A spate of recent US enforcement actions is likely just the beginning of a crackdown on companies that overhype artificial intelligence (AI) to investors. Since March, the Securities and Exchange Commission (SEC) has accused three companies of “AI washing,” or misrepresenting how they utilize machine learning and other advanced tools. These actions follow multiple warnings from SEC Chair Gary Gensler and the agency’s top enforcement attorney about the consequences of misleading statements regarding AI technology.
Gensler has referred to AI as “the most transformative technology of this generation.” However, he has also expressed concerns that it might trigger a financial meltdown if companies engage in overblown claims. Despite AI’s immense potential, the SEC’s recent enforcement actions suggest that regulatory scrutiny is ramping up, an echo of its early stance on cryptocurrency.
Legal professionals working in major corporations and law firms should anticipate increased regulatory attention and ensure that any public statements concerning their use of AI are carefully vetted for accuracy. The initial trickle of SEC cases could indeed turn into a flood, impacting a wide range of industries that are increasingly incorporating AI into their operations.
For more detailed information on this emerging regulatory trend, visit the Bloomberg Law article.