SEC Chair Vows to Crackdown on AI if This Line is Crossed

The United States Securities and Exchange Commission (SEC) enforcement actions know no bounds, and emerging technologies such as Artificial Intelligence (AI) now appear on the commission’s radar.

SEC Chair on AI Regulation

SEC Chairman Gary Gensler recently remarked that AI’s potential with respect to interference and disruption of market dynamics would attract the agency’s wrath. Speaking earlier this week before The National Press Club, the Chairman said terrible actors may seek to use AI to influence the US markets, or spook the public, which will attract an appropriate response from the commission.

Unlike the discrepancy most people make, Gensler noted that ‘under the securities laws, fraud is fraud,’ irrespective of the format the fraud takes.

Bad actors may seek to use AI to influence our mkts, or spook the public. Make no mistake, under the securities laws, fraud is fraud. @SECGov is focused on identifying & prosecuting any form of fraud that might threaten investors, capital formation, or the mkts more broadly.

— Gary Gensler (@GaryGensler) July 20, 2023

The Artificial Intelligence ecosystem is just shaping up, but we have seen a very defined embrace and growth in this space following the release of ChatGPT, the conversational-style bot released by OpenAI. The advent of ChatGPT has proven that there is no limit to what AI can do. The apparent limits observed have been touted by experts that within the next few years, such previous use cases that appear insurmountable can be unraveled by AI.

With ChatGPT passing both Medical and Law exams with a good margin, the likelihood of training bots to exploit the financial market is high. Thus, the SEC said it will frown at remarkably. The SEC Chairman confirmed that the agency is doing all it can to identify every means the markets can be exploited or harmed and prosecute the perpetrators accordingly.

Crypto-Related Crackdowns?

It remains unclear whether or not the SEC intends to crack down on AI service providers the way it is cracking down on players in the crypto ecosystem.

The past year has been particularly busy for the SEC as it has sued and settled with Kraken Exchange and currently has an active lawsuit against the duo of crypto trading behemoths, Coinbase and Binance respectively.

With the recent XRP ruling in the Ripple vs SEC case, industry stakeholders believe a very important precedent is being set that may shape other enforcement actions in the near future. For AI, the industry is just sprouting and stakeholders may soon join those in the blockchain ecosystem in calling for a special regulation to guide these emerging technologies.