AI Usage Policy Changes: What Businesses Need to Know About the New Restrictions on Legal Advice from Chatbots

As artificial intelligence becomes increasingly embedded in business operations, many organizations have turned to tools like ChatGPT to help draft contracts, interpret regulations, or provide quick legal context. However, a significant policy update from OpenAI has changed how AI can be used for legal guidance. The shift has important implications for business owners.

Effective October 29, 2025, OpenAI updated its public Usage Policies, adding clearer restrictions around providing tailored advice that requires a license, such as legal or medical advice about specific facts or circumstances, without appropriate involvement by a licensed professional. Although OpenAI has not issued a public statement explaining the change, it comes amid increasing scrutiny and potential liability surrounding AI-generated professional advice.

For businesses that adopted AI tools as a cost-saving substitute for legal consultation, this update should be viewed as a warning and a moment to reassess risk. While platforms like ChatGPT may continue to provide general legal summaries from generic sources, this guidance often falls short in assessing risk and options on legal issues. A “caveat emptor” situation where the consequences of not seeking advice from counsel can lead to disastrous outcomes.

Why the Change Matters to Businesses

Over the last two years, business owners have increasingly relied on AI to assist with all sorts of traditional legal issues, including:

• Drafting contracts, demand letters, or employment agreements
• Interpreting state or federal legal requirements
• Handling HR or compliance-related questions
• Reviewing leases, vendor agreements, or consumer disclosures

In many cases, AI tools provided answers that appeared legally sound even when they were not, sometimes creating the impression that chatbot feedback could replace licensed counsel.

The new policy looks to limit how much people may rely on AI tools for legal advice. Because, unlike a lawyer whom you retain for counsel for your specific circumstances, under the new policy, AI will not provide specific advice to your situation. And one thing that has not changed: AI companies will not assume the legal liability that comes with users treating AI as a lawyer. If the advice is wrong, the only one who will suffer is you, not the chatbot you relied on for the bad advice. 

With the general AI legal landscape changing, businesses can expect a shift toward two primary paths for legal support:

• Legal-specific AI platforms: Specialized tools designed for law firms and legal professionals. They offer jurisdiction-specific research, document review, and compliance-aware functionality. 
• Licensed attorneys: AI tools may begin directing business users to lawyers when questions reach legal thresholds, reducing the risk of unqualified guidance.
  

In both cases, it is often the cost that drives people to rely on cheaper, but more unreliable, sources like ChatGPT for legal advice. But as these platforms become more aware of the harm their “legal hallucinations” can cause and explore ways to take corrective action, the era of using general-purpose chatbots for legal help is ending. Businesses will need to be more thoughtful about how AI is used in legal adjacent situations.

Why OpenAI Is Stepping Back from Legal Advice

Most experts believe the policy shift is driven by risk. Legal advice is a regulated profession. The rules governing unauthorized practice of law are strict, and states are increasing enforcement related to AI-generated legal guidance.

Three key pressures are influencing AI companies to impose stricter usage limits:

• Legal liability: Exposure if a user relies on incorrect legal advice.
• Regulation: Growing scrutiny from bar associations and state regulators.
• Misuse at scale: AI makes it easy to distribute unlicensed legal guidance to large audiences.

OpenAI has reiterated that its tools do not replace licensed professionals and that users must comply with legal and ethical standards. The company emphasizes that responsible use is a shared responsibility, policies are designed for safety first, and misuse may result in loss of access.

The clear message is that AI can support work, but cannot serve as a lawyer.

Potential Future Partnerships Between AI Companies and Law Firms

Some industry observers believe AI companies may begin partnering with law firms to offer attorney-verified services. OpenAI has already established ties with legal technology companies, including Harvey, which is backed by major venture capital firms. This may signal a developing model in which AI identifies legal issues and then connects the user to a licensed attorney.

Future business models may include:

• Paid legal referrals
• Subscription-based legal review services layered on AI tools
• Integrations that connect AI platforms with vetted law firms

If that occurs, business users may soon interact with AI systems that identify legal red flags and route them to licensed counsel when needed. The integration of AI into industries like legal is here to stay. By improving efficiencies, these platforms can help firms decrease costs and increase access to their services. But challenges such as transparency, output quality, and accountability remain as the legal landscape continues to undergo significant transformation. 

Where Businesses Should Use Caution

AI remains a valuable tool for business efficiency, but guardrails are becoming more explicit. Potential AI use cases where the risk of harm is lower include:

• General research support on the express language in state laws and regulations
• Drafting and summarizing basic non-legal documents like correspondence
• Process and productivity enhancement recommendations

Businesses, however, should not use AI as a substitute for legal services, especially when legal questions arise related to specific facts or circumstances, such as:

• Regulation or compliance interpretations
• Contract drafting or enforcement
• Employment law, data privacy, or HR decisions
• Actions or inactions that could create legal exposure

If a situation involves rights, liabilities, compliance requirements, or enforceable obligations, retaining a licensed attorney is highly recommended. ChatGPT may give off the impression of sounding reliable, accurate and trustworthy. But if you rely on ChatGPT or similar large language models for legal advice, you will have no recourse if it proves to be wrong: a situation that is happening with increasing frequency in and outside the courts. 

What Businesses Should Do Now

To adjust to the new AI landscape, businesses should consider the following:

• Review how employees are currently using AI for legal adjacent tasks
• Create internal AI usage policies
• Vet legal-specific AI tools before adoption
• Involve an attorney in reviewing AI-generated legal content
• Educate employees on what AI can and cannot provide

These steps reduce exposure and enable businesses to responsibly benefit from AI. Another option is to connect with law firms that are utilizing more “client-aligned” solutions by incorporating AI tools mixed with attorney oversight. Innovative firms like this are focused on giving clients the best of both worlds, more cost-effective legal services with someone actually standing behind the rendered advice.  

Final Takeaway

AI continues to reshape modern business, but misuse can pose significant risks. OpenAI’s updated Usage Policy is a reminder that the boundary between AI assistance and legal advice is real and is now actively enforced by technology platforms themselves. For a quick reference check regarding general guidelines, a quick “chat” may meet the mark. But when your business is on the line, do you want to trust advice from an unaccountable chatbot, or retain a trusted adviser whose reputation and livelihood depend on providing accurate, quality guidance?  

Businesses that implement appropriate internal guidelines and engage licensed counsel when legal questions arise will be best positioned to leverage AI efficiently and safely.

To discuss more best practices on how to integrate AI into your business operations without increasing legal risk, contact Jimerson Birr.