
In what may be the SEC’s first AI-washing enforcement action against a reporting company, on January 14, 2025, the agency brought a settled enforcement action against Presto Automation, a restaurant services technology company, based on the company’s alleged misrepresentations “regarding critical aspects of its flagship artificial intelligence (“AI”) product, Presto Voice.” A copy of the SEC’s January 14, 2025 press release about the action may be found here. The agency’s January 14, 2025 Order in the proceeding can be found here.
Presto Automation provides technological products and services to the restaurant industry. Presto became a publicly traded company through a September 2022 merger with a SPAC. The company was listed on Nasdaq until September 2024. The company’s flagship artificial intelligence (AI) product, Presto Voice, employs AI-assisted speech recognition technology to automate aspects of drive-thru order taking at quick-service restaurants.
The SEC alleges that between November 2021 and May 2023, the company made misrepresentations about its use and the capabilities of its AI-based product in Commission filings and public statements.
Specifically, the agency alleges that the company “failed to disclose that, for a period of time, the AI speech recognition technology in all units of Presto Voice that the company had then deployed was owned and operated by a third party.”
The SEC alleges further that subsequently, after the company Presto did deploy Presto Voice units powered by its own AI speech recognition technology for some customers, the company “falsely claimed that its own AI product eliminated the need for human order-taking. In fact, the vast majority of drive-thru orders placed through this version of Presto Voice required human intervention.”
As part of the resolution of the enforcement proceeding the company agreed to a cease-and-desist order. There was no civil penalty imposed.
Discussion
In her post on TheCorporateCounsel.net blog discussion the SEC’s action against Presto Automation (here), Liz Dunshee noted that she is “pretty sure” that this action represents the first AI-washing related enforcement action against a reporting company. As far as I know, she is correct about that.
It will also be interesting to readers of this blog that Presto Automation was a de-SPAC company. So this enforcement action is not only AI-related but it is SPAC-related as well. Like so many post-SPAC merger companies, this company seems to have stepped into its role as a publicly traded company without being fully prepared.
Among other things, the SEC’s order alleges that Presto “had no established process for drafting, reviewing, or approving periodic or current reports required to be filed with the Commission.” The order also alleges that the company “never implemented disclosure controls and policies and procedures for reviewing periodic or current reports required to be filed by the company.” As a result, the Order alleges, the company “did not have an established process to ensure that the information required to be disclosed in its filings was recorded, processed, summarized, and reported accurately, or that information required to be disclosed by the company was accumulated and communicated to Presto’s management for timely assessment and disclosure pursuant to applicable rules and regulations.”
The bottom line is that the company, like so many other companies that are hit with AI-washing allegations, overstated the capabilities of its AI-based products and services.
It is worth noting that this settled enforcement actions was filed in the waning days of the Biden Administration SEC. It remains to be seen to what extent alleged AI-related misrepresentations will be a priority for the SEC under the new Trump administration.