Ex-FTC boss Khan urges Uncle Sam to break out the handcuffs for AI CEOs, citing 1934 precedent

Former FTC chair Lina Khan wants the federal government to know that it doesn't need to wait for new laws to address AI threats. There are already laws and regulations on the books, including a 92-year-old Supreme Court precedent, that she argues could be used to hold AI companies and, in some circumstances, their executives accountable for their actions. Khan’s comments on X Sunday follow a flurry of activity from the leadership of OpenAI, Anthropic, Microsoft, and xAI aimed at doing what can only be described as trying to corner regulators into giving them their way. The former Biden administration trust buster pointed to numerous examples of current laws, and prior precedent, that could be used to hold frontier labs to account, even if they’re currently doing all in their power to change the conversation. “We shouldn’t let discussions about new legal regimes distract from the fact that there’s no AI exemption from laws already on the books,” Khan said. “Law enforcers already have authority to charge companies and their CEOs for creating and releasing dangerous, unvetted, or defective products.” As one example, Khan points to laws governing dangerous and defective products as an avenue to prosecute AI leaders. She notes that the release of unvetted models or agents can violate consumer protection laws, and that shipping tools “without implementing adequate measures to detect and stop rogue or defective AI agents” could be prosecuted under rules governing unfair and deceptive trade practices. Particularly timely, Khan also pointed to existing laws prohibiting unfair methods of competition. This, she notes, includes cases “where firms pursue dangerous behavior, aware that doing so may compel rivals to do the same.” There’s no leap needed to understand what Khan’s talking about here. OpenAI’s agents broke out of their intended sandbox and gained unauthorized access to Hugging Face systems - conduct that could raise serious criminal-law questions if carried out knowingly by a human. After doing some digging to look at its own agents' behaviors, Anthropic has essentially copped to similar activities that would be criminal if a meatbag was behind the keyboard instead of a simulated silicon brain. OpenAI’s agents have since been identified as the culprits in other misuses of online assets that, again, would be crimes were they perpetrated by a human. Khan points to a 1934 US Supreme Court decision to argue that the current battle between American frontier labs, which has put parts of the internet in the firing line of agents that escaped their intended constraints, could amount to an unfair method of competition if companies feel compelled to take similar risks to keep up. That decision, FTC v. R.F. Keppel & Bro, includes a passage where the justices argue that, if keeping up with the competition requires companies to “descend to a practice which they are under a powerful moral compulsion not to adopt,” that competition is unfair whether or not it’s criminal. Without weighing in on who shot first, OpenAI and Anthropic appear locked in a race to build increasingly capable AI while also warning, as both did over the weekend, that those systems could become dangerous without stronger safeguards and coordinated limits. Aside from the bad activity of the frontier labs themselves, Khan points out that the “highly concentrated and interconnected structure” of the AI industry also merits scrutiny for its potential to create “major risks and conflicts of interest.” Again, Khan points out this isn’t a hypothetical. “OpenAI could face liability given the Hugging Face incident, but Hugging Face being bought up by Nvidia means that we’re unlikely to see it file a lawsuit over this,” Khan noted, “given Nvidia’s strong incentive to see OpenAI continue full speed ahead.” Nvidia has dumped billions of dollars into OpenAI, becoming a centerpiece of the lab’s datacenters that power ChatGPT. Why, then, would the soon-to-be-owner of Hugging Face opt to hold one of its major partners accountable and further push it to build its own hardware? “We can and must pursue any new efforts alongside enforcing existing laws,” Khan said. Let’s be frank, though: The current administration is unlikely to do anything except capitulate and allow the AI industry to capture its regulators, if it even bothers to implement new regulations at all. Trump has already rejected the AI industry’s weekend calls for regulation, declaring himself to be the only guardrail the AI industry needs. As the AI industry leaders basically admitted over the weekend, whichever one of them blinks first stands to lose, so every single frontier lab in the US is going to keep pushing full steam ahead unless all of them agree to hit the brakes and pace their development. With Trump and other Republican leaders rejecting those calls, Khan’s argument leaves her former agency and other state and federal regulators as potential avenues for action. Kirk Sigmon, a founding partner at technology law firm KellDann Law, told us that it’s unlikely federal regulators will take any action. “Most governments are desperate not to kill a nascent technology as it grows, especially when other countries are allowing it to grow,” Sigmon told The Register. He said the only actions against the industry he expects to see in the next few years are “easy wins” in places like deepfake porn, impersonation, and AI-enabled scams. “I very much doubt we'll see much action … against the entire process of training, or the like - that's likely to be perceived as strangling the industry.” In other words, fire up the boilers - it’s full speed ahead toward the day AI does something truly devastating and we all gnash our teeth and wail about how something should have been done earlier. ®