Litigation & Enforcement Attorneys Analyze AI's Impact on Financial Markets and Trading Regulation in New York Law Journal

In a new article published in New York Law Journal, litigation & enforcement partners Helen Gugel and JR Drabick, and associates Corey Still and Sofia Scotti, examine the growing intersection of AI and market manipulation law. The article, “AI and Financial Markets: Some Challenges and Strategies,” explores how traditional anti-fraud frameworks, including Section 10(b) of the Securities Exchange Act of 1934 and the wire fraud statute, may be applied to novel AI-driven trading strategies.

The authors analyze key challenges regulators face in establishing an intent to deceive, manipulate, or defraud when AI algorithms autonomously develop manipulative trading patterns, citing academic studies in which AI agents independently discovered collusive and manipulative strategies without human direction. The article also highlights recent regulatory developments, including the CFTC's creation of an Innovation Task Force and SEC Chairman Paul Atkins' remarks on the risks of technological abuse in the markets. The authors conclude with practical compliance considerations for financial institutions deploying AI-backed trading tools, including the importance of clear documentation of user intent and regular audits of algorithmic trading behavior.