Texas draws a line in the sand on AI discrimination

New Law Takes Effect January 2026

Starting January 1, 2026, Texas will have some of the strictest AI rules in the country.

Governor Greg Abbott signed the Texas Responsible Artificial Intelligence Governance Act last June, and it bans everything from discriminatory hiring algorithms to government systems that rate citizens based on their behavior.

The law went through major changes before passing, and the final version balances consumer protection with room for innovation. What made it through tells you a lot about where AI regulation is headed.

Abbott Signs a Scaled-Back Bill

Governor Greg Abbott signed the law on June 22, 2025, marking the end of a bill that received national attention and underwent major changes throughout the legislative process.

The original draft proposed a sweeping regulatory scheme modeled after the Colorado AI Act and the EU AI Act, focusing on high-risk AI systems and imposing substantial requirements on the private sector.

But in March 2025, Texas legislators introduced an amended version that significantly scaled back the scope. The final law focuses on specific banned uses rather than regulating all AI based on risk levels.

Government Cannot Score Citizens

Texas bans government agencies from using AI systems that evaluate or classify people based on social behavior or personal characteristics with the intent to calculate a social score.

This prohibition applies when the scoring would result in detrimental or unfavorable treatment in contexts unrelated to where the behavior was originally observed.

The rule mirrors concerns about China’s social credit system and prevents Texas agencies from tracking and rating residents based on everyday activities.

AI That Encourages Harm Is Illegal

The law prohibits anyone from developing or deploying an AI system that intentionally aims to incite or encourage a person to commit physical self-harm, including suicide, harm another person, or engage in criminal activity.

This applies to private companies and government agencies alike.

The ban targets AI chatbots or systems that could be designed or modified to push vulnerable users toward dangerous behavior.

Deepfakes and Child Exploitation Banned

Texas prohibits developing or distributing AI systems with the sole intent of producing child pornography or deepfake videos depicting intimate imagery without consent.

The law also bans AI systems that engage in text-based conversations simulating sexual conduct while impersonating a child younger than 18.

These provisions criminalize AI tools specifically built for exploitation, closing loopholes that existing laws might have missed.

Agencies Must Disclose AI Use

Government agencies that use AI systems to interact with consumers must disclose this before or during the interaction, regardless of whether it would be obvious to a reasonable person.

Healthcare providers must also disclose when patients are interacting with AI in relation to their care or treatment.

The disclosures must use plain language and cannot employ dark patterns designed to confuse or manipulate users.

Intent Matters, Not Just Impact

Texas prohibits intentional discrimination using AI systems, but disparate impact alone is not enough to prove unlawful behavior.

For purposes of the law, a disparate impact is not sufficient by itself to demonstrate an intent to discriminate.

This means a company using an AI system that produces unequal outcomes across racial or gender groups cannot be penalized unless prosecutors prove the discrimination was deliberate.

Sandbox Lets Companies Experiment

The law creates a regulatory sandbox that allows a person to test an AI system for a limited time without being licensed or registered under state laws.

Participation is limited to 36 months, though extensions are possible for good cause. Participants must file quarterly and annual reports on system performance, risk mitigation, and stakeholder feedback.

The sandbox gives startups and researchers a way to develop new AI tools without immediately facing the full weight of state regulations.

Seven Experts Will Guide Policy

The law establishes the Texas Artificial Intelligence Advisory Council, comprising seven qualified members appointed by the governor, lieutenant governor, and speaker of the house.

The council will conduct AI training programs for state agencies and local governments and may issue reports on data privacy, AI ethics, and legal compliance.

However, the council is expressly prohibited from creating any binding rules or regulations itself.

Only the AG Can Enforce It

The law vests exclusive enforcement with the Texas Attorney General, precludes private lawsuits, and authorizes civil penalties up to $200,000 per violation.

Companies that fail to cure violations may face penalties ranging from $10,000 to $12,000 for each curable violation and $80,000 to $200,000 for each uncurable one.

Other state agencies may impose additional sanctions up to $100,000 and can suspend or revoke business licenses.

60 Days to Fix Mistakes

The law requires the Attorney General to provide written notice before initiating action, giving companies 60 days to cure violations and implement policy changes.

Defendants who substantially comply with the NIST AI Risk Management Framework or another recognized risk-management framework gain an affirmative defense.

Developers are also shielded from liability if another person uses their AI system in a prohibited manner.

Texas Beats Colorado by One Month

The Texas law takes effect January 1, 2026, exactly one month before the Colorado AI Act.

Colorado’s law was delayed until June 30, 2026 after the governor called a special session to allow more time for negotiations.

Texas now has a head start in shaping how states regulate AI, and companies operating in both states will need to navigate two different frameworks with different rules on discrimination, disclosure, and enforcement.

This article was created with AI assistance and human editing.

Read more from this brand:

• Democrats Want to Stop AI From Discriminating Against You
• California Just Passed a Law That Could Save Your Life at Chain Restaurants
• Trump Killed the Rule That Would Have Paid You $775 for Flight Delays