The US Senate dealt a blow to the technology sector early on Tuesday (July 1), voting 99-1 to strip a provision from President Donald Trump’s economic package that would have prevented states from regulating artificial intelligence for a decade.

The rejection signals a victory to creative industry groups that have campaigned against what they see as an attempt to shield AI companies from accountability when using creators’ art and music to create AI models.

The proposal emerged from concerns that a “patchwork” of state and local AI laws would hinder American AI companies competing against China. Senator Ted Cruz of Texas, who chairs the Commerce Committee, proposed the measure after securing backing from tech leaders.

Initially designed as a 10-year ban on state AI oversight, Cruz and other lawmakers worked to secure that the provision is included in Trump’s GOP megabill. Supporters of the proposal include OpenAI’s Sam Altman, Anduril’s Palmer Luckey, and a16z’s Marc Andreessen, according to TechCrunch.

“People will be at risk until basic rules ensuring safety and fairness can go into effect.”

Sarah Huckabee Sanders, Governor of Arkansas

However, the proposal drew opposition as further details emerged. Arkansas Governor Sarah Huckabee Sanders, Trump’s former press secretary, rallied Republican governors against the measure, writing to Senate Majority Leader John Thune and Speaker of the House of Representatives Mike Johnson last week to remove the AI regulatory moratorium.

Sanders wrote: “People will be at risk until basic rules ensuring safety and fairness can go into effect.”

Senator Marsha Blackburn of Tennessee, who initially supported the moratorium, ultimately partnered with Washington Democrat Maria Cantwell to kill the provision entirely.

Despite Cruz and Blackburn teaming up to pitch changes to the AI moratiorium including shortening the timeframe to five years, Blackburn pullled her support, citing “problems with the language” of the amendment.

“While I appreciate Chairman Cruz’s efforts to find acceptable language that allows states to protect their citizens from the abuses of AI, the current language is not acceptable to those who need these protections the most.”

Marsha Blackburn, US Senator

Blackburn on Tuesday said: “While I appreciate Chairman Cruz’s efforts to find acceptable language that allows states to protect their citizens from the abuses of AI, the current language is not acceptable to those who need these protections the most.”

“When I spoke to President Trump last night, he said it was a terrific agreement… But outside interests opposed that deal.”

Ted Cruz, US Senator

Cruz suggested the bill could have “passed easily” if Blackburn hadn’t withdrawn her support.

“When I spoke to President Trump last night, he said it was a terrific agreement,” Cruz was quoted by the Associated Press as saying. “The agreement protected kids and protected the rights of creative artists. But outside interests opposed that deal.”

The Human Artistry Campaign —  which represents recording artists, songwriters, composers, publishers, independent record labels, journalists, photographers, actors, athletes and more — welcomed the decision, arguing that the ban would have prevented states from requiring transparency about whose artistic works train AI models and from blocking unauthorized deepfakes.

“This dangerous and unwise proposal would have banned states from passing new legislation or enforcing existing laws, including to provide greater transparency about whose art was copied to create AI models and banning nonconsensual deepfakes and voice clones.”

Human Artistry Campaign

Following the vote, the campaign said in a statement to MBW: “The Human Artistry Campaign is grateful to Senators Blackburn and Cantwell for their steadfast support and applauds the Senate’s resounding rejection of AI without guardrails. This dangerous and unwise proposal would have banned states from passing new legislation or enforcing existing laws, including to provide greater transparency about whose art was copied to create AI models and banning nonconsensual deepfakes and voice clones. There is a better way forward with policies that recognize AI could be a valuable tool aiding human creativity, but should never be used to destroy artistry and culture.”

Mitch Glazier, Chairman and CEO of the Recording Industry Association of America, also welcomed the news, telling MBW: “We applaud Senators Blackburn and Cantwell for their persistent leadership to protect artists and rightsholders – driving a nearly unanimous Senate rejection of a proposed 10-year ban on state-based AI guardrails.”

“This final vote is a resounding dismissal of the shortsighted, zero-sum game thinking from some tech companies and signifies a widespread recognition that respect for human creativity does not impede winning the AI race, but instead is essential to its success.”

Mitch Glazier, RIAA

Added Glazier: “Federal and state governments both have a critical role to play in protecting creators while promoting AI innovation. This final vote is a resounding dismissal of the shortsighted, zero-sum game thinking from some tech companies and signifies a widespread recognition that respect for human creativity does not impede winning the AI race, but instead is essential to its success.”

The RIAA represents the US recording industry, whose members include major record labels and distributors.

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UK government bonds faced their biggest one-day sell-off since the 2022 “mini” Budget after Sir Keir Starmer declined to back a tearful Rachel Reeves during Prime Minister’s Questions.

Starmer refused to say that the chancellor would remain in her post in a combative exchange on Wednesday with Conservative leader Kemi Badenoch following Labour’s dramatic gutting of its welfare bill, which abandoned a planned £5bn in savings.

Gilts slumped as investors grew increasingly nervous about the UK public finances, pushing the 10-year yield up 0.2 percentage points to 4.66 per cent, on course for the biggest one-day rise in borrowing costs since the market fallout from Liz Truss’s unfunded tax cuts three years ago. The pound dropped 1 per cent against the dollar and 0.6 per cent against the euro.

“There is a risk that a sell-off in gilts becomes self-reinforcing, if market fiscal worries are left unchecked,” said Mark Dowding, chief investment officer for fixed income at RBC BlueBay Asset Management.

Reeves, who sat beside Starmer during PMQs on Wednesday, appeared to shed a tear after the prime minister stopped short of giving her his full backing when asked about her future by Conservative leader Badenoch. She had entered the chamber looking visibly upset.

Starmer, who has previously publicly backed Reeves, said he was “thankful” for the chancellor but the absence of full-throated support increased speculation that her position is under threat.

A Labour spokesperson, asked why Reeves appeared distraught, said she had no comment and referred questions to the Treasury.

She added: “The chancellor is going nowhere. She has the prime minister’s full backing.”

Reeves has become a target for rebel anger over Labour’s handling of the welfare reforms.

Badenoch said the chancellor was being used by Starmer as “a human shield for his incompetence” and said that she looked “miserable”.

As PMQs ended, Reeves was ushered out of the chamber by her sister and fellow MP, Ellie Reeves, who is chair of the Labour party. She appeared to squeeze the chancellor’s hand as she guided her from the chamber.

The spokeswoman said the prime minister had previously said Reeves would serve as chancellor for the whole parliament. “He doesn’t have to repeat [that] every time.”

Asked whether Reeves had offered her resignation, the spokesperson said: “No.” She said Reeves and Starmer were getting on with delivering reform.

A spokesperson for Reeves said: “It’s a personal matter, which — as you would expect — we are not going to get into. The chancellor will be working out of Downing Street this afternoon.”

A spokesperson for Badenoch said: “The ‘personal matter’ doesn’t cover it. I think we should find out what’s going on.”

Asked what markets might make of the chancellor appearing to cry in the House of Commons, the Labour spokesperson said: “We don’t comment on markets.”

Pointing to the bond sell-off, Mike Riddell, a fund manager at Fidelity International, said: “The conclusion from the gilt price action this afternoon is that the market actually likes Rachel Reeves.”

Labour’s U-turn late on Tuesday managed to stop its welfare reform bill from being defeated, but required the prime minister to gut it of any measures that may have led to a net saving in the long run.

Reeves’ position is of huge interest to investors as she has pledged to abide by strict fiscal rules. But she is operating with minimal fiscal headroom and the government’s U-turn on welfare has blown a £5bn hole in her plans.

There is growing speculation she will need to increase taxes at the autumn Budget or pare back Labour’s spending plans — something that has become more challenging with backbench MPs increasingly aware of the sway they can exercise over the government’s agenda.

The North Korean IT worker scheme has become one of the most urgent cybersecurity issues among global Fortune 500 businesses. Hundreds of companies have unknowingly hired thousands of North Korean IT workers in recent years, giving them access to personal information and intellectual property and paving the way for U.S. dollars to be used as a funding source for DPRK authoritarian ruler Kim Jong Un’s nuclear ambitions. U.S. authorities are publicizing the issue with joint warnings from the FBI and Department of Justice, alongside top cyber experts who have chosen to speak out about the threat. 

U.S. Attorney for the Northern District of Georgia Theodore S. Hertzberg told Fortune the office announced charges against four North Korean IT workers this week as part of an orchestrated publicity campaign to encourage business and tech leaders to better understand the threat they’re facing. 

“It is not uncommon for business owners to meet potential partners and employees online,” said Hertzberg in a statement. “But companies that work in this space would be wise to hire Americans and to thoroughly vet all potential employees and partners, preferably in person.”

Inside the IT worker operation

Kim was one among thousands of trained software developers deployed outside the DPRK to get lucrative jobs in tech using stolen identities. The delegations of workers are then forced to send the majority of their earnings to the government—part of a global money-making and laundering empire that generates up to $600 million a year, according to UN estimates, not including the billions stolen in crypto heists. 

Kim told Fortune his minimum earnings target was $5,000 per month up until the COVID-19 pandemic led to a boom in the remote IT sector. Once remote-work offerings exploded, his target amount doubled. Typically, the money was converted to U.S. dollars at local work sites overseas and then delivered either directly to North Korean headquarters or to a representative of the headquarters abroad. 

“My primary job was to earn foreign currency through IT services,” said Kim, according to an email translation of his interview responses. “However, during the COVID-19 pandemic, I often received additional instructions to intensify regime propaganda online as well.”

Kim’s interview was facilitated by People for Successful Corean Reunification (PSCORE), which provided translation and access. PSCORE was founded in 2006 by Kim Young-Il, a North Korean defector, and the group has worked with thousands of other former DPRK citizens who have since fled the country. PSCORE retains UN Economic and Social Council consultative status, which allows it to participate in UN meetings and research. 

Kim is living in South Korea under an alias to avoid endangering his friends and family, who could be targeted by the DPRK government in retaliation for his actions and interviews with U.S. media. That chilling calculus keeps most North Korean IT workers in line, PSCORE secretary general Bada Nam told Fortune. 

According to Nam, the regime’s reach and control extends far beyond individual IT and other workers stationed abroad. 

“Not only their immediate family members, but even distant relatives could get punished if a relative escapes from North Korea,” said Nam. “They are sending the message to the entire people of North Korea, ‘If any family member defects from North Korea or betrays their fatherland, then they will get punished.’”

Those who remain behind are often under constant and severe surveillance, Nam explained. DPRK government workers might be following a defector’s family members in addition to entire neighborhoods. The consequences of a defection can be devastating.

“In some cases, they send the entire family to political prison camp and they cannot get out of that camp for their entire life,” he said. 

Despite the risk, Kim has chosen to break his silence by answering questions from select news outlets. 

Deception Tactics

Kim’s method of disguising his true identity was elaborate and involved the use of popular tech networking and job websites. 

“I used platforms like Facebook, LinkedIn, Freelancer.com, and Upwork.com to pose as a client and post project listings,” Kim said. “I would then contact developers, negotiate with them—including handling payment—and gain access to their accounts.”

Using the identities of those who engaged with him on those platforms, whether they were European or American, Kim would then disguise himself using the identities of those who had sent bids to him. Thus, he was using real, verified identities in order to conceal his own, he said. Kim posted on other platforms as well, including Freelance.com, Guru.com, and Toptal, he said.

In his work, Kim received and carried out development orders from multiple American companies, with his main area of work focused on e-commerce shopping sites and occasionally mobile app development. In Europe, he worked on developing a healthcare app. Kim declined to name any specific companies because he said sharing specifics could lead to inferences about his personal information.   

While Americans in the U.S. have been indicted for knowingly taking part in the North Korean IT worker scheme by renting out their identities or hosting laptop farms in their homes, in Kim’s experience, the Americans who were involved in the scheme were unwitting. He pushed back against a question referring to Americans involved in the scheme as “accomplices.” 

“It would be more appropriate to say they were simply clients who placed orders for work,” he said. “They had no idea we were from North Korea.”

He described the conditions he worked under as “relatively decent.” The workspace and sleeping quarters were “sufficiently spacious” and the food conditions were “good.” But work could also turn brutal if the IT workers weren’t delivering on their financial targets.

“We were required to work a minimum of 10 hours a day, and if we failed to meet the assigned targets, we were sometimes forced to work more than 18 hours a day,” he said. 

He denied ever being asked to share information with DPRK workers who engaged in crypto heists and claims he had “no contact whatsoever with individuals involved in those activities.”

Direct contact with Kim’s family wasn’t possible, he said. During phone calls between his overseas team and the headquarters in North Korea, the IT workers would occasionally get brief updates about major family issues, although in principle, sharing personal family matters was forbidden. 

“We could receive information if it was truly serious and deemed necessary,” he said. “Conversely, in cases where something significant happened abroad—such as an accident or serious illness—the information could also be relayed back to our families through North Korean headquarters.”

Life after the Scheme

Kim’s decision to defect comes at an enormous personal cost, in addition to the harsh reality that his family and even distant relatives could be in danger because of him. Nam said that fear—coupled with extreme personal risk—creates a psychological trap that stops most DPRK citizens from even thinking about escaping. If families attempt to contact defectors, it can become another tool for DPRK control. 

“The regime could pressure the family to contact the defector in South Korea, asking them for small favors,” said Nam. “If the defector responds, sending any information can slowly turn into a situation where they are being used as an unwilling source of information.”

Nam said some defectors have been recaptured afterward because they contacted family members. 

For now, Kim remains in South Korea facing an uncertain future. He is skilled in IT so he plans to continue working in the field, but the psychological scars remain. 

“As for how I feel—it’s a mix of the joy of gaining freedom and the sorrow of losing my family,” said Kim. “From my perspective, it feels like I’ve lost more than I’ve gained.”

He estimates there are thousands of IT workers operating the way he was, some overseas and others inside North Korea. 

In response to a request, a Meta spokesperson declined to comment. LinkedIn directed Fortune to its update on fighting fake accounts. Upwork directed Fortune to its approach to state-sponsored threats. Freelance.com., Freelancer.com, Guru.com, and Toptal did not immediately respond to requests for comment.