New Mexico moves to uncap consumer-protection penalties and pull chatbots into scope

New Mexico Attorney General Raul Torrez is working with state lawmakers on two bills strengthening online consumer protection and child safety, and the package is expected to extend beyond social media to cover artificial intelligence and chatbots ^[1][3]. Fortune reported the effort, citing the Guardian, one day before 29 state attorneys general were set to face Meta in a separate federal trial in Oakland ^[1][2].

One of the bills would remove the cap on penalties for violating New Mexico's consumer protection laws ^[7]. That is the detail operators should read twice. A statutory cap is a number a finance team can model and reserve against; removing it converts a known ceiling into an open question decided by a judge and a jury. Torrez told the Guardian his office will keep lobbying Congress while also working at the state level on both a comprehensive social media safety bill and updated consumer protection law ^[7].

The leverage behind this is a fresh judgment. On Aug. 6, First Judicial District Judge Bryan Biedscheid ordered Meta to create a $567 million abatement fund on top of $375 million in civil penalties a jury imposed in March, bringing total New Mexico liability to $942 million ^[9]. The abatement fund is roughly 60 percent of that total ^[2], which is the part of the remedy that does not look like a fine at all. The court also imposed five years of reforms including age verification, overnight limits on push notifications, and mandatory time-use limits for users under 18 ^[10]. A Meta spokesperson told Fortune the company disagrees with the ruling and will appeal, and said it remains confident in its record of protecting teens online ^[8].

"I think there's a lot of momentum coming out of our victory in court, and the idea is to build on that momentum," Torrez told the Guardian ^[3]. He is not stopping at legislation: his office is pursuing a second case against Meta over data privacy and civic harms with trial expected in September, and he said he is preparing to sue an AI company over a chatbot to which children have formed emotional attachments ^[5][6]. The New Mexico Attorney General's office declined Fortune's request for comment ^[4].

The federal contrast is the story. Congress has moved in fits and starts on the Kids Online Safety Act and the App Store Accountability Act, and the Federal Trade Commission has pulled back from social media rulemaking even as kids spend more than four hours a day online ^[11]. Haley Hinkle, policy counsel at Fairplay, told Fortune that states have been leading and urged Congress to pass KOSA to bring baseline safety-by-design standards nationally ^[12]. Julie Scelfo of Mothers Against Media Addiction told Fortune it should not matter whether a company makes food, toys, vehicles or digital products ^[13]. Both framings assume the same thing: the enforceable rules are being written in state capitals.

The mandates themselves remain unsettled. Most Americans doubt existing age verification laws will work, and reporting has shown Gen Alpha users routinely get around the age checks that exist ^[14].

Watch for the actual bill text in the coming weeks, specifically whether chatbot liability attaches to a product category or to conduct, because that determines whether a small AI vendor with no New Mexico users is in scope. Watch the September privacy trial, the promised chatbot filing, and whether other attorneys general copy the uncap language rather than the child-safety headline.