As California and New York race to regulate artificial intelligence (AI), a new study predicts the AI governance market will explode to $5.78 billion by 2029. With lawmakers grappling to balance innovation and safety, tech giants and startups are rushing to cash in on the growing demand for ethical AI tools and compliance solutions.
California Gov. Gavin Newsom has formed a panel of AI experts to study potential statewide safety rules following his veto of a comprehensive AI regulation bill. The three-member panel, consisting of Stanford’s Fei-Fei Li, UC Berkeley’s Jennifer Chayes and Carnegie Endowment’s Mariano-Florentino Cuéllar, all have strong ties to the AI industry.
Newsom vetoed a sweeping AI regulation bill in September, arguing it focused too heavily on large AI model makers while potentially overlooking risks from smaller, specialized models. In his veto message, Newsom suggested that a more comprehensive approach to AI regulation was needed, leading to the formation of this expert panel to study and propose new safety rules.
State Sen. Scott Wiener, author of the vetoed bill, has expressed willingness to work with the panel on future legislation, emphasizing the need for diverse viewpoints. The governor’s office suggested the panel may expand and aims to propose new AI safety legislation next year.
Meanwhile, New York legislators are preparing to introduce new regulations to protect consumers and guide the technology’s development. Following a recent hearing in Albany, lawmakers are reportedly drafting proposals to balance innovation with public safety.
Assemblyman Alex Bores is spearheading efforts to establish legal standards for AI liability and implement measures to help users distinguish AI-generated content. “It’s much more difficult to detect what is false than it is to prove what is true,” Bores said according to Spectrum News.
The proposed legislation, expected to be introduced in December, will build upon New York’s existing initiatives, including a substantial investment in an AI research hub in Buffalo and restrictions on AI-generated deepfakes in political campaigns.
Additionally, State Sen. Kirsten Gonzalez is focusing on regulating AI chatbots to combat misinformation. Earlier this year, Gonzalez sponsored a bill regulating how state agencies use certain automated AI systems.
As New York progresses with its AI strategy, lawmakers stress the urgency of addressing potential risks while harnessing the technology’s benefits. The coming months will likely see intense debate and collaboration between legislators, tech industry representatives and consumer advocates as the state shapes its AI policy landscape.
The market for AI governance tools is set to surge over the next five years, driven by increasing regulatory pressures and the widespread adoption of AI across industries, according to a new report released Monday (Oct. 7) by market research firm MarketsandMarkets.
According to the study, the global AI governance market is expected to reach $5.78 billion by 2029, growing at a compound annual rate of 45.3% from $890.6 million in 2024.
Regulatory compliance is emerging as a key driver as governments worldwide implement stricter rules around AI development and deployment. For instance, the European Union’s AI Act has mandated risk assessments and compliance audits for AI systems in high-risk sectors like healthcare and finance.
“Organizations also run the risk of facing reputational damages linked with prejudiced or harmful AI output,” the report noted, citing controversies surrounding large language models and biased AI recruiting tools.
Data governance tools are expected to capture the largest market share as they help organizations track data quality and mitigate bias in AI training datasets. Software and technology providers are projected to be the fastest-growing end-user segment as they rush to implement ethical AI frameworks.
North America is poised to dominate the market, buoyed by substantial government funding and stringent regulations. U.S. federal funding for AI governance surpassed $1 billion in 2023, the report said.
“More than half of businesses expect more stringent AI rules in the next five years, with 62% citing data privacy compliance as a main factor for implementing governance,” MarketsandMarkets said in a news release.
