Neural Data Privacy: The New Compliance Frontier for BCI, Neurofeedback, and Neurotech Startups

If you are building a brain-computer interface, neurofeedback device, EEG headband, or sleep-tracking wearable, you are collecting data that a growing number of state legislatures have decided deserves the highest tier of privacy protection. Neural data — information generated by measuring the activity of the central or peripheral nervous system — is now classified as "sensitive data" or "sensitive personal information" under enacted laws in Colorado, California, Montana, and Connecticut, with more states actively considering similar legislation. If your device reads brain signals, even indirectly through a consumer headset or earbud, these laws may already apply to you.

The regulatory landscape is moving fast. Colorado became the first state in U.S. history to enact targeted neural data protection when Governor Jared Polis signed HB 24-1058 into law on April 17, 2024, with the law taking effect August 7, 2024. California followed with SB 1223, which amended the California Consumer Privacy Act (CCPA) to include neural data as sensitive personal information, effective January 1, 2025. Montana's SB 163, which adds neurotechnology data to its Genetic Information Privacy Act, takes effect October 1, 2025. Connecticut's SB 1295, signed June 24, 2025, amended the Connecticut Data Privacy Act to include neural data as sensitive data. At the federal level, Senators Cantwell, Schumer, and Markey introduced S. 2925 in 2025 to shield Americans' brain data from exploitation. Texas has not yet enacted neural-data-specific legislation, but its existing Texas Data Privacy and Security Act (TDPSA) framework already regulates sensitive data — and the legislative trend makes Texas neural data regulation a question of when, not if.

This guide covers what BCI, neurofeedback, and neurotech hardware startups need to know: which state laws include neural data, what "neural data" actually means under each statute, when your device triggers these laws, consent and disclosure obligations, how neural data interacts with HIPAA, and the practical compliance architecture you should build before your next investor diligence round.

Which State Laws Now Include Neural Data

Four states have enacted laws that specifically classify neural data as a category requiring heightened privacy protections. Each approaches the problem differently — amending different underlying statutes, using different definitions, and imposing different consent requirements. The Future of Privacy Forum's analysis describes this as a "Goldilocks problem": states are searching for a definition that is neither too broad (capturing data that has nothing to do with the brain) nor too narrow (excluding consumer devices that clearly measure neural activity).

Colorado HB 24-1058: The First Mover

Colorado was the first state to explicitly extend privacy rights to neural data by amending the Colorado Privacy Act (CPA) to include "neural data" in the definition of "sensitive data." Under the CPA, regulated entities must obtain opt-in consent before collecting or processing sensitive data — so neural data now requires affirmative consent before collection. Colorado defines neural data as "information that is generated by the measurement of the activity of an individual's central or peripheral nervous systems and that can be processed by or with the assistance of a device." This definition is notable for the "device" requirement: the data must be processable by or with the assistance of a device, which means it targets neurotechnology products rather than subjective self-reported mental states.

California SB 1223: Broadest Definition, Opt-Out Model

California amended the CCPA to include "neural data" in the definition of "sensitive personal information," effective January 1, 2025. California's definition is the broadest among the four states: "information that is generated by measuring the activity of a consumer's central or peripheral nervous system, and that is not inferred from nonneural information." This means that data from wearable devices capturing heart rate or pupil dilation — which are downstream physical effects of neural activity, not direct measurements of nervous system activity — would not qualify as "neural data" under the CCPA. However, the CCPA's protections for sensitive personal information are limited: consumers have the right to opt out of the use and disclosure of their neural data, but only if the use or disclosure is for purposes other than providing goods or services the consumer requested. This is a weaker standard than Colorado's opt-in requirement.

Montana SB 163: Neurotechnology Data Under GIPA

Montana took a different approach from Colorado and California. Rather than amending a comprehensive consumer privacy law, Montana's SB 163 adds "neurotechnology data" to its existing Genetic Information Privacy Act (GIPA). The law defines neurotechnology data as "information that is captured by neurotechnologies, is generated by measuring the activity of an individual's central or peripheral nervous systems, or is data associated with neural activity." Montana's law also defines "mental augmentation" — technologies that not only read but can influence mental function — making it the first U.S. legislation to address the write-side of neurotechnology. Montana requires express consent to collect or use neural data and separate consent before disclosing that data to a third party.

Connecticut SB 1295: Sensitive Data Amendment

Connecticut amended the Connecticut Data Privacy Act (CTDPA) to include neural data as a type of sensitive data, following California's approach. The bill requires opt-in consent before processing neural data and data impact assessments for each processing activity. Connecticut's definition is broader than Colorado's — it is not limited to data used for identification purposes.

What "Neural Data" Actually Means Under Each Statute

The definitions matter because they determine whether your device triggers the law. Here is the practical breakdown:

• Direct neural measurement: If your device measures electrical activity from the brain or nervous system — EEG headsets, BCI implants, consumer neurofeedback devices — your data is "neural data" under all four state laws. There is no ambiguity.
• Indirect neural inference: If your device measures downstream physical effects of neural activity — heart rate, pupil dilation, breathing rate, motor activity — and uses that data to infer mental states, the analysis differs by state. California explicitly excludes data "inferred from nonneural information" from its neural data definition. Montana similarly excludes "nonneural information" defined as "information about the downstream physical effects of neural activity." Colorado and Connecticut do not include this carve-out as explicitly, which could mean that data used to infer mental states from physiological signals may fall within scope.
• Self-reported mental states: If a user manually enters their mood or stress level into your app, that is not "neural data" under any of the four statutes — it is not generated by measuring nervous system activity.

The Future of Privacy Forum notes that this definitional variation creates real compliance complexity for companies operating nationally. A device that captures EEG data is clearly within scope everywhere. A sleep-tracking wearable that uses accelerometer and heart rate data to infer sleep stages may be outside California's and Montana's neural data definitions but potentially within Colorado's and Connecticut's broader frameworks — depending on how regulators interpret the statutes.

When Your Device or App Triggers These Laws

Neural data laws do not exist in isolation — they amend existing comprehensive privacy statutes, which means the applicability thresholds of the underlying laws determine whether you are covered. Here is when your neurotech startup needs to comply:

• Colorado CPA: Applies to controllers that conduct business in Colorado or target Colorado residents and either (a) control or process personal data of 100,000 or more consumers per year, or (b) derive revenue or receive a discount on goods/services from the sale of personal data and process personal data of 25,000 or more consumers. If your device has users in Colorado and you cross these thresholds, the neural data amendment applies to you.
• California CCPA: Applies to businesses with annual gross revenue over $25 million, or that annually buy, sell, or share personal information of 100,000 or more consumers, or that derive 50% or more of annual revenue from selling or sharing personal information. California also includes employees and B2B contexts in its definition of "consumer" — a broader reach than Colorado.
• Montana GIPA: Applies to "entities" — defined as partnerships, corporations, associations, or organizations that offer consumer genetic testing or neurotechnology products or services directly to consumers, or that collect, use, or analyze genetic or neurotechnology data. If you offer a consumer neurotechnology product, you are covered regardless of size thresholds.
• Connecticut CTDPA: Similar thresholds to Colorado — 100,000 consumers or 25,000 consumers plus revenue from data sale.

For early-stage hardware startups, Montana's law is the one to watch: it applies based on whether you offer a consumer neurotechnology product, not on data volume or revenue thresholds. If you sell an EEG headband or neurofeedback app to consumers in Montana, you are likely covered from your first user.

Consent and Disclosure Obligations

Once neural data is classified as sensitive, the obligations that attach go beyond standard privacy compliance. Here is what each state requires:

Opt-in consent (Colorado, Montana, Connecticut): You must obtain affirmative, express consent from the consumer before collecting or processing their neural data. A pre-checked box or a privacy policy that says "by using this device you agree to data collection" does not satisfy opt-in consent requirements. The consent must be clear, specific, and separate from other terms.

Opt-out right (California): California's model is less burdensome but still significant. Consumers must be given the right to opt out of the use or disclosure of their neural data for purposes beyond providing the requested goods or services. If you use neural data for targeted advertising, product improvement, or research, California consumers can opt out.

Purpose limitation: Under all four statutes, neural data collected for one purpose cannot be freely repurposed for another without additional consent. If you collect EEG data for sleep tracking and later decide to use it for attention monitoring or emotion recognition, you need fresh consent for the new purpose.

Deletion rights: All four states require that businesses provide consumers with a mechanism to delete their neural data. This means your data architecture must support complete deletion — not just de-identification — when a consumer exercises their deletion right.

Third-party disclosure restrictions: Colorado and Montana require separate consent before disclosing neural data to third parties. If your business model involves sharing aggregated or anonymized neural data with research partners or advertisers, you need explicit consent for each disclosure.

How Neural Data Interacts With HIPAA When Health Entities Are Involved

One of the most common questions neurotech founders ask is: does HIPAA already cover the neural data my device collects? The answer is almost certainly no — unless you are a covered entity or business associate.

The Arnold & Porter analysis makes this clear: HIPAA protects neural data only to the extent that it is received or created by HIPAA "covered entities" — health plans, certain healthcare providers, healthcare clearinghouses — or their business associates. Consumer neurotechnology companies that sell directly to consumers are not covered entities. Your EEG headband is not a medical device under HIPAA's regulatory framework unless you are specifically contracted with a healthcare provider or health plan as a business associate.

This means consumer neurotech companies operate in a gap: the data they collect is too sensitive for baseline privacy protections, but not covered by HIPAA's stringent safeguards. The new state neural data laws are designed to fill this gap. But if your neurotech startup does contract with healthcare providers — for example, providing EEG devices for clinical use or partnering with hospitals for research — HIPAA's Privacy Rule, Security Rule, and Breach Notification Rule apply on top of state neural data laws. You would need both a Business Associate Agreement and state-law-compliant consent for neural data collection. We cover the healthcare regulatory overlay in our guide to telehealth licensure and interstate compliance, which addresses the same HIPAA-state-law intersection from the telehealth perspective.

Practical Compliance Architecture for BCI and Neurofeedback Startups

If you are building a neurotech hardware startup, compliance with neural data laws is not a legal afterthought — it is an architecture decision. Retrofitting consent flows and data deletion capabilities into a product that has already launched is expensive and disruptive. Here is the compliance architecture we recommend building from day one:

1. Build Consent Management Into Your Firmware and App Stack

Because Colorado, Montana, and Connecticut require opt-in consent before collecting neural data, your consent flow must be the gatekeeper to data collection — not a privacy policy buried in settings. When a user first activates your device or app, the onboarding flow should present a clear, specific consent request for neural data collection, explain what the data will be used for, and require an affirmative action (not a pre-checked box) before any neural data is captured. If you operate in multiple states, your consent flow should detect the user's jurisdiction and apply the most stringent applicable standard — opt-in consent satisfies all four states' requirements.

2. Implement Purpose Limitation at the Data Schema Level

Neural data collected for sleep tracking cannot be repurposed for emotion recognition without fresh consent. Build purpose limitation into your data architecture by tagging each neural data record with the specific purpose for which consent was obtained. If you later want to use the data for a new purpose, your system should flag it as requiring re-consent before processing.

3. Build Deletion Into Your Data Pipeline

All four state laws grant consumers the right to delete their neural data. Your system must be able to identify and completely delete a specific user's neural data on request — including from production databases, backups, analytics pipelines, and any downstream processing systems. This is the same deletion capability we discuss in our SaaS data processing agreement guide, but applied to neural data specifically. If your neural data has been incorporated into aggregated or anonymized datasets, you should be prepared to explain to regulators how anonymization prevents re-identification — or build your aggregation pipeline to exclude individual user records on deletion.

4. Separate Third-Party Disclosure Consent

If your business model includes sharing neural data with research partners, advertising networks, or analytics providers, you need separate consent for each third-party disclosure under Colorado and Montana law. Build a disclosure consent layer that tracks each third-party recipient and the consent status for that specific sharing arrangement.

5. Map Your Data Flows for Investor Diligence

Just as investors run open-source license scans and security audits, neurotech investors are beginning to ask about neural data compliance. Be prepared to produce: a neural data map showing what data you collect, where it is stored, who has access, what consent was obtained, and how deletion works. We have seen this diligence pattern in other hardware compliance contexts — our hardware startup IP protection guide covers a similar pre-investment audit framework for patents and trade secrets.

The Neurorights Foundation Report and Why It Matters

In April 2024, the Neurorights Foundation released a report that surveyed 30 companies selling consumer neurotechnology products. The findings were sobering: 29 of 30 companies had access to users' brain data and provided no meaningful limitations to that access. Almost all could share the data with third parties. The report galvanized legislative action in multiple states and prompted U.S. Senators to write to the FTC in April 2025, urging the agency to investigate whether companies are exploiting consumers' brain data.

For neurotech startups, this report is both a warning and an opportunity. Companies that build privacy by design — with meaningful access limitations, clear consent flows, and transparent data practices — will stand out in a market where the default is inadequate protection. Investors, regulators, and consumers are all paying attention to this issue, and the companies that treat neural data privacy as a competitive advantage rather than a compliance burden will be better positioned for funding, partnerships, and regulatory scrutiny.

Actionable Next Steps

1. Audit your device's data collection against the neural data definitions. Does your device measure activity of the central or peripheral nervous system directly (EEG, BCI)? If so, you are collecting neural data under all four state laws. Does it measure downstream effects (heart rate, pupil dilation) and infer mental states? You may be within scope in Colorado and Connecticut even if California and Montana exclude nonneural information. Document exactly what your device captures and how it is processed.
2. Implement opt-in consent before any neural data collection. Do not rely on a privacy policy or terms of service. Build a consent flow into your onboarding that presents the specific purposes of neural data collection and requires an affirmative action before data capture begins. This satisfies the most stringent state requirements and positions you for compliance as more states enact laws.
3. Build purpose limitation and deletion into your data architecture. Tag each neural data record with the purpose for which consent was obtained. Implement a deletion mechanism that can completely remove a user's neural data across all systems — production, backup, analytics, and third-party sharing — on request.
4. Separate consent for third-party disclosures. If you share neural data with research partners, advertisers, or analytics providers, obtain separate consent for each disclosure. Track consent status by recipient so you can demonstrate compliance if audited.
5. Prepare a neural data compliance map for investor diligence. Document what you collect, where it flows, what consent you obtain, and how you handle deletion and third-party sharing. Investors in the neurotech space are increasingly asking these questions — and the companies that can answer them win the diligence round.
6. Monitor Texas and other states for neural data legislation. Texas has not yet enacted neural-data-specific legislation, but its TDPSA already regulates sensitive data and the Texas legislature meets in biennial sessions. The legislative trend is bipartisan and unanimous — Montana's bill passed 49-1 in the Senate and 100-0 in the House. Build your compliance architecture to the most stringent current standard so you are prepared when Texas or your next target state follows suit.
7. Get legal review of your consent flows and data architecture before launch. The cost of building compliance into your product from the start is a fraction of the cost of retrofitting it after launch — or worse, after a regulatory inquiry. Have counsel review your consent flow, privacy policy, data map, and deletion mechanism before you begin collecting neural data from users.

Neural data is not just another category of personal information. It is a direct measurement of human cognition, emotion, and mental state — and legislators across the political spectrum have decided it deserves the strongest privacy protections available under state law. For BCI, neurofeedback, and neurotech hardware startups, the compliance architecture you build today determines whether you can scale into every state market — or whether you are forced to restrict your product to jurisdictions where you have not yet triggered regulatory obligations. Build for the most stringent standard, and you build for the future.