Removing the 10-year moratorium opens the door for smart federal AI regulation, essential for US leadership over China.
The removal of the 10-year moratorium on state-level AI regulations from the Senate version of the so-called “Big Beautiful” budget bill does not end the intense national debate it ignited. Nor should it derail the essential federal dual mandate of both promoting and regulating AI development in the United States. Much of the debate centers around the future of American AI innovation and the country’s position in the global AI competition with China. It is important to recognize that concerns about domestic innovation would be far less urgent without the geopolitical rivalry, precisely the arena where state-level policies are inherently limited and where federal leadership must take precedence.
Innovation Needs Freedom—But Also Guardrails
Few would dispute that one of the core lessons of industrial history is that light-touch regulation tends to foster innovation. AI should not be the exception. Especially given how rapidly China is closing the AI gap with the US, and how central AI is to Beijing’s broader ambition to surpass the United States as the global geopolitical leader, America must ensure that its innovation ecosystem remains dynamic and unimpeded.
While many state regulations tilt heavily toward restriction, federal policy should strike a balance between oversight and encouragement, establishing and enforcing baseline consensus standards while providing the freedom and incentives needed for breakthrough research. At the same time, it should coordinate state-level efforts to support that goal, rather than stifle them.
AI Is Not Value-Neutral: Risks Require Responsible Oversight
The conclusion that light-touch regulation fosters innovation is not absolute, especially in the case of AI and in the context of US–China competition, where historical analogies fall short. Unlike past technologies, AI is not necessarily value-neutral. Every atomic bomb was value-neutral until it was deployed. In contrast, many AI models embed biases and assumptions from the moment they are trained.
The rapid evolution of AI has created legitimate fears and uncertainties. These fears are not irrational. AI systems affect human safety, privacy, and the structure of society at every stage—from development to deployment to daily use. Algorithms, often operating as black boxes, can unintentionally cause devastating harm or be designed by malicious actors to do so deliberately. As such, every responsible nation must regulate AI. Left unchecked, AI could destabilize the world order.
The US Cannot Win the AI Race Without Trust
Yes, the US is in a real race with China—a sprint toward technological supremacy. But winning that race requires more than speed. It requires trust, leadership, and values. If the US wants to preserve its role as the chief architect and steward of global order in the AI era, it cannot allow its AI sector to become a lawless frontier. Smart regulation—federal, clear, and principled—can enhance rather than hinder the US position.
A national regulatory framework can set essential safety and privacy standards without smothering innovation. The goal should not be to restrict but to enable: to provide the minimum constraints necessary to build systems the world can trust.
Why is trust so central? Because in AI, success isn’t just about who can build the fastest model—it’s about who can earn global adoption. People will use AI systems they trust. And trust must be earned through transparency, accountability, and good governance. Without it, even the most powerful systems will falter in the marketplace.
In this sense, the federal government can and should act as a respected certification body. Products that carry the label of safety and oversight sell better. Similarly, AI regulated by trustworthy public institutions will be adopted more widely and with greater longevity.
Governance Reflects Values—And the World Is Watching
Regulation is not only about how we govern. It’s about the values that underpin our governance. China does regulate AI, but it does so with political control and state security as its guiding principles. Chinese AI companies are required to comply fully with government demands, including turning over user data and embedding state narratives. That makes both the development and use of Chinese AI inherently risky from a global privacy and freedom standpoint.
For example, a German data protection agency recently found that an AI application by DeepSeek was illegally transferring user data from Germany to China. It asked Google and Apple to consider banning the app. This kind of international backlash illustrates China’s growing credibility crisis. If it continues, Chinese AI models will struggle to gain global traction.
The US Must Link Technological Strength With Democratic Credibility
This is why the regulatory model matters so much. AI is becoming a key vector of international competition, and AI systems are only as trustworthy as the governments that regulate them.
The United States must not drift toward China’s model. Instead, we must show that technological excellence can coexist with democratic values. During the Cold War, the US didn’t just out-innovate the Soviet Union. It demonstrated that innovation powered by freedom and civil rights could prevail. Sputnik jolted American science, but it also spurred domestic progress in civil liberties, proving that freedom, not repression, is the more durable foundation for progress.
Today, that dual track—technological capability and value superiority—is no longer split. AI collapses the distinction because values are now embedded directly into the technologies we build.
Global market leadership in AI is both the end goal and a means to that end. It ensures capital flow back into the sector, particularly important since US government funding for AI still lags behind China’s. Smart regulation can enhance trust, expand global market share, and indirectly finance the next generation of AI research. Unified, democratically grounded national regulations can clearly and powerfully signal the trustworthiness of American AI systems—and thus serve as a vital business strategy for US AI technology.
The US Must Lead in Shaping the Global AI Ecosystem
This isn’t just a market issue; it’s about who sets the global AI norms and builds the ecosystem others must join. The US must act quickly to establish a transparent, democratic, values-driven AI ecosystem—and leverage its global alliances to make that the default model for the world.
If China wants access to global markets, it must operate within these norms. If not, it risks exclusion. At the same time, the US must take decisive steps to demonstrate that its ecosystem is grounded in trust, safety, and shared benefits for humanity. Federal policies must therefore be visible, credible, and enforceable.
States Have Been Pioneers—And Must Not Be Silenced
To date, many US states have made meaningful advances in AI oversight. California and Illinois, for example, have led with privacy and biometric regulations. While national standards are desirable and arguably necessary, they must not come at the cost of bottom-up innovation. States should continue to serve as “laboratories of democracy,” contributing ideas, standards, and pilot policies that inform federal direction. The federal approach should aim for coordination, not preemption. It should harvest the best insights from state experimentation and elevate them to national policy.
AI is evolving too quickly for any one-size-fits-all solution to endure. Once core principles are enshrined, implementation must remain dynamic and adaptable
AI Security Also Demands Strategic US–China Cooperation
Finally, the US must resist framing the AI competition with China as a zero-sum game. Some level of cooperation will be essential, especially in the military domain. Just as the US and the Soviet Union negotiated nuclear arms treaties during the Cold War, the US and China must engage in dialogue on the ethical use of AI in warfare. This includes bans on autonomous lethal weapons and limits on AI-driven military decision-making to avoid catastrophic miscalculations.
To Lead, the US Must Regulate With Vision, Values, and Urgency
To win the AI competition with China, the United States must enact unified standards and credible enforcement that both enable innovation and build trust, at home and abroad. But unlike China, the US must not centralize power to dominate AI. It must win by doing what no authoritarian regime can: harnessing openness, innovation, accountability, and freedom to create a better system that others want to join.
This race is not only about whose machines are faster. It’s about whose values are embedded in the code, and whose governance earns the world’s confidence.
To lead in the AI century, America must lead not just in technology, but in trust.
About the Author: Jianli Yang
Dr. Jianli Yang is the founder and president of Citizen Power Initiatives for China and author of For Us, The Living: A Journey to Shine the Light on Truth and It’s Time for a Values-Based “Economic NATO.
Image: Shutterstock
