SEC Charges Public Company With AI Washing

On January 14, 2025, the U.S. Securities and Exchange Commission (SEC) charged Presto Automation Inc. (Presto) with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 for misleading artificial intelligence (AI) claims made by Presto in its SEC filings and public statements.¹ Without admitting or denying the SEC's findings, Presto consented to a cease-and-desist order.

The proceeding centered on the practice of "AI washing," where a company exaggerates or distorts its AI capabilities, creating a false impression of the company's technological expertise and future prospects. The SEC has increased its focus on this matter and issued guidance reminding companies that AI disclosures remain subject to the basic principles of the securities laws and should only be made with reasonable bases, which should be disclosed to investors.² In addition to this informal guidance and recent administrative proceedings, the SEC has used the comment letter