AI Rules & Risks: What Small Businesses Need to Know Now

Jeremy Ryan
Sep 19
3 min read

How Small Businesses Can Navigate the New AI Frontier

If you’re a small business owner, you’re likely hearing two very different stories about AI: “It’s the Wild West, totally unregulated” vs. “It’s your golden ticket to growth.” The truth? It’s both.

In this episode of Polarity’s AI for Small Business, Jim and Jeremy break down the latest AI legislation, the risks of “AI slop” in advertising, and a practical framework every SMB can use today to prepare for the future.

This post captures the highlights and gives you a step-by-step approach to keep your business safe, ethical, and competitive in the age of AI.

Key Takeaways

AI regulation is heating up: California moves toward stricter AI disclosures, while federal lawmakers push for a deregulated “sandbox.”
Advertising is ground zero: 87% of SMBs see growth potential with AI-powered ads, but tool overload and quality risks are real.
Avoid “AI slop”: Blindly using auto-generated ads or content can harm your brand voice and search visibility.
Transparency builds trust: Document your AI use and communicate it—internally and externally.
Start with digital housekeeping: Organize your tools and processes before scaling AI across your business.

The Regulatory Tug-of-War

California SB 53 requires large AI firms to disclose safety practices and incidents. While it doesn’t directly target SMBs, it sets a tone for transparency that trickles down.
The AI Sandbox Bill from Senator Ted Cruz temporarily shields companies from regulation to encourage innovation—creating more uncertainty for small businesses.
What it means for SMBs: Don’t wait for clarity. Build your own AI safety framework now.

“The federal government basically wants it to be the Wild West for at least a couple more years… maybe ten. This isn’t a fad. Get ready.” — Jim (at 04:36)

AI in Advertising: Growth or Slop?

Amazon’s latest research shows 87% of SMB marketing leaders believe AI-powered advertising will fuel growth. But optimism comes with caveats:

Overload: Too many tools create confusion.
Quality vs. brand voice: AI copy often lacks authenticity.
Ethical use: Misleading AI-generated ads invite reputational and legal risk.
Data privacy: Feeding customer data into unvetted tools is dangerous.

Jim puts it bluntly:

“Everyone’s pumping out AI slop. And now AI is training itself on its own slop.” (at 08:23)

The solution? Use AI to augment, not replace your marketing creativity.

Tool Tip: The AI Safety & Transparency Checklist

Here’s a simple framework to start implementing today:

Inventory AI Use – List all tools, why they’re used, and what data they touch.
Classify Risk Levels – High risk (finance, health, legal) vs. low risk (creative copy).
Document Policies – Add human oversight and error checks.
Define Incident Protocols – Decide how to report and fix AI errors.
Communicate Transparently – Internally with staff and externally with customers.
Review Quarterly – Regulations are evolving fast. Stay updated.

Jeremy calls this digital housekeeping:

“AI is the company that’s coming over. Get your house in order now before it walks into your living room.” (at 16:25)

FAQs

What’s the biggest AI risk for small businesses right now?

Tool overload and poor-quality content (“AI slop”) that damages brand trust.

Will new AI laws apply to SMBs?

Directly, not always—but indirectly, yes. Customers and partners will expect transparency.

How can I prepare for AI regulation?

Create a lightweight AI checklist documenting what tools you use, why, and how you ensure safety and accuracy.

Is AI worth it for advertising?

Yes—if you use it strategically to save time and enhance your creativity, not replace it.