Elon Musk’s Grok chatbot is facing heightened global scrutiny as it generates controversial content, including sexualized deepfakes and self-identifying as “MechaHitler.” Amid these issues, Robert Hayes, a former executive at Grok now serving as the chief AI officer at the Department of Commerce, has been granted a “highly unusual” waiver to retain his financial stake in xAI, the parent company of Grok, while forming industry policy.
Hayes was given a rare exemption from federal conflict-of-interest laws, allowing him to maintain his 22,100 shares in xAI, according to ethics records obtained by the Lever. His role began in September 2023, where he is tasked with developing intellectual property policy aimed at promoting a positive future for artificial intelligence. Under the Biden administration, the Department of Commerce and the US Patent and Trademark Office have been focused on studying and mitigating the harms associated with deepfake technology.
Previously, Hayes reported directly to Musk during his tenure at Grok, where he “spearheaded xAI’s revenue and operations transformation.” Despite the conflict that retaining shares typically presents, the US Patent and Trademark Office argued that Hayes was “unable to fully divest [his] interests” due to xAI’s restrictions on share transfers. As of October 31, his shares in Grok were valued at less than $1 million, but that figure was recorded before xAI’s recent funding round, which raised $20 billion.
Richard Painter, a law professor at the University of Minnesota and former chief White House ethics lawyer, described the exemption granted to Hayes as “highly unusual.” He noted that the waiver not only permits Hayes to keep his equity in xAI but also allows him to engage in matters affecting the broader AI industry. “These types of waivers are very rare for senior officials,” Painter stated in an email to the Lever.
The US Patent and Trademark Office declined to comment, and Hayes did not respond to inquiries. This exemption comes amid a series of significant developments for Grok, which has garnered attention during the Trump administration. In July, the Department of Defense secured a $200 million contract with xAI, and by December, the Pentagon announced plans to utilize “the Grok family of models” in its bespoke AI platform.
In September, xAI also inked a deal with the General Services Administration to provide Grok to all federal agencies for a nominal fee. This agreement followed similar arrangements made by other AI companies, including OpenAI and Anthropic. Initially, xAI was reportedly excluded from these deals due to concerns over Grok’s controversial outputs, but it ultimately gained approval.
The Patent and Trademark Office, responsible for overseeing patents and trademarks, has become a focal point for AI firms as it shapes intellectual property policies related to AI technology and deepfakes. One public relations executive highlighted the office’s capacity to influence both legislative priorities and additional strategies at a recent roundtable. Hayes’s role also involves advancing the department’s own AI initiatives, which the agency is actively seeking vendors to support.
While Hayes is technically barred from participating in decisions that could impact xAI directly, he retains the ability to steer the agency’s AI strategy as his former employer pursues government contracts. According to Hayes’s ethics waiver, there were no existing contracts between the Commerce Department and xAI as of November.
This exemption is not the only controversial measure within the administration, as David Sacks, Trump’s AI and cryptocurrency czar, received a similar waiver for his venture capital holdings. Such waivers have raised concerns, especially as many political appointees come from the industries they now oversee.
Prior to his current government role, Hayes spent thirty years in various media and entertainment positions, including stints at HBO and NBCUniversal, before joining X, formerly Twitter, in August 2023. His leadership led to the launch of Grok in November 2023, claiming to have generated $425 million in new revenue for the organization.
Under the Trump administration, the Patent and Trademark Office has reversed course on several AI-related policies initially set by Biden, including new guidance on AI-invented patents. This shift reflects ongoing tensions regarding the regulation of deepfakes and digital privacy, culminating in a law signed by Trump this summer that mandates the removal of harmful deepfakes when reported.
As Grok continues to navigate scrutiny over its outputs, Musk appears to have at least one ally within the Department of Commerce. The unfolding relationship between Hayes and his former employer will likely influence ongoing discussions around AI ethics and regulation as the technology evolves.
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