FTC resolves another case involving “AI-washing”

On January 27, 2026, the Federal Trade Commission (FTC) announced the resolution of its case against Growth Cave, underscoring the agency’s continued focus on artificial intelligence (AI)-related marketing practices. While the FTC has been going through substantial changes, enforcement throughlines remain, including the application of the FTC Act against companies making deceptive claims about AI products.

Our alert explores the key points from Growth Cave and what they mean for businesses making AI-related marketing claims.

FTC’s position on AI-related marketing claims

In December 2025, FTC Chairman Andrew N. Ferguson stated that the agency has found “that, not infrequently, the representations those [AI] companies are making are wildly inaccurate.” Similarly, at an event in September 2025, Chris Mufarrige, Director of the FTC’s Bureau of Consumer Protection, emphasized:

Just like everyday products and services will have difficulty being adopted in the presence of fraud or other unfair methods of competition, AI cannot be broadly adopted in the market without trust in the marketplace. To reinforce that trust, the Commission is targeting fraudsters and other unscrupulous actors who make false and misleading claims related to their use of AI…[W]e remain a zealous law enforcement agency. Where a company breaks the law—such as by deceiving consumers about what their AI products or services can do or the sales they will generate—we will enforce the law. [Emphasis added.]

Since April 2025, the FTC has filed three cases alleging that defendants engaged in AI-related deceptive marketing claims. One case, Workado, was resolved earlier in 2026, while another, Air AI, remains pending.

Resolution of Growth Cave

In Growth Cave, among other allegations, the complaint asserted that the company misrepresented to consumers that its “AI software,” GrowthBox, would “automate nearly 100% of the process” of setting up and operating an online education course. According to the FTC, the technology instead “requires users to manually upload their advertisements, set appointments, and input messages that can be sent out to potential customers via text message and email.”

The proposed orders include a provision barring defendants from misrepresenting “[t]hat a product or service will use artificial intelligence (AI) to maximize revenues or otherwise enhance [its] profitability, effectiveness, or efficiency.”

The language appears to bar both:

1. Misrepresenting that a product uses AI when it does not; and
2. Making misleading claims that AI will improve the product’s profitability, effectiveness, or efficiency.

The FTC used nearly identical language in orders filed in May and June 2025 to resolve AI-related business opportunity cases that the agency filed in 2024, including Ascend Ecom, Empire Holdings Group, and FBA Machine. The FTC is expected to continue using this language in future orders involving similar marketing claims.

Looking ahead

Across administrations, the FTC has repeatedly warned marketers of AI products to ensure their claims are accurate. The agency has also backed those warnings with enforcement action. Sellers are encouraged to ensure that they can substantiate claims made for AI products and that they do not mislead consumers via AI references in marketing materials.

For more information, please contact the authors.