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Today’s Menu

• Federal court backs AI training on legally purchased books in landmark ruling

• US housing regulator explores crypto holdings for mortgage qualification

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TODAY IN AI

Federal court backs AI training on legally purchased books in landmark ruling

A federal judge has delivered a significant victory for AI companies by ruling that Anthropic's training on legally purchased books qualifies as fair use, though the company still faces liability for using millions of pirated copies. This mixed verdict could establish crucial precedents for the numerous copyright lawsuits currently targeting AI developers.

The judge characterized AI training as "spectacularly" transformative, comparing Claude's learning process to aspiring writers studying established authors rather than copying their work. This analogy reinforces the argument that AI training represents genuine transformation of source material rather than mere reproduction.

The authors' case was weakened by their inability to demonstrate that Claude could generate outputs resembling their original works, undermining claims about competitive harm—a crucial element in copyright infringement cases. This failure suggests that proving actual harm from AI training may be more difficult than copyright holders initially anticipated.

Court filings revealed that Anthropic legally spent "many millions" purchasing print books and scanning them into digital files for AI training, demonstrating the company's commitment to legitimate content acquisition. However, the company also downloaded approximately 7 million books from pirate sites and stored them permanently, which the court determined violated authors' rights.

Anthropic will face trial in December for willful infringement of the pirated works, with potential damages reaching $150,000 per book—a liability that could total over $1 billion if the court rules against the company across all contested works.

The ruling creates important precedent by distinguishing between legal and illegal content acquisition for AI training. Companies that invest in legitimate content licensing receive fair use protection, while those relying on pirated materials face substantial liability.

TODAY IN CRYPTO

US housing regulator explores crypto holdings for mortgage qualification

The Federal Housing Finance Agency is studying how cryptocurrency holdings could factor into mortgage approvals, marking a potential transformation in how digital assets integrate with traditional lending. FHFA Director Bill Pulte announced the initiative, signaling that Bitcoin and other digital assets may soon count toward loan qualification criteria.

While Pulte provided no specific timeline or technical framework, the announcement represents a significant shift toward recognizing crypto as legitimate collateral within America's mortgage system. Currently, crypto holders must convert digital assets to USD and hold funds in regulated accounts to use them in mortgage applications—a process that could fundamentally change.

Pulte brings unique credibility to this initiative as a Bitcoin advocate holding up to $1 million in Bitcoin and Solana, plus stakes in Bitcoin mining company MARA. Appointed by Trump and sworn in this March, he now oversees Fannie Mae, Freddie Mac, and 11 Federal Home Loan Banks—the foundational infrastructure of America's mortgage market.

The policy implications are profound. Allowing crypto holdings to count toward mortgage qualification would legitimize digital assets as wealth storage vehicles comparable to traditional investments. This recognition could accelerate mainstream adoption by demonstrating government confidence in crypto's stability and permanence.

For homebuyers, this development could unlock substantial purchasing power currently trapped in digital assets. Many crypto holders have accumulated significant wealth but cannot easily access it for major purchases without triggering tax events through asset sales.

The timing aligns with broader government efforts to integrate cryptocurrency into traditional financial systems. As regulatory frameworks clarify and institutional adoption accelerates, mortgage qualification represents the next logical step in crypto's mainstream integration.

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Until next time,

Damon James