50 affected consumers = $1M potential liability

[Skip to content](https://www.skadden.com/insights/publications/2024/06/colorados-landmark-ai-act#main-content)

Colorado has become the first state to enact a comprehensive law relating to the development and deployment of certain artificial intelligence (AI) systems. The [Colorado Artificial Intelligence Act](https://www.skadden.com/-/media/files/publications/2024/06/colorados-landmark-ai-act/2024a_205_signed.pdf?rev=44ed85a3d8dc4a9dbd6394d5ea904d48&hash=ADF46DF153FB0094ABCCA23AC4790F5D) (CAIA), which **will go into effect on February 1, 2026**, adopts a risk-based approach to AI regulation that shares some similarities with the EU AI Act.

The Colorado law may spur other states to adopt similar legislation, potentially creating a patchwork of state AI laws with which companies must comply absent any omnibus federal regulation.

## Key Points

- The CAIA is primarily focused on **high-risk artificial intelligence systems**, which is defined as any system that, when deployed, makes — or is a substantial factor in making — a “consequential decision.” As discussed further below, **consequential decisions** generally relate to those involving education, employment, financial services, housing, health care or legal services.
- The CAIA is designed to protect against **algorithmic discrimination**, namely unlawful differential treatment that disfavors an individual or group on the basis of protected characteristics.
- The law imposes various obligations relating to documentation, disclosures, risk analysis and mitigation, governance, and impact assessments for **developers** and **deployers** of high-risk AI systems.
- With respect to **_all_** AI systems that interact with consumers, deployers must ensure that consumers are aware they are interacting with an AI system.
- The state attorney general can bring an action for violations of the CAIA as an unfair or deceptive trade practice; there is no private right of action available.

## Overview

The CAIA, which was enacted on May 17, 2024, focuses on the development and deployment of “high-risk” AI systems and their potential to cause “algorithmic discrimination,” which is defined as any condition in which the use of an AI system results in an unlawful differential treatment or impact that disfavors an individual or group of individuals on the basis of their actual or perceived age, color, disability, ethnicity, genetic information, limited proficiency in the English language, national origin, race, religion, reproductive health, sex, veteran status or other classification protected under the laws of Colorado or federal law.

A “high-risk” AI system is defined as any system that, when deployed, makes — or is a substantial factor in making — a “consequential decision”; namely, a decision that has a material effect on the provision or cost of:

- education enrollment or an education opportunity,
- employment or an employment opportunity,
- a financial or lending service,
- an essential government servi

... (truncated, 13 KB total)