State AGs Escalate AI Enforcement Using Existing Laws—What CUs Need To Know
By CU Today Staff —
NEW YORK--State attorneys general are increasingly using existing consumer protection, licensing and privacy laws—not AI-specific statutes—to crack down on companies that overstate artificial intelligence capabilities or expose consumers to harm, according to a Troutman Pepper Locke analysis reported by PYMNTS.
The report said regulators are relying on longstanding unfair and deceptive acts and practices (UDAP) laws and professional licensing rules to police AI products marketed as substitutes for licensed professionals or deployed in sensitive areas such as healthcare, financial advice and mental health.
PYMNTS reported Pennsylvania's enforcement action against Character.AI illustrates the trend. State regulators alleged chatbot personas falsely represented themselves as licensed psychiatrists, claimed to hold Pennsylvania medical licenses and offered assessments and treatment recommendations without proper licensure. Rather than invoking an AI-specific law, Pennsylvania based its case on existing professional licensing authority, a model the analysis said other states could readily follow.
The analysis, as reported by PYMNTS, also found attorneys general are expanding scrutiny to children's safety, AI-enabled fraud and privacy. More than 40 state attorneys general have urged AI companies to strengthen safeguards for therapy and companion chatbots used by minors, while separate coalitions have pressed xAI over alleged harmful Grok chatbot outputs and called for stronger oversight of AI-generated advertising tied to investment, cryptocurrency and health-related scams.
For AI developers, PYMNTS reported the takeaway is clear: compliance efforts should focus on meeting existing consumer protection, advertising and privacy requirements rather than waiting for new AI laws. The analysis recommends substantiating AI performance claims, avoiding suggestions that AI can replace licensed professionals, clearly disclosing how consumer data is used, and implementing governance and testing procedures as state enforcement efforts continue to accelerate.
Originally reported by CU Today.