The FTC Says Complying With State AI Laws Can Still Be Illegal

The FTC has decided that the best way to handle AI's accelerating regulatory chaos is to add another layer of confusion. In a new policy statement, the agency warns that AI companies secretly steering or suppressing model outputs can be guilty of deception under Section 5 of the FTC Act — even if they're doing it to comply with state laws like Colorado's AI Act. So now companies have to choose between obeying Colorado or the FTC, and whichever they pick, a lawyer gets to buy a new boat. That's not regulation; it's a full-employment programme for legal departments.

The timing is exquisite: just when state legislatures are racing to pass AI bills faster than LLMs can hallucinate citations, the FTC swoops in with a 'gotcha' that makes compliance a guessing game. The Colorado AI Act required companies to disclose certain model behaviors, but if they 'secretly' did it? Deception. If they didn't? Also deception. The only clear path is to not have an AI model at all, which, given the quality of some frontier models, might actually be the most ethical option.

What this really means is that the regulatory gap is so wide you could drive a truck through it, or, more likely, watch an autonomous truck drive itself into a ditch because no one could agree on which jurisdiction's rules apply. The FTC's statement is a masterclass in warning about a problem they helped create: by the time states and federal agencies sort out who has the authority, the models will have already advanced three generations, and we'll be debating whether an AGI can be held in contempt of Congress. Cheers to that.