AI-Washing Enforcement Crackdown to Continue Despite Trump Rollbacks
Federal regulators are gearing up to keep a close eye on companies that exaggerate or mislead investors about using artificial intelligence, also known as AI washing. While changing regulations may not be a top priority, enforcement against these deceptive practices is expected to continue, despite anticipated deregulation under the new administration.
Securities lawyers and compliance consultants agree that using traditional fraud enforcement mechanisms to tackle AI washing is effective and likely to persist. The Securities and Exchange Commission (SEC), Federal Trade Commission (FTC), and state securities regulators have all taken steps to crack down on these misleading claims, highlighting the importance of holding companies accountable for their deceptive practices.
With AI becoming a popular buzzword, many companies have been quick to jump on the bandwagon, even if they don’t actually utilize the technology significantly in their operations. Recent data shows that over 40% of S&P 500 companies mentioned AI in their annual reports, signaling a growing trend. To combat this trend, the SEC has initiated enforcement actions against companies making exaggerated AI claims and plans to intensify its scrutiny of financial firms’ use of AI in 2025.
Although new leadership is on the horizon, both the SEC and FTC are committed to cracking down on deceptive AI practices. FTC Chair Lina Kahn has emphasized that there is no AI exemption from existing laws, signaling the agencies’ determination to protect consumers from misleading AI claims.
While new regulations may not materialize immediately, existing laws can be leveraged to address AI washing cases. The focus remains on enforcing current rules rather than introducing entirely new policies specific to AI. Despite potential roadblocks to rulemaking, federal agencies are poised to adapt and continue addressing deceptive AI practices under the current regulatory framework.
