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The Continuous Journey of Legal Compliance in Adult

The adult entertainment industry is teeming with opportunity but is also fraught with challenges, from anticipating consumer behavior to keeping up with technological innovation. The most labyrinthine of all challenges, however, is the world of legal compliance.

Legal compliance in adult is too complex to simply deal with and then cross off your to-do list. It requires a dedicated, ongoing strategy that adapts to evolving legal landscapes, customer preferences and technologies. It’s time we shift our paradigm from compliance as a one-time event to understanding it as a continuous life cycle. This article will explore the nuances of this life cycle in detail.

New technologies like virtual reality, augmented reality, artificial intelligence (AI) and blockchain are pushing the boundaries of traditional legal frameworks.

Evolving Regulations

Legal frameworks in the adult industry are like shifting sands, constantly changing and adapting to cultural norms, public sentiment and advancements in technology. Regulatory bodies frequently introduce new guidelines that can span a variety of subjects — age verification procedures, content classification and performer welfare, to name a few. To stay ahead of the curve, businesses should consider subscribing to specialized legal bulletins, joining industry associations and participating in advocacy and lobbying efforts that can both inform and influence regulatory changes. In fact, as I write this article, the U.K.’s Online Safety Bill has just become law and will require all adult businesses to be watchful and prepared to adapt.

Jurisdictional Differences

The geographical scope of the industry can be a double-edged sword. A wider audience may translate to higher revenue, but it can also bring a bewildering variety of jurisdictional rules and norms into play. Federal laws, state or provincial laws and international laws often clash or overlap, requiring businesses to adopt a complex, multilayered compliance strategy.

This complexity is further heightened by cultural considerations that influence local regulations, such as the acceptability of certain practices or types of content. Without a doubt, adult is one of the most highly scrutinized industries in the world. This has inspired many adult businesses to build their foundation in seemingly more “adult-friendly” places in the world.

Emerging Areas of Law

New technologies like virtual reality, augmented reality, artificial intelligence (AI) and blockchain are pushing the boundaries of traditional legal frameworks. These emerging tech trends raise fresh questions around consent, data privacy and intellectual property rights. For instance, what does consent look like in a virtual reality environment? How does data privacy law adapt to augmented reality applications? Do older legal and compliance forms sufficiently address and cover these quickly growing technologies? These are questions without definitive legal answers yet, making proactive compliance strategies all the more essential.

On the subject of legal and compliance forms: No single form will fit every industry interaction, and the practice of circulating and reusing generic, supposedly all-purpose forms continues to plague the industry and wreak havoc — sometimes with disastrous implications for those who utilize them. I once again urge all members of the adult entertainment industry to stop using them, if you have not done so already.

Engage in Regular Audits

A well-structured audit plan is crucial for ongoing compliance. It is advisable to incorporate key performance indicators (KPIs) related to legal compliance into these audits. This approach transforms vague ideas of “compliance” into quantifiable metrics that can be tracked over time. Additionally, third-party auditors who specialize in the adult industry can provide unbiased, expert analyses, thus adding a layer of robustness to your internal compliance checks.

For more on this topic, I encourage you to read or reread two of my previous XBIZ articles: “Preventing Legal Problems Before They Start” (May 22, 2017) and “Have You Had a Legal Checkup Lately?” (Sept. 23, 2019). The information in those articles remains highly relevant.

Legal Consultation With Adult Entertainment Lawyers

Continuous communication with legal experts who specialize in adult is indispensable. Regular consultations offer the double advantage of immediate problem-solving and proactive preparation for future compliance challenges. These consultations can extend beyond mere advice into strategic planning, such as identifying potential markets for international expansion that align with your existing compliance capabilities.

The adult industry is a unique place. Your dad’s family law attorney may be a nice person and a perfectly good lawyer, but that doesn’t mean that they possess the knowledge and experience to provide you with proper legal advice. At this point in my career, I have lost count of how many non-industry “nice guys” and “good attorneys” have provided terrible advice to adult businesses, leading to disastrous consequences.

Employee Training and Whistleblower Policies

Ensuring that every employee understands their role in legal compliance is vital for creating a culture of compliance. A well-planned, recurring training program can significantly mitigate the risk of unintentional legal violations. Moreover, establishing clear, confidential whistleblower policies encourages internal reporting of possible compliance issues, serving as an additional layer of risk management.

AI and Real-Time Monitoring

Machine learning and artificial intelligence offer unprecedented capabilities for monitoring compliance in real time. These systems can rapidly analyze vast datasets, identifying anomalous patterns or potential violations that might take a human team much longer to spot. Additionally, AI can provide predictive analytics, giving you insights into potential future risks based on current and past data trends.

Remember, however, that these technologies are tools — not replacements for actual human brain power and common sense, attributes that machine learning and AI still cannot replace.

Blockchain and Smart Contracts

Blockchain is not merely a tool for financial transactions; its application in creating smart contracts can be revolutionary for compliance. These self-executing contracts automatically enforce compliance with legal obligations, such as content rights or payment terms, thereby reducing the risk of contractual disputes and legal complications.

Despite these advantages, these types of contracts are still not perfect and overreliance on them can leave you in substantial legal peril. Again, this is a tool meant to assist, not replace proper legal guidance from an experienced professional.

Compliance Dashboards

Modern compliance dashboards have evolved into sophisticated tools that integrate data from multiple departments to provide a comprehensive, real-time view of an organization’s compliance status. Customizable alerts can be configured to notify decision-makers about potential issues or areas needing attention, thereby speeding up response times and mitigating risks. Compliance dashboards are growing at a monstrous pace and while it is still quite expensive, it is anticipated that as more competition comes to market, pricing should come down.

The Cost of Noncompliance

Here are some examples of what has happened when adult entertainment businesses did not take legal compliance seriously enough, and treated it as a one-time job:

Company A: Data Protection Lawsuit

Company A’s failure to continually update its data protection measures led to devastating consequences. A large-scale data breach exposed sensitive customer information, resulting in a costly class-action lawsuit. However, the financial impact was only the start; the company suffered severe reputational damage that deterred potential customers and partners, creating a long-term impact on revenue streams.

Company B: Fines and Reputational Damage

Company B was fined heavily due to insufficient age verification processes. Initial mechanisms were put in place, but as technology and regulations evolved, the company failed to adapt, leading to significant legal repercussions. Besides the financial penalty, the company faced a public relations nightmare, resulting in lost subscribers and a damaged brand image.

Company C: Intellectual Property Violations

Company C found itself embroiled in a lawsuit for copyright infringement after inadvertently hosting copyrighted material. Had an ongoing compliance program been in place, automated content recognition technology could have flagged this content, preventing legal complications. The fines and legal fees were substantial, but the cost to the company’s reputation was even higher.

Legal compliance in the adult entertainment industry isn’t a mere checkbox; it is an ongoing, evolving process. This continuous journey encompasses adapting to shifting laws, conducting regular audits, fostering a culture of legal awareness and embracing technology as an ally in ensuring compliance. Companies that adopt a proactive, multifaceted approach to legal compliance stand the best chance of navigating this complex landscape successfully and profitably.

This article does not constitute legal advice. It is provided for information purposes only and should not be relied upon in lieu of consultation with legal advisors in your own jurisdiction.

Corey D. Silverstein is the managing and founding member of Silverstein Legal. His practice focuses on representing all areas of the adult industry and his clientele includes hosting companies, affiliate programs, content producers, processors, designers, developers, operators and more. He is licensed in numerous jurisdictions including Michigan, Arizona, the District of Columbia, Georgia and New York. Contact him at MyAdultAttorney.com, [email protected] and 248-290-0655.

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