Warns privacy watchdog on AI

Echoing Big Tech, Newsom warns privacy watchdog on AI

The governor urged regulators to protect California’s “enduring dominance in technological innovation.”

By Tyler Katzenberger

Gov. Gavin Newsom has waded into a bitter fight at California’s privacy agency over proposed automation rules that could have nationwide impacts on everything from hiring to health care.

Newsom, in a rare letter to the California Privacy Protection Agency’s five-member board on Wednesday, obtained by POLITICO, urged regulators not to crush the state’s flourishing artificial intelligence sector under onerous regulations — echoing complaints from tech and business groups.

“As my office has relayed to Agency staff over the last year, enacting these regulations could create significant unintended consequences and impose substantial costs that threaten California’s enduring dominance in technological innovation,” Newsom wrote.

CPPA Executive Director Tom Kemp in a statement to POLITICO on Wednesday said the agency “appreciate[s] Governor Newsom’s letter and his engagement on this important issue.”

Big picture: California is home to many of the world’s largest AI companies, which help fuel the state’s budget through tax revenue, but also some of the nation’s most robust privacy and tech regulations, often putting the industry at odds with state policymakers. The CPPA, created in 2020, is also the only dedicated privacy agency in the country.

Newsom’s letter is the latest example of the governor intervening to oppose regulations he feels would undercut California’s global competitiveness in the lucrative tech industry. It lends support to business groups that spent months campaigning to weaken the CPPA’s proposed automation regulations, much to the disdain of privacy advocates and labor unions that support the rules.

The draft rules would require companies to scale back their use of automated tools in a wide array of scenarios if customers ask to opt out, ranging from hiring to health care to loan applications. They would likely set a de facto national standard, given California’s preeminence in the global tech sector.

More details: Newsom said he was “pleased” that the board asked CPPA staff earlier this month to exclude generative AI tools from proposed opt-out and risk assessment requirements.

“California is home to over half of the world’s top artificial intelligence companies, granting us a unique responsibility to lead in the safe advancement of an industry that has the potential to improve our lives, maintain the state’s economic dominance, and benefit the public good for decades to come,” he wrote.

However, CPPA board members remain divided over the proposed regulations. Some, like board chair Jennifer Urban, support passing strong safeguards that grant consumers broad rights to control how automated tools use their data, while others, like Alastair Mactaggart, argue stringent rules could expose the agency to legal threats and undermine its mission.

Background: Newsom’s letter comes after a bipartisan group of 18 state lawmakers, in partnership with the California Chamber of Commerce, sent a letter in February warning the agency against approving strict and potentially costly AI regulations.

The governor said he agreed with the lawmakers in his letter to the CPPA.

Financial outlook: Newsom made particular note of the potential financial impacts of the rules. The CPPA in an October analysis projected its draft rules could cost California businesses approximately $3.5 billion in the first year of implementation, though it also forecasted benefits would outweigh costs in the long run.

What’s next: Newsom said his team will “continue engaging with Agency staff” as regulators weigh how much to amend the proposed rules. The CPPA board has a November deadline to finalize the rules.