Colorado AI Act (SB 24-205): What You Need to Know

In May 2024, Colorado became the first U.S. state to pass a comprehensive AI law targeting algorithmic discrimination. The law takes effect on February 1, 2026 and is likely to serve as a model for other states.

Balancing innovation and accountability: Colorado’s AI Act sets the stage for responsible AI regulation in the U.S.

Who Does It Apply To?

• Developers of high-risk AI systems (wherever they are based, including outside Colorado) if their AI is sold, licensed, or deployed in the state.

• Deployers (companies using AI in Colorado to make decisions about people).

• Even if your company is outside Colorado, if your AI product is used by Colorado residents or businesses, you must comply.

Core Idea of the Colorado AI Act

The Colorado AI Act requires companies to use, test, and monitor AI responsibly whenever automated systems are making decisions that affect people’s lives.

Scope: “High-Risk AI”

The law applies to AI systems that make or support decisions in critical areas, including:

• Employment & hiring

• Education access

• Housing & credit

• Healthcare & insurance

• Legal & government services

Obligations for Developers & Deployers

Both those who create AI systems (developers) and those who use them (deployers) have strict compliance duties:

• Risk Management Program → Document how risks are identified, tested, and mitigated.

• Impact Assessments → Conduct annual reviews of AI systems, including testing for discrimination or bias.

• Transparency Notices → Inform consumers when AI is used in consequential decision-making.

• Consumer Rights → Individuals can request explanations and contest AI-driven outcomes.

• Incident Reporting → Disclose significant AI-related risks or harms to the Colorado Attorney General.

Timeline

• Signed into law: May 2024

• Enforcement begins: February 1, 2026

Why It Matters

• Developers → Must provide clear documentation and disclosures to buyers and regulators.

• Deployers (AI users) → Hold liability if their AI introduces bias or discriminatory outcomes.

• Out-of-state companies → If your AI is used in Colorado, this law applies to you.

• Everyone → This sets a U.S. precedent. Other states are expected to follow Colorado’s lead with similar legislation.

If your AI system impacts access to jobs, housing, credit, healthcare, or other essential services, compliance with the Colorado AI Act is not optional.