AI policy takes shape in Washington

Topline

• Federal AI policy begins to take shape

• SEC and CFTC publish token taxonomy; Atkins previews Reg Crypto

• California suspends VC diversity reporting law

• Quick hits

• Upcoming events

Federal AI policy begins to take shape

On March 20, the White House released its national AI legislative policy framework, outlining key priorities for Congress to establish a unified, innovation-first AI governance regime. The proposal organizes around six key principles: protecting children, safeguarding communities, respecting IP, preventing censorship, enabling innovation, and developing an AI-ready workforce. The framework rejects the creation of a new AI regulator, instead relying on existing agencies and industry-led standards, and limits federal intervention to targeted areas like child safety, digital replicas, and critical infrastructure. It also punts core copyright questions, including whether training on copyrighted content is fair use, to the courts.

But its most consequential feature: federal preemption of state AI laws. The framework calls on Congress to establish a single national standard and avoid a patchwork of state laws that regulate how AI models are developed or penalize companies for how their AI is used by others, though states would retain narrow authority primarily around child safety. The White House is also not pushing to pass a single comprehensive AI statute, but rather, is encouraging Congress to move a series of targeted bills, an approach that reflects both political constraints and the complexity of the issue.

Early signals of congressional action. Ahead of the White House release, Sen. Marsha Blackburn previewed the TRUMP AMERICA AI Act, offering an early view of how Congress could operationalize the White House framework. Like the administration’s approach, Blackburn’s proposal centers on preemption but pairs it with more prescriptive federal obligations for AI developers and platforms. Key provisions include:

• Duty of care, requiring AI chatbot developers to mitigate reasonably foreseeable harms 

• Section 230 sunset, phasing out liability protections for AI-driven platforms within two years

• Content provenance requirements for AI-generated creative and journalistic outputs

• Workforce impact reporting, requiring public companies to disclose AI-related job displacements to the DOL on a quarterly basis

• Ratepayer Protection Pledge, requiring AI data center operators to bear the cost of incremental energy demand

House and Senate Republicans have embraced the White House plan and pledged to work with Democrats to advance legislation. Yet there’s a critical tension at play: liability. While the White House framework explicitly cautions against open-ended liability that could stifle innovation, Blackburn’s duty-of-care standard introduces exactly that kind of liability hook, reflecting genuine divides within the Republican conference between a light-touch approach and a more accountability-driven model.

Political realities. While Washington is converging on the need for a federal AI framework, the politics remain fragmented. Democrats are largely unified against broad preemption, arguing that states should retain authority unless strong federal protections are in place. Republicans are increasingly divided, too. Innovation-focused members favor a light-touch federal standard that reduces regulatory friction and strengthens American competitiveness, particularly against China. But a growing populist wing is increasingly wary of labor displacement, corporate concentration, and ceding authority to a federal regime seen as too industry-friendly. 

Overlaying these tensions is a broader political headwind: public anxiety around AI is real, broad, and growing, and it cuts across party lines. Recent polling shows nearly 60% of registered voters believe AI’s risks outweigh its benefits, and only 26% have positive feelings about the technology. Concerns about job displacement are front and center, but energy affordability is quickly emerging as a parallel issue, as AI-driven data center demand strains power infrastructure and raises the prospect of higher electricity costs for consumers. As midterms approach, policymakers will be more sensitive to these pressures, which could narrow the space for compromise.

All of this is playing out against a structural challenge: AI deployment is moving faster than policymaking. By the time Congress acts, the technology—and the associated demands on labor and energy systems—may already look materially different from what lawmakers are debating today.

What’s next: The White House has set the direction, but Congress will determine both the pace and substance of AI legislation. Preemption will remain the central organizing principle, but also the biggest obstacle, likely forcing lawmakers to narrow its scope or pair it with more explicit federal guardrails to gain Democratic support needed to get 60 votes in the Senate. Senate Republicans are aiming to move legislation this spring, but reconciling competing approaches across committees—and between the House and Senate—will be complex. In the near term, expect movement through a series of targeted bills, with child safety, digital replicas, and content authenticity emerging as the most viable bipartisan entry points.

SEC and CFTC publish token taxonomy; Atkins previews Reg Crypto

The SEC and CFTC published landmark joint interpretive guidance clarifying how federal securities and commodities laws apply to crypto assets, marking one of the clearest regulatory statements to date. The guidance establishes a token taxonomy: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities; clarifies when a crypto asset may be part of an investment contract (and when it is not); and addresses common activities like staking, airdrops, and token wrapping. The SEC signaled that most crypto assets are not themselves securities, though securities laws may still apply based on the transaction and context. 

Chairman Atkins also previewed a potential “Reg Crypto” safe harbor, which would provide tailored pathways for token issuers to raise capital. Central to this framework is a proposed “startup exemption,” a time-limited exemption that would allow early-stage projects offering investment contracts to raise up to $5 million while providing principles-based disclosures similar to existing whitepapers. For early-stage token issuers, allowing capital formation under tailored disclosures similar to current white paper practices. Notably, the exemption would be non-exclusive, preserving access to existing securities exemptions like Reg D while creating a clearer on-ramp for compliant token development.

Why it matters: This is a meaningful step toward regulatory clarity and SEC-CFTC alignment, reducing long-standing uncertainty for builders, investors, and institutions. It also serves as a bridge to pending market structure legislation, signaling how agencies intend to divide jurisdiction and supervise the asset class in the near term, as well as provide pathways to innovate while Congress works to establish statutory rails. The startup and innovation exemptions are still being contemplated, but expect formal action in the coming weeks to address crypto-specific compliance pathways.

Speaking of the crypto market structure legislation, the long-running dispute over stablecoin yield appears close to resolution, potentially clearing a major hurdle to advancement. Still, several issues remain unresolved, alongside new complications as Republicans consider pairing the bill with broader community bank and housing provisions. Senate Banking is currently expected to hold a markup in the latter half of April. More to come, but the next few weeks will likely be decisive for whether a comprehensive federal crypto framework can advance this year.

California suspends VC diversity reporting law; signals reset through rulemaking

Last week, the California Department of Financial Protection and Innovation (DFPI) announced it is suspending implementation and enforcement of the Fair Investment Practices by Venture Capital Companies (FIPVCC) law. Covered VC firms are not required to register or report at this time and can stand down on immediate compliance efforts pending future rulemaking.

Background: The law would have required venture capital firms with a California nexus to survey and report aggregated demographic data on portfolio company founding teams, with initial reports due April 1, 2026. The pause follows sustained industry pushback on implementation mechanics, scope, and legal risk, particularly around how firms would collect sensitive demographic data and apply the law to out-of-state managers with limited California ties.

 Why it matters: This is a meaningful near-term reprieve for firms that have been preparing to operationalize new data collection and reporting processes under tight timelines. More importantly, it signals that the contours of the law are still very much in flux—and industry engagement will be critical to shape a workable framework moving forward.

Next steps: DFPI plans to begin stakeholder outreach to VC firms, founders, and industry groups, followed by formal rulemaking later this year. This process will create an opportunity to address key issues related to scope, data collection, and liability, potentially reducing friction and improving workability. A revised framework is likely, but implementation timelines will likely extend well into next year at the earliest. Carta will continue to monitor developments and engage as this process moves forward.

Quick hits

Wall Street turmoil muddies Trump’s pitch to boost 401(k)s. The Trump Administration’s effort to expand retirement access and allow broader exposure to alternative assets is facing growing headwinds amid market volatility, skepticism, and political friction. Recent stress in private credit—from redemption gates to concerns about AI-driven disruption—has intensified scrutiny around introducing more complex and illiquid investments into 401(k) plans, even as regulators work to broaden access. The Department of Labor’s long-awaited proposal aimed at addressing fiduciary risk and enabling private market exposure was expected as early as February but appears delayed amid negative market headlines. While it is still expected soon, regulators are taking a more measured approach, with Treasury Secretary Bessent emphasizing the need to proceed in a “safe, sound, and smart way” and SEC Chairman Atkins signaling that appropriate guardrails will be critical.

Nasdaq receives SEC nod for trading in tokenized securities. In a significant milestone for the tokenization of traditional assets, the SEC approved Nasdaq’s plan to allow certain securities to trade in tokenized form, integrating blockchain technology into U.S. equity markets. Under the new framework, eligible Nasdaq participants can opt to settle trades as blockchain-based tokens that trade alongside traditional shares with the same tickers, prices, and investor rights.

Big banks score win under new plan to ease capital rules. Federal banking regulators proposed revisions to the U.S. bank capital framework aimed at modernizing requirements to support the flow of credit to households and businesses, while maintaining overall system strength. The proposal replaces the prior, more stringent approach with a simpler, more risk-sensitive framework, including a single capital calculation method, adjustments to the GSIB surcharge, and improved alignment of capital requirements with underlying lending risk. This is a shift toward calibration over constraint, preserving post-crisis resilience while reducing friction that can limit lending or push activity outside the banking system. While the proposal may modestly free up bank balance sheet capacity, capital constraints remain, which reinforces the structural role of private credit and nonbank lenders even as banks regain some flexibility.

FDIC opens door for private equity to buy failed banks. The FDIC rescinded its 2009 policy restricting private investors from acquiring failed banks, removing barriers like ownership limits, hold periods, and cross-support requirements. The move is intended to expand the bidder pool and improve resolution outcomes, with regulators also exploring a “shelf charter” to enable faster transactions in failure scenarios. The move also reinforces a broader shift: private capital is moving from the sidelines into the core of the banking system. For private equity and private credit platforms, it creates new pathways to access stable funding and scale lending, further blurring the line between banks and nonbanks.

Upcoming events

• House Financial Services Committee Hearing: Tokenization and the Future of Securities: Modernizing Our Capital Markets - March 25 at 7:00 a.m. PT/10:00 a.m. ET

• House Committee on Small Businesses Hearing: Defending Main Street: Combatting CCP Threats to America’s Small Businesses - March 26 at 7:00 a.m. PT/10:00 a.m. ET

• House Financial Services Committee Hearing: Innovation at the Speed of Markets: How Regulators Keep Pace with Technology - March 26 at 7:00 a.m. PT/10:00 a.m. ET

• Carta Virtual Event: VC Masterclass: Navigating Liquidity and LP Communication in 2026 - April 7 at 10:00 a.m. PT/1:00 p.m. ET

Sign up below to receive Carta's Policy Weekly Brief