Data Center Boom Hits Privacy Wall in Illinois

Industry leaders that could benefit from further development of data centers in the greater Chicago area are honing in on changes to a privacy law they say is causing the region to lose out on projects.

Illinois’ Biometric Information Privacy Act, a 2008 law requiring consent before companies collect or use biometric data, has become a flashpoint as artificial intelligence drives unprecedented demand for data centers, Crain’s reported. The volume of data center construction in North America is set to more than double over the next five years, fueled by AI workloads, according to JLL. But hyperscalers like Amazon, Google and Microsoft are bypassing Illinois, fearing costly class-action suits under BIPA, developers say.

BIPA has stalled projects in Illinois while billions flow next door, said Dan Diorio of the Data Center Coalition.

“North of $100 billion” worth of hyperscale campuses — prime tax generators — have gone to Indiana, Wisconsin, Iowa and Michigan instead, JLL’s Andy Cvengros said. Amazon alone is building an $11 billion campus near South Bend, Indiana, while Microsoft and Google are planting multi-billion-dollar flags across Wisconsin and Indiana.

Chicago slipped from the No. 2 or 3 data center market in North America pre-2022 to seventh this year. The local pipeline is softening too, with many projects unleased past 2026, even as 80 percent of data center development nationally comes pre-leased.

Developers and labor unions argue that Illinois’ unusual position — ample power supply and surplus clean energy — should make it a magnet for hyperscale builds. Instead, neighboring states are reaping the tax revenues and construction jobs.

The irony isn’t lost on labor. Don Finn of IBEW Local 134 said that instead of the handful of tower cranes up in Chicago, there should be more like 20 or 30 if more projects went Chicago’s way. He said data centers are nearly half his members’ workload. The AFL-CIO has also lined up behind efforts to revisit BIPA, framing it as an economic development play.

But trial lawyers and privacy advocates are pushing back, casting the industry’s lobbying as a Trojan horse.

“BIPA is the firewall that protects Illinois workers and consumers,” said Timothy Cavanagh of the Illinois Trial Lawyers Association. The ACLU calls claims of lost investment an attempt to gut one of the strongest privacy laws in the country.

Lawmakers tweaked BIPA two years ago to curb runaway damages, but efforts to exempt or clarify its application for AI and data centers are contentious.

“Some sort of clarification is in the realm of possibility,” said State Sen. Bill Cunningham, who shepherded the last amendment. He said a clarification could be made in the law that wouldn’t give data center developers pause.

“An exemption for AI is a much heavier lift,” Cunningham said.

— Eric Weilbacher