AI Legal Watch: October 2025
California’s New Regulations for Developers of Frontier AI Models: What to Know about the Transparency in Frontier Artificial Intelligence Act
Ariel House
On September 29, 2025, California Governor Gavin Newsom signed into law Senate Bill 53 (“SB 53”), which includes the Transparency in Frontier Artificial Intelligence Act (“TFAIA”). This new law makes California the first state to enact a statute that specifically addresses frontier artificial intelligence (“AI”) development.
The TFAIA is expected to take effect on January 1, 2026. For developers of AI models, the law imposes significant new requirements that demand prompt attention, to avoid civil penalties of up to $1 million per violation.
Background of the Legislation
The Trump Administration has prioritized AI innovation through deregulation, and Congress has never passed any comprehensive federal legislation regulating AI development. Just a few months ago, Congress considered—but ultimately failed to pass—a 10-year ban on most state and local AI laws and regulations. As a result, states currently retain the authority to enact and enforce their own AI-related legislation.
Read full article here.
Illinois Enacts First-in-the-Nation Guardrails on AI Therapy
Michelle Molner
On August 4, 2025, Illinois enacted the Wellness and Oversight for Psychological Resources Act (HB 1806), the first U.S. state law to specifically regulate the use of artificial intelligence in the professional mental health space. Effective immediately, HB 1806 is designed to protect consumers by tightly circumscribing the permitted versus prohibited uses of AI in the context of “therapy and psychotherapy services.”
The law draws a bright line between administrative or supplementary tasks on the one hand, and therapeutic interaction on the other hand. More specifically, licensed therapy professionals may use AI for “administrative support” (e.g., scheduling, billing) and “supplementary support” (e.g., maintaining records, analyzing anonymized clinical data, organizing referrals). However, they are prohibited from letting AI make independent therapeutic decisions, directly interact with clients, generate treatment recommendations without clinician oversight, or detect emotions or mental states. Where AI is used to record or transcribe a clinical session, the provider must first disclose this to the individual in writing and obtain their explicit, revocable, and written consent.
Read full post here.
U.S. Launches “American AI Exports Program”
Jason Wilcox
On October 21, the U.S. Department of Commerce, through its International Trade Administration (ITA), formally announced the launch of the “American AI Exports Program.” This initiative stems directly from President Donald Trump’s July 23 Executive Order 14320, “Promoting the Export of the American AI Technology Stack,” which set a 90-day deadline for the program’s establishment. The stated goal is to advance America’s global leadership in artificial intelligence and reduce international dependence on AI technologies developed by foreign adversaries.
The program is designed to select, designate, and actively promote “full-stack” American AI export packages to countries and regions around the world. As described in the guiding Executive Order, this “full-stack” package encompasses five key components.
Read full post here.
Nick Palmieri
On September 8, 2025, the South Korean Ministry of Science and ICT ("MSIT") released for public comment a consolidated draft package of sub-laws which supplement, implement, and explain Korea’s Basic Act on the Development of Artificial Intelligence and the Creation of a Trust Base (the “AI Framework Act”). These drafts are intended to operationalize the Act—which was passed on December 26, 2024 and scheduled to take effect on January 22, 2026—so that core duties and procedures are in place in advance of the effective date.
Quick Links
For additional insights on AI, check out Baker Botts’ thought leadership in this area:
- AI Counsel Code: In the latest episode, "Lessons for Truthful AI Advertising," Maggie Welsh and Julie Albert expose “AI washing”—overstated or misleading AI marketing—and how the FTC, SEC, and NAD are ramping up enforcement.
- USPTO Appeals Review Panel Vacates PTAB Section 101 Rejection: Senior Associate Nick Palmieri review implications of the decision for AI Patenting and § 101 Eligibility.
- Navigating AI’s Spending Spree: Dot-Com Wisdom for Dealmakers: Partner Neil Torpey and Senior Associate Henry Klimowicz give guidance on navigating the gap between significant investment and modest monetization that lies at the heart of AI’s business challenge.
- “America First” for AI Chips: Senate Bill Seeks to Reshape Semiconductor Market: Special Counsel Jason Wilcox examines the NDAA provision to ensure that U.S. manufacturers have priority access to advanced semiconductors.
- The Real AI Constraint: Power at Velocity: Partner Mona Dajani argues that the race for AI leadership being decided in the energy deals being closed right now.
- AI As An Author - "Creativity Machine" Creator Asks Supreme Court to Reconsider Authorship Requirements: Senior Associate Nick Palmieri analyzes implications if the petition is granted.
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