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Recently, California Governor Gavin Newsome signed a bill designed to strengthen the protections for children
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in the online space. The focus of the bill is around AI and chatbots and how they interact with kids. To discuss the
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bill and its impact, welcome back to the show Kevin Orbach, who is professor of legal studies and business ethics here
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at the Wharton School. Kevin, great to see you again. >> Dan, always great to talk to you. I look
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obviously this is a very important topic when we're thinking about the development that we're seeing going on
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with AI but making sure that we have the protections necessary out there. So as this bill is signed and it's now being
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put in action. What are your thoughts about the importance of having something like this? There are a whole series of
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AI related laws that are under consideration in states throughout the US and especially in California which is
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where this particular bill was adopted. uh California has really been the the central battleground because it's such a
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big influential state and because Congress has not moved forward on federal legislation. So this particular
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bill comes about at a time where there is growing concern about AI companions and about children in particular being
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impacted in some cases uh causing self harm or even suicide because of their interactions with AI chatbots and
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companions. And so it's a bill that that actually does less than it sounds like
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at first, but at least tries to put a stake in the ground of saying that the state of California wants to put
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obligations on companies, especially the ones that are knowingly providing these
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services to children. So, you bring up an interesting point at at the beginning of that last statement and whether or
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not we're talking about this from the federal perspective or the state level
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and it feels like what we need to see is a lot more push from the state level because the federal level just doesn't
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be isn't able to, you know, move a a significant piece of legislation forward
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to really wrap the entire country in this. This has been the subject of tremendous debate. There was a push a
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few months ago to have a federal moratorum where the federal government would actually prohibit states from
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regulating AI for 10 years out of concern that comes from uh conservatives and from the AI companies that 50 states
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regulating in complex inconsistent ways is going to be a real burden on innovation. And there's some truth to
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that concern. But there's also some truth to the concern that you raised that these are real issues. States are
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the laboratories of democracy. They're closer to the ground. they should be taking action to protect their citizens.
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I ultimately think we need a balance. I think it doesn't make sense to have 50
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different state laws, but it also doesn't make sense to say we should just not do anything on these issues. So
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really the question is let's look at the legislation that's been adopted and
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assess it on its own merits. And I guess when you're talking about children and
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we obviously we know uh you know how much the internet is used by kids on different platforms, different websites,
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but you're talking about individuals that are in their development process, whether it be their physical
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development, but also their mental development as well. As you kind of alluded to, this is a very important
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subsect of the population that you really do need to look out for. The challenge is how do you look out for
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them? And this is a debate we've been having increasingly in recent years about social media that there is a law
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called Kappa that's really mainly about privacy but has to do with online services that know they're dealing with
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children but it doesn't require strict age verification. So if you tell Facebook that you're 13 years old, they
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have to do something. But if you don't or if you're a 13-year-old that pulls
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the drop down and says I'm 20 years old, um then potentially they're not
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obligated. We have the same issue with AI and there's all kinds of complexities
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around implementing those age restrictions but absolutely children are a distinct category and the AI companies
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themselves open AAI anthropic and so forth have acknowledged that they need to step up more and that you know
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there's one set of issues for adults thoughtfully using these AI tools. There's issues even with adults with
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with what's called AI psychosis that some small percentage of people it actually does drive them crazy. And so
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we need to address that. But with kids definitely uh I think whether it's mandated by law or just appropriate good
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governance and actions by the companies, they need to take some steps to address
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the issues with kids using these technologies. But there there are some out there that also say that if you have
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a higher regulatory kind of framework and and world around things like the internet that it's a way to kind of cut
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back on innovation. How do how do you respond to those those comments? It's not all or nothing. That's what I said
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before. People always want to say this law will stop innovation and it'll be a
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chilling effect. And that's a legitimate concern, but it's a problem to say
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anytime any law gets passed because the reality is all these companies are investing literally now trillions of
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dollars building this AI infrastructure because they're competing against each
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other. They're competing against China. They believe they are building something
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that is going to be absolutely foundational to not just the future of the internet, but the future of business
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and the world. And so, yes, there's an impediment and some cost that they have
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to put some guard rails on for kids, but I really don't think uh companies like
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OpenAI and Google and so forth are going to shut down what they're doing just
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because of those costs. >> So, where do you think we stand right now? And and maybe even more so, where
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do you think we're heading in terms of a regulatory framework on on obviously the
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internet, but also around AI? Well, that's a big question, but I I think that honestly the big pressure is
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not regulation. The big pressure is liability. Uh, one of the things that this law SB243 does is it does create
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private liability if companies are required to take steps to protect kids and fail to do so. But even without that
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law, there are a number of lawsuits that have already been filed by parents of kids that committed suicide after using
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some of these AI chatbot and companion tools. And they're doing it under general principles of tort law. And so I
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think uh regulation is important, but again, at the end of the day, most of these major companies acknowledge they
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need to take appropriate steps. Most of the enterprises who are the ones that I'm mainly working with that are all
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deploying AI acknowledge they need appropriate AI governance. And the big club that they're worried about is a
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lawsuit that's going to have massive amounts of damages. >> Kevin, always great to talk with you and
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get your insight. Thanks very much. >> My pleasure. >> Thank you. Kevin Warbach, professor of
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legal studies and business ethics here at the Wart School.