Colorado Enacts Historic AI Discrimination Law to Protect Workers and Consumers

In a pioneering move, Colorado is set to become the first state in the U.S. to enact a comprehensive law addressing the use of artificial intelligence (AI) in employment and other critical sectors. Senate Bill 24-205 (SB205), passed by the state legislature on May 8 and signed by Governor Jared Polis, aims to prevent algorithmic discrimination across various sectors.

The law, which takes full effect in February 2026, marks a significant step in regulating the burgeoning AI industry to protect consumers and workers.

Scope and Impact of SB205

SB205 defines “high-risk artificial intelligence systems“—machine-based algorithms significantly influencing decisions in employment, education, financial services, government services, healthcare, housing, insurance, and legal services. These systems are deemed high-risk if they substantially impact individuals or groups, potentially leading to differential treatment based on protected classifications like age, disability, race, religion, or sex.

Affected Entities

The law mandates compliance from both developers and deployers of high-risk AI systems within Colorado. Developers include any entity that creates or significantly modifies an AI system, while deployers are those that use such systems. Small businesses with fewer than 50 full-time employees may be exempt from some requirements.

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Industry Response and Legislative Concerns

The Colorado Technology Association (CTA), representing over 300 technology companies, has expressed concerns over the law’s broad definition of artificial intelligence(AI), fearing it could encompass all software and create an undue burden on businesses. They argue that the amendment allowing appeals by consumers who receive adverse decisions could lead to an influx of appeals, discouraging AI development in the state.

Governor Polis, while signing the bill, acknowledged these concerns. In a letter to lawmakers, he expressed reservations about the potential impact on innovation and competition. However, he remains confident that the delayed implementation until 2026 will provide ample time for necessary adjustments and improvements.

Looking Ahead

As SB205 becomes law, a task force will guide its rollout, addressing industry concerns and refining the regulatory framework. Additionally, House Bill 1468 expands the legislature’s Joint Technology Committee to include experts in AI and advocates for those historically discriminated against by AI systems.

As the first state to regulate AI on such a comprehensive scale, Colorado’s approach could influence future national policies, highlighting the importance of proactive measures in the rapidly evolving AI landscape.

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