Companies must be cautious against ‘AI washing’ in their claims about the technology, the chairman of the US Securities and Exchange Commission (SEC) has warned.

In a speech at Yale Law School, Gary Gensler, inspired by the term greenwashing warned companies must be honest about their AI strengths in company advertising and marketing materials. 

“We’ve seen time and again that when new technologies come along, they can create buzz from investors as well as false claims from the Professor Hills of the day,” Gensler said, referencing the character Harold Hill in the movie Music Man who hides behind a professor title whilst acting as a salesman. 

“If a company is raising money from the public, though, it needs to be truthful about its use of AI and associated risk.” 

Gensler said the number of AI disclosures made by SEC registrants had drastically increased in the past few years.  “Claims about prospects should have a reasonable basis, and investors should be told that basis… Investment advisers or broker-dealers also should not mislead the public by saying they are using an AI model when they are not, nor say they are using an AI model in a particular way but not do so.”

He warned any company found to be AI washing could be found guilty of violating the SEC’s rules. 

Since the release of ChatGPT to the public in 2022, AI has been widely adopted in every industry. In a 2023 survey conducted by GlobalData, Just Drinks’ parent, businesses demonstrated confidence in AI with nearly 60% of respondents answering that they believed AI would live up to all its promises. 

A further 36% of businesses stated even though they believed AI was overhyped, the technology did have useful potential for their industries. 

Companies have been rushing to include AI in their products and have heavily publicised the technology as a way of marketing to consumers. Gensler noted this in his speech, referencing the amount of AI mentions within Super Bowl advertising on Sunday (11 February).