California, pioneer state of digital regulation in the United States

Several bills imposing new rules on the digital sectors have just been adopted in this American state, which is already a pioneer in this field.

Home to Silicon Valley and its tech giants, California is also known for its laws regulating various digital sectors. Last week, this state made a name for itself with a series of bills adopted by parliamentarians for this purpose. Among them is, for example, one that would force social networks to better protect children in Californiaforcing them to put the interests of miners ahead of their profits.

It would be the first law of its kind in the United States if signed into law by Governor Gavin Newsom. “We hope that this model will be emulated by other American states and other countries around the world”, said Democrat Buffy Wicks, the main author of this text. And this is not the only time that California has been a pioneer in terms of digital regulation. A short tour of these laws (or possible future laws) allowing consumers to be protected in many respects.

Protect users of social networks

In addition to the aforementioned social media bill, parliamentarians passed another aimed at these platforms last week. This text would oblige them to disclose their provisions regarding hatred, misinformationextremism, cyber harassment and foreign political interference. Specifically, they would be required to submit reports on their terms of use to the Attorney General, which would include “any existing policy intended to deal with” these categories of content. They should also explain how their automatic moderation systems enforce these conditions and when they involve verification by a human moderator.

However, California’s attempts to regulate social media are not always successful. In August, a text which would have made it possible to financially sanction certain platforms – including those generating more than 100 million dollars in revenue per year – for the use of functionalities which they know can harm children, by causing their addiction, was rejected by parliamentarians. Although the reason for the rejection is unknown, this bill had been the subject of criticism, including from Internet policy experts like Eric Goldman, who believes that social networks could have, if the project had been adopted, removed minors from their platforms, depriving them of precious social places and educational resources. According to him, it would also have harmed children and adults by requiring age and probably identity verification from these platforms to distinguish them, exposing them “at greater privacy and security risks”.

Avoid confusion with self-driving cars

Allowing companies to test self-driving cars and others to market them, California also plans to impose rules on this sector. Specifically, it plans to make it mandatory for a dealer or manufacturer to inform consumers when they purchase a vehicle with partial driving automation functionality with a notice detailing its role and limitations. This would also be mandatory for a software update or car upgrade adding such functionality. This bill would also prohibit a manufacturer or dealer from misleadingly naming or marketing these types of features.

These measures are reminiscent of Tesla’s current situation in California. Accused of falsely promoting the self-driving capabilities of its vehicles, the automaker could be banned from selling its cars in the state. The California Department of Motor Vehicles, at the origin of two complaints filed at the end of July on this subject, believes that the terms “Autopilot” and “Full-Self Driving” and their descriptions suggest that vehicles equipped with them operate like an autonomous car while they are only driving assistance functions. The agency could thus decide not to renew Tesla’s license which allows it to sell it and expires on October 31.

Future rules for the cryptocurrency industry

In France, companies specializing in cryptocurrencies such as Binance are obliged to obtain authorization from the Financial Markets Authority to offer their services directly in the country. This could be the case in California as early as 2025, with a bill that would require such companies to obtain a license from the state’s Department of Financial Protection and Innovation (DPFI). In other words, it would be prohibited for such a company to engage in commercial activity of these digital assets, “with or on behalf of a resident” without this license.

California does not only rely on this text to regulate cryptocurrencies. In May, was signed an executive order on the blockchain to stimulate innovation while protecting consumers, who expose themselves to risks by investing in these digital assets (scams, volatility, etc.). Educational content will thus be produced by the DPFI in order to make Californians aware of the benefits and associated risks. With this text, the state follows in the footsteps of the United States. It is inspired by a decree signed by President Joe Biden which resulted in the submission of a report in July in which several agencies give avenues to guarantee responsible development of cryptocurrencies in the country.

A state with pioneering laws

In addition to these projects, digital laws are already in place in California. Since 2020, an equivalent of the European GDPR – the California Consumer Privacy Act – has given consumers more control over the personal information companies collect about them, guaranteeing new privacy rights. They can, among other things, refuse to have their data sold or demand that the data collected be deleted. At the end of August, it was through this law that Sephora was fined 1.2 million euros, including for not disclosing to consumers that it was selling their personal information. The United States is lagging behind seriously, with the national consumer protection authority which only had its GDPR draft last month.

California is also the only US state to require designers to chatbots to reveal the status of these when a person communicates with them, but only in two cases. They must indeed inform them when these conversational agents are used to “induce the purchase or sale of goods or services in a commercial transaction or influence a vote in an election”. A similar obligation could also be included in the future European regulation on artificial intelligence.