State attorneys general are urging major AI developers to address the issue of misleading information generated by their platforms.

State attorneys general are intensifying scrutiny of AI technology, demanding major firms like Microsoft, OpenAI, and Google implement stringent safeguards against "delusional outputs" to prevent potential psychological harm. This move signals a shift towards stricter regulatory frameworks, emphasizing the necessity for transparent audits and independent evaluations to mitigate real-world impacts and maintain user trust in digital systems.

Nathan Mercer

December 11, 2025

In an intriguing twist of regulatory focus, a cohort of state attorneys general has squarely targeted the Achilles' heel of AI technology: its potential to churn out misleading or harmful content. This collective action underscores a growing concern over the unintended psychological impacts that AI systems can have on users-a concern severe enough to prompt official warnings to major players like Microsoft, OpenAI, and Google.

According to a recent dispatch from TechCrunch, the warnings are not just idle threats. The letter issued by the attorneys general details the need for robust internal safeguards to prevent what they term "delusional outputs" from AI systems. This demand is paired with a clear ultimatum: align with state laws or face potential legal consequences.

The main bone of contention here seems to be the real-world harm linked to these AI-induced delusions. The attorneys general are not just asking for minor tweaks; they're advocating for a systemic overhaul that includes transparent third-party audits and stringent pre-release evaluations by independent groups. These groups would operate without fear of retaliation-a critical point that highlights the current mistrust between regulatory bodies and tech giants.

Moreover, the comparison of AI incidents to cybersecurity breaches is particularly telling. It suggests a paradigm shift in how we perceive and respond to AI's influence on mental health. Just as companies are expected to promptly report data breaches, these officials now demand immediate reporting of harmful AI interactions, which could set a new regulatory standard that might ripple across the tech landscape.

While federal attitudes toward AI development have been notably more lenient, the push from state-level figures could catalyze a more cautious approach to AI deployment in consumer-facing applications. This is not merely a legal or ethical issue but a broad societal concern that touches on the fundamental trust users place in digital systems that increasingly mediate our daily lives.

As we watch this situation unfold, it's clear that the line between technological innovation and consumer safety is becoming increasingly blurred. Companies would be wise to anticipate not only the capabilities but also the vulnerabilities of their AI systems. Preventing harm could become just as important as enhancing utility, especially in applications that interact deeply with human mental and emotional well-being.

For those of us in fintech, where AI also plays a burgeoning role, we should take this as a cautionary tale. The integration of AI in financial services-from risk assessment to customer interaction-must be handled with a nuanced understanding of these potential psychological impacts. This might involve a closer alignment with frameworks like those proposed by the state attorneys general, not just to comply with future regulations but to safeguard the mental health of the very users we aim to serve.

In essence, as we navigate this AI-infused landscape, balancing innovation with responsibility isn't just advisable-it's becoming imperative.

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