Texas Takes Bold Step Toward AI Regulation with HB1709
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Texas Takes Bold Step Toward AI Regulation with HB1709

Discover how Texas’s HB1709, the Texas Responsible AI Governance Act, could reshape AI use for businesses.

By Natasha L. Giuffre

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What Business Leaders Need to Know About the Texas Responsible AI Governance Act

The artificial intelligence landscape is rapidly evolving, and with it comes increased regulatory attention. Texas has positioned itself at the forefront of this movement with House Bill 1709, also known as the Texas Responsible AI Governance Act (TRAIGA). Filed by Republican Representative Giovanni Capriglione in December 2024, this comprehensive legislation could significantly impact how businesses develop and deploy AI systems in the Lone Star State.

Why This Matters

As AI becomes increasingly integrated into business operations across industries, regulatory frameworks are inevitable. Texas's approach is particularly noteworthy because it represents one of the most comprehensive state-level attempts to regulate AI systems while balancing innovation with consumer protection. With Texas's significant tech sector and Republican-controlled legislature, TRAIGA could become a model for other states and potentially influence federal legislation.

Key Components of TRAIGA

The bill specifically targets high-risk AI systems - those that play a substantial role in consequential decisions affecting consumers in areas such as:

  • Financial services
  • Healthcare
  • Housing and insurance
  • Employment
  • Education
  • Criminal matters
  • Government services

Who's Affected?

TRAIGA creates a three-tiered framework of responsibility:

  • Developers who create AI models
  • Distributors who package and sell AI systems
  • Deployers who use AI systems to interact with consumers

Small businesses, as defined by the Small Business Administration, would be exempt from the requirements.

Core Requirements

For businesses using high-risk AI systems, the bill would mandate:

  • Annual impact assessments documenting the purpose, benefits, risks, and data categories used by the system
  • Risk management policies to govern AI development and deployment
  • Clear consumer disclosures about AI use, including when consumers are interacting with AI systems
  • Protection against algorithmic discrimination
  • Reporting requirements if algorithmic discrimination is discovered

What's Prohibited

The bill explicitly bans several AI applications:

  • Systems using subliminal or deceptive techniques to manipulate behavior
  • "Social scoring" systems that evaluate people based on social behavior
  • Using biomarkers or internet images to identify specific individuals
  • Creating deepfakes or harmful content

Enforcement Mechanisms

Unlike some other regulatory frameworks, TRAIGA would be enforced by the Texas Attorney General rather than through private lawsuits. Violations could result in substantial penalties:

  • $50,000 to $100,000 per standard violation
  • $80,000 to $200,000 for violations related to prohibited uses
  • $12,000 to $40,000 per day for continued operation after being found in violation

The bill includes a 30-day right to cure violations before penalties are imposed.

Innovation-Friendly Components

TRAIGA isn't solely focused on restrictions. The bill also creates:

  • An AI Regulatory Sandbox Program allowing developers to test innovative AI systems in a controlled environment with temporary regulatory exemptions
  • A Workforce Development Grant Program to support AI skills training in high schools and community colleges
  • An Artificial Intelligence Council to provide oversight and identify regulations that may impede innovation

Consumer Rights

The legislation grants consumers specific rights, including:

  • The ability to appeal consequential decisions made by AI systems
  • The right to receive explanations about how AI influenced decisions
  • The right to know if personal data will be used in AI systems and opt out of such use

Looking Ahead

If passed, TRAIGA would take effect on September 1, 2025. While the bill has garnered significant attention, it's still early in the legislative process and may undergo changes before final passage.

What Businesses Should Do Now

  • Assess your AI footprint: Determine whether your organization develops, distributes, or deploys high-risk AI systems as defined by the bill.
  • Review documentation practices: Begin documenting AI system purposes, data sources, and risk mitigation strategies.
  • Evaluate disclosure mechanisms: Consider how your organization currently discloses AI use to consumers and whether changes would be needed.
  • Monitor developments: Stay informed about amendments or changes to the bill as it progresses through the legislative process.
  • Engage with industry groups: Consider participating in discussions about the bill's potential impact through relevant industry associations.

The Bigger Picture

Texas's move represents part of a broader trend toward increased AI regulation at both state and federal levels. While the specifics vary, common themes are emerging around transparency, risk assessment, and protection against discrimination.

By taking proactive steps now, businesses can position themselves to adapt smoothly to the evolving regulatory landscape while continuing to leverage AI's transformative potential.

This article is for informational purposes only and does not constitute legal advice. Businesses should consult with qualified legal counsel regarding compliance with current or proposed regulations.