SIMI VALLEY, CALIFORNIA - SEPTEMBER 27: California Gov. Gavin Newsom talks to reporters in the spin room following the FOX Business Republican Primary Debate at the Ronald Reagan Presidential Library on September 27, 2023 in Simi Valley, California. Seven presidential hopefuls squared off in the second Republican primary debate as former U.S. President Donald Trump, currently facing indictments in four locations, declined again to participate. (Photo by Mario Tama/Getty Images)
Sacramento, California – California Gov. Gavin Newsom is heatedly debating proposed AI regulations, cautioning that overly strict privacy rules could deal a major blow to the state’s booming artificial intelligence sector and broader economy.
In a rare move, Newsom sent a letter Wednesday to the California Privacy Protection Agency (CPPA) board urging them to reconsider draft regulations allowing consumers to opt out of automated hiring, healthcare, and lending decision-making tools. The governor argued that the rules could have far-reaching unintended consequences and cost California businesses up to $3.5 billion in their first year of implementation.
“Enacting these regulations could create significant unintended consequences and impose substantial costs that threaten California’s enduring dominance in technological innovation,” Newsom wrote, according to a letter obtained by POLITICO.
The CPPA, established in 2020 as the nation’s only state-run privacy agency, is tasked with enforcing the California Consumer Privacy Act and crafting new privacy safeguards in an era increasingly dominated by AI. Its proposed automation rules have drawn praise from privacy advocates but sparked fierce opposition from tech and business groups, including the California Chamber of Commerce.
Newsom’s letter aligns him with those critics and echoes concerns a bipartisan group of 18 state lawmakers expressed earlier this year. The letter underscores the economic importance of California’s tech sector, which houses more than half of the world’s leading AI companies and contributes significantly to state revenues.
CPPA Executive Director Tom Kemp acknowledged the governor’s message, saying in a statement that the agency “appreciates Governor Newsom’s letter and his engagement on this important issue.”
The proposed rules would allow consumers to request companies stop using automated tools to make significant decisions about their lives. Critics argue such restrictions could stifle innovation and create legal vulnerabilities for the agency. At the same time, supporters believe the regulations are necessary to protect consumer rights and establish guardrails for rapidly advancing AI technologies.
Newsom expressed approval of a recent board decision to exempt generative AI tools from some of the most burdensome regulations. “California has a unique responsibility to lead in the safe advancement of an industry that has the potential to improve our lives,” he said.
With the CPPA board split and a November deadline to finalize the rules looming, the battle between privacy advocates and tech industry defenders is far from over. Newsom said his office will continue to work with the agency as it deliberates the final shape of the landmark regulations.
