ANALYSIS: AI Washing Meets ‘Short-and-Distort’

The Paul Atkins-led SEC has taken a step back from pursuing AI washing claims, which were more of a priority for his predecessor, Gary Gensler. Yet the private sector doesn’t appear to be following the federal government’s lead: AI washing securities class actions continue to be filed.

AI washing is a practice that involves making misleading representations about an AI tool’s products, competencies, or proprietorship. In general, AI washing class actions are filed by shareholders against product companies, alleging false disclosures or advertising based on activist short seller reports. These activists are investors who take a short position in ...