Securities Laws Will Still Apply to AI Tech

Securities and Exchange Commission chair has touted artificial intelligence (AI) as the “most transformative tech of our time.” The comments may have merit but his claims that the SEC is “tech neutral” has caused outrage among the crypto community.

On Aug. 15, SEC chair Gary Gensler made a lengthy post on the benefits of AI, likening the technology to the internet. 

Gensler on AI and Securities Laws 

“AI is used in finance for acct openings, compliance programs, trading algorithms, sentiment analysis, and more,” gushed Gensler. He added that in his opinion, AI will continue significantly transforming science, technology, and commerce. 

His waxing lyrical continued with a questionable declaration that the SEC is “technology neutral.” Furthermore, he declared that there may be implications for securities laws and his agency. 

“We focus on the outcomes, rather than the tool itself. Securities laws, though, may be implicated depending upon how AI tech is used. Within our current authorities, we’re focused on protecting against both the micro & macro challenges of AI.”

He went on to state that enforcement action will continue even with AI because “fraud is fraud” under securities laws. 

“The SEC is focused on identifying and prosecuting any form of fraud that might threaten investors, capital formation, or the markets more broadly,” he added. 

The comments regarding that tech neutrality claim came thick and fast: 

• “AI is a security,” someone quipped while others asked if ChatGPT was an unregistered security.
• “What AI stocks do you own Gary? And why are you shilling it to us?” said another respondent. 
• “Is this seriously a setup for the argument that the SEC is the most appropriate agency to regulate it?” questioned another. 

In Other AI and Crypto News 

Moreover, the self-styled “cop on the beat” has taken matters into his own hands regarding digital assets and their underlying technology. 

Cryptocurrencies have yet to be officially classified by Congress, but that hasn’t stopped the SEC from labeling them all as securities and investment contracts. 

Gary Gensler appears to be pivoting from crypto to AI. Earlier this month, he warned that AI could cause a financial collapse due to opaque decision-making using deep learning.

He claimed that companies competing for the best client returns using algorithms could create market instability and volatility.

On Aug. 11, the US Department of Defense initiated “Task Force Lima” to explore the potential of generative AI in enhancing national security.

On Aug. 15, Fortune reported that current cutting-edge artificial intelligence is based on neuroscience from the ‘50s and ‘60s.