WASHINGTON (Reuters) -The fight over a proposed 10-year federal moratorium on state regulation of artificial intelligence heated up on Wednesday, with Republican and Democratic Senate leaders differing on whether such a measure would be tied to billions of dollars in funding to help states improve broadband infrastructure.

Major AI companies including Alphabet's Google and OpenAI have expressed support for Congress taking AI regulation out of the hands of states, to free innovation from a panoply of differing requirements. But opponents of the measure, including the Teamsters union -- which raised concerns on Wednesday about worker surveillance and self-driving vehicles -- say states should be able to protect their residents.

The proposed moratorium, part of President Donald Trump's sweeping tax-cut and spending bill, faces mounting pressure from critics ahead of crucial votes by the U.S. Senate expected this week.

A previous version of the measure would have secured compliance by blocking states that regulate AI from the $42 billion Broadband Equity, Access, and Deployment program, known as BEAD.

Unions, state lawmakers and attorneys general, faith leaders and the conservative Heritage Foundation have all opposed the measure, as have at least three Senate Republicans concerned that it would erode states' rights and erase state protections for creative workers and children online.

Amid that criticism, Republican Senator Ted Cruz, who leads the commerce committee, released an updated version on Wednesday, which he said would only restrict states that tap a new $500 million fund to support AI infrastructure.

"This pause in AI regulation is voluntary and not a federal mandate on states," Cruz's office said in a fact sheet.

Senator Maria Cantwell, senior Democrat on the commerce committee, disputed that interpretation, saying the measure continues to hold the BEAD funding hostage, "forcing states to choose between protecting consumers and expanding critical broadband infrastructure to rural communities."

U.S. Commerce Secretary Howard Lutnick voiced his support for the measure in a post on social media site X, saying it would end "the chaos of 50 different state laws and makes sure American companies can develop cutting-edge tech for our military, infrastructure, and critical industries--without interference from anti-innovation politicians."

A Commerce Department spokesperson did not immediately respond to an inquiry from Reuters whether compliance with the moratorium would be voluntary as Cruz's office stated.

Earlier on Wednesday, the president of the International Brotherhood of Teamsters -- a union representing more than 1.3 million workers, many of them in blue-collar jobs such as trucking -- had called the measure "a disaster for communities and working people."

Teamsters President Sean O'Brien, who spoke at the Republican National Convention last year, said in a letter posted on social media site X that the measure "denies citizens the ability to make choices at the local or state level."

"Pure and simple, it is a giveaway to Big Tech companies who reap economic valueby continuing to operate in an unregulated void where their decisions and behavior are accountable to no one," he said.

(Reporting by Jody Godoy in New York and David Shepardson in Washington; Editing by Jan Harvey and David Gregorio)