SEC’s AI Crackdown Signals Trickle of Cases Will Turn to Flood

A spate of recent US enforcement actions is likely just the beginning of a crackdown on companies overhyping artificial intelligence to investors.

Since March, the Securities and Exchange Commission has accused three companies of so-called AI washing, or misrepresenting how they use machine learning and other tools. The moves follow multiple warnings from Gary Gensler, the agency’s chair, and the regulator’s top enforcement attorney over misstatements around the technology.

Although Gensler has referred to AI as “most transformative technology of this generation,” he has also said it could spark a financial meltdown and cautioned firms against overblown claims. Even ...