California can’t afford to turn AI into the next lawsuit gold rush

Capitol Weekly Version posted here

By Jaime Huff

OPINION – At a time when California’s budget is strained and lawmakers are scrambling to close deficits, one sector is very obviously doing the heavy lifting for the state’s economy: artificial intelligence.

AI is generating billions in private investment, creating high-paying jobs and producing tax revenue that helps fund schools, public safety and essential services. In many ways, AI is helping stabilize the state’s otherwise shaky fiscal picture.

That makes the current push to rush through sweeping new AI regulations – under threat of political retaliation from labor – especially concerning.

While rumors swirl about what different regulatory structures could look like, one 800-pound gorilla is already making threats. Earlier this month, organized labor signaled that Governor Gavin Newsom would face political consequences if he does not embrace their preferred regulatory framework.

Public policy should not be shaped by ultimatums. It should be shaped by careful analysis, economic reality and a clear understanding of consequences.

California has a long track record of passing ambitious – yet ambiguous – laws that become magnets for aggressive litigation. Instead of clarity, we get courtroom battles. Instead of innovation, we get uncertainty. Instead of better outcomes for consumers and workers, we get higher costs.

Poorly drafted and rushed AI legislation would invite years of costly lawsuits. Trial attorneys – not regulators – will become the primary referees of AI policy. Start-ups will be forced to divert capital away from their product and employees and toward attorneys. Insurance costs will increase. Investors will price in litigation exposure. And companies operating in a multi-trillion-dollar global marketplace will have to consider whether California remains the best place to build the future.

At a time when AI is helping support state revenues and offset broader economic weakness, that is a risk we cannot afford.

Responsible guardrails are appropriate. AI systems must be transparent and accountable to its users – especially children. But there is a meaningful difference between smart oversight and constructing the next litigation gold rush. When regulation relies primarily on private lawsuits, it creates opportunity for exploitation.

Governor Newsom deserves credit for approaching AI deliberately – convening experts, studying impacts and pushing back on the reactionaries. That measured approach is exactly what a rapidly evolving technology demands.

California can lead in responsible AI governance – but leadership does not mean writing the broadest statute or creating unnecessary legal liability. It means crafting precise standards that protect consumers and workers without driving innovation out of state. It means ensuring that enforcement is thoughtful and proportional.

AI is helping carry California through a difficult fiscal moment. Turning it into the next lawsuit gold rush would be an act of self-sabotage.

If policy is shaped by threats, we will watch innovation slow, costs rise and trial lawyers thrive. The Governor should stand firm. California’s budget situation is too fragile – and AI’s promise too important – to let pressure politics turn a bright spot into a courtroom battleground.

Jaime Huff is the President and CEO of the Civil Justice Association of California.