California's Landmark AI Law: How New Regulations Could Impact Chatbots

The week of October 20-27, 2025 saw significant developments in AI regulation across North America and Europe, with particular focus on chatbot governance, federal oversight, and state-level legislative action.

On October 13, 2025, California became the first state to enact an AI law that includes a private right of action, specifically targeting AI companion chatbots[3]. This landmark legislation creates serious litigation risk for companies deploying AI chatbots in California, as businesses found in violation may face actual or statutory damages of $1,000 per violation, plus reasonable attorneys' fees[3]. The law addresses consumer protection concerns around AI-powered companions and represents a significant escalation in state-level AI enforcement mechanisms beyond traditional regulatory penalties.

Federal Regulatory Review Progresses

The Office of Science and Technology Policy (OSTP) set an October 27, 2025 deadline for public comments on federal regulations that hinder AI development and deployment[6]. This initiative reflects growing recognition that existing regulatory frameworks may require adjustment to accommodate rapid AI advancement while maintaining appropriate safeguards. The comment period represents an opportunity for industry stakeholders to identify specific regulatory barriers that may be impeding responsible AI innovation.

State Legislative Landscape Expands

As of October 2025, at least six states enacted new AI chatbot laws during 2025, creating an increasingly complex patchwork of compliance obligations for businesses operating across multiple jurisdictions[3]. These laws address various concerns including consumer deception risks, such as failing to inform users they are communicating with AI rather than humans, and sector-specific applications including mental health chatbots and AI systems interacting with children[3].

Colorado and Utah made notable changes to their preexisting AI legal frameworks during this period[3]. All current state chatbot laws provide for civil monetary penalties on a per-violation basis and are enforced by state regulatory authorities[3].

European Policy Developments

The European Commission announced new AI strategies as part of ongoing implementation of the EU AI Act, which was adopted in 2024[5]. Consultations were launched in the EU on various AI governance matters[5]. The AI Act's risk-based framework categorizes systems into four tiers—unacceptable, high, limited, and minimal risk—with corresponding compliance requirements[1][2]. Rules for general-purpose AI models, particularly those posing systemic risks, are scheduled to take effect in August 2025 and will be supported by a forthcoming Code of Practice[2].

Compliance Challenges for Industry

The regulatory developments create significant compliance challenges for businesses deploying AI systems, particularly those operating across multiple jurisdictions. Companies must now navigate divergent state requirements while preparing for potential federal regulatory changes. The introduction of private rights of action in California marks a shift from purely regulatory enforcement to civil litigation exposure, fundamentally changing the risk calculus for AI deployment decisions.

Risk assessments, transparency measures, and human oversight requirements continue to emerge as central themes across jurisdictions. Over 50% of countries globally have adopted some form of AI regulation as of October 2025, with 65% of AI stakeholders reporting alignment with international standards[1].

REFERENCES

[1] Sparkco AI. (2025, October). Global AI Regulation Policy Developments: October 2025. https://sparkco.ai/blog/global-ai-regulation-policy-developments-october-2025

[2] Anecdotes.ai. (2025). AI Regulations in 2025: US, EU, UK, Japan, China & More. https://www.anecdotes.ai/learn/ai-regulations-in-2025-us-eu-uk-japan-china-and-more

[3] Cooley LLP. (2025, October 21). AI Chatbots at the Crossroads: Navigating New Laws and Compliance Risks. https://www.cooley.com/news/insight/2025/2025-10-21-ai-chatbots-at-the-crossroads-navigating-new-laws-and-compliance-risks

[5] Stephenson Harwood. (2025, October). Neural Network – October 2025. https://www.stephensonharwood.com/insights/neural-network-october-2025

[6] American Hospital Association. (2025, October 17). Reminder: Comments due to OSTP Oct. 27 on regulations hindering AI development, deployment. https://www.aha.org/news/headline/2025-10-17-reminder-comments-due-ostp-oct-27-regulations-hindering-ai-development