The Seventh Circuit ruled that privately possessing AI-generated child sexual abuse material is protected speech under decades-old Supreme Court precedent -- while two judges warned the justices that technology has outpaced their 2002 ruling.
A federal appeals court has ruled that privately possessing AI-generated child sexual abuse material is protected by the First Amendment, citing a Supreme Court precedent that predates modern image-generation technology by nearly a quarter century.
The Seventh Circuit affirmed a lower court's dismissal of one of four charges against Steven Anderegg, a Wisconsin man investigators say used the AI generator Stable Diffusion to create hundreds of photorealistic images depicting minors in sexual situations. Two of the three judges on the panel wrote separately to warn that the Supreme Court needs to revisit its 2002 decision before AI imagery becomes impossible to distinguish from real abuse.
Anderegg was caught after sending an image to a minor over Instagram. Meta flagged the message to the National Center for Missing and Exploited Children, and investigators obtained a search warrant that turned up hundreds of AI-generated images on his devices.
He was charged with producing, distributing, and possessing the material, plus transferring an image to a minor. The government's case on the possession charge collapsed in district court, which dismissed it on First Amendment grounds. The Justice Department appealed, and the Seventh Circuit upheld the dismissal.
The ruling rests on two Supreme Court decisions. Stanley v. Georgia in 1969 established that the government cannot prosecute someone for privately possessing obscene material inside their own home. Then in 2002, Ashcroft v. Free Speech Coalition struck down restrictions on images that merely resemble child sexual abuse material, reasoning that the usual justifications for banning such content -- that it fuels demand for real abuse, grooms children, or normalizes the behavior -- do not apply when no actual child was involved in its creation.
Judge John Lee, writing for the panel, said the government's arguments that AI images could groom children, normalize abuse, substitute for real material, or complicate prosecutions were all expressly discussed and rejected by the Supreme Court in Free Speech Coalition. The panel said it remains bound by that precedent no matter how far AI has advanced, warning that ignoring it would invite anarchy within the federal judicial system.
Lee and Judge Joshua Kolar, the two judges who ruled for Anderegg, went further in a concurrence. Today's AI-generated images, they argued, are virtually indistinguishable from CSAM created through the physical abuse of a real child -- a scenario the Supreme Court itself anticipated in 2002 when two justices suggested the government might someday have a stronger case as technology caught up.
The judges also flagged a question Free Speech Coalition never had to weigh: some AI image generators may have been trained on real child sexual abuse material, which would undercut the no-real-victim premise the ruling depends on. The record in this case does not allow the court to evaluate that question, they said, only to flag it for a higher court.
The ruling applies only within the Seventh Circuit, covering Illinois, Indiana, and Wisconsin. The other three charges against Anderegg -- producing, distributing, and transferring the material -- remain intact, and he still faces serious prison time on those counts.
The Justice Department, which has made combatting AI-generated child exploitation a priority, pushed hard for the possession charge and is expected to weigh further options, including a petition for Supreme Court review. Legal observers note the case gives the high court a clean vehicle to revisit Free Speech Coalition in the AI era, and the justices' own prior language suggests at least some of them see the technology gap as a reason to reconsider.
Congress has also taken notice, with lawmakers on both sides of the aisle backing legislation to criminalize AI-generated abuse material. The ruling effectively raises the stakes: without new Supreme Court precedent or federal statute, the fastest-growing category of child exploitation content may enjoy constitutional protection whenever it stays on a private device.
The Seventh Circuit ruled that privately possessing AI-generated child sexual abuse material is protected speech under decades-old Supreme Court precedent -- while two judges warned the justices that technology has outpaced their 2002 ruling.
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