Rethinking California’s flawed AI regulations

OPINION – California has long been at the forefront of technological innovation. Having worked with hundreds of companies that drive our state’s economic engine, I’ve witnessed firsthand how leading innovators have powered California’s economy to the 4th largest in the world. The innovation ecosystem has created millions of jobs and generated tremendous economic growth, not just within the tech sector itself but across healthcare, agriculture, manufacturing, and countless other industries throughout our state.

But, the California Privacy Protection Agency’s proposed regulations surrounding the use of Automated Decision-Making Technology (ADMT) and other AI-assisted systems risk undermining the very ecosystem that has made our state a global economic leader. As the CEO of the Silicon Valley Leadership Group, representing innovative companies that employ hundreds of thousands of Californians, I must voice serious concerns about these sweeping new requirements.

Consumer privacy is unquestionably important, and it’s a core value that must be taken seriously by all leading innovation companies. Many have already implemented robust privacy practices and security systems that meet or exceed current requirements. However, these new regulations go far beyond reasonable privacy safeguards and introduce complex mandates that create significant operational burdens with uncertain benefits for consumers.

The economic analysis on these regulations estimates implementation costs of $3.5 billion and a potential loss of 98,000 jobs in the first year alone. At a volatile time when we are working to maintain the growth and stability of California’s economy, we cannot afford such a significant disruption across industries with regulations that are out of step with standards across the country.

Many people often assume that these types of regulations are only aimed at the largest companies who have the resources necessary to comply, but in fact this would equally impact the small businesses that are the backbone of our state.

The same complex requirements would apply to both multinational corporations and small businesses with limited resources. A startup with twenty employees would face cybersecurity audit requirements nearly identical to those imposed on companies employing thousands. Similarly, the proposed restrictions would harm the ability of a small retail business that depends on e-commerce sales to use digital tools to reach consumers, promote products, and conduct transactions.

Ultimately, this uneven approach threatens to stifle the entrepreneurial dynamism that has defined California’s economy for generations.

The most recent CPPA hearing saw the agency reconsider certain aspects of these regulations, but it is still unclear whether the Agency will make adequate changes before finalizing the regulations. We appreciate the CPPA’s willingness to finally start listening to the feedback from stakeholders, but we still believe that the overly burdensome requirements and unclear definitions would negatively impact consumers and businesses alike. Many of the systems classified as ADMT under the proposed rules are essential to operations that protect consumers—like fraud detection, identity verification, and cybersecurity monitoring. By requiring opt-out rights for these systems and mandating human review processes that may be impractical at scale, the regulations could actually undermine critical services that safeguard consumers.

I believe a more balanced, commonsense approach is possible—one that achieves the strong privacy safeguards upon which we all rely while also strengthening California’s innovation leadership and global economic competitiveness. We should focus on finding solutions that protect consumer privacy without imposing disproportionate burdens on businesses of all sizes, particularly those that are already implementing strong privacy practices.

California can maintain its leadership in both privacy protection and innovation, but it requires thoughtful regulations and robust engagement from the business community to ensure that we can effectively balance these priorities. Anything less puts our economic dynamism at risk—and with it, the future prosperity of our state.”

Ahmad Thomas is the CEO of the Silicon Valley Leadership Group, the leading business association representing the innovation economy and its ecosystem.