California’s SB 574 Signals a New Era of Enforceable AI Guardrails in Legal Practice

The California Senate has just passed SB 574, one of the first state-level bills aimed at formally regulating how lawyers and arbitrators use generative AI in legal practice. The bill now moves to the Assembly, where it will undergo further review before it can be signed into law. And while it does not ban AI outright, it makes something very clear: the era of optional AI guidelines is quickly giving way to enforceable regulation.

At its core, SB 574 requires attorneys to personally verify the accuracy of any AI-generated material before submitting it in court. That includes everything from case citations to legal arguments. Lawyers can no longer rely on AI output as a shortcut, and they must take “reasonable steps” to confirm accuracy, correct false or hallucinated information, and remove biased content.

This is a direct response to a growing national problem: courts across the country have already sanctioned or reprimanded lawyers and litigants for submitting filings containing fabricated citations and fictional details generated by AI. These “hallucinations” aren’t just technical glitches they’re serious legal risks.

The bill also addresses one of the most critical issues in professional services: confidentiality. Attorneys would be barred from putting confidential, personally identifying, or other nonpublic client information into public generative AI tools. In other words, convenience cannot come at the cost of privacy or compliance.

SB 574 goes even further when it comes to arbitration. Arbitrators presiding over out-of-court disputes would be prohibited from delegating legal decision-making to generative AI. They also cannot rely on AI-generated information outside the official case record without full disclosure to all parties involved.

That’s a major line in the sand: AI can assist, but it cannot replace accountable human judgment.

Senator Tom Umberg, who introduced the bill and chairs California’s Senate judiciary committee, summed it up well: as AI becomes more common in the legal system, we need clear guardrails to ensure real people and not algorithms are making legal decisions.

For those of us watching AI adoption across highly regulated industries, this is part of a broader trend. We are bound to see more and more of this. Regulation is moving from theoretical to operational, and compliance is becoming a competitive wedge.

At Wisedocs, we’ve long believed AI alone isn’t enough and especially in environments where accuracy, confidentiality, and fairness are non-negotiable. That’s why our approach blends AI speed with expert human oversight. Human-in-the-loop validation isn’t just a feature; it’s quickly becoming the standard that regulators expect.

SB 574 is a reminder that the future of AI in legal and claims workflows won’t be defined by automation alone, but by accountability, transparency, and trust.

The organizations that treat compliance as “The Wedge Advantage” will be the ones best positioned for what comes next.