The way states regulate AI and automated decision-making technology for businesses as we approach 2026 appears to be in flux. While Colorado was one of the first states to put comprehensive AI laws on their upcoming agenda in 2023, the state is now pulling back on plans to implement regulations for business use case scenarios in 2026. Meanwhile, California seems to have a clearer path for how businesses should use AI.
Colorado pulls back on upcoming AI laws
Previously, we covered the Colorado Artificial Intelligence Act (SB24-205), the nation’s first comprehensive statewide AI regulation bill. SB24-205 was originally charted to go into effect on February 1, 2026. The original legislation introduced obligations for high-risk AI developers on documentation, public disclosures, and risk mitigation. Regulations for deployers included responsibilities for risk management, impact assessments, notices, and consumer disclosures.
The original law was signed with reservations
After Governor Jared Polis signed the bill in May 2024, a signed statement located on the Colorado Chamber of Commerce website expressed reservations about its potential to stifle innovation, urging revisions. Industry groups have also raised concerns regarding administrative complexity, overlapping definitions, and implementation burdens for both developers and deployers.
Attempt to amend SB24-205 with the Colorado Special Session & “AI Sunshine Act”
Following this statement, the Colorado legislature convened a special session to revisit SB24-205 in August. Multiple bills emerged in response, notably the “Colorado Artificial Intelligence Sunshine Act” (SB25B-004.)
The proposed revision, led by Colorado Senate Majority Leader Robert Rodriguez, aimed to narrow the original Act and create a framework for joint liability shared by developers and deployers if an AI system was found in violation of civil rights laws. However, this ultimately collapsed, as consensus could not be reached among industry, labor, and consumer advocates.
Revisions postponed
With new negotiations stalled due to the inability to reach an agreement, SB 25B-004 was amended to delay the effective date until June 30, 2026. This amendment received broad bipartisan support and was then signed into law by Governor Polis on August 28, 2025. Postponing implementation allows the Colorado legislature the opportunity to revisit the issue when it reconvenes for the 2026 regular session.
Active Advancement of AI Regulations in California
While Colorado is rethinking its upcoming AI laws, California is moving full steam ahead to set firmer guidelines for algorithmic accountability in employment and hiring. On June 30, 2025, the California Civil Rights Council secured approval for regulations aimed at protecting against employment discrimination related to artificial intelligence.
A summary of the approved regulations
The approved regulations went into effect on October 1, 2025. According to the State of California Civil Rights Department, these regulations aim to provide clarification in the following areas:
- Automated decision-making systems: Clarification that using an automated decision-making system may violate California law if it harms applicants or employees based on protected characteristics such as gender, race, or disability.
- Record retention requirements: Ensure employers and covered entities maintain employment records, including automated-decision data, for a minimum of four years.
- Assessments and medical inquiries: Affirm that automated-decision system assessments, including tests, questions, or puzzle games that elicit information about a disability, may be considered illegal medical inquiries.
- Key term definitions: Added definitions for key terms used in the regulations, such as “automated-decision system,” “agent,” and “proxy.”
The California Civil Rights Department (CRD) will oversee enforcement for new AI consumer protection regulations. The full text for these regulations can be found here.
The outlook for 2026 AI employer regulations is still unclear
While Colorado has temporarily delayed SB25B-004, declaring a need to reevaluate regulations to strike a balance between promoting innovation and remaining mindful of civil rights protections, California appears to be moving forward with guidance for employers.
Colorado’s call for further consideration and nuanced specifications on how AI use affects employer regulations may influence future state or federal regulations. Meanwhile, the new regulations approved in California could potentially influence final revisions to 2026 AI laws in Colorado and future laws in other states. Verified Credentials will attempt to provide updates on AI laws and regulations that affect employers as they become available.
This content is for informational purposes only and shall not constitute legal opinion or advice. Consult your legal counsel to ensure compliance.
