proposed AI moratorium provision does and how it operates within the bill in order to correctly assess its impact. The interpretation of the plain text presented below has been largely unconfirmed but could have implications for its score by the Congressional Budget Office and viability under parliamentary rules.
Plain text reading of the AI moratorium
The AI moratorium is situated in a section of the Senate draft that amends the BEAD statute under 47 U.S.C. § 1702 by adding new funding and compliance requirements. It appears alongside provisions that directly reference compliance with the moratorium when determining BEAD fund eligibility. This layout and text have led to confusion about whether the moratorium itself is merely a funding condition or a broader restriction. However, a plain text reading of the bill shows that the moratorium stands alone as a direct federal prohibition, is not conditioned on any other provision, and immediately goes into effect once the bill becomes law. The other provisions function merely to enforce it through the BEAD funding mechanism.
A plain text reading of the bill shows that the moratorium stands alone as a direct federal prohibition, is not conditioned on any other provision, and immediately goes into effect once the bill becomes law.
How the senate tax and budget bill alters the BEAD statute
To help clarify how the proposed Senate tax and budget bill would alter existing law, the Center for American Progress has prepared a redline showing the bill’s language inserted into the current BEAD statute.
To understand this, it is helpful to first examine the two enforcement provisions in the draft that explicitly tie BEAD funds to compliance with the moratorium.
Subsection (p), titled “RECEIPT OF FUNDS CONDITIONED ON COMPLIANCE WITH MORATORIUM,” states:
On and after the date of enactment of this subsection, no amounts made available to carry out this section may be obligated to an eligible entity or a political subdivision thereof that is not in compliance with subsection (q).
This provision bars new BEAD funds from being obligated to any state or local government that violates the AI moratorium in subsection (q).
Similarly, subsection (g)(3)(B)(iii), titled “DEOBLIGATION OF AWARDS; INTERNET DISCLOSURE,” inserted under BEAD’s general program requirements states:
The Assistant Secretary … may, in addition to other authority under applicable law, deobligate grant funds awarded to an eligible entity that … (iii) is not in compliance with subsection (q).
This provision gives the assistant secretary of commerce for communications and information explicit authority to rescind previously awarded BEAD funds from the states or local governments that violate the AI moratorium in subsection (q).
A plain reading of the text shows that subsections (p) and (g)(3)(B)(iii) are enforcement tools intended to ensure compliance with the moratorium by withholding or reclaiming BEAD funds. They do not create or trigger the moratorium. Instead, both provisions assume that the moratorium in subsection (q) is already in effect. While they reference the moratorium, they do not define its scope or determine its legal force.
The moratorium in Subsection (q)(1), titled “MORATORIUM–IN GENERAL,” states:
Except as provided in paragraph (2), no eligible entity or political subdivision thereof may enforce, during the 10-year period beginning on the date of enactment of this subsection, any law or regulation of that eligible entity or a political subdivision thereof limiting, restricting, or otherwise regulating artificial intelligence models, artificial intelligence systems, or automated decision systems entered into interstate commerce.
This language imposes a direct and unconditional prohibition on state and local regulation of AI systems that operate in interstate commerce. It does not mention BEAD, funding eligibility, or any connection to the enforcement provisions in subsection (p) or (g)(3)(B)(iii). On its face, it binds every eligible entity—in other words, every state—and political subdivision nationwide, regardless of whether they seek or have received federal funds.
The Senate AI moratorium is not a funding condition that states can choose to opt into or out of. It is a blanket federal prohibition that applies to all state and local governments, regardless of whether they participate in the BEAD program. The presence of funding-related enforcement mechanisms in the bill does not change the plain text effect of subsection (q), which stands on its own.
Ironically, because the moratorium takes effect immediately after the bill becomes law and gives states no choice in the matter, the funding restrictions tied to compliance would have little incremental impact. Nearly every state would remain eligible for BEAD funds simply because they are legally prevented from passing and enforcing AI laws in the first place. What may appear at first as a conditional incentive is in fact a nationwide restriction. This distinction is central to understanding whether it is appropriate for inclusion in a reconciliation bill.
It is possible that the limitation on BEAD funds would only apply if a state were to challenge the moratorium in the courts, refusing to implement it until a court order is handed down. While the courts could ultimately interpret the moratorium language more narrowly, there is no guarantee that they will. At this stage, the plain text remains the most reliable basis for understanding the provision’s legal effect and how it fits within the requirements of Senate rules.
The AI moratorium’s broad impact
Setting aside the funding considerations of this provision, the AI moratorium itself is deeply concerning and antithetical to promoting safe and effective AI innovation and deployment. The moratorium is a sweeping federal attempt to paralyze state and local policymaking in arguably the fastest-moving and highest-stakes technological domain today. The bill would prevent the passage of state laws that regulate artificial intelligence for 10 years, regardless of evidence of harm, priority, urgency, or public demand for protections. That includes efforts to limit algorithmic discrimination in hiring and health care decision-making systems, regulate biometric surveillance in public places and schools, or curb the spread of AI-generated misinformation ahead of an election. The bill carves out laws that make it easier to deploy AI, not ones that contain its abuses or mitigate its risks. Numerous state legislators, state officials, prominent AI CEOs, and even some Republican Senators have begun to express concerns about the moratorium.
The moratorium is a sweeping federal attempt to paralyze state and local policymaking in arguably the fastest-moving and highest-stakes technological domain today.
Congressional Republicans are attempting to pass their sweeping bill using the budget reconciliation process, which allows legislation to pass the Senate with a simple majority. But that process is subject to strict limitations under the Senate’s Byrd rule, which among other things bars provisions that do not affect the budget or whose budgetary impact is merely incidental to their primary policy purpose. A standalone AI moratorium almost certainly runs afoul of those rules. Even a narrower version that conditions BEAD funding on an optional state or local moratorium would likely fail due to the condition being incidental to the funding. While it is paired with new broadband funding and may technically affect federal spending, the moratorium’s actual aim is to influence state policy—nonbudgetary state policy—not to directly raise or lower federal outlays. It uses a budgetary incentive to trigger nonbudgetary action, making its qualification by the Senate parliamentarian under reconciliation highly questionable.
Conclusion
As debate over the reconciliation package continues, it is essential to be clear about what the language would do. The Senate tax and budget bill buries a federal ban on state and local regulation of AI for 10 years at the end of the BEAD statute. Despite preceding provisions that directly reference the moratorium, the moratorium is clearly written as a standalone legal restriction that immediately goes into effect once the bill becomes law, leaving states with no opportunity to opt out.
The author would like to thank Adam Conner, Megan Shahi, Ben Olinsky, Bobby Kogan, and Colin Seeberger for their contributions to this piece.