Effective January 1, 2027Up to $20,000 per violationAG exclusive enforcementNarrowed and court-stayed in 2026
Colorado AI Act (SB24-205)

Colorado will hold you to what your AI decides.
Keep the evidence to prove it.

SB24-205 is the first comprehensive state AI regulation in the US. If your AI systems make decisions about lending, healthcare, employment, insurance, or housing in Colorado, you need annual impact assessments, consumer disclosures, and a documented risk management program. Violations carry penalties of up to $20,000 per occurrence.

TIMELINE

Enacted in 2024. In May 2026 the legislature delayed the effective date to January 1, 2027 and narrowed it toward notice and transparency, and a court stayed enforcement of the original text. The obligations are coming on a longer runway. Build the evidence layer now, on your terms, not under a countdown.

Get Free Compliance TemplateSee How Daylite Helps

Does SB24-205 apply to you?

The law applies to any organization that deploys or develops AI systems making consequential decisions about consumers in these domains. If your AI touches Colorado consumers, you are in scope.

Financial Services
Credit scoring, lending decisions, account eligibility, fraud detection systems that affect consumer access to financial products.

Banks, credit unions, fintechs, payment processors, insurance underwriters

Healthcare
Clinical decision support, coverage determinations, treatment recommendations, patient triage systems.

Health systems, payers, digital health, pharmacy benefits managers

Employment
Resume screening, hiring decisions, promotion scoring, compensation analysis, performance monitoring tools.

Employers, HR platforms, staffing agencies, workforce management tools

Insurance
Policy pricing, claims adjudication, coverage eligibility, risk scoring that determines premiums or coverage terms.

P&C insurers, health insurers, life insurers, InsurTech platforms

Housing
Rental application screening, mortgage approval, property valuations, tenant risk scoring.

Property management, mortgage lenders, real estate platforms

Education
Admissions decisions, financial aid determinations, disciplinary scoring, academic performance assessment.

Universities, K-12 systems, EdTech, financial aid offices

What the law requires

SB24-205 imposes obligations on both deployers (organizations using AI) and developers (organizations building AI). Here is what each must do.

Deployers
If you use AI systems
1.Risk management program -- implement a documented policy governing deployment of high-risk AI systems
2.Annual impact assessment -- complete for each high-risk system, and within 90 days of substantial modifications
3.Consumer disclosure -- notify consumers before AI makes consequential decisions about them, and after adverse decisions
4.Discrimination monitoring -- ongoing monitoring for algorithmic discrimination across protected classes
5.Human oversight -- meaningful human review mechanism for AI-assisted decisions
6.Documentation retention -- maintain impact assessments and records for 3 years after system discontinuation
Developers
If you build AI systems
1.Deployer documentation -- provide documentation sufficient for deployers to complete their impact assessments
2.Public disclosure -- publish summary of high-risk AI systems you offer, including discrimination risk management
3.Training data documentation -- disclose data types, limitations, and known biases in training data
4.Discrimination testing -- evaluate systems for algorithmic discrimination and share results with deployers
5.Incident reporting -- report discovered discrimination risks to the AG and all known deployers within 90 days
RequirementFrequencyApplies toPenalty
Risk management programOngoingDeployers$20K/violation
Impact assessmentAnnual + 90 days post-modificationDeployers$20K/violation
Consumer disclosurePer interactionDeployers$20K/violation
Deployer documentationPer systemDevelopers$20K/violation
Public system summaryOngoingDevelopers$20K/violation
Discrimination incident reportWithin 90 days of discoveryDevelopers$20K/violation
Documentation retention3 years post-discontinuationBoth$20K/violation

How Daylite supports an SB24-205 program

Daylite does not make you compliant on its own. It enforces your policy at runtime and produces the tamper-evident evidence several SB24-205 obligations call for. Here is how the features map to the requirements.

SB24-205 Requirement
Annual impact assessment
Daylite Feature
Immutable audit log
Every AI interaction logged with inputs, outputs, model, timestamps, and tenant. SHA-256 hash chain with HMAC signatures provides tamper-evident evidence for impact assessments.
SB24-205 Requirement
Algorithmic discrimination monitoring
Daylite Feature
PII redaction + data classification
The scanner detects and classifies sensitive data flowing through your AI systems and logs what each system processed. That record is the evidence base for your own discrimination monitoring and impact assessments.
SB24-205 Requirement
Consumer data documentation
Daylite Feature
Data classification engine
Automatic classification from PUBLIC through SECRET. Tracks every data category processed by each AI system. Exportable reports for impact assessment documentation.
SB24-205 Requirement
Post-deployment monitoring
Daylite Feature
SIEM connector (Splunk HEC, OCSF)
Real-time export of every AI interaction to your SIEM. OCSF format for compliance dashboards. Continuous monitoring for model drift and anomalous outputs.
SB24-205 Requirement
Documentation retention (3 years)
Daylite Feature
Audit log with legal hold
Immutable audit trail with configurable legal hold. HMAC-signed entries prevent tampering. Meets the 3-year retention requirement with cryptographic integrity.
SB24-205 Requirement
Risk mitigation controls
Daylite Feature
Budget enforcement + hybrid routing
Per-tenant policies enforce which data goes where. Sensitive data routes to local models only. Budget caps prevent runaway costs. Classification ceilings per connector.
SB24-205 Requirement
Human oversight mechanism
Daylite Feature
RBAC + governance module
Role-based access control with per-tenant classification ceilings. Configurable human-in-the-loop approval gates for high-risk decisions.
SB24-205 Requirement
Vendor/developer management
Daylite Feature
Connector framework + phantom tokens
Track every external AI integration. Phantom tokens prevent credential leakage via prompt injection. Outbound DLP scans every request before it leaves your network.

Evidence and monitoring in 90 days

Daylite is the enforcement and evidence layer, not the whole program. This timeline takes you from deploy to documented, tamper-evident evidence and live monitoring that your SB24-205 impact assessments and risk program can build on.

Week 1-2
Deploy + audit
Deploy Daylite in your VPC. Connect your AI systems. Enable audit logging on every LLM interaction. Start generating compliance evidence.
Week 3-4
Classify + monitor
Configure PII redaction rules. Set data classification policies. Enable SIEM export. Begin discrimination monitoring on live traffic.
Week 5-8
Inventory + assess
Complete AI system inventory using audit log data. Draft impact assessments with real monitoring data. Identify and document discrimination risks.
Week 9-12
Disclose + certify
Implement consumer disclosure templates. Train staff on AI risk management. Establish ongoing monitoring cadence. Full compliance review.

The safe harbor advantage

SB24-205 provides an affirmative defense for organizations that discover and cure violations AND comply with recognized AI governance frameworks. Daylite helps you qualify.

NIST 800-53 alignment
Daylite maps to NIST SP 800-53 controls. The compliance score API reports real-time framework adherence.
60-day cure period
The AG must provide notice before enforcement. Daylite's monitoring detects issues early, giving you time to remediate before notice.
Continuous evidence
Hash-chain audit logs and SIEM exports provide continuous, tamper-evident evidence that you exercised reasonable care.

Get the free SB24-205 compliance template

Impact assessment checklist, AI system inventory template, consumer disclosure templates, risk classification guide, and a feature-by-feature mapping to Daylite capabilities. Everything you need to start your compliance program.

No spam. We will send the template and SB24-205 enforcement updates only.

Questions about SB24-205 compliance? hello@daylite.ai