Extract from Cassandre Coyer’s article “‘Not Generative AI’: Investors, Customers Call Out Legal Tech’s ‘AI Washing’”
The breakneck pace at which companies across industries have released generative artificial intelligence-powered offerings in the last year is raising red flags within several federal agencies, including the Securities and Exchange Commission. The regulator recently coined a new term to define some of the deceptive AI practices it has observed “time and [time] again”: AI washing.
The latest successor to greenwashing—which calls out some companies’ use of green marketing materials to convince consumers that their practices are more environmentally friendly than they actually are—AI washing refers to businesses making unfounded AI claims to the public.
“Investment advisers or broker-dealers also should not mislead the public by saying they are using an AI model when they are not, nor say they are using an AI model in a particular way but not do so. Such AI washing, whether it’s by companies raising money or financial intermediaries … may violate the securities laws,” SEC Chair Gary Gensler warned in a speech last month.
Both legal tech customers and investors have watched legal technology providers make inaccurate, if not entirely deceptive, claims about their AI offerings, especially since the release of OpenAI’s ChatGPT in November 2022.
