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State and federal AI law clash. Address misuse fuels over half a billion in ETH losses. India provides new guidance for the re-entry of space objects. This edition of Risk Wrap highlights six developments shaping compliance, governance, and insurance exposure across high‑risk industries.
Deepfakes and Copyright Disputes Raise AI Liability Concerns in Brazil
Brazil is facing growing concerns over AI. A key issue is the unauthorized use of copyrighted materials. A prominent case involved the newspaper Folha de S.Paulo suing OpenAI over the use of its content to train AI models. The dispute was ultimately settled, with OpenAI agreeing to compensate the Folha media group. Unlike in the US, “fair use” doesn’t offer the same protection for companies looking to use copyrighted material without permission.
Banking fraud is another key area of concern. A survey by law firm Cescon Barrieu of 81 civil lawsuits involving AI before the São Paulo State Court of Justice (TJSP) found that 58% involved financial scams. The growing sophistication of deepfakes is expected to further increase the risk.
After financial fraud, AI-related cases most commonly involve social media algorithms (11.1%) and AI tools used in decision-making (7.41%).
Implications for brokers and their clients:
- Consider dedicated AI insurance that addresses risks like algorithmic errors, IP disputes, and other AI-related claims that may fall outside traditional policies.
- Consider crime cover to protect against losses from fraud, social engineering, and other financial crimes, including the heightened risk posed by deepfake technology.
- Consider errors and omissions cover to help protect AI developers and vendors against claims arising from faulty outputs, flawed systems, or financial losses suffered by clients relying on their technology.
Source: Valor International (August 6, 2026). AI lawsuits surge as autonomous agents raise new legal risks.
Emerging insurance industries mentioned: Artificial Intelligence Insurance.
Lines of business mentioned: Crime Insurance, Errors and Omissions Insurance.
Ethereum Address Misuse Drives $574.8 Million in Crypto Losses
A new study has identified 65,340 cases of address misuse on Ethereum and BNB Chain, resulting in losses of more than $574.8 million. The study used data provided by researchers at Sun Yat-sen University, Zhejiang University, Peking University, and other institutions. 49,344 cases involving contract account misuse were discovered, and 15,996 involved exposed accounts. The losses amounted to around 127,000 ETH and 17,700 BNB.
Some incidents stemmed from test addresses being copied and used in ordinary transactions. Attackers also exploited address reuse across blockchains, deploying malicious contracts at addresses where funds had become trapped, leading to losses of 3,446.37 ETH and 431.79 BNB across 469 cases.
The study further identified 17,270 cases involving EIP-7702, which allows externally owned accounts to delegate execution rights to smart contracts. Attackers used compromised private keys to assign malicious contracts to compromised accounts, enabling them to automatically drain incoming funds.
Implications for brokers and their clients:
- Consider crime coverage to help address direct financial losses from theft, fraud, and other criminal activity.
- Consider cyber liability insurance to respond to incidents involving compromised systems, ransomware, social engineering, and other threat vectors.
- Investigate digital asset and web3 insurance solutions that are designed to protect custodians, exchanges, and other firms in the sector from the above exposures and much more.
Source: Yellow (August 17, 2026). Ethereum Address Misuse Hits 65,340 Cases As Losses Pass $574.8M.
Emerging insurance industries mentioned: Digital Asset and Web3 Insurance.
Lines of business mentioned: Crime Insurance, Cyber Liability Insurance.
India’s New Re-entry Rules put Space Economy Liability in Focus
International space law doesn’t address every aspect of modern commercial space activity, leaving individual countries to establish their own rules for operators and third-party risks.
The Indian National Space Promotion and Authorisation Centre (IN-SPACe) recently provided new guidelines on the planned re-entry of space objects. The guidelines only apply when space objects are being brought back to Earth in a controlled way once their missions are complete. They don’t apply to objects that naturally decay from orbit or are expected to burn up on re-entry.
The guidelines address:
- Authorization: Indian entities planning controlled re-entry within or outside Indian territory must get authorization from IN-SPACe. Non-Indian entities looking to carry out re-entry within Indian territory can do so only through a compliant Indian-incorporated entity.
- Risk threshold: Operators must ensure that re-entry is executed in a way that minimizes the risks to people, property, and the environment. The expected casualty risk must be less than one in 10,000, and technical analyses that demonstrate compliance with this threshold must be submitted.
- Technical documentation: Applicants must submit information about the re-entry trajectory, mission profile, de-orbit strategy, failure scenarios, fragmentation and survivability analyses, ground casualty and reliability assessments, identification of impact or danger zones, and risk mitigation measures.
- Insurance: Operators must comply with third-party liability and insurance requirements.
Implications for brokers and their clients:
- Consider obtaining third-party liability cover from insurers with expertise in the space sector.
- Review existing policy wording to ensure controlled re-entry risks are adequately addressed.
- Investigate tailored space insurance to address the risks associated with launch, orbit, re-entry, third-party liability, and mission-specific risks.
Source: Business Standard (August 3, 2026). Explained: India’s new guidelines for planned re-entry of space objects.
Emerging insurance industries mentioned: Space Economy Insurance
New Opportunities and Risks in the Pipeline for Illinois Cannabis Cultivators
Illinois regulators have proposed letting cannabis companies grow outdoors, which researchers say could reduce energy use by 76% compared to indoor cultivation. The cost savings could then be passed onto consumers.
According to state law, cannabis must be grown in an enclosed, locked facility. Due to concerns about security and pesticides from other crops, the Illinois Department of Agriculture had previously banned outdoor cultivation entirely. However, the agency proposed changing its interpretation after two firms secured court approval for outdoor cultivation and a third challenged the restriction in court.
Under the proposed rules, licensed operators and craft growers would be able to cultivate cannabis outdoors alongside their existing facilities, provided that certain conditions are met. These include:
- Ensuring that growing areas are surrounded security wire-topped with continuous chain-link fencing that’s at least eight feet high.
- Keeping plants out of public view.
- Only using outdoor-grown marijuana to produce concentrates for products like vapes, oils, and edibles.
The proposal is now undergoing a 45-day public comment period.
Implications for brokers and their clients:
- Consider commercial property coverage to protect cultivation facilities, equipment, and outdoor growing areas against physical damage and other property risks. Review current policy wording to ensure that any changes to operations will be adequately addressed.
- Consider business interruption insurance to help protect against lost income and additional expenses following potential enforcement actions.
- Investigate specialized cannabis insurance that covers operational and production risks, product liability, media liability, counterfeiting, and other key exposures.
Source: Chicago Tribune (August 23, 2026): Illinois regulators propose allowing licensed cannabis producers to grow outdoors.
Emerging insurance industries mentioned: Cannabis Insurance.
Lines of business mentioned: Business Interruption Insurance, Commercial Property Insurance.
Potential Conflict Between Colorado’s AI Rules and Federal Oversight
Conflict may be on the horizon between Colorado’s AI law and federal law. The state’s Attorney General is continuing to develop rules under the Automated Decision-Making Technology (ADMT) Act, with public comments open until October 26, 2026.
The framework covers AI used for consequential decisions in areas including employment, housing, insurance, education, healthcare, and government services, and enforcement is scheduled to start on January 1, 2027. Developers of AI agents will then have to comply with strict transparency and risk mitigation requirements.
However, federal authorities are questioning whether some state-level AI requirements are compatible with federal law. In a July 1, 2026, policy statement published in the Federal Register, the FTC argued that certain state mandates could be pre-empted by federal consumer protection law if they require companies to alter the accuracy of AI outputs for political or ideological reasons.
No court has ruled on the FTC’s pre-emption argument yet, so pre-emption is still only a proposed legal position. However, the legal environment for developers and operators of AI agents in Colorado remains uncertain for now.
Implications for brokers and their clients:
- Review the wording of existing policies to ensure coverage is up to date with AI regulations and addresses potential changes to compliance requirements.
- Consider tech E&O insurance to help protect against claims arising from errors, omissions, or failures in AI systems.
- Consider D&O coverage to protect executives against claims related to regulatory compliance, governance, and oversight of AI systems.
Source: Forkast (August 22, 2026). Colorado Is Writing AI Transparency Rules. The FTC Says Federal Law May Override Them.
Lines of business mentioned: Tech E&O Insurance, Directors and Officers Liability Insurance.
Mexico’s Online Casino Crackdown Draws US Scrutiny Over Money Laundering Risks
Several online casinos in Mexico have been suspended due to investigations into money laundering and terrorist financing.
Mexico’s Financial Intelligence Unit (UIF) and Security Cabinet launched investigations in November 2025. Authorities targeted 13 gaming businesses suspected of involvement in a money laundering network involving cash transactions, cross-border payments, and poorly supervised digital platforms.
Bank accounts were frozen and platforms were taken offline while further investigations took place. Activity was detected that resembled ML patterns, but the authorities emphasized that these indicators alone don’t confirm connections to criminal organizations.
Between January and May 2026, financial institutions filed 202,045 reports covering betting, contests, and draws, showing just how much scrutiny the sector faces. Within the same timeframe, “relevant activity notices” (mandatory notices covering transactions above the reporting threshold) reached at least MXN 15.287 billion ($901.31 million).
The scrutiny extends beyond Mexico itself. In the US, FinCEN has identified transactions involving 10 Mexican gaming businesses as a primary money laundering concern and proposed restrictions on their access to the US financial system.
Implications for brokers and their clients:
- Investigate specialized gambling insurance which can address the sector’s combination of regulatory, operational, player liability, and other exposures.
- Consider D&O insurance to protect executives against claims of wrongful acts in the management of the business, including allegations arising from regulatory or compliance failures.
- Consider business interruption insurance in case regulatory enforcement actions require platforms to be taken offline.
Source: SiGMA (August 7, 2026). Mexico suspends 10 online casino websites over financial concerns.
Emerging insurance industries mentioned: Gambling Insurance.
Lines of business mentioned: Business Interruption Insurance, Directors and Officers Liability Insurance.
