Government Relations Update · MAY 2026

The Label That Could Cost You 31.5% of Your Clicks

With the Maryland General Assembly adjourned since April 13, the policy conversation

doesn’t stop. It just moves. Right now, the most consequential regulatory debate for

Baltimore advertisers isn’t happening in Annapolis. It’s happening in Brussels, New

Delhi, Sacramento, and Washington, D.C. And it centers on a deceptively simple

question: when an ad is made with AI, does it need to say so?

The answer, depending on where your clients operate, is increasingly yes. But how that

disclosure gets implemented could be the difference between a campaign that performs

and one that doesn’t. It’s worth remembering that AI has been part of digital advertising

for nearly a decade, from smart bidding to dynamic creative optimization. What’s new is

that AI is now helping create the ads themselves, and policymakers are moving fast to

respond.

The Patchwork Is Already Here

A fragmented set of AI disclosure laws is taking shape globally, and if your clients have

reach beyond Baltimore, you are already operating inside this landscape.

The EU AI Act includes provisions that require labeling for AI-generated content, with

definitions broad enough to potentially capture standard creative editing techniques that

advertising professionals use every day. New York’s Synthetic Performers Law requires

disclosure when a human-like AI-generated character appears in a visual ad. India is

moving toward labeling requirements for synthetically generated information. Several

U.S. states have introduced or passed their own versions.

What this means for your agency: If you are running campaigns nationally or

internationally, you are likely already subject to at least one of these frameworks. The

challenge is that each law defines AI-generated content differently, and compliance in

one market doesn’t guarantee compliance in another. Maryland’s own MODPA, now in

full enforcement as of April 1, adds another layer of data and targeting compliance that

intersects directly with how AI-powered campaigns are built and measured.

The Label Problem Is a Performance Problem

Here is where it gets urgent. Research published in October 2025 found that

AI-generated ads without a disclosure label produced a 19% increase in click-through

rate compared to non-AI ads. The same AI-generated ads with a front-facing disclosure

label saw a 31.5% decrease in CTR.

That is a 50-point swing driven entirely by how a label is applied.

The reason matters. When consumers see an AI label on an ad, they don’t think about

how the ad was made. They think the product itself is AI-generated. A label intended to build transparency is triggering skepticism about the product, not the production

method. You can read the comprehensive research at SSRN.

What this means for your agency: A poorly designed or broadly applied AI disclosure

isn’t just a compliance checkbox. It is a performance tax that your clients will feel

directly. Understanding how and where these labels appear in the platforms you buy

through is now part of your job.

The Industry Has a Better Answer

The good news is that the advertising and technology industry is not waiting for

regulators to define the solution. A coalition of major technology and media companies

is advancing a technical standard called C2PA, the Coalition for Content Provenance

and Authenticity, that embeds provenance data directly into the asset itself.

Think of it as a nutrition label on the back of the ad, not a warning sticker on the front.

The metadata travels with the asset through the entire ad tech stack, it is

tamper-evident, and it is interoperable across platforms. When a consumer wants to

know how an ad was made, they can access that information on demand rather than

having it pushed at them in ways that create confusion.

What this means for your agency: Ask your platform partners where they stand on

C2PA adoption. Ask your production tools whether they embed provenance metadata.

These are the questions that will define responsible AI creative workflows over the next

two years.

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The AAFB Government Relations Committee is tracking AI disclosure legislation at the

state and federal level, alongside AAF National’s ongoing engagement with federal

regulators.

As always, if you have questions about how any of these developments affect your agency, reach out to the GR committee at advocacy@baltimoreadvertising.com.

Submitted by Ronaldo J. Sellers, Government Relations Chair, AAF Baltimore