AI Is Moving Into Physical Products, And Out of Regulatory Reach

Matt Steinberg, a recent Policy Fellow at OTI, discusses in a Tech Policy Press article how AI wearables and toys blur the line between products and speech—raising urgent regulatory gaps in privacy and child safety.

To regulate AI effectively, we have to update our mental model of what AI is. It’s no longer just a chatbot or a website algorithm. It’s a product, a presence, and increasingly, a companion made possible by a quiet transformation in infrastructure. AI is now able to move fluidly among tools, services, and devices, transforming from a static program into something modular, embedded, and always on. If we keep treating AI as static software with guardrails rather than as a system that occupies physical, emotional, and social space, regulators will continue to fall behind.

The question isn’t whether AI will inhabit our physical world—it already has. The question is whether rules will catch up before it becomes so embedded that governing it is no longer possible.