AI Washing: What It Is and How the SEC and FTC Have Charged It

AI washing means saying you use artificial intelligence in a way you do not. The SEC's chair used the term in a March 18, 2024 press release about two investment advisers that marketed that they were using AI in certain ways when, in fact, they were not, and said "such AI washing hurts investors" Source [1].

This page reports what two agencies said in their own announcements in 2024. We did not follow what happened to these cases afterward, and several of the FTC actions were announced as complaints or proposed orders, with some still to be decided by a court Source [2]. It is general information, not legal advice.

Autonomah describes itself as an artificial creative and advertising brain Source [4], so the claim is ours to back as well. Its FAQ says what makes it different is the judgment with which it diagnoses, spots opportunities, proposes objectives and checks each piece Source [4].

What the SEC charged

The SEC announced settled charges against Delphia (USA) Inc. and Global Predictions Inc. for false and misleading statements about their purported use of AI, and the two firms agreed to pay $400,000 in total civil penalties Source [1]. Delphia's share was $225,000 and Global Predictions' was $175,000 Source [1].

The SEC's order against Delphia covers statements from 2019 to 2023 in SEC filings, a press release and on its website about its use of AI and machine learning that incorporated client data Source [1]. One example was the claim that it "put[s] collective data to work to make our artificial intelligence smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else" Source [1]. The order finds the statements false and misleading because Delphia did not have the AI and machine learning capabilities it claimed Source [1].

Global Predictions made its claims in 2023 on its website and on social media Source [1]. The SEC says it falsely claimed to be the "first regulated AI financial advisor" and misrepresented that its platform provided "[e]xpert AI-driven forecasts" Source [1].

Both firms consented to the orders without admitting or denying the findings Source [1]. The release also ties both firms to the Marketing Rule, which our guide to the SEC Marketing Rule covers Source [1].

What the FTC announced

On September 25, 2024 the FTC announced Operation AI Comply, a sweep with five law enforcement actions against operations that use AI hype or sell AI technology that can be used in deceptive and unfair ways Source [2]. The FTC's chair said the actions "make clear that there is no AI exemption from the laws on the books" Source [2]. The FTC's announcement lists:

• DoNotPay claimed to offer "the world's first robot lawyer." The complaint alleges it did not test whether its chatbot's output equaled a human lawyer's and did not hire or retain any attorneys. The proposed order would require a payment of $193,000 and bar claims that it can substitute for any professional service without evidence Source [2].
• Ascend Ecom allegedly claimed its "cutting edge" AI-powered tools would help consumers earn thousands of dollars a month, and the complaint says the scheme defrauded consumers of at least $25 million Source [2].
• Ecommerce Empire Builders claimed to help build an "AI-powered Ecommerce Empire." The complaint alleges the company has no evidence for its claim in social media ads that clients can make $10,000 monthly Source [2].
• Rytr sold an AI writing assistant with a "Testimonial & Review" use. The complaint alleges the reviews it generated contained specific details unrelated to the user's input, and the proposed order would bar it from selling a service dedicated to generating consumer reviews or testimonials. The Commission vote on that complaint was 3-2 Source [2].
• FBA Machine allegedly promised guaranteed income through online storefronts that used AI-powered software, and the FTC says it cost consumers more than $15.9 million Source [2].

What the cases have in common

Our read: most of these cases turn on a claim about what AI does or earns. The SEC faulted firms that said they used AI in ways they did not Source [1], and the FTC's DoNotPay complaint turns on the lack of testing behind a claim Source [2]. Rytr is different: the FTC's complaint is about a tool that generates reviews Source [2].

The FTC's 1983 statement on deception adds a general rule that applies here: the Commission presumes that express claims are material, meaning likely to affect a consumer's choice Source [3]. Our read: a sentence that names AI is an express claim, so it should be one you can show.

A check before you write "AI-powered"

The routine below is ours, not either agency's.

1. Say in one plain sentence what the tool does, without the word AI.
2. Find the record that shows it does that: a test, a log or a feature page.
3. If you cannot find one, cut the claim or shrink it to what the record shows.
4. Do not state an outcome such as "predict," "earn" or "replace" that you have not measured.
5. Write the date next to the check, and repeat it when the tool changes.

In the onboarding, Autonomah reads the brand's addresses while the brand watches Source [4].

How Autonomah does it

Autonomah is an artificial creative and advertising brain that thinks, creates and publishes each brand's advertising Source [4]. Asked whether it is done by artificial intelligence, its FAQ says yes: Autonomah uses artificial intelligence as a tool to produce and publish, and a person on the brand's team approves every piece Source [4]. Check what it claims against its own FAQ.

Frequently asked questions

What is an example of AI washing?

The SEC's example is Global Predictions, which it says falsely claimed to be the "first regulated AI financial advisor" Source [1].

Is AI washing illegal?

"AI washing" is a term the SEC used and not the name of a statute. The SEC's orders found that Delphia and Global Predictions violated the Advisers Act Source [1]. The FTC's Rytr complaint charges a violation of the FTC Act Source [2].

Does AI washing apply only to financial firms?

The SEC cases involve investment advisers Source [1]. The FTC's five actions involve legal services, online storefront schemes and a review-writing tool Source [2]. Whether any of this reaches your business is a question for a lawyer.