Crypto is out, artificial intelligence (AI) is in — at least when it comes to U.S. securities class action filings, according to a report issued Wednesday from Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse.
The volume of class action filings ticked higher in the first half of 2024, with 112 cases filed in the first six months of the year, up from 103 filings in the previous six months (the second half of 2023), the report said.
Almost all of the cases in the first half of this year were so-called “core” class action filings — cases that didn’t involve allegations stemming from merger and acquisition activity, the report said. There were 110 core filings in the first half, well ahead of the historical average of 96 cases.
Class action filings involving crypto are on the decline, the report noted, with just three cases in the first half of this year, compared with 11 for the same period a year ago.
The report also tracked a new source of activity — AI-related cases. There were six of these kinds of cases in the first half of the year, compared with six for all of 2023.
“The potential for real liability resulting from artificial intelligence is among the more interesting developments of the past six months,” said Joseph Grundfest, professor emeritus at Stanford Law School and former commissioner at the U.S. Securities and Exchange Commission (SEC), in a release.
“While we’ve seen AI-related filings in recent years, the first half of 2024 marks the beginning of tracking these filings as a trend category. The growing prominence of AI in the business models of many companies may lead to more filings in the future,” said Alexander Aganin, senior vice president at Cornerstone Research and co-author of the report, in a release.
“Meanwhile, SPAC-related filings are on pace to decline steeply relative to recent years, and cryptocurrency-related filings, which have been hot for the past several years, experienced a sharp decline,” Aganin added.
While AI-based cases are gaining popularity, Grundfest said, “But more immediately, keep an eye on the upcoming Supreme Court term. Important decisions will issue in the NVIDIA litigation regarding pleading requirements for securities fraud claims, and in the Facebook/Cambridge Analytica litigation involving risk factor disclosure.”
Cornerstone also reported that its Maximum Dollar Loss Index — which measures the difference in a defendant firm’s market cap from its highest point during the period covered by a class action, to the end of the class period — decreased by 9% in the first half to US$908 billion.
This continued a decline from the inflation-adjusted record high set in the first half of 2023, it noted, but remained above the historical average.