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A comprehensive artificial intelligence consumer protection bill was heard by the legislature’s Judiciary Committee on Thursday afternoon. LB642 would require companies to disclose when they use “high-risk” AI systems to make significant decisions about consumers.
Sen. Eliot Bostar introduced the bill.
“LB642 strikes a careful balance between innovation and consumer protection,” Bostar said. “By enacting this legislation, Nebraska positions itself as a leader in addressing the complexities of artificial intelligence while ensuring our residents are shielded from harm.”
Bostar said the bill aims to prevent AI systems from making “consequential decisions” in areas like housing, employment, criminal justice and health care without Nebraskans knowing. He said the transparency requirements give more power to the consumer.
“Consumers will have the right to correct inaccuracies, appeal adverse outcomes and access transparent explanations about how decisions were made,” Bostar said. “These measures empower individuals to engage with AI-driven systems confidently, knowing their rights are protected and their interests are prioritized.”
Bostar also raised concerns about possible discrimination.
“The rapid evolution of artificial intelligence has brought immense benefits to society,” Bostar said. “However, it also presents new challenges, particularly when it comes to protecting Nebraskans from potential algorithmic discrimination and ensuring transparency and consequential decisions made by AI systems.”
Bostar’s concerns about algorithmic discrimination arise from studies about AI models training on biased data or recommending different outcomes and opportunities for different groups.
In 2024, 31 states passed AI-related legislation or adopted resolutions, but Nebraska is one of the first states to consider a comprehensive consumer protection bill. Colorado passed a bill last year with similar language, and California passed several individual bills that accomplish similar goals.
Opponents of this type of legislation said it could stifle innovation in America. Tanner Jones, a policy analyst at the Texas-based Cicero Institute, testified that more regulations could slow progress.
“We just had our Sputnik moment in AI a couple weeks ago,” Jones said. “China demonstrated that it can keep pace with the United States. Now is not the time to slow down and pump the brakes. It's the time for everyone, particularly in the heartland of the U.S., to be building an AI so we maintain our edge and can compete with China effectively.”
Another opponent, Tech Nebraska Executive Director Laurel Oetken, said regulations could strain the resources of small businesses.
“The potential compliance costs associated with this bill could be particularly burdensome on small-to-medium-sized businesses within our state, potentially deterring them from starting, scaling and adopting AI,” Oetken said.
While the bill does carve out exemptions for businesses with less than 50 employees, Oetken clarified that other language in the bill would invalidate it.
Director of Public Policy Taylor Barkley for the Abundance Institute, a non-profit promoting tech innovation, said it’s better to focus AI-related bills on specific issues.
“In contrast to what's proposed, targeted, incisive legislation on known harms is the better approach,” Barkley said.
In his closing statement, Bostar said he’s heard mixed feedback on the bill.
“This has been an interesting bill to pursue,” Bostar said. “I feel a little caught in the middle. There are folks who don't support it because they think it goes too far. There are folks who don't support because they think it doesn't go far enough.”
Bostar said he’s already made amendments to the bill with feedback from Nebraska’s tech organizations. He said he will continue working on it before it advances to the floor.
“We've been putting together amendments and kind of packaging them together to address some concerns that folks have raised,” Bostar said. “We're going to continue to do that.”
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