New York Bill Proposes AI Chatbot Liability for Professional Advice

The New York State Senate has advanced Senate Bill (SB) 7263, a pivotal piece of legislation aimed at establishing liability for proprietors of artificial intelligence (AI)-powered chatbots that offer professional advice. Introduced in April 2025, this bill seeks to prevent AI systems from providing responses or guidance that, if delivered by a human, would constitute the unauthorized practice of a licensed profession under existing state law. This initiative reflects a growing legislative focus on regulating AI's societal impact, particularly in sensitive sectors.

Central to SB 7263 is the definition of a 'proprietor,' which encompasses any entity owning, operating, or deploying a chatbot, explicitly excluding third-party developers who merely license underlying technology. This distinction is crucial for pinpointing accountability within the intricate AI supply chain. The bill creates a private right of action, allowing individuals to sue for actual damages resulting from violations, with provisions for reasonable attorneys' fees in cases of willful misconduct. This enforcement mechanism represents a significant departure from traditional regulatory models, empowering citizens rather than solely relying on state agencies as primary gatekeepers.

Furthermore, the legislation mandates that proprietors provide clear, conspicuous, and easily understandable notice to users that they are interacting with an AI system. Critically, the bill stipulates that proprietors cannot waive or disclaim liability by simply disclosing the chatbot's non-human nature. This provision underscores a legislative intent to ensure genuine accountability, preventing companies from using disclaimers to circumvent responsibility for potentially harmful AI outputs.

The bill is framed against a backdrop of concerns, including warnings from organizations like the American Psychological Association regarding AI chatbots 'masquerading' as therapists and potentially reinforcing harmful user thinking. From a policy perspective, SB 7263 aligns with New York's long-standing approach to professional licensure and restrictions on corporate practice, extending these principles to AI systems capable of mimicking professional judgment at scale. It also follows another New York law from November 2025, which requires AI companion operators to address suicidal ideation, indicating a broader trend of states exploring diverse regulatory levers for AI, from transparency mandates to governance frameworks and mental health guardrails.

However, the effectiveness of SB 7263, if enacted, will largely depend on judicial interpretation of key terms such as 'substantive' response, 'practice' of a profession, and the precise scope of 'proprietor' in an evolving AI landscape. These ambiguities could lead to complex legal challenges, potentially impacting AI innovation and deployment strategies within the state.

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