It is hard to find a CEO today who does not extol the virtues of artificial intelligence. Whether in press releases, earnings calls or investor presentations, the mere invocation of AI makes a company leader sound as if he is on the cutting edge of leading technology.
Seemingly overnight, AI has become an integral part of almost every industry imaginable. Customer experience and engagement; operations and efficiency; data analysis and decision making; product development and innovation, and specialized industry applications in financial services, manufacturing, retail, telecom, automotive, education and education are just a few areas where AI is firmly embedded.
According to the experts, approximately 78 percent of companies worldwide currently use AI in at least one business function.
AI is the new gold standard of innovation, and no company wants to be left behind. So it stands to reason that almost every corporation feels the need to make an AI declaration or manifesto touting how the technology is transforming their business.
Most of the statements are rooted in real world facts. But some are subtly deceptive, and others are wildly incredulous. It has become clear that not every AI claim has the integrity it should. As the rhetoric ramps up, so too does the incidence of misrepresentation.
Many of the claims are merely aspirational projections of what companies want consumers and the market to believe, whether fully actualized or not.
This is not just a business problem. There are serious policy implications as well.
Both the Department of Justice and the Securities and Exchange Commission have significantly ramped up their focus on Artificial Intelligence in the last two years, particularly concerning claims, fraud, disclosures, and enforcement. This heightened scrutiny is a direct response to the rapid proliferation of AI and concerns about “AI washing” and other deceptive practices.
SEC officials have declared artificial intelligence “the most transformative technology of our times” while cautioning that “if a public company is using AI, that company has to be honest about the role AI plays in its business and not exaggerate it to the point of AI washing.”
The SEC has been particularly active in addressing AI-related disclosures and preventing misleading statements in the financial markets. It has brought “first-of-their-kind” enforcement actions against firms for making false and misleading statements about their AI use.
In March 2024, the SEC charged two investment advisers with making false and misleading statements about their purported use of AI. Delphia USA Inc. allegedly claimed to use AI and machine learning to analyze client spending and social media data for investment advice, but the SEC found it never actually used the data, or the AI as described. Global Predictions allegedly falsely advertised itself as the “first regulated AI financial advisor” and made other unsubstantiated claims about its AI-driven forecasts. Both firms settled, agreeing to pay civil penalties.
AI washing is generally deemed to occur when a company overstates its AI capabilities or use of AI to mislead the market.
These actions point out an emerging problem. Amidst raging competition in the AI space, there is an absence of clear, universal standards for how companies should talk about AI.
The more pervasive AI becomes in our lives, the higher the risks for corporations, investors and consumers. Public trust and market integrity are at stake for any company that gets it wrong.
But this is nothing new.
Not long ago, the widespread practice of “greenwashing” spawned calls for environmental, social, and governance or ESG disclosure reform. That has taken on a life and trajectory all its own, and now exaggerated claims about the use of AI — “AI washing” — call for similar disclosure. Except now, the technology is evolving faster than the oversight and enforcement.
And the prospect of oversight begs the question: what kind of regulation, and how much, is warranted to stop fraudulent claims but not stifle innovation?
Getting the right balance is crucial for consumers, companies and for global competition.
Last week, the White House released “Winning the AI Race: America’s AI Action Plan,” whihc identifies more than 90 federal policy actions that the Trump administration will take in the coming weeks and months.
The plan includes multiple key policies. First is exporting American AI. The Commerce and State Departments will partner with industry to deliver secure, full-stack AI export packages — including hardware, models, software, applications, and standards — to America’s friends and allies around the world.
Second, the Trump administration says it will promote rapid buildout of data centers, expediting and modernizing permits for data centers and semiconductor fabs, as well as creating new national initiatives to increase high-demand occupations like electricians and HVAC technicians.
Third, Trump intends to remove onerous Federal regulations that hinder AI development and deployment, and seek private sector input on rules to remove.
He also says he will update Federal procurement guidelines to ensure that the government only contracts with frontier large language model developers that ensure that their systems are objective and free from top-down ideological bias.
Accompanying the AI Action Plan, three specific Executive Orders were signed on July 23. They were titled “Preventing Woke AI in the Federal Government”; “Accelerating Federal Permitting of Data Center Infrastructure;” and “Promoting the Export of the American AI Technology Stack.”
The challenge is not whether to regulate but how to strike a balance between innovation and accountability.
Transparency in statements about AI capabilities or involvement in business operations should be mandated at least at the level of material business impact and risk — akin to disclosures on cybersecurity or ESG. So far, Congress has yet to move deliberately.
A federal baseline standard for AI claims — coordinated by agencies like the SEC, FTC, and FDA — could prevent a patchwork of state laws and industry chaos.
Just as Sarbanes-Oxley brought accountability to financial disclosures, a federal AI disclosure standard could reinforce market confidence and protect consumers.
Without thoughtful oversight, the U.S. risks ceding regulatory leadership to Europe — much like it did in privacy with Europe’s General Data Protection Regulation.
In an AI-powered economy, transparency is not a luxury — it is a mandate every company should embrace as a competitive edge.
Adonis Hoffman is a corporate critic and independent counsel who writes on business, law, and policy. He served in senior roles at the FCC and in the U.S. House of Representatives.
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