Addressing Regulatory Arbitrage in the AI Supply Chain
Addressing Regulatory Arbitrage in the AI Supply Chain
https://www.techpolicy.press/addressing-regulatory-arbitrage-in-the-ai-supply-chain/
Publish Date: 2026-06-16 09:21:00
Source Domain: www.techpolicy.press
This post is part of a series of student essays produced in collaboration with the Berkman Klein Center for Internet & Society at Harvard University. Read more in the series here.
Protesters march through downtown Memphis, Tennessee, carrying signs opposing Elon Musk and xAI during the “Get Out of Memphis” demonstration on October 4, 2025. (Photo by AUSTIN JOHNSON/AFP via Getty Images)
Last year, my phone’s photo album image classifier sorted me into three people: one before my transition, one during, and one after. While my face stayed the same, the algorithm apparently failed to understand my fluid identity. It would appear that people like me were missing from the training data, or perhaps simply that no one designing the system stopped to ask how we want to be represented.
This failure of recognition extends far beyond my personal experience. It is symptomatic of a major gap in protection and representation throughout entire artificial intelligence supply chains. We see it in Kenyan content moderators earning $2 an hour, denied basic labor protections while absorbing the internet’s most traumatic content. We see it in Boxtown, a historically Black neighborhood in South Memphis with cancer risk quadruple the national average that is now enduring pollution from gas turbines powering a neighboring supercomputer. The populations most harmed by AI consistently have the least agency over its development, creation, and deployment.
These realities all point to the power of regulatory arbitrage. Reminiscent of the decade-long battle to regulate e-cigarettes, AI companies exploit legal gray areas to cause familiar harms through new mechanisms, all while evading existing legal protections in place. AI repackages the systemic issues marginalized communities have fought so hard against: bias, labor exploitation, and environmental racism. And deliver it through something new: algorithms, micro-task platforms, and data centers. Nevertheless the core harms remain the same.
