Colorado Paves the Way for Algorithmic Fairness in AI Regulation

Colorado Paves the Way for Algorithmic Fairness in AI Regulation

It’s a remarkable moment in the world of artificial intelligence (AI) as Colorado stands on the precipice of becoming the first state in the United States to enact a comprehensive law addressing the use of AI in employment and other critical areas. The state legislature recently passed Senate Bill 24-205 (SB205), which now awaits the signature of Governor Jared Polis. This groundbreaking legislation, set to take full effect in 2026, aims to prevent algorithmic discrimination and requires developers and users of high-risk AI systems to adopt stringent compliance measures.

But what exactly does this mean for the state of Colorado and the broader landscape of AI regulation? Let’s delve deeper into the details.

Under the Act, SB205 defines “high-risk artificial intelligence systems” as machine-based algorithms that significantly influence decisions in areas such as employment, education, finance, government services, healthcare, housing, insurance, and legal services. These AI systems are deemed high-risk if they have the potential to impact individuals or groups, leading to differential treatment based on protected classifications like age, disability, race, religion, or sex.

The Act extends its reach to both developers and deployers of high-risk AI systems. Developers include any entity in Colorado that develops or significantly modifies an AI system, while deployers encompass any entity that uses a high-risk AI system. Small businesses with fewer than 50 employees may be exempt from some of the compliance requirements.

Should SB205 be signed into law, businesses will need to adhere to a number of stringent obligations. Developers must provide extensive information to deployers, including known harmful uses and data summaries. They are also required to publish a public statement on their website outlining the types of AI systems developed and their risk management strategies. Developers must disclose any known risks of algorithmic discrimination to the attorney general.

On the other hand, deployers must implement and regularly review a comprehensive risk management policy. They need to conduct impact assessments of AI systems annually and within 90 days of significant modifications. Additionally, deployers must notify consumers when a high-risk AI system will be used to make consequential decisions and provide detailed disclosures on their website. Furthermore, consumers must be made aware that they are interacting with an AI system unless it is inherently obvious.

Both developers and deployers are expected to exercise reasonable care to avoid algorithmic discrimination, with a presumption of compliance if they adhere to the rules. Deployers are obligated to inform the attorney general of any discriminatory outcomes detected by their AI systems. Developers, in turn, must notify the attorney general and all known deployers of any new risks of discrimination that are discovered.

The Act also mandates that businesses using high-risk AI systems provide detailed notices to individuals affected by these systems. This includes information on the purpose and nature of the AI system, the type of decision being influenced, and the right to opt out of profiling in decisions with significant legal effects. Businesses must also provide contact information and details on how to access their public statement on AI use.

Enforcement of SB205 will be handled exclusively by the Colorado attorney general, treating violations as unfair and deceptive trade practices. While there is no private right of action under this law, businesses can assert an affirmative defense if they identify and rectify violations through feedback or internal review processes.

The implications of this landmark legislation reach far beyond Colorado’s borders. Employers in the state must prepare for the significant compliance burdens imposed by SB205, which may pave the way for broader scrutiny and regulation of AI systems nationwide. It’s imperative for companies to develop robust AI risk management programs, conduct regular impact assessments, and provide transparent disclosures to ensure compliance with these evolving regulations.

Employers outside of Colorado should also take note, as similar laws are being considered in other states, signaling a nationwide trend toward stricter AI regulations. The emergence of Colorado as a pioneer in AI regulation sets the stage for a more fair and equitable future in the field of artificial intelligence.

“In enacting this legislation, Colorado has taken an important step toward ensuring the ethical and responsible use of AI,” said Governor Jared Polis. “We must be mindful of the potential biases and discrimination that can arise from AI systems, and this law sets the foundation for addressing those concerns.”

As the debate around AI regulation continues to unfold, it is clear that Colorado’s groundbreaking legislation sets a precedent for other states to follow. The path toward algorithmic fairness and accountability in AI systems is becoming clearer, and it is one that we must embrace to ensure a future where technology works for the betterment of all.