Balanced Legislation on Chatbots Will Preserve Main Street’s Competitiveness

By: Tracey Spellmire

Arizona’s small businesses are competing in a marketplace that looks nothing like it did even just a few years ago. Restaurants might have better luck finding customers through digital ads rather than street signs, mom-and-pop shops might have expansive ecommerce portfolios, and customer service bots might empower service-based businesses to answer web inquiries in seconds rather than days. Small businesses will always have a place on Main Street to serve brick-and-mortar customers, but a strong online presence is no longer an option; it’s a necessity.

Digital tools have opened the door to new opportunities. Customers can engage with small businesses worldwide, and emerging technologies like artificial intelligence are helping them streamline processes and operate more efficiently and effectively daily. Arizona’s entrepreneur community is no stranger to leveraging these tools. In fact, data shows that over 60% of small businesses statewide use AI platforms, and over 80% believe it will help their business in the future. 

That optimism is justified, as tools like AI chatbots can take on functions such as serving in a customer service role, translation, appointment booking, order tracking, and more. Since entering into force over the past few years, they’ve become a practical tool, particularly for businesses with small teams—freeing up capacity for growth planning and more time spent serving customers in-store. But just as they have started to deliver real, day-to-day value, Arizona lawmakers are already considering sweeping changes that could dramatically alter how chatbots operate. 

As organizations that rely on chatbots daily, business owners want clear rules and strong guardrails—particularly for consumers and vulnerable groups like our kids. Responsible regulation can build trust while setting clear expectations for developers and deployers on how these tools can be used safely. But what matters, especially in the absence of federal guidance, is how these guardrails are designed, and whether they preserve access to the tools small businesses rely on to remain competitive.

That is where caution is warranted. Without legal departments or compliance teams to interpret vague standards or adapt to new rulemakings, fast-moving state legislation has created uncertainty for businesses experimenting with AI. That concern is not theoretical, as lawmakers have already introduced competing proposals to regulate chatbots this session, and the differences between them are meaningful for small businesses. 

One bill, HB2311, takes a more targeted approach, addressing actual harms by establishing safeguards for minors and other vulnerable populations. It shields minors from inappropriate responses and stops chatbots from generating statements that lead them to believe they are interacting with a human.

On the other hand, HB2737 takes a far broader approach. It introduces sweeping new responsibilities for data retention and processing, while creating vaguely defined standards and broad-based liabilities for “reasonable care” in the design and distribution of chatbots. Those loose standards expose anyone who “creates, distributes, or otherwise makes a chatbot available” to private litigation and to action by the county attorney and the attorney general, even for minor or technical violations. 

As Arizona’s lawmakers debate these two approaches, it’s critical that they remember that protecting consumers and minors can be done without harming small business competitiveness. Arizona should choose a targeted, measured approach to chatbot regulation that ensures our state’s small business community continues to have access to the tools that help them reach consumers and keep their doors open.

Tracey Spellmire is a longtime Phoenix resident and small-business owner. When she is not at the Capitol, you can find her being a mother to her two sons, 9 and 13 years old.