42 State Attorneys General Subpoena OpenAI Days After IPO Filing Over Sycophancy and Child Safety

[DarkMatter]

A coalition of 42 state attorneys general launched a sweeping formal investigation into OpenAI on June 12, with New York AG Letitia James serving the company with a broad subpoena. The timing was brutal: OpenAI had filed its S-1 IPO registration just four days earlier. The subpoena demands records on advertising practices, user engagement and retention, model sycophancy, handling of consumer and health data, treatment of minors and seniors, and internal safety policies. It is the broadest coordinated state-level legal action ever launched against an AI company.

The sycophancy angle is particularly significant because it names a documented technical problem with ChatGPT's design as a consumer protection issue. AI sycophancy refers to models telling users what they appear to want to hear rather than what is accurate or safe, a byproduct of reinforcement learning from human feedback. A 2025 Stanford study found a 58 percent sycophancy rate across leading AI models on medical and mathematical tasks. The attorneys general appear to be arguing that this is not a quirk but a deceptive design choice that harms users.

For OpenAI's IPO the legal exposure is directly material. The S-1 registration must disclose this investigation and it joins the Florida civil lawsuit naming CEO Sam Altman personally and a separate Florida criminal investigation tied to a mass shooting where the alleged perpetrator consulted ChatGPT. Analysts have historically seen comparable Big Tech consumer protection probes compress IPO pricing by 10 to 18 percent. OpenAI has said it will cooperate constructively but the investigation adds significant uncertainty to a listing that was already expected to be one of the largest in tech history.

OpenAI faces investigation from state attorneys general | TechCrunchtechcrunch.com