Law & Order & Chatbots

Top News

• Character.ai settles lawsuits: The social chatbot platform has been sued — along with Google —in four states by the families of multiple teenagers who killed or harmed themselves after using the product. The parties have agreed to settle, in general, but lawyers are still hashing out the terms. This remains arguably the highest-profile legal case around “GPT psychosis” and fears about the negative impact of chatbot use on mental health, particularly among young people. But it’s not the only one; OpenAI and Meta are involved in similar cases now working their way through the courts. Some states have already attempted to respond with legislation, though that now raises a separate, thorny legal issue… Do they have jurisdiction, now that the Trump administration has declared federal exclusivity on AI regulations?

• Anthropic’s next raise: The team behind our good pal Producer Claude raised an additional $10 billion, at a $350 billion valuation. GIC, the sovereign wealth fund of Singapore, led the round, along with Coatue Management. That’s on top of two major raises in 2025, including a September deal that brought in $13 billion, at a $183 billion valuation. So for all the skepticism and headwinds that continue to hit AI conceptually in the culture, the investment dollars have clearly not stopped flowing.

• Lux lands largest-ever fund: The storied VC firm closed its ninth fund, totaling $1.5 billion, the largest in its 25-year history. TechCrunch argues, well, they’ve earned it, for getting heavily into the defense tech industry well before its recent boom. Lux was a seed investor in Anduril (now worth $30.5 billion) and Applied Intuition, recently valued at $15 billion following some lucrative Pentagon contracts. (They were also early into a number of notable AI startups, like Hugging Face, Runway AI, and MosaicML.) That kind of high-profile success certainly grabs the attention of potential limited partners.

TWiST 500

On TWiST, we check in frequently with the hottest Polymarkets, and always reiterate the same very important rule… READ THE “ABOUT” SECTION! That’s where you find out the specifics of how Polymarket is evaluating real-world scenarios and will determine their markets’ final outcome. It’s the only way to really understand the rules of that market before you make your choice and place your proverbial bets.

A group of Polymarket users are learning this lesson the hard way this week. Or are they? It’s a divisive issue for a tech newsletter!

Here’s what happened: Polymarket asked the question of whether or not the US would “invade” Venezuela. Now that the US has in fact captured former president Nicolás Maduro, many users who wagered millions on YES assumed they’d be paid out. However, Polymarket then clarified that the capture of Maduro itself did not qualify as an “invasion,” meaning that the market would likely resolve to NO. (The Guardian reports that more than $10.5 million has been wagered on Polymarket around a potential Venezuelan invasion over the past year. Most of these markets set the deadline at January 31, 2026.)

You’re probably already asking… Well, what did the RULES section say? Good question. The platform stated that an invasion of Venezuela would constitute “US military operations intended to establish control.” The prediction market is now arguing that extracting Maduro is insufficient to meet this criteria, despite President Trump’s rhetoric suggesting that the US might take control of the country (along with its oil reserves).

This has led to all sorts of accusations and allegations. BBC reports that one first-time unknown gambler took four positions — all Venezuela-based — just last month, and extracted more than $436,000 from $32K in wagers, leading to new concerns about people potentially using insider information to “game” the markets. Others have pointed out the fact that the US President’s son, Donald Trump Jr., is an investor in Polymarket, creating a potentially confusing political situation… If Polymarket argues that Venezuela was an invasion, does this contradict Trump Sr.’s suggestions that it was not?

Regardless of your specific take on this hot potato, it’s clear that this will be an ongoing concern for Polymarket, Kalshi, and other prediction markets. It’s easy to say “there’s no crying in the casino,” but in reality… you often see upset, angry people in Las Vegas. – Lon

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E2230: New year, new TWiSTs. We’re starting 2026 with a look at Meta’s behind-the-scenes AI drama, Nvidia’s “acquisition” of Groq and what it means for his bestie Chamath, Twitter co-founder Biz Stone’s new social media app Tangle, PLUS another check-in with the sharps at Polymarket.

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