California SB 942 Now Requires AI Providers to Watermark Generated Content

California's AI Transparency Act, known as SB 942, became operative on August 2, 2026, after a delay from its original January 1, 2026, start date. The law applies to large generative AI providers and sets new requirements for how AI-generated content must be labeled and disclosed.

The law covers companies that create or produce a generative AI system publicly accessible in California with more than one million monthly visitors or users.

Under the law, covered providers must embed machine-readable watermarks in AI-generated images, video, and audio. These watermarks must include the provider's name, the system's name and version, the date and time of creation, and a unique identifier, where technically feasible.

Providers must also offer a free, publicly accessible tool that allows users to check whether content was created or altered by their AI system. The tool must support an API and allow for URL-based content assessment.

Users must be given the option to include a clear, visible label identifying content as AI-generated.

If a covered provider licenses its system to a third party, it must require the licensee to maintain these disclosure capabilities by contract. If a licensee modifies the system to bypass the requirements, the provider must revoke the license within 96 hours.

Violations carry a civil penalty of 5,000 dollars per violation, with each day of non-compliance treated as a separate violation. The state attorney general, city attorneys, and county counsel can bring enforcement actions.

The law does not apply to products or services providing exclusively non-user-generated video games, movies, television, streaming, or interactive experiences.