Taking A Sensible Approach to AI Regulation

By Kelly Schulz

During the recent legislative session, both the Maryland Senate and House considered bills aimed at increasing compliance requirements and regulations for small companies that utilize AI technology. Although neither bill passed, the Maryland legislature responded by forming a Work Group tasked with evaluating the need for and recommending appropriate regulations related to AI. This group, comprised of thirty-five members from diverse industries, is expected to provide recommendations on or before July 1, 2026.

The topic of how the State should regulate AI is a complicated new area of the law that requires a careful balance of safety, transparency, and consumer protection with the reality that AI is enmeshed with our daily lives.

On behalf of small business owners, entrepreneurs and companies who supply AI-powered products, it is vital that policymakers focus on smart regulation that carefully considers the impacts on Maryland businesses, particularly small ones. While I recognize the importance of commonsense regulation in the AI sector, lawmakers should not make it difficult for small businesses to develop or offer innovative AI products.

Additional regulations, without sufficient consultation with those who would be directly impacted, could constrain innovation, impose significant costs, and administrative burdens on businesses already struggling in a difficult economic environment. The recent 3% Tech Tax on small businesses is just one example of how such policies can quickly add up, squeezing already tight margins. Regulations that require extensive compliance measures could not only raise costs but could also create an unpredictable business environment, leading to increased uncertainty and, potentially, forcing businesses to scale back or even relocate outside of Maryland.

I encourage the Work Group to consider how overly broad regulations might impose significant financial strain on small businesses, cast a negative light on this important technology, and harm a fledgling industry’s growth in Maryland. The additional costs, both direct and indirect, could force many companies to make tough choices. In a time of economic uncertainty, this could lead to layoffs, closures, or even the relocation of businesses to more regulatory-friendly states.

At a time when small businesses are already facing numerous challenges, the AI study Group presents a tremendous opportunity for Maryland’s leadership to take a step back and promote policies that support, rather than burden, entrepreneurs, and startups. Viewed through the lens of solving for Maryland’s multi-billion-dollar budget deficit outlook, cultivating an environment friendly to job-creating AI tech innovators could foster a much-needed new industry in Maryland comprised of startups unburdened by fear of regulatory limitation and unanticipated costs.

Let’s collaborate to ensure Maryland remains a diverse and vibrant hub for businesses of all sizes, where smart, targeted regulation holds bad actors accountable without stifling innovation or casting a shadow over AI as a whole.