As artificial intelligence becomes increasingly embedded in business operations, governments worldwide are intensifying scrutiny and unleashing a wave of regulations to address risks in this space. Global companies must contend with a complex, and often conflicting, patchwork of legal requirements.
In-house legal departments are uniquely equipped to lead organizational AI governance with their understanding of regulatory risk, operational context, and cross-functional collaboration.
AI regulation spans multiple legal domains, including global regulations, sector-specific guidance, and broader frameworks such as consumer protection, labor laws, privacy, and security. In the absence of comprehensive federal legislation, US federal agencies have started to shape AI oversight through rulemaking and enforcement actions.
Earlier this year, the Federal Trade Commission filed a complaint against Air AI for “AI washing,” which involves misrepresenting the AI capabilities of a product or service. In previous years, the Consumer Financial Protection Bureau issued a new rule regulating the use of AI and algorithms for home appraisals and valuations.
The Equal Employment Opportunity Commission previously settled with iTutorGroup for allegedly programming its AI to discriminate against certain job applicants. These cases signal increased federal interest in corporate AI practices through existing consumer protection frameworks.
Almost all states have introduced or enacted some form of AI legislation that is applicable to various industries and sectors. Most notably, California has led the charge with SB 53, the Transparency in Frontier Artificial Intelligence Act, a comprehensive law aimed at advanced AI models. Other states have implemented some form of AI laws, many of which regulate AI use in specific industries or sectors.
Globally, countries and regions are also moving forward with comprehensive AI laws. For example, the European Union’s sweeping AI Act has been gradually rolling out across member states since being enacted in 2024, with most substantive requirements taking effect in 2026.
Italy is the first EU country to implement a national AI Law that aligns with the EU’s AI Act. In China, newly effective generative AI labeling rules now apply to internet-based information service providers and require AI-generated content to be labeled both implicitly and explicitly, where applicable.
Companies that use AI, and whose products or services span multiple jurisdictions, must understand the applicability of these regulations. In-house legal teams are naturally equipped to interpret overlapping legal frameworks, anticipate and respond to enforcement trends, and integrate AI governance into overall enterprise strategy. In-house teams’ proximity to the business, combined with legal expertise, positions them ideally to help companies navigate this landscape.
Cross-department functionality. Legal’s fluency in the underlying technology helps unify key risk insights and regulatory considerations, supporting a more coordinated approach to implementation.
Because legal teams naturally work cross-departmentally across stakeholders and AI technology subject-matter experts, legal is uniquely situated to have or obtain a comprehensive inventory of AI usage and risks. The cross functionality enables legal teams to coordinate AI governance policies that align with regulatory obligations as well as an overall strategic business strategy for the company. This allows a more robust and informed ability to oversee and assess AI usage of primary and third-party vendor diligence and contracting.
Privilege protections. Given the way AI is increasing the speed and optimization of internal processes and external offerings to customers, companies are reevaluating their own systems and procedures to meet customers’ growing needs more quickly and at a bigger scale. AI’s development and implementation thus is highly proprietary in nature.
With in-house legal teams integrated in these conversations, decision makers can speak candidly about AI innovation and get understanding of the legal risks under attorney-client privilege. This can preserve business strategy from competitors due to the legal protections, as opposed to these types of conversations simply being everyday business communications.
Board level AI management. Senior legal leaders engage with the board and executive teams, translating complex legal and technical issues into strategic business insights.
This experience equips legal departments to elevate AI-related risks to governance conversations, further guiding the development and implementation of AI structures within the enterprise. Legal teams can use this strategic position to ensure enterprise-wide AI initiatives are not only compliant, but also aligned with broader business goals.
In-house legal teams can position themselves as strategic business partners and prepare their organizations for responsible AI in several ways.
Develop a comprehensive internal governance framework. Develop clear policies that define responsible implementation of AI. Consider the ethical implications across business units.
Conduct initial AI assessments. Conduct impact assessments to understand the scope, context, and decisions of current or future AI tools will influence within the enterprise. Understand the AI model limitations and maintain up-to-date documentation on use case justifications.
Stay informed. Monitor AI usage and impact across your organization, tracking evolving regulations, educating leadership and employees on policy updates, and understanding how third-party vendors use AI in ways that could implicate your business.
Protect confidentiality and trade secrets. Enact safeguards to protect against leaking sensitive data and maintaining privilege. Use AI tools that encrypt sensitive data or that requires access controls.
Drive innovation and competition. In-house counsel should lean into AI to drive teams toward ethical innovation and compliant implementation. Only use necessary guardrails that would enhance strategic growth and minimize legal exposure.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
Whitney Ford is corporate counsel at Sanofi, advising on US market access strategy, regulatory innovation, and AI integration.
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