Tyler Thompson sits down with Abigail Walker to break down the Colorado AI Act, which was passed at the end of the 2024 legislative session to prevent algorithmic discrimination. The Colorado AI Act is the first comprehensive law in the United States that directly and exclusively targets AI and GenAI systems.

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Transcript: 

Intro: Hello, and welcome to Tech Law Talks, a podcast brought to you by Reed Smith's Emerging Technologies Group. In each episode of this podcast, we will discuss cutting-edge issues on technology, data, and the law. We will provide practical observations on a wide variety of technology and data topics to give you quick and actionable tips to address the issues you are dealing with every day.

Tyler: Hi, everyone. Welcome back to the Tech Law Talks podcast. This is continuing Reed Smith's AI series, and we're really excited to have you here today and for you to be with us. The topic today, obviously, AI and the use of AI is surging ahead. I think we're all kind of waiting for that regulatory shoe to drop, right? We're waiting for when it's going to come out to give us some guardrails or some rules around AI. And I think everyone knows that this is going to happen whether businesses want it to or not. It's inevitable that we're going to get some more rules and regulations here. Today, we're going to talk about what I see as truly the first or one of the first ones of those. That's the Colorado AI Act. It's really the first comprehensive AI law in the United States. So there's been some kind of one-off things and things that are targeted to more privacy, but they might have implications for AI. The Colorado AI Act is really the first comprehensive law in the United States that directly targets AI and generative AI and is specific for those uses, right? The other reason why I think this is really important is because Abigail and I were talking, we see this as really similar to what happened with privacy for the folks that are familiar with that. And this is something where privacy a few years back, it was very known that this is something that needed some regulations that needed to be addressed in the United States. After an absence of any kind of federal rulemaking on that, California came out with their CCPA and did a state-specific rule, which has now led to an explosion of state-specific privacy laws. I personally think that that's what we could see with AI laws as well, is that, hey, Colorado is the first mover here, but a lot of other states will have specific AI laws in this model. There are some similarities, but some key differences to things like the EU AI Act and some of the AI frameworks. So if you're familiar with that, we're going to talk about some of the similarities and differences there as we go through it. And kind of the biggest takeaway, which you will be hearing throughout the podcast, which I wanted to leave you with right up at the start, is that you should be thinking about compliance for this right now. This is something that as you hear about the dates, you might know that we've got some runway, it's a little bit away. But really, it's incredibly complex and you need to think about it right now and please start thinking about it. So as for introductions, I'll start with myself. My name is Tyler Thompson. I'm a partner at the law firm of Reed Smith in the Emerging Technologies Practice. This is what my practice is about. It's AI, privacy, tech, data, basically any nerd type of law, that's me. And I'll pass it over to Abigail to introduce herself.

Abigail: Thanks, Tyler. My name is Abigail Walker. I'm an associate at Reed Smith, and my practice focuses on all things related to data privacy compliance. But one of my key interests in data privacy is where it intersects with other areas of the law. So naturally, watching the Colorado AI Act go through the legislative process last year was a big pet project of mine. And now it's becoming a significant part of my practice and probably will be in the future.

Tyler: So the Colorado AI Act was passed at the very end of the 2024 legislative session. And it's largely intended to prevent algorithmic discrimination. And if you're asking yourself, well, what does that mean? What is algorithmic discrimination? In some sense, that is the million-dollar question, but we're going to be talking about that in a little bit of detail as we go through this podcast. So stay tuned and we'll go into that in more detail.

Abigail: So Tyler, this is a very comprehensive law and I doubt we'll be able to cover everything today, but I think maybe we should start with the basics. When is this law effective and who's enforcing it and how is it being enforced? So the date that you need to remember is February 1st of 2026. So there is some runway here, but like I said at the start, even though we have a little bit of runway, there's a lot of complexity and I think it's something that you should start now. As far as enforcement, it's the Colorado AG. The Colorado Attorney General is going to be tasked with enforcement here. A bit of good news is that there's no private right of action. So the Colorado AG has to bring the enforcement action themselves. You are not under risk of being sued for the Colorado Privacy Act from an individual plaintiff. Maybe the bad news here is that violating the Colorado AI Act will be considered an unfair and deceptive trade practice under Colorado law. So the trade practice regulation, that's something that exists in Colorado law like it does in a variety of state laws. And a violation of the Colorado AI Act can be a violation of that as well. And so that just really brings the AI Act into some of this overarching rules and regulations around deceptive trade practices. And that really increases the potential liability, your potential for damages. And I think also just from a perception point, it puts the Colorado AI Act violation in some of these kind of consumer harm violations, which tend to just have a very bad perception, obviously, to your average state consumer. The law also gives the Attorney General a lot of power in terms of being able to ask covered entities for certain documentation. We're going to talk about that as we get into the podcast here. But the AG also has the option to issue regulations that further specify some of the requirements of this law. That's the thing that we're really looking forward to is additional regulations here. As we go through the podcast today, you're going to realize there seems like there's a lot of gray area. And you'd be right, there is a lot of gray area. And that's what we're hoping some of the regulations will come out and try to reduce that amount of uncertainty as we move forward. Abigail, can you tell us who does the law apply to and who needs to have their ducks in a row for the AGE by the time we hit next February?

Abigail: Yeah. So unlike Colorado's privacy law, which has like a pretty large like processing threshold that entities have to reach to be covered, this law applies to anyone doing business in Colorado that develops or deploys a high-risk AI system.

Tyler: Well, that high-risk AI system sentence, it feels like you used a lot of words there that have a real legal significance.

Abigail: Oh, yes. This law has a ton of definitions, and they do a lot of work. I'll start with a developer. A developer, you can think of just as the word implies. They are entities that are either building these systems or substantially modifying them. And then deployers are the other key players in this law. Deployers are entities that deploy these systems. So what does deploy actually mean? The law defines deploy as to use. So basically, it's pretty broad.

Tyler: Yeah, that's quite broad. Not the most helpful definition I've heard. So if you're using a high-risk AI system and you do business in Colorado, basically you're a deployer.

Abigail: Yes. And I will emphasize the fact that it only applies to most of the requirements of the law. Only apply to high-risk AI systems. And I can get into what that means. High-risk, for the purpose of this law, refers to any AI system that makes or is a substantial factor in making a consequential decision.

Tyler: What is a consequential decision?

Abigail: They are decisions that produce legal or substantially similar effects.

Tyler: Substantially similar.

Abigail: Yeah. Basically, as I'm sure you're wondering, what does substantially similar mean? We're going to have to see how that plays out when enforcement starts. But I can get into what the law considers to be legal effects, and I think this might highlight or shed some light on what substantially similar means. The law kind of outlines scenarios that are considered consequential. These include education enrollment, educational opportunities, employment or employment opportunities, financial or lending service, essential government services, health care services, housing, insurance, and legal services.

Tyler: So we've already gone through a lot. So I think this might be a good time to just pause and put this into perspective, maybe give an example. So let's say your recruiting department or your HR department uses, aka deploys an AI tool to scan job applications or job application cover letters for certain keywords. And those applicants that don't use those keywords get put in the no pile or, hey, this cover letter, it's not talking about what we want to talk about, but we're going to reject them. They're going to go on the no pile of resumes. What do you think about that, Abigail?

Abigail: I see that as kind of falling into that employment opportunity category t