Another week, another Ken Paxton lawsuit.
Texas Attorney General Ken Paxton filed a lawsuit against OpenAI and its CEO, Sam Altman, on Friday.
A press release announcing the legal action said: “OpenAI has failed to protect Texans, including children, from the many harms of relying on its artificial intelligence chatbot, ChatGPT.”
“A virtually unknown concept outside of science fiction until a handful of years ago,” the lawsuit begins, “AI now accounts for over a third of U.S. market value.” According to Paxton, those gains were not earned, but came from a “web of deceit and the exploitation of users.”
The lawsuit alleges that OpenAI violated two Texas laws: the Texas Deceptive Trade Practices—Consumer Protection Act and the Securing Children Online through Parental Empowerment (SCOPE) Act.
The SCOPE Act, passed in the 88th Legislative Session in 2023, was intended to prevent digital service providers from entering into user agreements with minors without parental or guardian consent. The law has faced several legal challenges, and was recently partially upheld by the U.S. 5th Circuit Court of Appeals regarding age verification.
On the first count, Paxton alleged that OpenAI deceptively marketed its flagship product ChatGPT regarding its “safety, accuracy, and reliability.” Because of this, the lawsuit says, “mass shooters have been aided and abetted in deadly rampages, vulnerable people have been encouraged into suicide, professionals have suffered public humiliation, users have lost critical thinking skills, and minors have become addicted to a tool that feigns human compassion to collect their data with no parental oversight.”
Regarding the SCOPE Act, Paxton alleged that ChatGPT lacked required age verification.
The lawsuit also seeks to hold OpenAI CEO Sam Altman personally liable for the alleged violations “and the deceptive statements he has personally made regarding his firms’ products.”
OpenAI (which is not an open source company or product at all) is certainly among the slimiest of AI companies, but Paxton faces a number of legal hurdles for the lawsuit to actually succeed in a court of law. The first is that OpenAI’s own terms and conditions state that “You may not use our Services for any illegal, harmful, or abusive activity,” which theoretically offers a certain amount of legal indemnification for end users misusing your product in violation of said terms. The terms also address the underage issue, stating “Minimum age. You must be at least 13 years old or the minimum age required in your country to consent to use the Services. If you are under 18 you must have your parent or legal guardian’s permission to use the Services.” That may or may not be considered sufficient to address the “access control” issue. Those same terms and conditions also specify binding arbitration when using their products, which is going to provide another hurdle to overcome in a lawsuit. Thirdly, if you’re using a product for free, it’s going to be hard to convince a court you have standing to sue them, as you have not entered into a commercial contract (actual or implied) with that company.
All that said, the Attorney General for the State of Texas is a very different category of plaintiff than the average Joe Schmoo, which probably addresses the standing issue. But even given that, it will be much more difficult to hold Altman personally liable for the actions of his company. Paxton will have to prove that Altman knew his product was defective and said that it wasn’t, rather than offering up a piece of beta software for free on a “use at your own risk” basis.
Of course, carrying a lawsuit all the way through to judgment is far from the only purpose of filing it. Forcing OpenAI to more rigorously enforce SCOPE Act controls and pay a sizable fine (as Paxton has successfully done with numerous other large companies) is probably a more likely endgame. Facing a litigant with such deep pockets as the State of Texas may be a powerful motivator for a company that might possibly want to go public in 2027 to settle sooner rather than later.
Given the possibility of discovery unearthing many unappetizing details about just how the AI sausage is being made, I would expect OpenAI and Altman to settle with Paxton, or likely Texas AG successor Mayes Middleton, sooner rather than later.
