The Securities and Exchange Commission (SEC) has declared war on 'AI washing,' targeting companies that exaggerate or misrepresent their artificial intelligence capabilities to attract investors.
Speaking at the Securities Enforcement Forum West 2025 on May 15, senior officials from the SEC's Enforcement Division and newly formed Cybersecurity and Emerging Technologies Unit (CETU) identified rooting out AI-related fraud as an immediate priority. The officials specifically emphasized examining 'whether there's transparency around the technology, whether it's described accurately, whether there's responsible communications to customers.'
This enforcement push comes amid a significant increase in AI-related securities litigation. According to data from Cornerstone Research, AI-related securities class action filings more than doubled from 7 in 2023 to 15 in 2024, and are on pace for further growth in 2025. Courts have consistently ruled that companies' misstatements about AI are 'material' to investors, recognizing the substantial impact such claims have on company valuations.
The SEC's focus on AI washing follows several high-profile enforcement actions earlier this year. In January 2025, the Commission settled charges with Presto Automation Inc. for allegedly misrepresenting its AI-assisted speech recognition technology. More dramatically, in April 2025, both the SEC and Department of Justice brought parallel actions against the founder of Nate, Inc., alleging he fraudulently raised $42 million by falsely claiming the company's app used advanced AI.
Companies are now being advised to implement robust controls for vetting the accuracy of public statements about AI capabilities. 'The promise of AI technology carries implications about cost-efficiency and scalability that may be deemed material to investors and investment decisions – even if less advanced methods can perform the services as marketed,' noted legal experts from DLA Piper in a recent client alert.
Despite a perceived enforcement slowdown under new SEC leadership, including Acting Chairman Mark Uyeda and anticipated Chairman Paul Atkins, the Commission appears committed to maintaining vigilance against deceptive AI claims while balancing a 'technology-neutral' approach that encourages innovation.