Week in Review

IN THE NEWS

• California Governor Gavin Newsom vetoed a bill aimed to introduce the nation’s first safety regulations for large-scale artificial intelligence (AI) models that require a high level of computing power and are expensive to build. The bill would have required companies to disclose safety protocols and identify potential existential threats from AI usage. Governor Newsom stated that the bill was “well-intentioned” but worried that it neglected risks posed by “smaller, specialized models,” which “could give the public a false sense of security.” Earlier this year, Governor Newsom signed other AI-related bills into law, including ones regulating deepfakes and protecting workers from unauthorized AI use.
• The National Credit Union Administration (NCUA) issued a final rule that will expand career opportunities for individuals with prior criminal convictions, allowing them to work and volunteer at insured credit unions. The Federal Credit Union Act prohibits people who have been convicted of crimes involving dishonesty or breach of trust from working at credit unions without the prior written consent of the NCUA Board. Under the new rule, however, individuals with prior convictions for misdemeanors and drug possession, as well as individuals with older and expunged convictions, will be permitted to work in the credit union industry without applying for approval from the NCUA Board. The rule is intended to offer “second chances” to individuals with prior convictions in the interest of “forgiveness and redemption.”
• California Governor Gavin Newsom also signed a bill into law that will protect people’s brain activity data under the California Consumer Privacy Act . The law categorizes “neural data” as “sensitive information,” requiring neurotechnology companies to give users the ability to access, delete, or restrict the sharing of their data. Some experts argue that the law overlaps with existing biometric protections and lawmakers should instead focus on the regulating the algorithms using this data to make predictions on users’ behavior.
• The U.S. Department of Defense issued a final rule that authorizes payments to current and former Defense Department employees—and their dependents—who have experienced brain injuries. The rule implements the Helping American Victims Afflicted by Neurological Attacks (HAVANA) Act, which Congress passed in response to “a sudden onset” of neurological symptoms amongst federal employees stationed in Havana, Cuba in 2016. The new rule applies to individuals who incurred brain injuries on or after January 1, 2016.
• The U.S. Small Business Administration published a direct final rule that will make it easier for small businesses to refinance their debt, helping them lower their debt payments and obtain more affordable funding. The rule amends the 504 Loan Program, which provides financing to small businesses for the purchase of “land, buildings, and major equipment.” The rule removes the cap on debt refinancing, raises the loan value requirement, and eliminates the cap on eligible business expenses.
• The Department of Veterans Affairs proposed a rule that would establish a program to evaluate the feasibility of expanding the legal assistance services available to veterans. The pilot program would investigate the ability to offer grants to create new legal assistance clinics, enhance existing clinics, and strengthen  pro bono efforts dedicated to providing veterans with legal assistance. The proposed rule would outline the financial management, administration costs, and reporting requirements for legal assistance grantees.
• California Governor Gavin Newsom signed a bill into law, permitting cannabis dispensaries to sell non-cannabis food and beverages. The law only applies to retailers licensed to sell cannabis and allows the California Department of Cannabis Control to shut down operations if public health is at risk. California Assemblyman Matt Haney, however, argues that the bill will increase consumer safety by decreasing the use of illegal cannabis. The law also prohibits these retailers from selling alcohol and tobacco and allowing cannabis consumption in food preparation spaces.
• The U.S. Federal Aviation Administration (FAA) published a final rule that will allow pilots to count their flight time from public aircraft operations toward meeting the FAA’s flight time requirements. Prior to this rule, only pilots conducting official law enforcement activities could log flight time for civil regulatory purposes. The rule will also amend the FAA’s requirement that pilots maintain a minimum standard of recent flight experience, allowing individuals undergoing flight training to serve as pilot-in-command on flights without the recent flight experience typically required.

WHAT WE’RE READING THIS WEEK

• In a recent article, William Hubbard and Colin P. Starger, law professors at the University of Baltimore, argued that state driving laws are unfit to regulate automated vehicles. They estimated that thousands of state laws are ambiguous or inapplicable to automated vehicles. Hubbard and Starger claimed that terms such as “driver” and “operator” are especially problematic because laws that target human drivers may not apply to automated vehicle systems. To improve state regulations, they suggested a system where federal authorities would develop “best practices for updating state laws” and then use financial incentives to get states to adopt them.
• In a recent working paper released by the National Bureau of Economic Research,  Donald S. Kenkel, a professor at Cornell Brooks School of Public Policy, and several coauthors, explored the potential consequences of a U.S. Food and Drug Administration ban on menthol cigarettes, which are smoked by almost 19 million people in the United States. The authors suggested that a menthol cigarette ban could encourage menthol smokers to attempt to quit at higher rates. The authors also warned that a ban could create high demand for an illegal market for menthol cigarettes, which could cause additional unintended consequences, including racial disparities in the policing of illicit cigarette sales.
• In a paper published in the Stanford Law and Policy Review, Kathryn Judge, Harvey J. Goldschmid Professor of Law at Columbia Law School, and Dan Awrey, a Professor of Law at Cornell Law School, argued that Congress should have commissions convene every ten years to strengthen financial regulatory needs. Judge and Awrey found that recent Supreme Court decisions have limited the power of regulatory agencies, creating challenges for financial regulation. Judge and Awrey identified that the structured process used by commissions have historically produced rules and practices that can be proactively implemented to strengthen current financial regulations. Judge and Awrey argued that the approach would help Congress proactively address new challenges rather than only responding to crises, enhancing the regulatory process while balancing risks, efficiency, and public trust.

EDITOR’S CHOICE

• In an essay in The Regulatory Review, Keith B. Belton, Senior Director of Policy Analysis and Statistics at the American Chemistry Council, highlighted the steps United States regulators need to take to ensure the United States remains a leader in international conversations about artificial intelligence (AI). Belton argued that lagging on regulations can create three challenges to AI-enabled innovation: outdated regulations that hinder advancements, uncertain requirements that deter investment, and new regulations that may delay market entry of AI-enabled products. Belton proposed that risk assessments should guide regulations, existing regulatory frameworks should be used when possible, and new regulations should be proportional to the risk.