AI & Web3 Weekly Legal Newsletter

• Release Date: Wednesday, May 20, 2026

• Week in Review: May 13-20,2026

AI & Web3 Law-Key Developments

U.S. COURTS

• May 14-Bartz v. Anthropic fairness hearing held. Judge Martínez-Olguín (N.D. Cal.) heard the $1.5 billion Al copyright settlement, pending approval. The tone of the hearing was positive; written approval order expected imminently, with author payouts (~$3,000/work) to follow in June.

• May 18- Musk v. OpenAl: Jury rejects all claims in under 2 hours due to expiration of statute of Limitation. After a three-week trial in Oakland, a nine-person jury unanimously threw out every claim Elon Musk brought against OpenAl and Sam Altman, because Musk was found to have sued too late under the statute of limitations. He had sought $134 billion in damages and Altman's ouster. Musk immediately announced an appeal.

U.S. LEGISLATION

• May 11-CLARITY Act full text released. The Senate Banking Committee published the complete text of the Digital Asset Market Clarity Act ahead of its hearing-the most ambitious crypto market structure bill in the U.S. history, establishing an SEC/CFTC jurisdictional split for digital assets.

• May 14-CLARITY Act clears Senate Banking Committee 15-9. Passed on a largely party-line vote with two Democrats crossing over. Now heads to the full Senate floor, where it needs 60 votes to overcome a filibuster.

• May 14-Colorado Governor signs revised Al Act (SB 26-189). Colorado's original first-in-the-nation Al consumer protection law is repealed and replaced. The new law narrows the scope from "high-risk Al systems" to automated decision-making technology (ADMT) in "consequential decisions." Takes effect January 1, 2027.

• May 20-TAKE IT DOWN Act platform compliance deadline (today). The one-year window for covered online platforms to build notice-and-takedown systems for non-consensual AI deepfake intimate imagery expired today. Platforms without operational removal systems are now in breach, with FTC enforcement authority active.

CHINA

• May 17-China announces its first-ever comprehensive Al law. The State Council released its 2026 Legislative Work Plan, formally committing-for the first time using explicit language-to drafting a single unified Al statute. This replaces China's current approach of separate, fragmented CAC rules on algorithms, generative Al, deepfakes, and recommendation systems. The law will cover data, computing power, algorithms, IP rights, cybersecurity, and supply-chain security under one framework. No draft published yet, but it is formally on the 2026 legislative agenda. This is the biggest China Al policy development of the year.

EU

• May 13-20 -EU AI Act Omnibus full details published. The political agreement from May 7was formally detailed this week. The most significant update: the high-risk Al compliance deadline has been extended by 16 months-from August 2026 to December 2, 2027-for Al systems used in hiring, healthcare, education, biometrics, and border control. Al embedded in physical products (lifts, toys, machinery) gets even longer, to August 2, 2028. Formal adoption by Parliament and Council expected before August 2026.

• May 13-20-"Nudification" app ban confirmed, effective December 2,2026. The Omnibus adds a new explicitly prohibited Al practice: Al systems that generate non-coonsensual sexually explicit or intimate imagery. The ban covers images, video, and audio, and uses a foreseeability standard-meaning any Al system where such misuse is reasonably foreseeable is caught, not just tools purpose-built for it. Penalties: up to €35 million or 7% of global turnover. Applies to CSAM as well.

• May 8-20 (ongoing) -EU Al transparency guidelines consultation still open. Draft guidelines on Article 50 disclosure obligations-requiring companies to inform EU users when they interact with Al or consume Al-generated content-remain open for public comment. Deadline: June 3, 2026. From August 2, 2026 onward, these disclosure obligations become enforceable.

• May 20- EU opens formal MiCA "fit for purpose" review. In a surprise move, the European Commission launched a public consultation today asking whether MiCA-its landmark crypto law only fully in force since late 2024-- already needs updating. Open until August 31, 2026. The hottest issue: whether MiCA's ban on stablecoins paying interest should be lifted, given that U.S. dollar stablecoins under the GENIUS Act can pay yield, putting EU-issued stablecoins at a competitive disadvantage. The review also covers DeFi, staking, lending, NFTs, and classification of wrapped tokens and synthetic assets. If the evidence supports it, a formal legislative amendment to MiCA could follow.

Summary Table-May 13-20 Only

COMPLIANCE ACTION ITEMS

What Al Companies Should Do Now

U.S. - Federal Level

• TAKE IT DOWN Act (U.S. Federal): If your platform hosts user-generated content, verify your notice-and-takedown system for non-consensual intimate imagery is operational today (compliance deadline: May 20, 2026). Failure to comply is an FTC enforcement trigger.

• Human Authorship Documentation: For any Al-generated content your company or clients intend to copyright, ensure clear evidence of human creative contribution at each stage. Post-Thaler, pure Al-generated outputs have zero copyright protection in the U.S.

California

• California AB 2013 (Training Data Transparency): If you are a generative Al developer serving California users, ensure your public training data disclosures are complete and accurate.

• Algorithmic Pricing Review (California AB 325): California now treats using a shared Al pricing tool as price-fixing-companies face $6 million fines and executives face up to 5 years in prison, so any business using third-party pricing software needs an antitrust review immediately.Real estate, hospitality, rental, and ride-share platforms are the highest risk.

• California AB 853: Begin or accelerate compliance build for the August 2, 2026 deadline. Large online platforms and generative Al-hosting services must have disclosure mechanisms operational.

• Training Data Audit: In light of Bartz v. Anthropic, conduct a full audit of all training datasets to confirm lawful sourcing. Any dataset derived from piracy sites (LibGen, Z-Library, PiLiMi,etc.) must be identified, quarantined, and legal exposure assessed immediately. Implement a documented data provenance program going forward.

New York

• New York RAISE Act (Effective January 1, 2027): If your company is a frontier model developer (>10^26 FLOPs, >$100M training cost, >$500M revenue) with any New York nexus, begin building: (a) a safety protocol document for publication, (b) a 72-hour incident response and reporting workflow for DFS, and (c) a DFS registration plan. Note: distilled/fine-tuned smaller models may also be covered-assess your model is necessary.

China

• China Comprehensive Al Law: Begin mapping all Al products and services deployed in China against existing CAC rules (generative Al measures, algorithm regulations, deep synthesis rules).

• China CAC Interactive Al / Virtual Human Rules: Draft compliance frameworks for any companionship, avatar, or emotionally interactive Al products deployed in China ahead of expected H2 2026 promulgation.

EU

• EU AI Act High-Risk Deadline (August 2, 2026): Confirm your AI system's risk classification under the Act. If your system falls into a high-risk category, all conformity assessment obligations must be met by August 2. Watermarking/disclosure systems must be operational by December 2, 2026.

What Web3 Companies Should Do Now

U.S.

• CLARITY Act Monitoring: The bill cleared the Senate Banking Committee on May 14. If enacted, it will redefine your regulatory obligations-whether you face SEC (securities) or CFTC (commodity) oversight turns on the bill's decentralization threshold.

• SEC/CFTC Joint Interpretation: Review your current activities against the March 2026 joint interpretation and the April 2026 UI provider statement. If you operate a trading interface for cryptoasset securities, confirm whether you qualify for the no-action treatment on broker-dealer registration.

• GENIUS Act-Tax Reporting (U.S.): Exchanges and wallet providers must begin building systems to capture and report user transaction data to the IRS by January 31, 2027.

• GENIUS Act-Stablecoin Compliance (U.S.): If you issue or plan to issue a stablecoin in the U.S., confirm 100% reserve backing with qualifying liquid assets. Implement reserve auditing and attestation processes.

• DeFi Protocol Review: The CLARITY Act's DeFi safe harbor provisions are still being negotiated. Until enacted, DeFi protocols operating with U.S. users remain in a legal gray zone. Advise clients to minimize U.S. user exposure or implement KYC for U.S.-facing interfaces.

Hong Kong

• Hong Kong Licensing: If you operate a digital asset trading platform or custody service with any Hong Kong user base, assess your SFC licensing status. operating without a license while the regime is fully active creates serious regulatory exposure.

• Hong Kong as Gateway: For clients seeking Greater China market access, Hong Kong's regulated virtual asset framework (SFC licensing, Stablecoins Ordinance, forthcoming custodian rules) is the only viable legal pathway. Assist clients in structuring HK-domiciled entities with clear firewalls from Mainland China operations.

Global

• AML/KYC Global Upgrade: Regulators across all major markets (U.S., EU, HK, Singapore, UAE) treat AML/KYC as a non-negotiable minimum. Clients should conduct a full AML program review against FATF Travel Rule requirements and local VASP obligations.

• DAO / Foundation Governance: Web3 DAOs and foundations should document decision-making, mission evolution, and governance changes carefully to defend against future claims of breach of founding purpose.

China

• Strict Avoidance: Any client or product with Mainland China nexus must completely avoid crypto transactions, stablecoin issuance, RWA tokenization, and Web3 service provision.

This briefing is prepared for informational purposes only and does not constitute legal advice. If you are seeking Al legal governance, or web 3 & digital assets compliance, feel free to reach out to our lawyers.

Many thanks!