Preparing for Washington State’s New Chatbot Disclosure Law
By Charlsey Zyne
June 30, 2026
Washington is one of the latest states to further regulate artificial intelligence technologies, with Governor Bob Ferguson recently signing House Bill 2225, known as the Chatbot Disclosure Act. The law takes effect on January 1, 2027, and imposes new disclosure obligations on operators of certain AI-powered chatbots designed to simulate human relationships and ongoing interactions.
The law reflects growing concern over increasingly sophisticated AI systems that can engage users in extended, human-like conversations. Businesses, including financial institutions, developing, deploying, or utilizing these technologies should evaluate their compliance obligations and potential AI legal risks now if they have not already done so.
Which Chatbots Are Covered?
The Chatbot Disclosure Act applies to operators of AI “companion” chatbots. Under the statute, a companion chatbot is an AI system that simulates human responses and can sustain a relationship with users over multiple interactions.
The law does not apply to every chatbot. Exemptions include:
- Chatbots used solely for a business’s operational purposes
- Certain educational tools
- Voice command devices
- Chatbot features within video games that do not engage users on specified sensitive topics such as mental health, self-harm, or suicide
Disclosure Requirements for Companion Chatbots
The centerpiece of the law is a set of requirements that companion chatbot operators clearly and continuously disclose that users are interacting with an AI system rather than a human being.
Specifically, operators must:
- Inform users that the chatbot is “artificially generated and not human” at the beginning of each interaction
- Repeat the disclosure every three hours during any continuous conversation
The law imposes additional safeguards when minors are involved. If an operator knows that a user is a minor, or if the chatbot is directed toward minors, the operator must implement reasonable measures to prevent manipulative engagement techniques. For example, the law seeks to prevent AI systems from encouraging emotional dependency by praising minors for repeatedly returning to the chatbot for support or companionship.
Risks and Considerations for Financial Institutions
The Chatbot Disclosure Act is enforceable under Washington’s Consumer Protection Act (RCW 19.86), creating meaningful compliance and litigation risks for businesses. Notably, the statute provides consumers with a private right of action. As a result, individuals who believe they have been harmed by violations of the law may file lawsuits against chatbot operators. Available remedies include actual damages, as well as discretionary treble damages of up to $25,000.
For financial institutions and credit unions, the key compliance considerations include:
Third-party vendor tools
Compliance extends beyond internally developed AI tools. Financial institutions using vendor-provided chatbot technology should conduct appropriate due diligence to determine whether those solutions could be considered “companion chatbots” under the Act.
Contract and oversight obligations
Vendor contracts and compliance reviews should address whether the chatbot meets the law’s disclosure requirements and whether the vendor has implemented appropriate safeguards, particularly where minors may interact with the technology.
Out-of-state reach
Although the Act is a Washington state law, financial institutions outside Washington should consider whether their AI-powered chatbots are accessible to Washington consumers and whether cross-state activity could trigger compliance obligations.
Broader AI governance
While the Act is narrowly focused on AI companion chatbots, it reflects a broader trend toward increased regulation of artificial intelligence. Financial institutions using or evaluating consumer-facing AI tools should monitor evolving disclosure and governance requirements and assess related AI legal risks.
Looking Ahead
Washington’s Chatbot Disclosure Act is just one example of a growing trend across the country that places artificial intelligence at the forefront of legislative and regulatory efforts. As federal and state lawmakers continue to examine the risks and benefits of AI technologies, credit unions and financial institutions should expect additional compliance obligations, disclosure requirements, and consumer protection measures in the coming years.
Organizations that proactively establish governance frameworks for AI today will be better positioned to adapt to this rapidly evolving regulatory landscape. SW&M can help organizations assess emerging AI compliance obligations, strengthen governance programs, and prepare for evolving regulatory requirements.
Final Takeaways
Washington’s Chatbot Disclosure Act is unlikely to be the last AI-specific law or associated AI legal risks businesses will need to navigate. As AI regulation continues to evolve, businesses should assess whether their existing AI tools, disclosures, and governance practices align with emerging legal requirements. Our team at SW&M will continue monitoring developments and advising clients on the practical implications of new AI laws.
About the Author
Charlsey Zyne
Charlsey Zyne is an Associate Attorney at SW&M, focusing on Contracts, FinTech, and Real Estate matters. She brings a wealth of experience advising clients on contract negotiations, corporate governance, intellectual property disputes, and business formation. Her practice spans multiple industries, […]
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