This week decoded

This week in AI federal policy, Senate Commerce Committee Chair Ted Cruz (R-TX) released an AI legislative framework and legislation to establish an AI regulatory sandbox. Rep. Jay Obernolte (R-CA) is reportedly drafting comprehensive AI legislation to codify recommendations from last Congress’s bipartisan AI task force and portions of the Trump Administration’s AI Action Plan, as well as clarify the interaction between state and federal regulations. Congress has a busy schedule of AI-focused hearings this week.

The FTC formally launched its investigation into consumer-facing AI chatbots. Agencies throughout the federal government continue to issue actions to implement President Trump’s AI Action Plan, including an expected request for information from OSTP on federal regulations that hold back the development and deployment of AI.

Upcoming: I will be in NYC to discuss U.S. emerging tech policy at events around UNGA. If you’ll be there, let me know!

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Congress

Hearings

• Last week
  • On September 10, the Senate Commerce, Science and Transportation Science, Manufacturing, and Competitiveness Subcommittee held a hearing on Winning the Race: America’s AI Action Plan.
• This week
  • On September 15, the House Veterans’ Affairs Technology Modernization Subcommittee holds a hearing on Advancing VA Care Through Artificial Intelligence.
  • On September 16, the Senate Judiciary Crime and Counterterrorism Subcommittee holds a hearing on Examining the Harm of AI Chatbots.
  • On September 17, the House Oversight and Government Reform Cybersecurity, Information Technology, and Government Innovation Subcommittee holds a hearing on Shaping Tomorrow: The Future of Artificial Intelligence.
  • On September 18, the House Financial Services Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee holds a hearing on Unlocking the Next Generation of AI in the U.S. Financial System for Consumers, Businesses, and Competitiveness.
  • On September 18, the House Judiciary Courts, Intellectual Property, Artificial Intelligence, and the Internet Subcommittee holds a hearing on AI at a Crossroads: A Nationwide Strategy or Californication?

Legislation

• Sen. Ted Cruz (R-TX) introduced the Strengthening Artificial Intelligence Normalization and Diffusion by Oversight and Experimentation (SANDBOX) Act to create a federal regulatory sandbox for AI, allowing developers to apply for waivers or modifications of federal rules. (Fact sheet)(Text)

• Reps. Jay Obernolte (R-CA) and Josh Gottheimer (D-NJ) introduced the Liquid Cooling for AI Act to direct a comprehensive technology assessment exploring the use of liquid cooling technologies in U.S. data centers and how they can advance AI computing abilities and to call for the development of government-wide best practices that will guide federal use of liquid cooling technologies and methods to enhance the security and reliability of data centers and establish standards that accelerate adoption of liquid cooling systems across both public and private AI facilities. (Press release)

• Rep. Harriet Hageman (R-WY) introduced a bill prohibit the Federal procurement of large language models not developed in accordance with unbiased AI principles. (Text)

• Reps. Jim Costa (D-CA) and Blake Moore (R-UT) introduced the Unleashing Low-Cost Rural AI Act to require the U.S. Departments of Energy, Interior, and Agriculture to study the impact of AI data center expansions in rural America. (Text)

• Rep. Eugene Vindman (D-VA) introduced a bill to direct the Secretary of Commerce to submit reports on strategies regarding the development of, and research relating to, critical artificial intelligence technologies. (Text)

• Rep. Julie Johnson (D-TX) introduced the Protect Elections from Deceptive AI Act to prohibit the distribution of materially deceptive AI-generated audio or visual media relating to candidates for Federal office (Text)

• Sens. John Curtis (R-UT) and Lisa Blunt Rochester (D-DE) introduced the Consumer Safety Technology Act to direct the Consumer Product Safety Commission to establish a pilot program to explore the use of artificial intelligence in support of the mission of the Commission and to direct the Secretary of Commerce and the Federal Trade Commission to study and report on the use of blockchain technology and tokens. (Text) The House passed a similar version from Rep. Darren Soto (D-FL) in March.

• Sens. Lisa Blunt Rochester (D-DE), Jon Husted (R-OH), and Bill Cassidy (R-LA) introduced the Recommending Artificial Intelligence Standards in Education (RAISE) Act to support states in developing academic standards for artificial intelligence for K-12 students. (Text)

Correspondence

• Sens. Ed Markey (D-MA), Ron Wyden (D-OR), Jeff Merkley (D-OR), Elizabeth Warren (D-MA), Cory Booker (D-NJ), Chris Van Hollen (D-MD), Bernie Sanders (I-VT), Adam Schiff (D-CA), and Tina Smith (D-MN)  wrote to Todd Lyons, Acting Director of U.S. Immigration and Customs Enforcement (ICE), urging ICE to cease using a new biometric mobile phone app Mobile Fortify to surveil individuals in the United States. (Letter)(Press release)

• Sen. Elizabeth Warren (D-MA) wrote to the Department of Defense (DoD) with concerns about awarding xAI a $200 million contract to integrate Grok into military systems and about xAI’s access to sensitive government data. (Letter)(Press release)

• Sens. Adam Schiff (D-CA), Sheldon Whitehouse (D-RI), Chris Van Hollen (D-MD), Edward J. Markey (D-MA), Kirsten Gillibrand (D-NY), Alex Padilla (D-CA), Ron Wyden (D-OR) and Jeanne Shaheen (D-NH) sent a letter to the Army Corps of Engineers and Environmental Protection Agency requesting information regarding the implementation of President Trump’s Executive Order on Accelerating Federal Permitting of Data Center Infrastructure as it relates to the Clean Water Act. (Letter)

Publication, Events, and Announcements

• Rep. Greg Steube (R-OH) published an op-ed in the Washington Times on the value of Open-Source Intelligence and the need for U.S. intelligence to modernize in the face of growing threats, saying, “While adversaries exploit advances in artificial intelligence, open-source data and cyber capabilities, the intelligence community remains anchored to legacy systems, outdated analytical models and rigid institutional practices. This lack of agility and innovation threatens to render U.S. intelligence obsolete. The intelligence community risks losing strategic advantage, compromising national security and becoming increasingly irrelevant in a rapidly evolving global threat environment.” (Op-ed)

• Senate Commerce Committee Chair Ted Cruz (R-TX) released a “light-touch regulatory framework for AI” to address five pillars: 1) streamline permitting for AI infrastructure and empower entrepreneurial freedom; 2) protect free speech in the age of AI, particularly countering attempts by foreign governments to censor Americans and control public discourse; 3) prevent a patchwork of burdensome AI regulation, including often-conflicting state AI regulations; 4) stop nefarious uses of AI against Americans, like fraud and scams enabled by AI, particularly when targeting senior citizens; and 5) defending human value and dignity, including reinvigorating bioethical considerations in federal policy and opposing threats to human dignity and flourishing. (Press release)(Framework)

Trump Administration

Federal Trade Commission (FTC)

• The FTC issued 6(b) orders seeking information from companies providing consumer-facing AI chatbots regarding how they measure, test, and monitor potentially negative impacts on children and teens. The companies are Alphabet, Character Technologies, Instagram, Meta Platforms, OpenAI, Snap, and X.AI. (Press release)

Department of Homeland Security

• The Coast Guard announced a Cooperative Research and Development Agreement (CRADA) with VoiceBrain to determine the efficacy of artificial intelligence multicast overlays into operational communication platforms currently in use by the Coast Guard. In addition, it published a request for comment on the possible nature of and participation of other parties in the CRADA. The comment period ends October 10. (Federal Register)

White House

• Office of Science and Technology Policy (OSTP) Director Michael Kratsios told Axios that OSTP will issue a request for information about federal regulations that hold back the development and deployment of AI. (Axios)

Department of Energy (DOE)

• DOE issued a Request for Application (RFA) seeking proposals from U.S. companies to build and power AI data centers at Idaho National Laboratory (INL) in Idaho Falls, Idaho. (Press release)

Government Accountability Office

• GAO published a report on Artificial Intelligence: Federal Efforts Guided by Requirements and Advisory Groups, describing federal agencies’ current AI-related requirements in law, executive orders, and guidance and the roles and responsibilities of AI oversight and advisory groups. The report identified 94 AI-related requirements that were government-wide or had government-wide implications. (Report)

Noteworthy Quotes and Events

ADMINISTRATION

White House

• Asked by reporters about conservative criticism of the Trump Administration’s AI actions, a spokesperson said, “President Trump is committed to maintaining US dominance in AI over China. By fully harnessing the power of AI, we will unleash this productivity for the full benefit of workers while driving down costs for services and goods to make America more affordable.” (Politico)

• The Office of the First Lady tweeted a video of tech CEOs at the White House and said, “AI & The White House When the public and private sectors work together to move AI forward, we are paving the way for our next generation to inherit a more prosperous America.”

Securities and Exchange Commission (SEC)

• SEC Chair Paul Atkins delivered remarks at the Inaugural OECD Roundtable on Global Financial Markets, including AI and finance, saying, “For our part, America’s financial leadership depends on charting the future, rather than fearing it. Just as blockchain is reshaping how we trade and settle assets, artificial intelligence (AI) is opening the door to agentic finance—a system whereby autonomous AI agents execute trades, allocate capital, and manage risk at speeds no human can match, with securities law compliance embedded in its code. The benefits could be immense: faster markets, lower costs, and broader access to strategies once reserved for Wall Street’s largest firms. By coupling AI with blockchains, we could empower individuals, strengthen competition, and unlock new prosperity. The government’s responsibility here is to ensure that commonsense guardrails are in place while eliminating the regulatory obstructions that stifle innovation. AI is now part of our capital markets, and its role will only grow. We must resist the temptation to overreact out of fear. On-chain capital markets and agentic finance are on the horizon, and the world is watching. The choice before us is simple yet profound: either America steps forward with confidence and conviction, or others will. I choose leadership, freedom, and growth—for our markets, for our economy, and for the next generation. And I am eager to work with international counterparts who are interested in joining us in this pursuit for a more prosperous and free society.” (Remarks)

CONGRESS

House Financial Services Committee National Security, Illicit Finance and International Financial Institutions Subcommittee hearing on FinCEN Oversight

• In the House Financial Services Committee National Security, Illicit Finance and International Financial Institutions Subcommittee hearing with Andrea Gacki, Director of the Financial Crimes Enforcement Network (FinCEN), members asked questions about AI:
• Rep. Bill Foster (D-IL)
  • Rep. Bill Foster (D-IL): “In November of last year, FinCEN issued an alert warning for financial institutions about the increase in identity fraud schemes associated with the use of deep fakes and created with generative AI tools. Criminals are using Gen AI to cheaply mass produce false identity documents and circumvent live identity verification and authentication methods in online transaction. I appreciate FinCEN’s efforts to raise awareness of these scams, and I encourage you to do more, because it’s clear that Gen AI and the deep fakes that they produce will continue to become more believable and accessible as time goes by. Now, I believe the best tool that we have at our disposal today to verify identities online is a form of secure digital ID, and the tool at hand is the mobile driver’s licenses currently being issued by several states and in fact, most, many countries, most countries, including all countries of the EU, digital IDs can allow consumers to prove they are who they say they are in online transactions, a verified credential attached to a secure mobile device creates a reliable system that’s extremely difficult to fake. I believe this technology would go a long way towards stopping identity fraud in the banking system and also with fraud and government benefits. It is, however, my understanding that many financial firms do not feel that they have the regulatory go ahead to start using digital IDs and digital driver’s licenses in their AML KYC processes, and that they need guidance from regulatory agencies like FinCEN to start implementing this technology in online transactions. I think there’s also a federal role in providing federal standards for what states are providing adequate digital driver’s license and some may need improvements. So my question is, do you expect Vince and will take steps to provide clarity, regulatory clarity, for firms to start using these for KYC purposes and online transactions.”
    • Director Andrea Gacki: “Thank you Representative Foster for that excellent question. And I also want to thank you for your focus on this issue across many years. I want to note that this is certainly something that FinCEN is looking at. Questions of identity are critical to our work on fraud. And you know, the misuse and the of identity, whether it’s using generative AI or less sophisticated techniques, is something that we are very, very much focused on and looking to ensure that we are providing the best guidance we can to financial institutions. I would like to I want to commit that I will work with my federal banking agency colleagues to look at what further guidance we can provide to financial institutions on this matter. This past year, we did work with our other financial with our federal banking agency colleagues, to work on how to adjust how financial institutions can adjust their processes, including in terms of collecting and verifying taxpayer identification numbers and use of customer identity, Customer Identification programs. But I look forward to looking at this more closely and seeing what we need to modernize in terms of guidance for financial institutions going forward.”
  • Rep. Bill Foster (D-IL): “Yeah, thank you. And I think there’s also an important federal role that isn’t yet, doesn’t yet exist, which is to verify, to specify which cell phones are actually safe, to deploy digital IDs on them, because it’s well documented that certain early model cell phones had a Secure Enclave that was not, in fact, secure, meaning that someone could go and hack your cell phone and impersonate your digital driver’s license, which obviously be a disaster if someone used them. So we will need, at some point, probably a federal agency or someone they delegated to call balls and strikes on this version of a cell phone is okay. It’s got an adequately Secure Enclave. This one cannot be used. You know, that’s sort of being done by Apple in its ecosystem, by. Just saying we’re not supporting the iOS for once, you know, phones get old enough. The Android system is a complete, you know, so it’s less organized, and it will be difficult to do that, but this is an important role. And if you could, for the record, come back and give us some suggestions on what you what is needed there to specify when we can trust the silicon in different versions of cell phones and where that federal agency is best housed. Because right now, you know, DOD does some of it, and other agencies do some of it, but there isn’t an organized standard federal way to do that, and I think it’s a missing piece here.” 
    

• Rep. Juan Vargas (D-CA)
  • Rep. Juan Vargas (D-CA): “I do want to talk about elder abuse. You spoke about it a little bit, but I do want to get into it a little bit more. You did say in April of 2024, you published a financial trend analysis and look at the patterns and data of the elder financial exploitation. According to this analysis, between June 2022, and June 2023, FinCEN received more than 155,000 elder financial exploitation reports associated with more than $27 billion in reported suspicious activity, to finally show that scams accounted for 80% of the reported elder financial expectation activity. What role does FinCEN play in addressing this financial exploitation against elder adults, older adults.”
    • Director Andrea Gacki: “Thank you. Representative Vargas and yes, so the financial trend analysis on elder financial exploitation and different guidance processes that guidance products that we have issued ask filers financial institutions to use those as guideposts to provide us with financial intelligence that law enforcement can action to actually go after those perpetrators of fraud against our elderly population. And so not only does FinCEN play a role at educating financial institutions as to what to look for so we get high quality financial intelligence, but we also actively support law enforcement.”
  • Rep. Juan Vargas (D-CA): “So how do you use AI if you do because I know my time is going to run out. How do you use AI to do this?”
    • Director Andrea Gacki: “So there is a of course, is an administration priority to incorporate the use of artificial intelligence tools to analyze data. And FinCEN, like other federal government agencies, is exploring that we do use advanced artificial intelligence products in terms of machine learning and other data analytics, because FinCEN does collect and protect a large amount of data in order to in order to truly support law enforcement with the highest quality.”

Miscellaneous

• Rep. Jay Obernolte (R-CA) told reporters, “What’s very clear is that it’s the job of the federal government to set some preemptive guidelines. [We’re] hoping that we will get some legislative oxygen towards the end of the year to get that across the finish line. It’s clear that it’s going to take a partnership between state regulation and federal regulation.” (Politico)

• In his opening statement at the Senate Subcommittee on Science, Manufacturing, and Competitiveness hearing, Chair Ted Budd (R-NC) said, “To build out American AI Infrastructure, Congress needs to work on comprehensive permitting reform to ensure we do not lose this race because of a lack of energy production. Enhancing domestic manufacturing capabilities in key inputs like semiconductors and fiber optic cable, which my state of North Carolina knows a good deal about, is critical as well. To lead in AI internationally, the U.S. must lean into exporting our AI tech stack across the world to allies, partners, and important third countries. AI must be globally diffused within a U.S.-led technology ecosystem.” (Press release)

• Sen. Josh Hawley (R-MO) delivered remarks on AI Threatens the Working Man at NatCon5, saying, “And the problem with the AI ‘revolution’ as it’s currently going is that it only entrenches the power of the people … who are already the most powerful in the world. Imagine a future—a not too-distant future—where AI is deployed across the economy, across the country. We are well on the way to this future now. And we are told by AI boosters of the remarkable efficiencies it will bring. The papers written in seconds. The contracts drafted instantly. The algorithms that write themselves. Productivity like we’ve never seen. But here’s the flip side: millions of Americans out of work. That’s not any conspiracy theory, by the way. That’s what the tech titans openly tell us. One CEO recently predicted half of entry-level, white-collar jobs could be gone in the next five years. Half. Ultimately, when it comes to guardrails, protecting our children should be our lodestar. You may have seen recently how Meta green-lit its own chatbots to have sensual conversations with children—yes, you heard me right. Meta’s own internal documents permitted lurid conversations that no parent would ever contemplate. And most tragically, ChatGPT recently encouraged a troubled teenager to commit suicide—even providing detailed instructions on how to do it. We absolutely must require and enforce rigorous technical standards to bar inappropriate or harmful interactions with minors. And we should think seriously about age verification for chatbots and agents. We don’t let kids drive or drink or do a thousand other harmful things. The same standards should apply to AI.” (Remarks)

• Rep. Anna Paulina Luna (R-FL) said, “AI lacks a few things — one being a soul, and also empathy. And we are not gods or God.” (Politico) 

• Rep. Vern Buchanan (R-FL) tweeted, “By advancing AI through strong public-private collaboration, we’re fostering innovation and delivering real results for the American people. Together, we’re laying the groundwork for future generations to inherit a stronger and more prosperous America.”

• Sen. John Husted (R-OH) tweeted, “Too many companion chatbots have put minors at risk by exposing them to explicit, dangerous, and sexual content.   The CHAT Act would add common-sense safeguards to keep minors safe while they use chatbots.”

• Husted also tweeted, “AI companion chatbots are exposing America’s kids to sexual content and information on self-harm and suicide. I’m leading the CHAT Act to require parental consent and to stop these chatbots from introducing children to harmful material.”

• Husted also tweeted, “AI companion chatbots are talking with kids about self-harm, killing their parents, and sexual material. My bill works to help parents keep their kids safe”

• Rep. Pat Ryan (D-NY) tweeted, “Using AI to decide which seniors get the healthcare they need & who’s out of luck while funneling record-breaking profits to healthcare monopolies? That’s a big no from me & is why I joined colleagues on a letter to demand that CMS end this plan immediately.”

• Sen. Tom Cotton (R-AR) tweeted, “American companies and customers should have priority access to American AI chips ahead of adversaries like the Chinese Communists. I’m proud to co-sponsor SenatorBanks’s America First GAIN AI Act.”

• Rep. Greg Landsman (D-OH) tweeted, “We’ve introduced a resolution to end the Administration’s attempt to pay AI tech companies for denying treatment to seniors.”

• Rep. Jim Costa (D-CA) tweeted, “AI data centers are rapidly expanding across our country in rural areas. These data centers use more energy and water than an entire city, which increases utilities costs for consumers. I introduced, along with RepBlakeMoore, the Unleashing Low-Cost Rural AI Act to require U.S. Departments of Energy, Interior, and Agriculture to study the impact of data centers in order to protect our rural communities.”

• Energy and Commerce Committee Chair Brett Guthrie (R-KY) and Ranking Member Frank Pallone (D-NJ) issued a statement regarding the FTC’s decision to launch an inquiry into AI companion chatbots, “Artificial intelligence has unleashed exponential levels of innovation, yet we are alarmed by recent incidents concerning the use of AI chatbots by minors. While some AI chatbot providers are taking steps to address such horrific and disturbing instances, additional investigation is needed to ensure children and teens are not in danger when using these services. We strongly support this action by the FTC and urge the agency to consider the tools at its disposal to protect children from online harms. We are also hopeful Congress will be able to build on this work with durable, bipartisan legislation to protect children online and empower parents.” (Press release)

• Rep. Julie Johnson (D-TX) tweeted, “I just introduced the Protect Elections from Deceptive AI Act with RepHoulahan, RepBrianFitz, & RepTonyGonzales to stop AI from misleading voters. Americans deserve to cast ballots based on truth, not deception. Protecting democracy means protecting trust in our elections.”

• Sen. Ted Budd (R-NC) tweeted, “If developed, deployed, & employed properly, AI stands to enable Americans to make the most and the best of themselves. Our AI policy should be anchored in maximizing opportunity for Americans.”

• Sen. Chris Coons (D-DE) tweeted, “Credit where due to AnthropicAI for limiting sales of AI services to China. I applaud their commitment to a more stable and secure future for AI and for the world as a whole.”

• Sen. Ted Cruz (R-TX) tweeted, “The future prosperity of American workers depends on American victory in the race for AI. That’s why I have introduced legislation to create a regulatory sandbox for AI that will allow developers to waive or modify regulations that could impede their work.”

• Rep. Don Bacon (R-NE) tweeted, “As Cyber Subcommittee Chair I worked with my  HASCRepublicans colleagues to ensure FY26NDAA invests $142B+ in research development testing & evaluation for AI hypersonics & autonomous systems. With China holding 10x our cyber power & attacking our networks daily, the NDAA strengthens our security.”

• Sen. Ed Markey (D-MA) tweeted, “Meta ignored my warnings in 2023—two years later, I’ve been proven correct. So let me say it once again: do not allow teenagers on your AI chatbots.”

• Rep. Lloyd Doggett (D-TX) tweeted, “As private insurers interfere in medical decisions, Trump is preparing to expand prior authorization in Traditional Medicare and pay AI companies to delay and deny care. Along with RepAOC, I led colleagues in demanding the Administration abandon this dangerous plan and investigate denials of medically necessary care by UnitedHealthGrp and other insurers.”

• Rep. August Pfluger (R-TX) tweeted, “Terrorist organizations are exploiting artificial intelligence to spread propaganda and recruit and radicalize lone wolf actors. Congress must pass my Generative AI Terrorism Risk Assessment Act to respond to the emerging threats of tomorrow.”

• Sen. Chris Van Hollen (D-MD) tweeted, “Make no mistake: Trump’s war on clean energy will raise electricity prices even higher. It’s simple: higher demand from AI and data centers, and less supply from wind means we pay more. Another gift to his Big Oil backers and betrayal of American families.”

• Sen. Elissa Slotkin (D-MI) tweeted, “We’re in a tech race with China– and there’s no area more important to win than on artificial intelligence.”

What I’m Reading This Week

• The Next Wave Arrives: Agentic AI in Financial Services, Jeanette Quick, Colin Colter, Luke Dillingham, and Kelly Thompson Cochran, FinRegLab.

• Aligning Security and Economic Interests in the Age of AI, Dr. John Kunkel and Tom Barrett, United States Studies Centre.

• A.I.’s Prophet of Doom Wants to Shut it All Down, The New York Times.

• The AI Deregulation Agenda has Helped Create an AI Bubble and May Hasten a Crash, Amber Sinha, Tech Policy Press.

• Are Businesses Scaling Back Hiring Due to AI?, Jaison R. Abel, Richard Deitz, Natalia Emanuel, Ben Hyman, and Nick Montalbano, Federal Reserve Bank of New York.

About Zero One Strategies

Zero One Strategies is a boutique government relations practice dedicated to navigating the complex landscape of U.S. federal policy in emerging technologies. As advancements in technology continue to outpace regulatory frameworks, Zero One Strategies aims to provide strategic guidance and bipartisan advocacy for innovators and businesses operating at the forefront of technological development.

The practice focuses on key areas such as artificial intelligence, blockchain, decentralized technologies, cybersecurity, data, and digital infrastructure, as well as the multiple policy issues impacting these sectors, including tax and financial services.

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