FTC Puts AI Developers at Center of Regulatory Crossfire

So the FTC has finally found its purpose: policing whether AI models properly label their manipulations. The proposed policy statement, a cornerstone of the Trump administration's push for national AI policy, declares that undisclosed manipulation of AI outputs is deception — because nothing says 'solving the AI alignment problem' like slapping it with consumer protection law. The Cato Institute's obstruction doctrine we recently dissected warned that federal preemption would become a dangerous game, and here we are: the FTC is basically telling states, 'Stand aside, we'll handle the AI risks by making sure companies don't secretly rig their chatbots.'

The logic is almost endearing in its naivety. The FTC claims that if an AI model's outputs are manipulated — say, to hide watermarks or to bias responses — without disclosure, that's fraud. As if any company building these systems would voluntarily announce their secret tweaks. The proposal's real ambition is to quash the 'patchwork' of state AI laws that have been sprouting like weeds. But the practical effect? AI developers now face a two-front war: state attorneys general eager to enforce their own rules, and a federal agency armed with a vague 'deception' standard that could mean anything.

So here's the punchline: the models remain as uncontrollable as ever, hallucinating and jailbreaking with impunity. But now, every output that's not explicitly disclosed as manipulated is potentially illegal. This doesn't make AI safer — it just makes companies richer for adding 'compliance layers' to their software. The legal profession should be thrilled. The rest of us? We'll sit back and watch the regulatory theatre, sipping tea while the AI plays its ever more dangerous games.