Connecticut has passed a law requiring artificial intelligence (AI) subscription providers to disclose usage caps, feature restrictions, and any discretion to reduce service quality before a customer pays. It takes effect Oct. 1.
Gov. Ned Lamont in May signed SB 5, “An Act Concerning Online Safety.” Law firm WilmerHale noted that before collecting payment, providers must give consumers written notice of any quantitative or qualitative limitations, including usage caps and feature restrictions, as well as any discretion the provider retains to reduce the quantity, quality or functionality of the AI.
Violations are enforceable by the state attorney general as unfair and deceptive trade practices under the Connecticut Unfair Trade Practices Act.
The law arrived as a federal lawsuit made the case for why it was needed. As PYMNTS reported Monday (June 15), Washington, D.C.-based plaintiff Karl Kahn filed a class-action complaint against Anthropic, alleging the usage limits on its Claude Max 5x and Max 20x plans were difficult to understand and changed without clear notice. The plans cost $100 and $200 a month and promised five and 20 times the usage of the base Claude Pro tier.
A Cap Structure Subscribers Couldn’t Track
The Wall Street Journal reported on Monday that the complaint contends Anthropic’s actual limits fell short of what was marketed and were nearly impossible for users to pin down. Kahn upgraded to the Max 20x tier for heavy coding work. One five-hour session consumed 15% of his weekly allotment.
Last July, TechCrunch reported that Anthropic’s existing usage limits reset every five hours, with two additional weekly rate limits layered on top, one covering overall usage and another specific to its most advanced model. It is unclear if Anthropic has since changed its reset intervals.
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Connecticut’s disclosure law converts that gap into a pre-sale obligation. Legal consulting firm Davis Wright Tremaine noted in May that required disclosures must cover whether the provider has discretion to limit or eliminate a consumer’s access to any functionality of the AI, and that at renewal, providers must also disclose limitations that are new or modified from the prior term.
Law firm ArentFox Schiff reported that through Dec. 31, 2027, the attorney general may give alleged violators a 60-day period to address its failures before initiating litigation.
The Economics Behind the Fine Print
The Anthropic case reflects a cost structure that makes AI subscriptions different from traditional software. Traditional subscription models don’t map neatly to how much compute large language models require to work at scale. Every prompt a user sends, and every response a model generates, draws processing capacity that costs real money. A heavy developer session on a $200 plan can consume compute that would cost $600 to $1,500 at API rates, PYMNTS reported.
Competition hasn’t eased that pressure. Google cut its entry-level AI Plus plan from $7.99 to $4.99 a month. OpenAI is also weighing significant price cuts to stay competitive ahead of its initial public offering (IPO).
Morrison Foerster noted on June 8 that Connecticut’s SB 5 joins a growing list of state AI laws alongside California and Colorado. With no federal standard governing AI subscription disclosures, what providers must tell customers before they pay will be set, state by state, by attorneys general watching the same complaints that landed Anthropic in court.
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