The law needs to stand up and make an example here, otherwise this will just continue and at some point a real disaster will occur due to AI.
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Being wrong is usually not a punishable offence. It could be considered defamation, but defamation is usually required to be intentional, and it is clearly not the case here. And I think most AIs have disclaimers saying that that may be wrong, and hallucinations are pretty common knowledge at this point.
What could be asked is for the person in question to be able to make a correction, it is actually a legal requirement in France, probably elsewhere too, but from the article, it looks like Gemini already picked up the story and corrected itself.
If hallucinations were made illegal, you might as well make LLMs illegal, which may be seen as a good thing, but it is not going to happen. Maybe legislators could mandate an official way to report wrongful information about oneself and filter these out, as I think it is already the case for search engines. I think it is technically feasible.
I was just yesterday brooding over the many layers of plausible deniability, clerical error, etc that protect the company that recently flagged me as a fraud threat despite having no such precedent. The blackbox of bullshit metrics coupled undoubtedly with AI is pretty well immune. I can demand review from the analysis company, complain to the State Attorney General, FTC and CCPA equivalents maybe, but I'm unsure what else.
As for outlawing, I'll present an (admittedly suboptimal) Taser analogy: Tasers are legal weapons in many jurisdictions, or else not outlawed; however, it is illegal to use them indiscriminately against anyone attempting a transaction or job application.
AI seems pretty easily far more dangerous than a battery with projectile talons. Abusing it should be outlawed. Threatening or bullying people with it should be too. Pointing a Taser at the seat of a job application booth connected to an automated firing system should probably be discouraged. And most people would much rather take a brief jolt, piss themselves and be on with life than be indefinitely haunted by a reckless automated social credit steamroller.