The Future of AI Governance Amid U.S. Regulation Pause

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House Republicans have proposed banning states from regulating AI for the next ten years. The sweeping moratorium, quietly tucked into the Budget Reconciliation Bill last Sunday, would block most state and local governments from enforcing AI regulations until 2035 if passed.

Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research, sees a splintering global AI landscape ahead.

“America’s moratorium will likely deepen the regulatory divergence with Europe,” said Gogia. “This will accelerate the fragmentation of global AI product design, where use-case eligibility and ethical thresholds vary dramatically by geography.”

Many large companies aren’t waiting for government guidance. “Even before public oversight being put on hold, large enterprises have already launched internal AI governance councils,” Gogia explained. “These internal regimes — led by CISOs, legal, and risk teams — are becoming the primary referees for responsible AI use.”

But Gogia cautioned against over-reliance on self-regulation: “While these structures are necessary, they are not a long-term substitute for statutory accountability.”

Gogia puts it more bluntly: “Even in a regulatory freeze, enterprises remain legally accountable. I believe the lack of specific laws does not eliminate legal exposure — it merely shifts the battleground from compliance desks to courtrooms.”

Gogia offers a succinct assessment of the situation: “The 10-year moratorium on US state and local AI regulation removes complexity but not risk. I believe innovation does need room, but room without direction risks misalignment between corporate ethics and public interest.”

As quoted in ComputerWorld.com, in an article authored by Gyana Swain published on May 14, 2025.

Beyond the Media Quote: Our View, In Full

Pressed for time? You can focus solely on the Greyhound Flashpoints that follow. Each one distills the full analysis into a sharp, executive-ready takeaway — combining our official Standpoint, validated through Pulse data from ongoing CXO trackers, and grounded in Fieldnotes from real-world advisory engagements.

Moratorium or Missed Mandate? Why Oversight Cannot Be Postponed Indefinitely

Greyhound Flashpoint – The 10-year moratorium on U.S. state and local AI regulation removes complexity but not risk. Greyhound CIO Pulse 2025 finds 58% of enterprise tech leaders prefer national consistency in regulation, yet 52% also worry that delaying oversight at all levels could invite irresponsible deployment. At Greyhound Research, we believe innovation does need room, but room without direction risks misalignment between corporate ethics and public interest.

Greyhound Standpoint – According to Greyhound Research, this moratorium may simplify governance in the short run, but it creates a strategic dependency: innovation will be fast, but guardrails must evolve in parallel. This isn’t a binary between progress and policy—it’s about synchronizing the two. If federal standards do not follow swiftly, the void will be filled by corporate self-regulation, where priorities often diverge from public accountability. In this decade, regulatory calm should be used for architectural reform—not institutional silence.

Greyhound Pulse – In ongoing Greyhound CIO Pulse 2025 interviews, 54% of U.S.-based CIOs said that multiple overlapping AI policies at the state level discouraged long-term AI planning. Yet 49% expressed discomfort with the idea of AI advancing for a decade without any enforceable public oversight. These responses indicate that enterprises are seeking consistency—not a regulatory holiday.

Greyhound Fieldnote – Per a Greyhound Fieldnote from an engagement with a U.S. insurance group, the firm faced internal pushback when rolling out an AI-based claims adjudication system. The technology team moved ahead, citing a lack of regulatory restrictions, but the legal function intervened, demanding internal review protocols due to reputational risk. This friction highlights how even in the absence of regulation enterprises must construct their own governance structures—or risk exposure from within.

U.S. Regulatory Holiday vs. EU AI Act: One Market, Two Moral Compasses?

Greyhound Flashpoint – America’s moratorium will likely deepen the regulatory divergence with Europe. In Greyhound CIO Pulse 2025, 44% of global CIOs reported building dual AI workflows to separately comply with the EU AI Act and looser U.S. frameworks. At Greyhound Research, we believe this will accelerate the fragmentation of global AI product design, where use-case eligibility and ethical thresholds vary dramatically by geography.

Greyhound Standpoint – According to Greyhound Research, the regulatory split between the U.S. and EU is becoming structural, not temporary. Enterprises operating across both regions will increasingly build “compliance-localized” AI architectures—those that embed transparency, safety, and explainability into products only for some markets. This not only strains engineering resources, but it also challenges brand coherence. AI platforms with different ethical foundations across geographies risk alienating stakeholders and inviting scrutiny.

Greyhound Pulse – From Greyhound CIO Pulse 2025, 37% of U.S.-headquartered multinationals with European operations have created dedicated compliance layers solely for EU-facing AI services. An additional 28% are reviewing whether to restrict advanced AI deployments in the EU altogether due to the cost of conformance. These decisions are shaping AI development strategies not just for today, but for the next product cycle and beyond.

Greyhound Fieldnote – A recent Greyhound Fieldnote from a U.S.–Europe hybrid retail platform revealed tensions between its algorithmic recommendation engines across regions. While the EU team embedded explainability and audit trails, the U.S. system prioritized real-time optimization. This divergence—driven by compliance obligations—created inconsistent user experiences and stakeholder confusion. Over time, such duality risks undermining AI maturity by splitting focus across ethical baselines.

Who Governs AI in a Regulatory Pause? The Rise of Private Ethics Regimes

Greyhound Flashpoint – Even prior to the public oversight being put on hold, Greyhound CIO Pulse 2025 indicates 61% of large enterprises have already launched internal AI governance councils. These internal regimes—led by CISOs, legal, and risk teams—are becoming the primary referees for responsible AI use. At Greyhound Research, we caution that while these structures are necessary, they are not a long-term substitute for statutory accountability.

Greyhound Standpoint – According to Greyhound Research, in the absence of regulation, responsibility doesn’t disappear—it decentralizes. Enterprise boards, legal teams, and ethics officers are becoming the new arbiters of acceptable AI behavior. While this reflects maturity, it also introduces variance. Not all companies are equally equipped to govern AI risks internally. Without shared standards or enforcement mechanisms, the industry risks cultivating a patchwork of values—with some firms leading and others hiding behind opacity.

Greyhound Pulse – Our latest Greyhound CIO Pulse 2025 shows 51% of firms in the U.S. have formal AI ethics policies in place, and 46% have created cross-functional review boards. However, only 29% report consistent implementation across business units. The gap between policy and practice reveals the fragility of self-regulation in the absence of external oversight.

Greyhound Fieldnote – Per a Greyhound Fieldnote from a Fortune 500 logistics firm, the company established an internal Responsible AI Committee that reviewed high-risk automation projects quarterly. While the initiative improved transparency, a lack of trained reviewers and defined thresholds led to inconsistent outcomes. Eventually, a flagged chatbot project went live before ethical clearance—highlighting the risk of overburdened internal frameworks replacing regulation without the required rigor.

No Regulation, But Still Liable: The Legal Maze for AI Harms

Greyhound Flashpoint – Even in a regulatory freeze, enterprises remain legally accountable. Greyhound CIO Pulse 2025 reports 41% of enterprise legal leaders expect AI liability disputes to escalate in civil courts over the next 3–5 years. At Greyhound Research, we believe the lack of specific laws does not eliminate legal exposure—it merely shifts the battleground from compliance desks to courtrooms.

Greyhound Standpoint – According to Greyhound Research, delaying regulation increases—not decreases—the role of litigation in shaping AI norms. Judges, not lawmakers, may now end up defining the boundaries of acceptable AI use via precedent. This dynamic creates unpredictable legal terrain where similar harms are judged differently across jurisdictions. Enterprises will need to invest heavily in documentation, model traceability, and auditability—not to meet regulation, but to prepare for litigation.

Greyhound Pulse – From Greyhound CIO Pulse 2025, 41% of general counsels and chief compliance officers in U.S. Fortune 500 firms anticipate using existing doctrines—product liability, tort, and consumer protection—to defend or contest AI harms. 33% are re-evaluating their D&O insurance policies and indemnity clauses in vendor contracts to reflect AI risk exposure. These are strong indicators that legal functions are bracing for post-deployment challenges, not policy-led protection.

Greyhound Fieldnote – A Greyhound Fieldnote from a financial services firm revealed complications following an AI-driven credit scoring algorithm that inadvertently downgraded applicants from certain zip codes. While the issue was quickly contained internally, a consumer class-action lawsuit is now underway. The legal team cited the lack of formal AI guidance as a barrier in pre-deployment risk analysis. The incident reinforces that even in a regulatory vacuum, courts will still demand accountability.

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