Colorado’s AI law delayed until June 2026: What the latest setback means for businesses

Colorado’s AI law has become a major focus for employers nationwide as they prepare to navigate laws governing decision-making tools powered by artificial intelligence following the 2024 enactment of SB 24-205. However, the state’s groundbreaking AI law has faced another setback after contentious negotiations during the recent special session collapsed. Lawmakers passed a special-session bill on August 26^th to delay the Colorado law’s effective date five months to June 30, 2026, allowing more time to consider revisions.

The Rocky Road to Regulation

Originally passed in 2024 as Senate Bill 24-205, Colorado’s AI Act (“CAIA”) was designed to be the nation’s first comprehensive law regulating artificial intelligence systems used in high-stakes decisions like employment, housing, loans, and healthcare. On and after February 1, 2026, the act requires a developer of a high-risk artificial intelligence system to use reasonable care to protect consumers from any known or reasonably foreseeable risks of algorithmic discrimination.

The CAIA would require companies to conduct impact assessments, provide consumer disclosures, and maintain risk management programs when using AI for consequential decisions. It also establishes liability frameworks that could result in fines up to $20,000 per violation.

Special Session Sparks Heated Debates

Colorado’s recent special session, originally called to address a budget shortfall, became a battleground over AI regulation. Negotiations over the AI law, which is meant to prevent the technology from being used as a tool of discrimination, have consumed the Capitol since lawmakers returned to the building last Thursday for a special session, with reports of shouting filling the halls of the House and Senate.

Senate Majority Leader Robert Rodriguez initially sought to reform the law with compromise legislation but ultimately abandoned those efforts. “It became impossible to iron out a path forward that works for everyone,” Rodriguez told the Senate as he amended the bill.

Industry Pushback and Political Reality

The tech industry’s intense lobbying efforts proved decisive in derailing reform negotiations. “Big tech companies do not want to come to the table — they do not want compromise, they do not want any liability,” said Rep. Brianna Titone, who withdrew her support from the delay bill in protest.

Business groups had raised concerns about compliance costs and potential negative impacts on innovation, leading some companies to consider relocating operations outside Colorado.

What’s Next for Businesses?

The delay provides lawmakers with nearly a full regular session in 2026 to negotiate changes before the June 30, 2026 implementation deadline. However, the repeated failures to reach consensus suggest that Colorado’s ambitious AI regulation may continue to face significant challenges.

For businesses using AI systems, the delay offers additional time to prepare compliance programs while uncertainty persists about the law’s final form. As the first state attempting comprehensive AI regulation, Colorado’s experience will likely influence similar efforts

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