Colorado’s SB 24-205 AI law governing the deployment of “high-risk” AI systems for procedures like hiring has now been hit by a lawsuit amid ongoing resistance. Regulations on AI in the United States have been slow to come, and despite attempts to narrow the gap, there is still much work to be done.
What was meant to be a landmark protection for residents of Colorado has now turned into a battlefield as a result of the lawsuit that has been filed to intervene with the state’s AI hiring law. While the bill was signed into effect in May 2024 and set to take effect in February 2026, the deadline was moved to June 30 to allow for further discussions. Before matters could reach a resolution, Elon Musk’s xAI rushed to file a lawsuit on April 9, arguing that the law was “unconstitutionally vague” and intruded on the First Amendment rights of developers. The federal Department of Justice (DOJ) has now joined the lawsuit.
The Colorado AI law is a landmark decision that aims to regulate the use of AI tools in hiring, but has been met with some resistance. (Image: Freepik)
Colorado’s AI Hiring Law Faces Uncertainty as a New Lawsuit Takes Shape
Colorado;s Anti-Discrimination in AI Act (ADAI) or Senate Bill 24-205, was signed into law by Colorado Governor Jared Polis in May 2024. While the bill was applauded as a major step towards regulating the use of AI in hiring and preventing discrimination through the application of these tools, there were some reservations with regard to the law. Not only did the regulation set checks and impose a “duty of care” on those who developed such high-risk AI systems, but those who deployed them as well.
This ensured that every individual in the chain of deployment was responsible for the safe use of artificial intelligence for screening applicants and determining other aspects of their employment. As a result of the Colorado AI law’s requirements, employers have to implement risk management programs, conduct annual impact assessments, and also disclose when AI is used to make “consequential decisions” to candidates. This requires HR teams and recruiters to be more transparent about their AI use and regularly audit it for bias, ensuring that unfair negative outcomes are reduced as a result.
What Are the Issues xAI Faces with Colorado’s AI Law?
Colorado’s AI law was expected to go into effect earlier this year in February, but was later moved to June 30. Over the last few months, there has been some dissent expressed against the bill. Most prominently, there is the lawsuit filed by Elon Musk’s xAI on April 9, 2026. The lawsuit argues that Colorado’s regulations are unconstitutional and preempted by federal policy. Reportedly, xAI believes that pressuring developers and regulating their AI builds was a violation of their First Amendment rights and was a governmental intrusion.
Critics of the AI hiring laws also argue that the law is “unconstitutionally vague,” and that, with each state developing its own regulations, they are likely to be left with a patchwork of laws that are going to be tough to keep up with. If the DOJ and xAI are successful, it could effectively halt state-level AI regulations, moving the power back to the federal level. With the attitudes surrounding the regulation of AI, this could allow all work on AI safety regulations to stall.
Implications for HR Operations
The progress of US state AI laws in 2026 may be slow to come, but it is important to prepare for a more regulated future, where transparency and anti-discriminatory applications lead the way. Regardless of the lawsuit’s outcomes, the standard of care for AI in employment falls to HR. This means that HR teams cannot take a passive stance on the use and deployment of AI, and must instead demand transparency from their ATS and AI vendors so they are aware of its strengths and limitations.
To further mitigate legal risks, HR teams can also ensure that they distance themselves from auto-reject systems. This would require them to ensure that all applications of AI are closely monitored and supervised by human experts who can ensure there is no algorithmic harm at play. Ensuring that privacy, safety, and fairness are evenly applied in all workplace processes and decisions is always a worth endevor. AI hiring law compliance isn’t an immediate priority until the law takes effect, but this does not mean that HR teams should ignore the sentiments at the heart of these regulations until then.
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