US regulatory action on the tech sector may come too late — or not at all

The writer is international policy director at Stanford University’s Cyber Policy Center

Between the meltdown of cryptocurrency exchange FTX, Elon Musk’s adolescent toying with Twitter, and the appearance of the disruptive chatbot ChatGPT, 2022 was a confrontational year for tech companies. It left society reeling. Now crashing stock prices have finally delivered a moment of reckoning, bursting the bubble of those who peddled a narrative of unregulated, “permissionless” innovation and its inexorable success.

Although FTX and Twitter must deal with their own leadership problems, and OpenAI’s breakthrough will be seen by many as progress rather than a threat, these disparate examples tell a common story: sooner or later the lack of guardrails produces the potential for damage to society. So can we expect decisive regulatory action this year?

The answer unfortunately, at least in the US, is “no”. Washington’s lawmakers are laughed at in Silicon Valley, where companies are confident that their lobbying spend of about $100mn over the past two years will continue to steer proposed laws away from damaging their bottom line.

In Congress, hopes of finding a majority to rein in crypto brokers and social media giants, or to establish firm regulations of artificial intelligence, seem a mission impossible. Political divides are wider than ever, and the House of Representatives is at a historic moment of dysfunction after struggling to find the next Speaker. In 2022, initiatives towards greater antitrust regulation, data protection and even child protections online never managed to be brought to a vote or win over the majority. Given the speed of democratic decision-making, chances are that the US legal landscape in which billionaire tech bros operate will be remarkably similar at the end of 2023.

For Europeans, the answer on regulatory action is “yes, but”. A whole host of new laws are already in the works and will trim the sails of the Sam Bankman-Frieds and Elon Musks of this world, as well as those of Sam Altman of OpenAI. First, markets in crypto assets will be regulated. A new EU law seeks greater transparency regarding risks to consumers, better financial disclosure and oversight of company reserves and environmental harms. We now have to wait for the new law to come in to force this year.

For platforms such as Twitter, business as usual is over in the EU. The two-pronged legislation, the Digital Services Act and the Digital Markets Act, spell out new responsibilities for companies on moderating content, and clarify antitrust rules for gatekeeper companies. That means Musk will not enjoy limitless personal power over what content to allow on Twitter. There will also be greater transparency on algorithms. And here’s a date to mark in your calendar: February 17, a deadline for platforms to report the number of their active users.

On top of these new constraints, the EU’s AI Act, to be finalised this year, will be a world-leading law that takes a risk-based approach. Some very risky applications such as social credit scoring will be banned while the use of AI in chatbots would be identified as low risk. For generative AI (the technology used to power ChatGPT) the question is whether that label does justice to risks of bias in the underlying data sets that large AI models are trained on. Or would the application be considered risky if it comes up with misguided health solutions?

The political agreement within the EU means important work has already been done. Yet the power of the new rules to have an impact on crypto assets, social media platforms and artificial intelligence also depends on successful enforcement. That is a space to watch with a critical eye.

Once EU rules prove their promise in practice, American internet users and lawmakers can observe from the other side of the Atlantic that US technology companies are perfectly capable of complying with laws that ensure a fairer economy, respect for civil rights and the protection of consumers and investors. And they can already see the challenges of unregulated technologies all around us. “No industry did more harm than tech,” the investor Roger McNamee said last week.

Last year offered plenty of reminders that the marketing and lobbying narratives of tech companies are not matched by the level of societal value they create. Yes, crypto assets, social media platforms and AI companies are all different, and the companies in those sectors face distinct challenges. But to wait for the next disaster resulting from a lack of regulation and oversight would be a mistake. Here’s to making 2023 a turning point.