David Sacks Calls AI Regulation a 'Trojan Horse' to Shut Down Open Models, While Chamath Palihapitiya Warns US Investment Could 'Go Off of a Cliff'

Snigdha Gairola

Tue, August 25, 2026 at 2:00 PM GMT+3 5 min read

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Former White House AI and crypto czar David Sacks warned that proposed AI safety standards could evolve into regulations that disadvantage open models, while Chamath Palihapitiya cautioned that excessive restrictions could drive investment and capital outside the U.S.

Sacks Warns Open AI Models Face Regulation

On Friday, speaking on the All-In Podcast, Sacks argued that AI regulation could begin with a self-regulatory organization and eventually become mandatory.

It's a "Trojan horse of a FINRA for AI," he said, warning that voluntary standards and pre-release testing could eventually be codified into law.

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Sacks said regulators could then require the same safety standards for open and closed models, despite their technological differences.

He argued that open models cannot be centrally monitored, rolled back or withdrawn once released.

"Once you release an open model into the world, you can't roll it back," Sacks said, warning that open models could ultimately be "shut off" if they cannot meet regulatory requirements.

Palihapitiya Warns AI Rules Could Drive Capital Abroad

Palihapitiya warned that overly restrictive U.S. regulations could make American operations less attractive and encourage companies to direct investment overseas.

"What you will see is FDI, foreign direct investment in the United States, go off of a cliff," he said.

He compared the potential impact with China's crackdown on its technology sector, arguing that companies could redirect capital toward countries with more favorable regulatory environments.

The discussion also turned to Silicon Valley's changing culture.

Palihapitiya argued that the industry had "completely lost what made it great," saying it once attracted "weirdos" and idealists but had become increasingly focused on credentials and making money.

Warner, Huang Back Balanced AI Policy

Earlier, Sen. Mark Warner (D-Va.) urged Congress to quickly address AI's economic and national security risks while protecting U.S. competitiveness, saying, "We can't put AI back in the bottle."

Meanwhile, Nvidia Corp. CEO Jensen Huang backed both frontier open and closed AI models, arguing that open models could boost cybersecurity, innovation and technological sovereignty.

Huang also called Chinese AI models "excellent" and said broader AI adoption could increase demand for Nvidia's chips and infrastructure, while warning Washington against "science fiction" fears about AI regulation.

Photo courtesy: Shutterstock

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