Colorado Legislature Passes Swipe Fee Reform, Rewrites AI Law

The Colorado legislative session wrapped up Wednesday with a patchwork of wins and losses for local businesses. Senate Bill 134, which eliminates credit card swipe fees on sales tax, cleared both chambers and now sits on Governor Jared Polis's desk. Meanwhile, a third attempt to reshape the state's artificial intelligence regulations is racing through final committees after a May 1 introduction.

For restaurant owners and retailers, the swipe fee bill represents tangible relief. In 2024, Colorado merchants paid $218 million in interchange fees just on sales tax alone, according to CMSPI, a payments consulting firm. The total statewide swipe fee burden reached $2.1 billion that year. When a customer swipes their card at a Denver bistro, the merchant doesn't just see the transaction amount on their terminal—they're also paying up to 3% of the entire bill to the processor, including the portion they'll eventually remit to the state.

Senate Bill 134 would exempt sales taxes from those fees. The bill passed the House 44-20 and the Senate 18-17, a razor-thin margin that reflects the intensity of lobbying on both sides. The Colorado Sun reports the measure now awaits Polis's decision, with his office stating he's "considering the impact of national regulations."

Opposition came from banks and payment processors who argue the change would disrupt reward programs and require costly system updates. The Electronic Payments Coalition ran Instagram and Facebook ads warning of "credit card chaos" at checkout counters. They point to Illinois, where a similar law is currently entangled in litigation. But supporters say the savings are real—restaurants could save around $26,000 annually, according to a Colorado Restaurant Association survey.

This is a raise for a dishwasher, health insurance for a server. This is the difference between a small business making payroll or laying someone off. That's the framing from House Majority Leader Monica Duran, who sponsored the bill. The amendment requiring savings to go toward prices or employee benefits was added in the Senate, a compromise that kept some lawmakers on board.

The artificial intelligence legislation tells a different story—one of retreat and recalibration. Senate Bill 189 would repeal and replace the two-year-old Senate Bill 205, Colorado's first comprehensive AI antidiscrimination law. The original measure was set to take effect February 1, 2026, but got pushed to June 30 after business groups pushed back hard on the audit requirements (which frankly were never going to work for most companies).

The new framework strips out mandatory bias audits and replaces them with a transparency-and-notice model. Employers using AI for hiring decisions must provide clear notice that AI is being used. When an adverse outcome occurs—rejection, termination, denial—the affected person gets a plain-language explanation within 30 days, instructions on correcting inaccurate data, and the right to request human review. The effective date shifts to January 1, 2027.

Fisher Phillips notes the rewrite narrows scope significantly. Spell-check, calculators, spreadsheets, and general-purpose large language models like ChatGPT are excluded unless specifically configured for consequential decisions. The Colorado Attorney General retains exclusive enforcement authority—no private lawsuits. Violators get a 90-day cure period before civil penalties kick in, unless the violation was knowing or repeated.

Senate Bill 137, a regulatory efficiency measure, passed with little opposition. It requires state agencies to review rules at least every five years and adds criteria to determine effectiveness. The Colorado Chamber of Commerce called it a significant win. Even the AFL-CIO supported it, though with caveats about not sunsetting hard-fought programs. Governor Polis's office said he's excited to sign the final version, calling it a bipartisan effort that cuts through red tape.

Not everything went smoothly for business interests. Michael Smith, state director of the National Federation of Independent Business, flagged concerns about House Bill 1005, which would make unionization easier by repealing the 75% approval requirement in the state's Labor Peace Act. Polis vetoed a similar bill last year and is likely to do so again. Smith also worries about Senate Bill 116, which would remove inflation indexing from business property tax exemptions.

The physical reality of these changes matters. For a restaurant owner, SB 134 means their point-of-sale system needs to separate tax from the base price when calculating fees. Most digital systems already track "level 2" data with tax information, but cash-register merchants would need to submit documentation after transactions to get refunds. For AI compliance, employers need to update their hiring workflows—posting notices, documenting data categories, training human reviewers who can actually override algorithmic decisions.

Whether users actually pay for it remains the real question. The banking industry's warning about credit card chaos may or may not materialize. The AI transparency framework sounds reasonable on paper, but implementation will reveal whether businesses can navigate the new requirements without legal counsel. And Polis's signature on SB 134 could come with conditions—or not at all.

The legislative session ends Wednesday. Business organizations are waiting to see if their other proposals pan out before commenting fully. Some bills gave relief even with compromises. Others created new compliance burdens. The net effect depends on which measures survive the governor's desk and how enforcement plays out in practice.

Artūras Malašauskas is an AI Systems Integrator with 20+ years of production-grade web engineering experience. He has designed, shipped, and scaled enterprise Python/PHP systems for logistics, SaaS, and public-sector clients. For the past year, he has focused exclusively on AI integrations: deploying open-source LLMs, building generative media pipelines (image, audio, video), and engineering multi-agent workflows for real production environments. His standard: reproducibility, security, cost-efficient inference—no vaporware. He documents and evaluates emerging AI tooling, separating verified capabilities from marketing noise. Technical editor at: muza-ai.eu, ai-verslas.lt, ai-naujinos.lt Connect on LinkedIn