Business Law Today

April 2023

Recent Developments in Artificial Intelligence and Blockchain Cases 2023

Artificial Intelligence Business Law Fundamentals Business Litigation Business Litigation & Dispute Resolution Business Regulation & Regulated Industries Copyright Data Privacy Digital Currency Intellectual Property Law Internet Law & Cybersecurity Patent Recent Developments in Business and Corporate Litigation Securities Law

§ 1.1. Introduction

We are pleased to present the rapidly growing Chapter on Artificial Intelligence. This year, we have added a new component by including significant blockchain cases. Why? Both AI and blockchain represent emerging technologies that present vexing legal issues for clients, business lawyers, litigators and the judiciary. This Chapter seeks to serve as a guide for those seeking a better understanding of this rapidly evolving legal landscape.

It is no surprise that the number of cases and complexity of issues are proliferating. With regard to AI, issues around bias and fairness continue to predominate as use cases and adoption across industries expand. Questions around IP ownership and registrability, especially with generative AI tools, are also quickly becoming a hot topic. And Mr. Thaler continues to advance the question through litigation of whether AI software systems can obtain a patent or copyright for its output. See, e.g., Thaler v. Vidal, 43 F.4th 1207 (Fed. Cir. 2022) (affirming the district court holding in Thaler v. Hirshfeld, 558 F. Supp. 3d 238 (E.D. Va. 2021) that an artificial intelligence software system cannot be listed as an “inventor” on a patent application given that the language of the Patent Act requires inventors to be “natural persons.” This case arose after plaintiff Stephen Thaler filed two patent applications with the USPTO for which the inventor was identified as an AI machine named “DABUS.”) And at the moment this Chapter is going to the printer, the Copyright Office just released its first guidance on generative AI. See https://public-inspection.federalregister.gov/2023-05321.pdf. We will cover this in depth in next year’s Chapter as events continue unfold in this space.

Facial recognition applications, both in the government and private sectors, are raising a host of constitutional, statutory and privacy claims. And biometric-based litigation has also exploded. Other emerging issues include the role of AI tools in content moderation as part of a broader conversation on internet publisher immunity, and whether software aimed to support aspects of legal services delivery, including software that uses AI, violates rules against the unauthorized practice of law. With regard to blockchain, the spectacular collapse of FTX has brought into sharp focus the tension between centralized exchanges and the promise of Web 3.0 DeFi applications and protocols, and serves as a reminder that the nascent blockchain industry is not immune to garden-variety fraud. While there continues to be substantial SEC action claiming various tokens are unregistered securities, practitioners and judges alike can benefit from a deeper understanding of blockchain technology, layer 1-3 protocols, and how, when and why “crypto” matters to blockchains.

We also made certain judgments as to what should be included. Notably, we added some ongoing cases with particularly interesting AI issues, including two cases recently heard by the United States Supreme Court, and other cases related to recent developments in generative AI. We omitted cases decided prior to 2022 that were reported in previous iterations of the Chapter after evaluating whether there were any significant updates to those cases with respect to AI; in most cases there were not. With respect to class action lawsuits filed under the Illinois Biometric Information Privacy Act (BIPA) (740 ILCS 14), to the extent the allegations focus more on the data rather than the associated AI applications, we have not included a comprehensive summary of those BIPA cases. And as AI continues to be a subject of legislative proposals, we omitted the 2021 and 2020 legislative updates that were included in the Chapter in prior years and focus only on 2022.

Finally, I want to thank my colleagues, Adam Aft, Sam Kramer, Alex Crowley, Amarachi Abakporo, Mariana Oliver, and Marcela Pertusi Hernández for their assistance in preparing this chapter. Adam is a knowledgeable and accomplished AI attorney, Sam is a knowledgeable and accomplished blockchain attorney, and Alex, Amarachi, Marcela and Mariana are recent joiners to our team with much exuberance for AI.

We hope this Chapter provides useful guidance to practitioners of varying experience and expertise and look forward to tracking the trends in these cases in future years’ Chapters.

Bradford Newman
Palo Alto, California

§ 1.2. Artificial Intelligence

Cases

United States Supreme Court

There were no qualifying decisions within the United States Supreme Court in 2022.

Pending Cases of Note

Gonzalez v. Google LLC and Twitter v. Taamneh. On February 21 and 22, 2023, the US Supreme Court heard oral arguments for Gonzalez v. Google and Twitter v. Taamneh, which some have called “Cases That Could Break the Internet.” These are the first cases interpreting Section 230 of the Communication Decency Act (47 U.S.C. § 230) ever to be decided by the Supreme Court Both cases arose from an action filed against Google, Twitter, and Facebook by the father of a victim of ISIS-linked terrorism claiming, in part, that the platforms were liable for aiding and abetting international terrorism by not doing enough to keep terrorists off the platforms. Notably, with respect to Google, the plaintiff claimed that Google’s use of machine learning algorithms to analyze and suggest content to users assisted ISIS in propagating terrorism and that Section 230 does not grant immunity to Google from liability for such content. Decisions by the Supreme Court holding the platforms liable for the alleged claims could significantly impact the internet overall as platforms could become less willing to hosting certain kinds of content for fear of incurring liability for that content. Next year’s Chapter will address the Supreme Court’s opinions in these important Section 230 cases.

First Circuit

There were no qualifying decisions within the First Circuit in 2022.

Second Circuit

There were no qualifying decisions within the Second Circuit in 2022.

Third Circuit

United States v. Turner, No. 19-763 (WJM), 2022 U.S. Dist. LEXIS 17318 (D.N.J. Jan. 31, 2022) (under which the Court found that an evidentiary hearing was warranted to determine the admissibility of a photo array that was generated using facial recognition software that operates by manipulating or normalizing the input image by scaling, rotating, or aligning the image.)

Thomson Reuters Enter. Ctr. GmbH v. Ross Intel. Inc., No. 20-613-LPS, 2022 U.S. Dist. LEXIS 75493 (D. Del. Apr. 26, 2022) (denying Thomson Reuters’ and West Publishing Corporation’s motion to dismiss ROSS Intelligence’s claim alleging that the plaintiffs tied their legal research tool to their public law database in violation of the Sherman Antitrust Act and granting the plaintiffs’ motion to dismiss the counterclaims alleging that 1) the plaintiffs brought anticompetitive sham litigation to the court and 2) that the plaintiffs engaged in unfair competition under Delaware law. ROSS Intelligence had developed an artificial intelligence-based legal research application that the plaintiffs previously alleged was developed using certain Westlaw materials, notably Westlaw’s Headnotes and Key Number System, without the plaintiffs’ authorization. See Thomson Reuters Enter. Ctr. GmbH v. ROSS Intelligence Inc., 2021 U.S. Dist. LEXIS 59945 (D. Del. 2021).)

Pending Cases of Note

Getty Images (US), Inc. v. Stability AI, Inc., D. Del., No. 1:23-cv-00135, filed Feb. 3, 2023 (alleging that Stability AI copied over 12 million of Getty Images’ photographs and associated captions and metadata without authorization and “removed or altered Getty Images’ copyright management information, provided false copyright management information, and infringed Getty Images’ famous trademarks.” Getty asserts that it has licensed its photographs for AI and machine learning purposes to others before, but that Stability AI is using Getty’s photographs without authorization to train its Stable Diffusion machine learning-driven image-generation model. Getty Images filed similar litigation against Stability AI in the United Kingdom in January 2023.)

Fourth Circuit

In re Peterson, Nos. 19-24045, 19-24551, 2022 Bankr. LEXIS 1537, at *103 (Bankr. D. Md. June 1, 2022) (holding that the provision of a software application to assist pro se debtors filing for bankruptcy protection constitutes the practice of law by a non-lawyer as the software provides users with legal advice when it limits the options presented to the user based upon the user’s specific characteristics, thereby affecting the user’s discretion and decision-making. Notably, Upsolve denied that its software did not involve any AI, machine learning, or natural language processing algorithm. The court, however, did not comment specifically on AI in its opinion but focused instead on the software’s functions. This case would appear to put AI tools having functions related to legal services that are more complicated than Upsolve’s software at risk of unauthorized practice of law violations.)

Fifth Circuit

There were no qualifying decisions within the Fifth Circuit in 2022.

Sixth Circuit

Changizi v. HHS, No. 2:22-cv-1776, 2022 U.S. Dist. LEXIS 81488 (S.D. Ohio May 5, 2022) (granting defendant’s motion to dismiss plaintiff’s claims based on Plaintiff’s lack of standing and, in the alternative, on the content of their claims, stating that 1) the plaintiff’s First Amendment claim fails as allegations that defendant exercises coercive power over Twitter to censor certain users based on the information they share about COVID-19 do not satisfy the requirements under the “state compulsion” framework and because Plaintiff did not make a sufficient argument that another exception to the state-action doctrine applies and 2) Plaintiff’s Fourth Amendment claim fails as the Surgeon General’s (defendant) Request for Information from “technology platforms” to provide defendant with data concerning “sources of COVID-19 misinformation” did not constitute a search under the Constitution. As an additional point, the court cited a statement from the Surgeon General, in which he urged social media platforms to improve upon the monitoring of misinformation by “increas[ing] staffing of multilingual content moderation teams” and “improv[ing] machine learning algorithms in languages other than English since non-English-language misinformation continues to proliferate . . . .”)

Bond v. Clover Health Invs., Corp., 587 F. Supp. 3d 641 (M.D. Tenn. 2022) (denying Defendant’s motion to dismiss plaintiff’s claims that defendant defrauded the market by engaging in unlawful activities and making misleading statements about the success and value of its healthcare business and technological developments, including an AI-powered software called the “Clover Assistant.” Defendant suggested that Clover Assistant was intended to improve patient care, but, in practice, the Assistant appeared to merely increase Defendant’s profit from Medicare reimbursements without meaningfully improving care. Furthermore, the operator’s medical expertise and skill (e.g., qualified physician or not) affected the accuracy of the results produced by Clover Assistant. Separately, defendant struggled to even get physicians to use Clover Assistant. This case provides an example of how, in practice, AI tools may not always live up to the hype.)

Ogletree v. Cleveland State Univ., No. 1:21-cv-00500, 2022 U.S. Dist. LEXIS 150513 (N.D. Ohio Aug. 22, 2022) (holding that a university’s scan of plaintiff student’s room using virtual room scanning technology during a remote exam was unreasonable under the Fourth Amendment. Plaintiff argued that test integrity could be preserved by instead using alternatives such as artificial intelligence to detect suspicious movement or plagiarism.)

Seventh Circuit

Trio v. Turing Video, Inc., No. 21 CV 4409, 2022 U.S. Dist. LEXIS 173465 (N.D. Ill. Sept. 26, 2022) (holding that a company’s use of an artificial intelligence algorithm to locate an individual’s forehead and collect the individual’s forehead temperature in conjunction with facial recognition software to determine whether individuals were wearing face masks is enough to state a plausible claim that biometric data has been “collected” and “stored” for purposes of BIPA.)

Carpenter v. McDonald’s Corp., 580 F. Supp. 3d 512 (N.D. Ill. 2022) (holding that plaintiff has a plausible claim under BIPA Section 15(b) based on factual allegations that McDonald’s used a third-party voice assistant technology in its restaurants’ drive-through lanes to collect and use biometrics (voice recordings) directly from customers without their consent.)

Doe v. Apple Inc., No. 3:20-CV-421-NJR, 2022 U.S. Dist. LEXIS 222988 (S.D. Ill. Aug. 1, 2022) (denying Apple’s motion to dismiss plaintiffs’ claim that data sent to Apple’s iCloud Photos Library known as “Sync Data” contains biometric information or biometric identifiers and, thus, falls within the parameters of BIPA. Plaintiffs alleged that Sync Data contains biometric information or biometric identifiers subject to BIPA because it is created by “combin[ing] faceprint data processed on Apple Devices with user-inputted tags, users’ input regarding whether faces belong to particular individuals, and other data including key faces and face crops that are recognized by Apple’s faceprint algorithm.” Plaintiffs further alleged that Apple collected or possessed users’ Sync Data via its automatic iCloud transfer of Sync Data to Apple’s servers. The court concluded that the plaintiffs had provided sufficient facts to state a plausible claim that Sync Data contains biometric information and Apple collects or possesses users’ Sync Data.) See also Sosa v. Onfido, Inc., 600 F. Supp. 3d 859 (N.D. Ill. 2022).

Eighth Circuit

There were no qualifying decisions within the Eighth Circuit.

Ninth Circuit

Angel Techs. Grp. LLC v. Facebook Inc., No. CV 21-8459-CBM(JPRx), 2022 U.S. Dist. LEXIS 116427 (C.D. Cal. Jun. 30, 2022) (granting the defendant’s motion to dismiss the plaintiff’s patent infringement claim because the plaintiff’s patent for its digital photo tagging technology, which uses artificial intelligence algorithms to function, failed to establish an inventive concept in its claims. The patent merely claims that artificial intelligence algorithms will be used as part of the technology without providing details as to how Plaintiff has improved upon the algorithms or how they are implemented, rendering the patents at issue ineligible for patent protection.)

United States ex rel. Osinek v. Permanente Med. Grp., Inc., No. 13-cv-03891-EMC, 2022 U.S. Dist. LEXIS 81890 (N.D. Cal. May 5, 2022) (denying the defendant’s motion to dismiss in part as to the plaintiff’s claim alleging that the defendant fraudulently used its Natural Language Processing Software to identify new diagnosis codes to submit as additional claims to Medicare without reviewing such diagnosis codes before sending out the claims. The Software used an algorithm to search through electronic medical records to identify new diagnoses that could be used for submission of additional risk adjustment Medicare claims.)

Does v. Reddit, Inc., 51 F.4th 1137 (9th Cir. 2022) (granting the defendant’s motion to dismiss the plaintiffs’ child sex trafficking claims as the plaintiffs failed to allege that the defendant knowingly participated in or benefited from a sex trafficking venture through users posting child pornography on its site. Furthermore, the plaintiffs could not directly connect Reddit’s revenue to the child pornography posted on its site, apart from the fact that the subreddits with child pornography posted on them also had advertisements from which Reddit generated revenue. Notably, the plaintiffs pointed out that Reddit was delayed in employing automated image-recognition technologies like “PhotoDNA,” which can detect child pornography and prevent it from being posted on the site.)

Pending Cases of Note

DOE 1 et al. v. GitHub, Inc. et al., N.D. Cal., No. 4:22-cv-06823, filed Nov. 10, 2022 (class action lawsuit brought by owners of copyrighted materials published on GitHub against GitHub, Microsoft, and OpenAI (“Defendants”) in which the plaintiffs assert that, among other claims, in developing their machine learning systems using the plaintiffs’ copyrighted materials (software code) without authorization and propagating those systems, defendants violated the Digital Millenium Copyright Act, the Lanham Act, unfair competition law, the California Consumer Privacy Act, and contracts including open-source licenses and GitHub’s Terms of Service.)

Andersen et al. v. Stability AI Ltd. et al., N.D. Cal., No. 3:23-cv-00201, filed Jan. 13, 2023 (class action lawsuit brought by three full-time artists (“Plaintiffs”) against Stability AI, Inc., MidJourney, Inc., and DeviantArt, Inc. (“Defendants”) asserting claims of copyright infringement, violation of the Digital Millenium Copyright Act, violation of publicity rights, and violation of unfair competition law against Defendants. The Plaintiffs allege that Stability AI developed its “Stable Diffusion” AI-based image generation product using the Plaintiffs’ copyrighted images without authorization and further that the Defendants each used the Stable Diffusion product for commercial gain by selling images “in the style of” the Plaintiffs’ copyrighted images.)

Tenth Circuit

Young v. Tesla, Inc., No. 1:21-cv-00917-JB-SCY, 2022 U.S. Dist. LEXIS 145747 (D.N.M. Aug. 15, 2022) (granting in part and denying in part the defendant’s motion to dismiss plaintiff’s claims for breach of contract, unjust enrichment, civil conversion, negligence per se, and fraud, in which plaintiff argued that the defendant gave the false impression that the vehicle could drive itself without human intervention, and that it would have this capability by the end of 2019. To determine what the term “Full Self-Driving Capability” means, the Court analyzed the defendant’s description of the term “Full Self-Driving Capability” on its website.)

Eleventh Circuit

There were no qualifying decisions within the Eleventh Circuit.

DC Circuit

There were no qualifying decisions within the DC Circuit.

Pending Cases of Note

Thaler v. Perlmutter, D.C. Cir. No. 1:22-cv-01564, filed June 2, 2022 (asserting that human authorship is not legally required for copyright registration in the US. Similar to Stephen Thaler’s attempts to register patents as invented by the AI machine “DABUS,” Thaler attempted to register a copyright to a two-dimensional artwork titled “A Recent Entrance to Paradise” as created by an AI machine named “Creativity Machine.” The US Copyright Office rejected his application because it had no human author.)

Court of Appeals for the Federal Circuit

Thaler v. Vidal, 43 F.4th 1207 (Fed. Cir. 2022) (affirming the district court holding in Thaler v. Hirshfeld, 558 F. Supp. 3d 238 (E.D. Va. 2021) that an artificial intelligence software system cannot be listed as an “inventor” on a patent application given that the language of the Patent Act requires inventors to be “natural persons.” This case arose after plaintiff Stephen Thaler filed two patent applications with the USPTO for which the inventor was identified as an AI machine named “DABUS.”)

Administrative

US Copyright Office (USCO)

Recent Decision of Note

Cancellation of original copyright registration for Zarya of the Dawn (Registration # VAu001481096) (under which the USCO cancelled the original copyright registration for comic book Zarya of the Dawn to Kristina Kashtanova because Ms. Kashtanova had not disclosed as part of her application that the images in the comic book were created using Midjourney’s artificial intelligence technology. Based on the common-law principle and USCO practice that copyright registrations may not be granted to non-human authors, the USCO determined that no copyright registration should have been provided with respect to the comic book images. The USCO rejected Ms. Kashanova’s argument that her efforts to use Midjourney to create the comic book images and her subsequent efforts to edit the images qualified as human authorship of the images overall. The USCO replaced the original copyright registration with a new registration covering only the content authored by a human, “namely, the ‘text’ and the ‘selection, coordination, and arrangement of text created by the author and artwork generated by artificial intelligence.’”)

Legislation

We organize the enacted and proposed legislation into (i) policy (e.g., executive orders); (ii) algorithmic accountability (e.g., legislation aimed at responding to public concerns regarding algorithmic bias and discrimination); (iii) facial recognition; (iv) transparency (e.g., legislation primarily directed at promoting transparency in use of AI); and (v) other (e.g., other pending bills such as federal bills on governance issues for AI).

Policy

2022

Blueprint for an AI Bill of Rights. US Office of Science and Technology Policy. Lays out protections for Americans in regard to the design, development, and deployment of AI and other automated technologies.

Algorithmic Accountability

2022

[Fed] Algorithmic Accountability Act of 2022. Bill S 3572 (Pending Feb. 2022). Directs the Federal Trade Commission to require impact assessments of automated decision systems and augmented critical decision processes.
[Fed] Digital Civil and Human Rights Act of 2022. Bill HB 7449 (Pending Apr. 2022). Establishes prohibitions on the use of automated systems in a discriminatory manner.
[Fed] Government Ownership and Oversight of Data in Artificial Intelligence Act of 2021. Bill HB7296 (Pending Mar. 2022). Establishes an Artificial Intelligence Hygiene Working Group, among other decrees.
[Fed] Political BIAS Emails Act of 2022 Political Bias In Algorithm Sorting Emails Act of 2022. Bill SB 4409 (Pending Jun. 2022). Bans email providers from using filtering algorithms with respect to political emails.
[CA] Social Media Platform Duty to Children Act. Bill CA A.B. 2408 (Pending Jun. 2022). Prohibits a social media platform, as defined in the Act, from using a design, feature, or affordance that the platform knew, or by the exercise of reasonable care should have known, causes a child user, as defined, to become addicted to the platform.
[CA] The California Age-Appropriate Design Code Act. Bill CA A.B. 2273 (Pending Sep. 15, 2022). Enacts the California Age-Appropriate Design Code Act, which establishes requirements for businesses that provide an online service, product, or feature likely to be accessed by children.
[DC] Stop Discrimination by Algorithms Act of 2021. Bill B24-0558 (Pending Dec. 2021). Prohibits users of algorithmic decision-making to use the same in a discriminatory manner and requires corresponding notices to individuals whose personal information is used in certain algorithms to determine employment, housing, healthcare and financial lending.
[IL] Video Interview Demographic. Bill H.B. 53 (Effective Jan. 2022). Seeks to avoid algorithmic discrimination in first-pass hiring interviews conducted using AI.
[IL] Amendment to the Illinois Human Rights Act. IL H.B. 1811 (Pending Mar. 2022). Amends the Illinois Human Rights Act to provide that an entity that uses predictive data analytics in its employment decisions or to determine creditworthiness may not consider the applicant’s race or zip code when used as a proxy for race to reject an applicant for employment or credit.
[KY] An Act relating to credit. Bill HB779 (Pending Mar. 2022). Prohibits the violation of a person’s constitutional rights based on predictive behavior analysis.
[MA] An Act Relative to Algorithmic Accountability and Bias Prevention. Bill MA H.B. 4029 (Pending Jul. 2021). Requires covered entities to conduct impact assessments of existing high-risk automated decision systems and new high-risk automated decision systems prior to implementation.
[MA] An Act Relative to Data Privacy. Bill MA H.B. 136, see also SB 2687 (Pending Feb. 2022). Creates the Data Accountability and Transparency Agency and requires data aggregators that utilize automated decision systems to perform (i) continuous and automated testing for bias on the basis of a protected class; and (ii) continuous and automated testing for disparate impact on the basis of a protected class as required by the agency.
[NJ] An Act concerning discrimination and automated decision systems and supplementing P.L.1945, c.169 (C.10:5-1 et seq.). Bill S 1402 (Pending Feb. 2022). Prohibits certain discrimination by automated decision systems.
[NJ] An Act concerning discrimination in automobile insurance underwriting and supplementing P.L.1997, c.151. Bill A 537 (Pending Jan. 2022). Requires automobile insurers using automated or predictive underwriting systems to annually provide documentation and analysis to the Department of Banking and Insurance to demonstrate that there is no discriminatory outcome in the pricing on the basis of race, ethnicity, sexual orientation, or religion, that is determined by the use of the insurer’s automated or predictive underwriting system.
[NY] An Act to Amend the Labor Law, in Relation to Establishing Criteria for the Use of Automated Employment Decision Tools. Bill NY A 7244 (Pending Feb. 2022). Amends New York’s labor law to include a provision banning employers from using automated employment decisions tools that have not been subject to a disparate impact analysis.
[RI] An Act Relating to State Affairs and Government – Department of Business Regulation. Bill RI H 7230 (Pending Jan. 2022). Amends the “Department of Business Regulation” laws to include a section prohibiting discriminatory insurance practices through the use of algorithms or predictive models.
[WA] Making 2021-2023 Fiscal Biennium Operation Appropriations. Bill WA S 5693 (Enacted Mar. 31, 2022). Allocates part of the budget towards the office of the chief information security officer, who must determine how automated decision making systems will be reviewed before they are adopted. Part of that review will include auditing of those systems.

Facial Recognition Technology

2022

[AL] Facial recognition technology, use of match as the sole basis of probable cause or arrest, prohibited. Bill SB 56 (Enacted April 6, 2022). Prohibits state or local state or local law enforcement agencies from using facial recognition match results as the sole basis for making an arrest or for establishing probable cause in a criminal investigation.
[CO] Artificial Intelligence Facial Recognition. Bill CO S 113 (Enacted Jun. 8, 2022). Creates a task force aimed at considering use of facial recognition services.
[RI] Rhode Island Consumer Protection Gaming Act. Bill H. 7222, S. 2491 (Pending 2022). Prohibits the use of facial recognition technology and biometric recognition technology in video-lottery terminals at pari-mutuel licensees in the state or in online betting applications and prohibits the use of certain other technologies in state gaming operations.

Transparency

2022

[Fed] Justice in Forensic Algorithms Act of 2021. Bill HB 2438 (Pending Oct. 2021). Establishes national standards for the use of computational forensic software in criminal investigations.
[CA] Platform Accountability and Transparency Act. Bill CA S.B. 1018 (Pending Feb. 2022). This bill would require a social media platform to disclose to the public, on or before October 1, 2024, and annually thereafter, statistics regarding the extent to which, in the 3rd and 4th quarters of the preceding calendar year and first and 2nd quarters of the current calendar year, items of content that the platform determined violated its policies were recommended or otherwise amplified by platform algorithms, disaggregated by category of policy violated.
[MA] An Act Establishing An Internet Bill of Rights. Bill MA H.B. 4152 (Pending Sep. 2021). Requires businesses, when collecting data from data subjects, to disclose the existence of automated decision-making, including profiling as well as the significance and the predicted consequences of the processing for the data subject, and provides other rights to data subjects concerning their data.
[MA] An Act establishing the Massachusetts Information Privacy Act. E.g., Bill MA H.B. 4514 (Pending 2022). Requires businesses to disclose in their privacy policies whether they use automated decision systems and if they do, to use them only to the extent necessary for carrying out their purpose.
[NY] New York Privacy Act. Bill NY S 6701 (Pending May 2022). Includes privacy protections for New York consumers and requires, among other things, “meaningful human review” of algorithmic or automated decision-based outputs and transparency around automated decisions that produce “legal or similarly significant effects.”

Other

2022

[Fed] AI JOBS Act of 2022 Artificial Intelligence Job Opportunities and Background Summary Act of 2022. Bill HB 6553 (Pending Feb. 2022). Requires the Secretary of Labor, in collaboration with specified individuals and entities, to prepare a report on artificial intelligence and its impact on the workforce.
[Fed] Artificial Intelligence Training for the Acquisition Workforce Act. Bill S. 2551 (related to H.B. 7683) (Enacted October 17, 2022). This bill requires the Office of Management and Budget (OMB) to establish or otherwise provide an artificial intelligence (AI) training program for the acquisition workforce of executive agencies (e.g., those responsible for program management or logistics), with exceptions.
[Fed] To include certain computer-related projects in the Federal permitting program under title XLI of the FAST Act, and for other purposes. Bill HB 7870 (Pending – May 2022). Provides for the expedited review of infrastructure projects concerning semiconductors, artificial intelligence and machine learning, high-performance computing and advanced computer hardware and software, quantum information science and technology, data storage and data management, or cybersecurity.
[IL] Illinois Future of Work Act. Bill IL S.B. 2481 (Pending Feb. 2021). Creates the Illinois Future of Work Act and the Illinois Future of Work Task Force, which is given the responsibility to identify and assess the new and emerging technologies that have the potential to significantly affect employment, wages, and skill requirements and determine how to deploy these technologies to benefit workers and the public good, among other duties.
[MA] An Act Establishing a Commission on Automated Decision-Making by Government in the Commonwealth. Bill MA H.B. 4512, see also Bill S 60 (Pending Apr. 2022). Establishes a commission within the executive office of technology services and security for the purpose of studying and making recommendations relative to the use by the commonwealth of automated decision systems that may affect human welfare.
[NJ] An Act Requiring the Commissioner of Labor and Workforce Development to Conduct Study and Issue Report on Impact of Artificial Intelligence on Growth of State’s Economy. Bill NJ A 168 (Pending Jan. 2022). Requires the Commissioner of Labor and Workforce Development to conduct a study and then issue a report with findings assessing the impact of AI tools on labor productivity and economic growth for the state of New Jersey.
[NY] An Act creating “The Commission to Study the Impact of Automation and Artificial Intelligence on the New York Labor Force”; and providing for the repeal of such provisions upon expiration thereof. Bill A 09885 (Pending Apr. 2022). Creates the Commission to Study the Impact of Automation and Artificial Intelligence on the New York Labor Force.
[PA] An Act amending the act of April 9, 1929 (P.L.177, No.175), known as The Administrative Code of 1929, in powers and duties of the Department of State and its departmental administrative board, providing for artificial intelligence registry.. Bill HB2903 (Pending Oct. 2022). An Act amending The Administrative Code of 1929, providing for the creation of an artificial intelligence registry, a registry of businesses operating artificial intelligence systems in the Commonwealth of Pennsylvania.
[RI] An Act Relating to State Affairs and Government. Bill RI S 2514 (Pending Mar. 2022). Establishes a commission tasked with reviewing and assessing the uses of and purposes for which AI systems are used by the state.
[RI] An Act Relating to State Affairs and Government. Bill RI HB 7223 (Pending Feb. 2022). Establishes a commission to study the use of artificial intelligence in the decision-making process of state government.
[VT] An act relating to the creation of the Artificial Intelligence Commission. Bill H.410 (Enacted May 2022). Creates the Division of Artificial Intelligence, which will be responsible for overseeing anything related to the development, procurement, or use of AI by State government.

§ 1.3. Blockchain

Cases

United States Supreme Court

SEC v. W. J. Howey Co., 328 U.S. 293, 66 S. Ct. 1100 (1946). The term “security” includes the catch-all term investment, which this court defined as composed of four elements: (i) an investment of money, (ii) in a common enterprise, (iii) with a reasonable expectation of profits, (iv) to be derived from the entrepreneurial or managerial efforts of others.

First Circuit

CFTC v. My Big Coin Pay, Inc., 334 F. Supp. 3d 492 (D. Mass. 2018). My Big Coin Pay Inc. moved to dismiss the case, arguing that the CFTC had no jurisdiction over the particular virtual currency at issue, My Big Coin (MBC). The Court held that the CFTC had sufficiently alleged that MBC “is a virtual currency and it is undisputed that there is futures trading in virtual currencies (specifically involving Bitcoin).”

United States v. Mansy, No. 2:15-cr-198-GZS, 2017 U.S. Dist. LEXIS 71786 (D. Me. May 11, 2017). The court upheld a virtual currency-related unlicensed money transmitting indictment.

Second Circuit

CFTC v. Hdr Glob. Trading Ltd., No. 1:20-cv-08132, 2022 U.S. Dist. LEXIS 82960 (S.D.N.Y. May 5, 2022). The court found that BitMEX and related entities, operated an unregistered trading platform, violating AML rules, and various CFTC regulations.

Friel v. Dapper Labs, No. 1:21-cv-05837-VM (S.D.N.Y. Oct. 8, 2021). Class action developer of NBA TopShots NFTs for sale of unregistered securities.

Securities and Exchange Commission v. BitConnect, et al., No. 1:21-cv-07349 (S.D.N.Y., filed September 1, 2021). The court entered judgments against Glenn Arcaro and his company, Future Money Ltd., for the promotion of the BitConnect “lending program” because of the sale of unregistered securities and failing to be registered as broker-dealers with the SEC.

CFTC v. Control Finance-Limited, No 19-cv—5631 (June 17, 2019). CFTC alleged defendant exploited public enthusiasm for Bitcoin by fraudulently obtaining and misappropriating at least 22,858.822 Bitcoin—worth at least $147 million at the time—from more than 1,000 customers. $571,986,589 fine/restitution.

CFTC v. Gelfman Blueprint, Inc., No. 17-CV-07181 (PKC), 2018 U.S. Dist. LEXIS 207379 (S.D.N.Y. Oct. 1, 2018). Defendants, who solicited investments in Bitcoin, were charged with fraud, misappropriation, and issuing false account statements. The CFTC argued that Defendants ran a virtual currency Ponzi scheme by soliciting more than $600,000 from approximately 80 persons. The CFTC stated the respondents’ scheme was a fake strategy, where “payout of supposed profits . . . in actuality consisted of other customers’ misappropriated funds.”

CFTC v. McDonnell, 332 F.Supp. 3d 641 (E.D.N.Y. 2018). The district court stated that “virtual currency may be regulated by the CFTC as a commodity.” Moreover, the CFTC’s “broad statutory authority . . . and regulatory authority . . . extend to fraud or manipulation in the virtual currency derivatives market and its underlying spot market.”

United States v. Murgio, 209 F.3d 698 (S.D.N.Y. 2016). The court concluded that to establish criminal liability under the unlicensed money transmitting business statute, the USAO must prove that a person or business (a) transferred on behalf of the public; (b) funds; (c) in violation of State or Federal licensing and registration requirements, or with knowledge that the funds were derived from a criminal offense.