Event-Driven, AI Cases Dominate 2026 Securities Litigation Field

Looking ahead to 2026, we expect the continued development of the law in the wake of recent US Supreme Court decisions and that event-driven litigation—i.e., litigation that is the result of a disruptive event that causes a company’s share price to decline—will continue to be the predominant form of private securities litigation.

Within the broad category of event-driven litigation, the growth of artificial intelligence-related securities litigation and the reasons for that growth merit particular consideration.

AI-related litigation. With the massive growth of artificial intelligence has come massive growth in AI-related securities litigation. There were between six and eight AI-related securities cases each year between 2021 and 2023, followed by 15 such cases in 2024 and 12 more just in the first half of 2025. We expect this trend to continue in 2026.

One of the reasons for this rise is that quantifying AI capabilities and measuring AI performance present a fundamental challenge for public companies. Securities litigation typically follows when optimistic projections cross the line into potentially actionable misrepresentations or when companies fail to adequately disclose potential limitations and risks of AI capabilities.

In one recent case, the court held that statements that an AI model was a “fairly magical thing” were inactionable because they were “loosely optimistic statements that cannot be objectively verified,” but that claims arising from statements about the “significant advantage” of the AI model over “traditional FICO-based models” and its ability to “respond very dynamically” to macroeconomic changes were actionable material misstatements.

The court reasoned that these statements about the advantages of the AI model were actionable because they were sufficiently specific, material, and verifiable. Other courts might have found all those statements inactionable puffery or might have (incorrectly in our view) determined that even the “fairly magical thing” statement was potentially actionable. For the foreseeable future, there will be considerable uncertainty about which AI-related statements courts will determine are potentially actionable.

As AI-related securities litigation continues its upward trajectory, companies should be mindful that what may seem like standard marketing language about AI capabilities may be understood by courts to be verifiable statements of fact. The ability of companies to document the basis for any quantifiable statements about AI capabilities or performance could play a critical role in defeating this type of litigation.

Potential for mandatory arbitration provisions in organizational documents. On Sept. 17, 2025, the Securities and Exchange Commission published a policy statement clarifying that the inclusion of mandatory arbitration provisions in a company’s organizational documents won’t influence the SEC’s decisions about whether to accelerate effectiveness of a company’s registration statement.

However, whether this change will lead a significant number of companies to include such provisions in their organizational documents is uncertain. So far, at least one company has included such a provision. On Dec. 1, Zion Oil & Gas Inc. amended its bylaws to state that “Article XI includes a mandatory arbitration provision for claims under the federal and state securities laws of shareholder claims.”

Now the ball is in the court of Zion’s shareholders to decide whether to bring a lawsuit challenging the amended bylaw. One plaintiff-side securities litigator joked soon after the SEC published its policy statement that draft complaints already had been prepared and were merely awaiting the name of the defendant, so any such lawsuit may be filed in the near future. If such litigation does occur in 2026, it has the potential to reshape where and how securities cases are litigated for decades to come.

Dressing up securities claims as RICO claims. The Private Securities Litigation Reform Act provides that “no person may rely upon any conduct that would have been actionable as fraud in the purchase or sale of securities” to establish a Racketeer Influenced and Corrupt Organizations Act violation.

A recent petition for certiorari asks the US Supreme Court to resolve a circuit split over the applicability of this PSLRA bar to a civil Racketeer Influenced and Corrupt Organizations Act claim brought by a plaintiff who could not have successfully brought a securities fraud claim but arising from conduct that would have been actionable as securities fraud by a different potential plaintiff. In the case at issue, the RICO plaintiffs were bondholders who alleged that the purported misrepresentations and omissions induced them to hold (rather than to purchase) their securities.

The RICO plaintiffs in that case couldn’t have successfully brought a securities claim because there is no judicially inferred private right of action for mere holders of securities (as opposed to purchasers). The US Court of Appeals for the Eleventh Circuit held that the PSLRA bar didn’t apply. The cert petition argued that the Eleventh Circuit’s ruling conflicts with the decisions of other circuit courts, including the US Court of Appeals for the First Circuit, which has held that “the better read of the [PSLRA bar] bars reliance on conduct actionable as securities fraud, regardless of who could have brought such an action.”

This case could have significant ramifications. If the Supreme Court doesn’t grant cert, creative lawyers may seek to identify plaintiffs who lack standing to bring a securities case and to try to assert RICO claims on their behalf in the Eleventh Circuit (or in other jurisdictions where courts haven’t yet adjudicated this issue). RICO doesn’t impose the same heightened pleading standard set out in the PSLRA, allows for aiding and abetting liability, and offers the possibility of potential treble damages, making RICO cases potentially attractive to creative plaintiffs’ lawyers.

And of course, if the Supreme Court does agree to hear the case, any decision would significantly affect how securities claims are litigated in the future.

We expect that by the end of 2026, companies will have a better sense of what they can and can’t say about AI capabilities and limitations, whether they should try to include mandatory arbitration provisions in their organizational documents, and whether they need to worry about potential RICO liability for alleged misrepresentations or omissions.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Samuel P. Groner is a partner at Fried Frank focused on securities litigation, shareholder and derivative litigation, and corporate disputes.

Katherine St. Romain is a partner at Fried Frank focused on securities litigation, complex commercial litigation, white collar criminal and regulatory matters, and corporate investigations.

Elizabeth Kalanchoe is an associate at Fried Frank and focuses on representing corporations, boards of directors, special committees, and individuals in a broad array of securities and shareholder disputes.

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