The defeat early Tuesday of a ban on state laws for artificial intelligence dealt a major blow to the tech industry on the verge of a policy victory.

In a 99-1 vote, the Senate voted overwhelmingly to strike an amendment to the Republican economic policy package that would have imposed a decadelong moratorium on attempts to regulate AI by the states.

The before-sunrise vote was a win for consumer groups and Democrats, who had argued for weeks against the provision that they feared would remove any threat of oversight for the powerful AI industry.

“The Senate came together tonight to say that we can’t just run over good state consumer protection laws,” Sen. Maria Cantwell, D-Wash., said in a statement. “States can fight robocalls, deepfakes and provide safe autonomous vehicle laws.”

There are no federal laws regulating AI but states have enacted dozens of laws that strengthen consumer privacy, ban AI-generated child sexual abuse material and outlaw deepfake videos of political candidates. All but a handful of states have some laws regulating artificial intelligence in place. It is an area of deep interest: All 50 have introduced bills in the past year tied to the issue.

The Senate’s provision, introduced in the Senate by Sen. Ted Cruz, R-Texas, sparked intense criticism by state attorneys general, child safety groups and consumer advocates who warned the amendment would give AI companies a clear runway to develop unproven and potentially dangerous technologies.

The proposed ban on state AI laws stemmed from a proposal championed by Speaker Mike Johnson, R-La. On May 22, the House’s approved version of the bill included the “Artificial Intelligence and Information Technology Modernization Initiative,” a 10-year moratorium on state AI laws.

Silicon Valley venture capital powerhouse Andreessen Horowitz and AI startups OpenAI and Anduril, a defense tech company, lobbied fiercely in favor of the amendment.

The Trump administration also threw its support behind the proposal. Commerce Secretary Howard Lutnick called the moratorium a critical policy to advance American leadership in AI.

“If we’re serious about winning the AI race, we must prioritize investment and innovation,” Lutnick posted on social media Monday.

On Sunday, it appeared more likely the AI amendment might go through after Sen. Marsha Blackburn, R-Tenn., reached a compromise with Cruz on a shorter moratorium of five years. But the compromise included language that many legal experts said could neuter existing state laws. Blackburn withdrew her amendment written with Cruz late Monday and introduced a motion to strike his original amendment.

“The Senate did the right thing today for kids, for families and for our future by voting to strip out the dangerous 10-year ban on state AI laws, which had no business being in a budget bill in the first place,” Jim Steyer, CEO of the child safety group, Common Sense Media, said in a statement.