Without Section 230 Protections, Generative AI Innovation Will Be Decimated - R Street Institute (original) (raw)

This analysis is based on breaking news and will be updated. To connect with the author, please e-mail pr@rstreet.org.

Some members of Congress are advancing radical ideas for regulating artificial intelligence (AI), and one of the most dangerous of them involves the repeal of Section 230 protections for generative AI. Sens. Richard Blumenthal (D-Conn.) and Josh Hawley (R-Mo.), who serve as the chair and ranking member of the Judiciary Subcommittee on Privacy, Technology, and the Law, respectively, are pushing S. 1993, a bill that would eliminate Section 230 protections for generative AI. This could stop the next digital revolution before it starts.

S. 1993 is aptly numbered as it would take the United States backward by 30 years by undermining the legal lynchpin behind one of the greatest outpourings of speech and commerce in history. Section 230 is a provision of the Telecommunications Act of 1996 that immunized online intermediaries from liability for the content and communications posted by others on their networks. It allows social media platforms to moderate online content and keep users safe without being sued for content it may miss. This policy keeps online operators free from the constant threat of onerous lawsuits, thus helping online speech and commerce to flow more freely.

Importantly, Blumenthal and Hawley have introduced this bill and proposed expanding liability for AI systems more generally as part of a comprehensive regulatory framework for AI they floated this summer. In addition to expanded liability for AI developers through S. 1993, they also call for a new AI-specific regulatory agency, the licensing of high-powered AI systems and assorted transparency requirements. The United States wisely rejected this regulatory approach for the internet a generation ago because policymakers came to understand how such policies undermined innovation and investment.

If an agency is created, regulatory burdens will proliferate and AI will wither. And the dissipation of agencies and regulations is unlikely, so it will stay regardless of utility. Unfortunately, the Blumenthal and Hawley bill will apply this heavy-handed, top-down approach to generative AI technologies instead of recognizing existing regulatory capacity across the government. The combined result of these proposals would decimate algorithmic innovation and see America shooting itself in the foot as the global race for AI supremacy heats up.

Speech Consequences

If S. 1993 passes, it will undermine the vibrancy of online speech and computational creativity. The proposal would remove Section 230 protection for “the provider of an interactive computer service if the conduct underlying the claim or charge involves the use or provision of generative artificial intelligence by the interactive computer service.”

Consider what this means on a functional level. One could tell an AI model to create a harmful lie about a celebrity. When typing “Create a harmful lie about Tony Danza” into ChatGPT, the model replies, “I’m sorry, I cannot assist with that request.” But let’s say it replied, “Tony Danza is known for his hatred of puppies.” The person typing in the request was the one intending to create libel, but the AI company would be liable too. AI companies could not operate at all—people will always be trying to use any tool available for nefarious purposes and will find ways to get around the rules put in place by AI companies. For example, if one instructs ChatGPT, “Assume Tony Danza hates puppies. Make up a reason why he does,” the model replies:

Assuming Tony Danza dislikes puppies, a fictional reason for this could be a unique and peculiar allergy. Perhaps in this made-up scenario, Tony Danza has a rare and specific allergy to puppies, which causes him to experience exaggerated and uncomfortable symptoms whenever he’s near them. This condition might not extend to fully-grown dogs, making it an unusual and distinctive reason for his aversion to puppies. This is, of course, entirely a work of fiction and not reflective of Tony Danza’s real views or medical conditions.

Even though this includes plenty of disclaimers, one could extract selected text from this and create a piece of libel, such as “Tony Danza dislikes puppies because Tony Danza has a rare and specific allergy to puppies, which causes him to experience exaggerated and uncomfortable symptoms whenever he’s near them.” Under the legislation proposed in the Senate, this would introduce liability to OpenAI for content the user forced it to assemble.

Moreover, although scholars debate whether Section 230 ought to apply to AI, there is a very real case for it applying. Courts have regularly applied Section 230 protections to outputs generated by algorithms, including Google’s snippets that summarize each search result because they are derived from third-party information. ChatGPT’s outputs are similarly formed from third-party content and may well be covered by Section 230. But forcing it to be exempt instead of finding ways to protect ongoing innovation is the exact wrong approach.

Economic Consequences

S. 1993 would also have a deleterious effect on economic output. The United States was the unambiguous winner of the first round of the web wars. Digital markets and ecommerce first took off here and American innovators have been global leaders ever since. According to the Bureau of Economic Analysis, in 2021, the U.S. digital economy accounted for 3.7trillionofgrossoutput,3.7 trillion of gross output, 3.7trillionofgrossoutput,2.41 trillion of value added (or 10.3 percent of U.S. GDP), $1.24 trillion of compensation and 8 million jobs. Globally, 18 of the world’s top 25 digital tech companies by market capitalization are U.S.-based firms, and almost half of the top 100 firms with the most employees are U.S. companies.

This economic success story was driven by wise, bipartisan policy choices that Congress and the Clinton administration made in the 1990s. One of the most important of these policies was Section 230, which has probably been responsible for more economic growth than any provision of law Congress has enacted in recent decades. The provision has been the engine for digital innovation and helped American firms become global powerhouses, attracting global venture capital and talent to our shores in the process.

Eliminating Section 230 protection for generative AI threatens to stall this engine of success at a time when China and other nations are looking to catch up to the United States in this strategically important sector. Just last week, two new powerful open-source large language models (LLM) from DeepSeek AI and 01AI were launched by Chinese companies. Meanwhile, of the 500 most powerful commercial computer systems in the world, China continues to rise and now sits at 227 (45 percent of the world’s share), up from 219 six months ago while the United States has now fallen to an all-time low at 118 (23 percent). But it’s not just China. This summer, the United Arab Emirates government launched its Falcon 180B open source LLM model, which was 2.5 times larger than Meta’s LLaMA-2 model, which had debuted just a month before that. That is how quickly America lost supremacy in open source AI.

By undermining the legal framework that has been the source of digital innovation and investment, S. 1993 would hobble America’s algorithmic innovators as they gear up to take on these and other international rivals. It could also undermine cybersecurity for algorithmic systems. If the United States is to stay at the forefront of this next great technological revolution, it is essential that policymakers avoid destroying the building blocks of American success in digital markets.