by Companies across sectors are racing to integrate artificial intelligence into their products, operations, and messaging. The pace has produced a new category of reputational and legal risk: regulators now use the term AI-washing to describe false, misleading, or exaggerated claims about a company’s use or capability of AI. When those claims come under scrutiny, the response demands speed, precision, and tight coordination between legal counsel and crisis communications.
What is AI-washing, and why are regulators cracking down?
AI-washing describes false, misleading, or exaggerated claims about a company’s use and capabilities with artificial intelligence. Both the SEC and the FTC have made it a 2025 enforcement priority.
The SEC started its first foray into enforcement on March 18, 2024, with parallel actions against investment advisers Delphia and Global Predictions, which paid $225,000 and $175,000 to settle charges of making false AI claims.
On January 14, 2025, the SEC brought its first AI-washing action against a reporting company, Presto Automation, after Presto falsely claimed its drive-thru voice product eliminated human intervention in order taking while the majority of orders required human involvement.
On February 20, 2025, the SEC launched the Cyber and Emerging Technologies Unit, naming AI-related fraud a core mandate.
Then, on April 9, 2025, the SEC and DOJ filed parallel actions against Nate Inc. founder Albert Saniger, alleging he raised more than $42 million by claiming his shopping app used AI when contractors processed transactions manually.
The SEC’s actions were not the only regulatory pressure building. Beginning in 2024, the FTC moved in parallel, targeting consumer-facing AI claims. The FTC launched Operation AI Comply on September 25, 2024, sweeping five companies, including DoNotPay, which marketed itself as “the world’s first robot lawyer,” and Rytr, an AI writing tool the FTC alleged could generate fake testimonials. Enforcement postures may shift, but the underlying expectation holds: regulators expect AI claims to be substantiated.
What should companies do first when AI-washing allegations surface?
Audit every public AI-related claim before issuing any response. Pull statements from regulatory filings, earnings calls, press releases, marketing materials, websites, and social media. For each claim, confirm whether the technical team can substantiate it with documentation on data sources, model governance, performance metrics, and system limitations. Flag claims the team cannot defend and escalate them to legal counsel immediately.
Legal strategy must lead the response. AI-washing allegations create securities law exposure. Counsel determines whether prior disclosures were materially misleading, whether the company must issue a correction, whether the inquiry triggers an 8-K filing, and what the company can say publicly without expanding liability. A factually accurate statement can still create problems if it concedes too much or commits the company to positions that limit its defense later.
How does crisis communications guide stakeholders in response to AI-washing claims?
Each audience requires a calibrated response. Regulatory inquiries go through legal counsel, with communications in a key advisory role. Investors may need a corrective disclosure if prior statements were materially inaccurate; corrections must acknowledge the specific claim and provide accurate information. Employees need internal messaging that recognizes the situation without creating undue concern, along with clear guidance on what to say if external parties contact them. Customer-facing teams need short, factual responses ready to deploy.
A defensible holding statement acknowledges the inquiry without validating it, describes the company’s actual AI use, and explains the review process.
How does proactive crisis communications reduce AI-washing risk?
Many companies only begin building an AI communications plan after a regulatory inquiry or media story forces the issue. This reactive posture concedes the narrative and limits the response. A proactive approach is far more effective. It means building an external narrative that demonstrates transparency, accountability, regulatory awareness, and conveys the commitment to seeking a timely resolution.
In sectors where trust is paramount, the discipline behind AI claims becomes a differentiator. Pre-clearance for AI-related statements, evidence requirements for every capability claim, and ongoing monitoring across stakeholders and channels are reputational infrastructure, not compliance overhead. Done consistently, this discipline reinforces a reputation for responsibility, which is the asset most worth protecting when a regulator comes knocking.
Montieth & Company advises general counsels, CCOs, and boards across crisis communications, litigation PR, and AI strategy. By approaching communications not just as an extension of a regulatory strategy but as integral to both achieving compliance and reputational protection, B2B companies can minimize risk, build stronger stakeholder relationships, and stand out in a crowded marketplace.
To learn how Montieth & Company can support your organization in preparing for or responding to AI-washing scrutiny, contact us.