According to the Legislative Budget Board (LBB), HB 2874 is not expected to have a significant fiscal impact on the State of Texas. The analysis assumes that any implementation costs incurred by the relevant state agencies—particularly the Office of the Attorney General, which would oversee compliance exemptions—can be managed within existing appropriations and operational capacity.

The bill's primary enforcement mechanism involves social media platforms submitting documentation to the Attorney General if they lack the technological ability to attach provenance data. The fiscal note suggests that the administrative burden this process places on the Office of the Attorney General is not substantial enough to require additional funding or personnel.

Similarly, there is no anticipated significant fiscal impact on local governments. The bill imposes requirements solely on private social media entities and assigns regulatory oversight to a state-level office, meaning counties, municipalities, and other local entities are not expected to bear implementation or enforcement costs. In sum, while the bill introduces new regulatory functions, the fiscal note confirms that it is designed to operate within the bounds of existing state resources without causing budgetary strain.

HB 2874, the Social Media Content Transparency Act, proposes new regulatory mandates on social media platforms with the stated goal of combating disinformation and improving user awareness about artificial intelligence-generated content. While the concern behind the legislation—namely, the increasing prevalence of deepfakes and manipulated media—is legitimate, the bill takes an overly broad and heavy-handed approach that raises serious concerns under several foundational liberty principles, including limited government, free enterprise, and private property rights.

The bill expands the size and scope of government by introducing new oversight responsibilities to the Office of the Attorney General. Specifically, the office is tasked with determining whether a platform has sufficient technological capacity to comply with the law and may grant exemptions on a case-by-case basis. This not only increases the role of the state in regulating digital infrastructure but does so without establishing clear criteria or checks on the exercise of that discretion. Such open-ended regulatory authority invites future overreach and undermines predictable, limited governance.

From a market perspective, the bill imposes substantial compliance obligations on social media companies. These include attaching and retaining “provenance data” to every audio, image, or video file created or posted on a platform, including information about whether generative AI was used and the identity of the AI tool and its provider. Platforms are also required to make this metadata publicly accessible, either themselves or through a contracted third party. These requirements are complex, costly, and technologically intensive—especially for small or mid-sized platforms that may not have in-house capabilities or scalable infrastructure to meet such demands.

Crucially, the bill imposes these requirements without any threshold based on platform size or user base. This is a major departure from the originally filed version, which included a minimum user requirement (1.5 million monthly active Texas users). Without this limiting provision, the bill risks applying uniformly to businesses of all sizes, creating disproportionate compliance burdens and potentially discouraging market entry, innovation, or investment in Texas’ digital economy. This stands in direct conflict with the principle of free enterprise.

Furthermore, while the bill stops short of directly regulating user speech, it does require platforms to monitor, label, and publish information about the origins of user-generated content—potentially including creative or expressive works such as satire or parody. This introduces a form of compelled disclosure that risks chilling lawful speech and may pressure platforms into self-policing or suppressing content to avoid liability or regulatory scrutiny. These implications raise valid First Amendment concerns.

While the bill includes liability protections for platforms acting in good faith and acknowledges technological limitations, those safeguards are ultimately inadequate to resolve the broader issues. There is no compelling evidence that a state-level mandate of this kind is the most effective or necessary solution. Voluntary industry standards, technological innovation, and federal-level coordination may offer better paths forward without introducing the legal complexity and regulatory burden this bill would create.

In sum, although HB 2874 addresses a real issue, it does so through a framework that is overbroad, poorly scoped, and fundamentally at odds with Texas’ commitment to limited government, free markets, and constitutionally protected freedoms. For these reasons, Texas Policy Research recommends that lawmakers vote NO on HB 2874.

• Individual Liberty: At its core, individual liberty includes freedom of expression and protection from undue government interference in speech and information. While the bill does not directly censor content, it requires social media platforms to tag, store, and disclose metadata—including whether content was generated by AI—on all photo, video, or audio files. This raises free speech concerns by introducing compelled disclosures, particularly for content that might be artistic, satirical, or political in nature. Users could become hesitant to share content out of fear that it will be publicly flagged as AI-generated, even when it’s lawful and harmless. This indirect chilling effect on speech implicates core First Amendment liberties.
• Personal Responsibility: The bill does not directly regulate individuals or shift responsibility onto users. Instead, it places all compliance obligations on social media platforms. While the aim is to empower users to identify deceptive content, it does so by forcing platforms to do the work rather than encouraging users to apply critical thinking or personal discretion. Thus, the principle of personal responsibility is neither clearly strengthened nor undermined—it is largely bypassed in favor of institutional control.
• Free Enterprise: The bill significantly increases the regulatory burden on private companies operating in Texas. It imposes strict metadata requirements, retention mandates, and public access obligations on platforms of any size, without clear exemptions for smaller entities. Although the bill allows platforms to seek a waiver from the Attorney General if they cannot comply technologically, this process is discretionary, nontransparent, and potentially arbitrary. These requirements will drive up costs, discourage innovation, and favor large incumbents that can absorb the compliance burden—contradicting the principle of a competitive, minimally regulated market.
• Private Property Rights: Social media platforms are private digital properties that set their own terms of use and content standards. By mandating how they must handle user-generated content—requiring specific data formats, labeling practices, and external accessibility tools—the state is intruding into how these private businesses operate and manage their digital infrastructure. Even though the platforms remain privately owned, the bill effectively dictates how certain content must be treated, encroaching on their autonomy and managerial discretion.
• Limited Government: Perhaps the most significant concern lies in the bill’s expansion of state oversight into digital communication. The Attorney General is given broad authority to review exemption requests, and the bill imposes a complex regulatory regime without strong limiting principles or sunset provisions. It replaces private-sector innovation and voluntary standards with top-down mandates. Over time, this opens the door for further regulation of online platforms, establishing a precedent that undermines Texas' longstanding commitment to restrained, constitutionally bounded governance.