California didn’t just stumble into becoming the world’s AI capital. We built it. More than 1,300 AI startups call California home because this is where the talent, research universities, entrepreneurs, and investors came together to create the next big thing.
So naturally… Sacramento has decided this might be a good time to make it harder.
Assembly Bill 412 is one of those bills that sounds reasonable until you ask the people who actually have to comply with it.
Introduced by Assemblymember Rebecca Bauer-Kahan, D-San Ramon, the proposal would require developers of generative AI models to identify and disclose the data used to train their systems. Sounds simple enough until you realize it’s about as easy as finding one specific grain of sand on Huntington Beach. Even many of the largest AI companies have acknowledged that the technical challenge is extraordinarily difficult. If the giants say it’s nearly impossible, imagine what it looks like for a startup with twelve employees, a few laptops, and a dream.
The big companies will hire another army of lawyers.
The little guys? They’ll hire a moving company.
AB 412 creates enormous legal exposure for developers who can’t perfectly document or identify training data. Every mistake becomes another opportunity for litigation. Every unanswered request becomes another financial risk. Large corporations may be able to budget for years of lawsuits and regulatory battles. Startups can’t.
When you’re trying to decide whether to launch your product, hire another engineer, or spend your seed funding on attorneys, that’s not much of a choice.
And here’s where this stops being just an “AI industry” problem.
Small businesses across California are using AI every single day. It’s helping them write marketing copy, answer customer questions, manage accounting, improve cybersecurity, streamline operations, and squeeze more productivity out of every employee. These aren’t Silicon Valley luxuries anymore. They’re becoming everyday business tools on Main Street.
According to the U.S. Chamber of Commerce, 60 percent of California small businesses already use AI, and nearly two-thirds worry that a patchwork of state regulations will increase legal and compliance costs.
They’re right to worry.
Developers facing higher compliance costs don’t have a magic money tree growing behind the office. They either raise prices or stop offering products in California altogether. Neither option helps the small business owner who’s already dealing with higher labor costs, higher insurance premiums, inflation, and enough government paperwork to qualify as a second full-time job.
Less competition means higher prices.
Higher prices mean fewer businesses can afford these tools.
And fewer businesses using AI means California businesses become less competitive, not more.
That’s the opposite of what we should be trying to accomplish.
California has always succeeded because we welcomed innovation instead of regulating it into submission. We became the home of aerospace, entertainment, biotechnology, software, and now artificial intelligence because entrepreneurs believed they could build something extraordinary here.
AB 412 sends the opposite message.
It tells innovators that California is becoming a place where launching your company may be riskier than launching your product somewhere else.
That’s not leadership. That’s an invitation for the next generation of innovators to build the future somewhere other than California.
We all want responsible AI. We all want intellectual property respected. Those are worthwhile goals. But good intentions don’t automatically produce good policy.
If AB 412 becomes law, California won’t just be making life harder for AI startups. We’ll be making life more expensive for the small businesses that rely on them and giving innovators one more reason to take their ideas, their jobs, and their investment somewhere else.
California should be leading the AI revolution, not regulating itself onto the sidelines.
Lawmakers should reject AB 412 before we discover the cost of chasing innovation out of the state we worked so hard to make the innovation capital of the world.
Stuart Waldman is president & CEO of the Los Angeles County Business Federation (BizFed)